It’s almost 5 months since the Swiss National Bank shocked markets and removed the floor under EUR/CHF. The move not only ruffled the feathers of traders, but also had significant implications on many brokers, including some that got into serious trouble and others that went bust.
Clients of defunct broker Alpari UK are still struggling, even on positive balances. And regarding IG, a broker that continues operating, new evidence is quite disturbing as well. Here is news on both:
Ryan Littlestone at Forex Live reports:
The UK Financial Services Compensation Scheme, which will make up the difference on any shortfall to reimbursements has left some traders short of agreed settlement amounts by converting all the available client funds to USD before allowing the administrators to pay out
That’s left people with bank accounts in other currencies losing out on conversion charges and bank fees. To add insult to injury the rate the balances were converted to was somewhere between 1.5024 and 1.5142. As people have just been receiving their money very recently it probably means they got a rate even worse and thus losing out twice
This farce goes from bad to worse and you can read the full announcement from KPMG here
According to the group, the letter, sent by IG’s compliance department to one client, says that before trying to execute pooled client orders worth 115 million euros ($126 million), IG took seven minutes to manage its own risk from other trades executed on its platform.
“A result of the automatic filling of client Orders is that IG is left with exposure that it needs to manage and hedge within the underlying market,” said the letter, sent in late April and seen by Reuters.
“This took place between 09:32:41 and 09:39:44, therefore before the aggregate client Order was executed.” It also said the client trades subsequently received worse prices than its hedging trades.
Senior market participants who spoke to Reuters said IG might claim that clients, even those who had received an instant confirmation including the price gained for their order, were still responsible for the risk as IG hedged.
However, given the extended period over which transactions were executed, the company would also then have to explain why it did not treat all trades as one batch, priced at the same level.
The fallout goes on and on, and this is probably not the last of it. What do you think?
More: SNBomb – Reactions from 75 forex brokers
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