There seems to be no end to the bloodshed caused in the aftermath of the Swiss National Bank’s unexpected removal of the 1.2 EURCHF floor, simultaneously adopting negative interest rates leading to never a before seen volatility across franc pairs. Various institutions across the financial industry reported substantial losses, including Hedge funds, retail brokers, prime brokers and even some of the world’s biggest banks in their trading activities.
Today, we bring you news about Citigroup, one of the world’s largest FX dealers by volume. The bank was reported to have recorded a $150million dollar loss in trading during the SNB event, an unfortunate loss considering that the bank only removed its Swiss franc hedge about a week to the event. Just as news of casualties from the Swiss black swan event was beginning to die out, CitiFX Prime Broker, one of the largest prime brokers in the world is reported to have put accounts under review with an intent to terminate accounts, the process of which began last week. This is seen as a risk management technique, where the firm looks into its exposure by analyzing the prevailing market conditions and service costs, while consequently off-loading some accounts.
Citi FXPB is not alone in this ship as reports reaching us inform on similar steps taken by Bank of America. Firms affected by the off-loading process from these prime brokers will have their trading activities halted if they relied exclusively on a single PB for operations. Subscribing to another prime brokage service may also prove challenging as most such firms will be looking to raise requirements to cater for the imminent risk in FX trading.