It's certainly already 'hit' a few that I'm exposed to. My own broker (Interactive Brokers - NASDAQ listed) for one, although the damage right now appears very limited. Plus one of my stocks held via that broker, IG Index (IGG.LN)*. Firstly, a broker should operate within clearly defined and controlled risk parameters so the risk of damage is minimised: I see some internal risk managers, and internal/external auditors getting whacked because of this.Wd40 wrote:Apparently the SNB move has bankrupted a few forex brokers and also some businesses in Poland and Hungary who have taken loans in Swiss francs. Next week we may have a few more skeletons coming out of the closet
Interestingly, IGG report that their clients unwound their EUR/CHF positions faster than IGG could unwind their reverse position against it (i.e. unwind their hedge into an illiquid/dead market for the reverse side of the trade). That's going to get a lot of attention within the industry in future, the ability of a 'facilitator' (for example a broker, especially of geared-up derivatives) to dynamically and effectively hedge off risk in real-time, especially in a sudden 'fast market'.
'Poland and Hungary'. I haven't read the news recently about this whole saga so am unaware what their particular woes are, though I do understand that Hungary ties itself quite closely to the Swiss economy. But that's the risk, tying yourself to something over which you have no control. [X-ref S$, but at least in SGs case it's peg is against a wide enough basket of other currencies based upon physical trade, rather than being something essentially completely artificial].
Take this as a warning. If you use a broker read the smallprint about how they seek to manage internal risk, and to what extent your assets are segregated and protected. Also remind yourself that this is why the likes of trading currency-pairs (etc) is very high risk. Above and beyond that your reward can seem superficially attractive for taking on risk, but that risk can manifest itself out of the blue. Suddenly those ads in the local press for MYR or IDR fixed deposits paying 'generous' interest rates start to look less juicy....eh!
*'The core business is spread betting though IG also provides other services such as CFDs and FX trading.'
http://www.digitallook.com/equity/IG_Group_Holdings
Now I understand, why you were so cautious about carry trades and managed currencies. 30% move in the currency pair when you are taking on leverage of 100-200 times and are trying to trade pips. That's a massive loss.
