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TheCountOfNowhere

Alpari Uk Currency Broker Folds Over Swiss Franc Turmoil

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Alpari, which signed a £3m, three-year deal with West Ham in 2013, is one of a number of companies to be affected by the volatility caused by the SNB's action.

Seems like they got hammered.

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Bunch of speculators lose out. Can't cover their bets, so Alpari has to fill a gap.

Question: does that mean Alpari knowingly took on that risk and has no claim on its clients assets (unenforceable gambling debts), or does it mean all those speculators are now in debt to Alpari's administrators and will be pursued for their bets?

This means Alpari's creditors lose out. That's precisely the scenario that prompted our Scottish former masters Brown&Darling to bail out HBoS and RBS - not to mention Sir Fred's pension. Good to see it's not taxpayers on the hook this time ^_^

Does this expose a big bunch of total idiots? Or was it a load of rich folks making unenforceable bets where they could shrug off the losses? And whose money was behind Alpari: anyone lose serious money there?

/me shakes head

(Jim Rogers was interviewed on t'wireless this morning. He predicted this - and told us so - when the Swiss first introduced the link, and admits to having made a profit on it).

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http://

www.abc.net.au/news/2015-01-16/swiss-national-bank-had-no-choice-but-to-surprise/6021904

For an example of what could have happened, one only has to look at the Bank of England's losses to George Soros and other speculators in 1992.

In that case, the central bank was trying to keep its currency up so that the pound could remain in the European Exchange Rate Mechanism (ERM).

It did so by raising interest rates dramatically and spending billions in foreign currency reserves to buy pounds and maintain demand for the Sterling.

It was the exact opposite of what the SNB has been doing (until its announcement last night) to keep the franc low - it has been slashing rates and selling francs in exchange for other currencies.

George Soros and the similarity to the UK speculation in 1992.

Not that there's been any mention so far of him being involved with the Switzerland currency events.

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George Soros also made money on Thursday. Anyone with any economic nous would see that as the black Wednesday eventually Central Banks have to let the markets rule and let the inevitable happen.

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Bunch of speculators lose out. Can't cover their bets, so Alpari has to fill a gap.

Question: does that mean Alpari knowingly took on that risk and has no claim on its clients assets (unenforceable gambling debts), or does it mean all those speculators are now in debt to Alpari's administrators and will be pursued for their bets?

I believe it is the latter. These are not gambling debts, but legally binding financial derivative contracts.

Those clients are in debt to their broker/administrator and will be pursued by them. However, it's more than that; if the debt was likely to be enforceable, the company wouldn't necessarily be insolvent. That the company has declared insolvency suggests that they know that there is a significant unenforceable debt - i.e. they have already contacted their clients about their debts, and the clients have told them that they will be unable to pay and will themselves declare insolvency.

There were multiple idiots here. At one level, it was the clients, making bets at 100:1 or higher leverage. On the other, it was Alpari, for allowing such high leverages without examining their clients' personal finances in sufficient detail to ensure that potential losses could be covered.

There have been a number of forex forum postings about this market event about clients being completely screwed by their leverage and basically saying that they'll be declaring bankruptcy at the earliest opportunity.

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George Soros also made money on Thursday. Anyone with any economic nous would see that as the black Wednesday eventually Central Banks have to let the markets rule and let the inevitable happen.

Gordon Brown didn't. Remember he did "whatever it takes" to "save the world", no matter what the cost to the taxpayer. That's why we have the contrast between a reasonably rapid recovery after 1992 and today's zombie debt economy.

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George Soros also made money on Thursday. Anyone with any economic nous would see that as the black Wednesday eventually Central Banks have to let the markets rule and let the inevitable happen.

Has it been reported that he made money on Thursday? Do you have a link?

I've seen reports that speculators/hedge funds etc benefited (some would of course) but not specifically George Soros.

Edited by billybong

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There were multiple idiots here. At one level, it was the clients, making bets at 100:1 or higher leverage. On the other, it was Alpari, for allowing such high leverages without examining their clients' personal finances in sufficient detail to ensure that potential losses could be covered.

A completely unregulated market then?

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The Retail FX business model is not especially sophisticated. The main driver is finding "investors" around the world who put in their savings in (often relatively small amounts, although not to the individuals themselves of course), who then most proceed to lose all of it over the next few months with the broker looking to get paid whatever the outcome is.

The guys that run these outfits don't have to be the smartest most of the time, so it isn't that surprising I suppose that even the bigger operations can be caught out when something "unexpected" (as their website calls it) happens

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None of 22 economists surveyed by Bloomberg News between Jan. 9 and Jan. 14 expected the SNB to get rid of its cap in 2015.

Economics. It's got numbers and equations like real science...

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Gordon Brown didn't. Remember he did "whatever it takes" to "save the world", no matter what the cost to the taxpayer. That's why we have the contrast between a reasonably rapid recovery after 1992 and today's zombie debt economy.

Slightly different scenario here. Effectively leave the ERM i.e. devalue the currency v allowing the collapse of the banking system.

That's a big call and not one that any government would make lightly. If you get it wrong your talking mass unemployment, riots and possible civil war, revolution etc with Millon's of ruined lives.

Not saying your wrong by the way just trying to put the magnitude of the decision into perspective.

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Slightly different scenario here. Effectively leave the ERM i.e. devalue the currency v allowing the collapse of the banking system.

That's a big call and not one that any government would make lightly. If you get it wrong your talking mass unemployment, riots and possible civil war, revolution etc with Millon's of ruined lives.

Not saying your wrong by the way just trying to put the magnitude of the decision into perspective.

That's the spin. In reality the decision was to allow the collapse of specific banks, not of the system.

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The only thing I imagine that caused such tremendous losses, would have been clients selling uncovered options on the swissy. The premiums would have been very small, but apparently free money those selling them. Picking up pennies in front of a steam roller is probably the nearest analogy.

The buyers of the options would probably have been real money investors - those who stood to lose out if the CHF appreciated significantly, perhaps importers of Swiss goods who were insuring against this risk. The collapse of Alpari probably means that they will not get compensated. Those collecting the premiums are likely to be very, very out of pocket - potentially losing everything for a few hundred pounds.

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I believe it is the latter. These are not gambling debts, but legally binding financial derivative contracts.

Those clients are in debt to their broker/administrator and will be pursued by them. [Good] However, it's more than that; if the debt was likely to be enforceable, the company wouldn't necessarily be insolvent. That the company has declared insolvency suggests that they know that there is a significant unenforceable debt - i.e. they have already contacted their clients about their debts, and the clients have told them that they will be unable to pay and will themselves declare insolvency.

There were multiple idiots here. At one level, it was the clients, making bets at 100:1 or higher leverage. On the other, it was Alpari, for allowing such high leverages without examining their clients' personal finances in sufficient detail to ensure that potential losses could be covered.

There have been a number of forex forum postings about this market event about clients being completely screwed by their leverage and basically saying that they'll be declaring bankruptcy at the earliest opportunity. [Good]

There is only so much hand-holding you can do - screwed by their own mistakes. I've made trades where market has gone against me.. you have to stomach them. Learn. Improve. Get smarter. We each make our own decisions, and for me that means, as a trading client with another firm, not leaving yourself exposed to overnight bankruptcy causing losses from a market move. Instruct the debt collectors. Seize and sell off their homes, asap.

No one forced any client to open an account and to actively trade, and trade that specific market. You can be insolvent when the firm's regulatory licensing rules need you to have a certain amount of capital in reserve in order to remain in business.

That NZ firm seem to have had the good grace to accept it's affected their position (capital position), but with sufficient funds to pay out all other clients as they close down their operations. Perhaps the business assets can be bought cheap, taken over, by someone else, if a prospective bidder believes there are still enough suckers out there, with money, to trade.

Oh... what's that... the very essence of capitalism.... smart take over dumb's assets at lower price (one of the most hated things on hpc and in wider VI land)... as has occurred with another trading company whose clients got got out of positionn by the Swiss move, owing it some $200M. Another firm has bought a position into it, via secured loan and other conditions on the company. Perhaps putting itself in position to get it cheap.

Back in the old days, when it looked like UK low-mid-high prime houses might crash, before so many HPCers lobbied for reflation "no buyer outbidding venger buy 100ks knew what they were doing" CL took some heat. Doesn't appear to be badly affected in this latest little market event, but Michael Spencer can sure relax now, having recently sold up.

Michael Spencer forced to inject £70m as City Index clients default

Michael Spencer, the Conservative party treasurer, has been forced to inject £70m of his personal fortune into City Index after traders defaulted on tens of millions of pounds worth of trades.

02 Mar 2009

[..]"Mistakes have been made, but lessons have been learnt and the underlying business remains sound. We are now trading profitably. At no time were client monies at risk and the group continued to meet its regulatory capital obligations," said Mr Belsham.

..Despite the £70m injection City Index is in breach of its banking covenants, according to the accounts.

Negotiations with the banks are continuing, said Mr Belsham. "It will be concluded. We are down to the fine print," he added.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4903575/Michael-Spencer-forced-to-inject-70m-as-City-Index-clients-default.html

Michael Spencer sells City Index to US rival for $118m

City grandee sells online spread betting firm to US rival Gain Capital for $118m

31 Oct 2014

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11201644/Michael-Spencer-sells-City-Index-to-US-rival-for-118m.html

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Apart from anything else the possibility of ecb QE had been increasingly on the cards for some days before the Swiss decision so if some weren't hedged accordingly etc why were they in that market for substantial solvency risking amounts.

Did they expect the Swiss to bail them out as well as most every other taxpayer etc around the world if things went against them.

Did they expect the rest of the eurozone to cover their losses and maybe get a gift from the UK taxpayer.

Edited by billybong

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Doesn't appear to be badly affected in this latest little market event, but Michael Spencer can sure relax now, having recently sold up.

I didn't realise he'd taken so much personal loss. Good on him for taking it on the chin rather than his company going bankrupt on its creditors. Or - given the Zeitgeist of when it happened - the taxpayer.

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Does anyone know what the process is likely to be for people who had funds deposited with Alpari UK? I had a few hundred quid in an inactive spread betting account (no open positions). Their login page now just redirects to the message about them closing. As far as I understand it, I shouldn't have lost it due to it being in a segregated account and governed by FCA rules. Do you think I'll have to claim it somehow?

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Does anyone know what the process is likely to be for people who had funds deposited with Alpari UK? I had a few hundred quid in an inactive spread betting account (no open positions). Their login page now just redirects to the message about them closing. As far as I understand it, I shouldn't have lost it due to it being in a segregated account and governed by FCA rules. Do you think I'll have to claim it somehow?

Your funds should have been segregated in a client money account and so unaffected. The administrators should pay you back, unless client money rules have been breached.

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Your funds should have been segregated in a client money account and so unaffected. The administrators should pay you back, unless client money rules have been breached.

I hear Bernard Madoff was on the board! - ok, only kidding.

Edited by weaker

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