Shares in the largest U.S. retail foreign-exchange brokerage slumped in pre-market trading and their opening was delayed in New York as upheaval caused by a surge in the Swiss franc rippled from New Zealand to the U.S.
FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank's decision to abandon the franc's cap against the euro roiled markets worldwide. Global Brokers NZ said losses from the franc's surge were forcing it to shut down. Alpari (U.K.) said it “entered into insolvency.”
“I would be astonished if we did not see more casualties,” Nick Parsons, the London-based head of research for the U.K. and Europe at National Australia Bank, said by telephone from Sydney. “This was a 180-degree about turn by the SNB. People feel hurt and betrayed.”
The franc surged as much as 41% vs. the euro on Thursday, the biggest gain on record, and climbed more than 15% against all of the more than 150 currencies tracked by Bloomberg. Dealers in London at banks including Deutsche Bank, UBS Group and Goldman Sachs Group battled to process orders Thursday when the SNB surprised investors with its announcement.
Market turmoil from the move extended into a second day as Asian shares dropped with U.S. index futures, while Japanese, Australian and French government bond yields plunged to records as investors sought haven assets.
FXCM slumped more than 90% in pre-market trading. Foreign-currency brokerage Gain Capital Holdings Inc. lost 25% and Interactive Brokers Group Inc. fell 9% in early New York trading.
The U.S. Commodity Futures Trading Commission allows investors to put down as little as 2% of the value of their foreign-exchange bets.
The market turmoil turned the $1.9 billion John Hancock Absolute Return Currency Fund into the biggest loser among U.S. peers. It tumbled 8.7% Thursday, the steepest drop on record and the most among more than 2,000 U.S.-domiciled funds tracked by Bloomberg with at least $1 billion under management. The fund had its second-biggest short position in the franc at the end of November, according to the latest fact sheet on John Hancock's website.