I’ve been getting a lot of feedback on my previous article about forex brokers dealing with the aftermath of the SNB shocker last month so I decided to write a follow-up entry on what’s been going on.
The issue of negative account balances has been a hot topic among retail forex traders these days, as some brokers have decided to forgive clients’ debts while others are trying to collect payments. Alpari UK, which has already filed for insolvency after seeing jaw-dropping losses on their clients’ accounts that fateful day, has been under administration by KPMG which announced that payments will be required on negative balances.
Following in the footsteps of Alpari UK are Boston Prime and BT Prime, which are entering into bankruptcy proceedings. As it turns out, most of their clients refused to repay negative account balances spurred by the SNB announcement, prompting these companies to report its insolvency to the FCA (Financial Conduct Authority).
LQD Markets, another UK-based forex broker, filed for bankruptcy protection recently after suffering losses of over a million dollars due to the unprecedented jump in volatility when the SNB decided to drop its franc peg. The company had attempted to look for a buyer, offering a 50% stake in exchange for as much as 500 thousand dollars, but failed to do so and was forced to seek bankruptcy protection.
With this recent wave of broker insolvency and bankruptcy, participants in the iFX EXPO Asia 2015 zoomed in on the importance of industry regulation in enforcing leverage and margin requirements. Thousands of forex professionals shared their insights on the SNB event, with some CEOs favoring decisions to forgive negative account balances and others arguing that clients should be held liable for their debts.
This issue should continue to dominate forex industry discussions moving forward, as the SNB surprise announcement is definitely one for the books. For now, significant changes such as adjustments in leverage and margin requirements are being felt across the market while most traders have become increasingly conscious of proper risk management strategies.
How do you think this “black swan” event could affect the forex industry in the longer run? Don’t hesitate to share your thoughts in our comments section!