AtoZForex.com Lagos — By far the most sudden market event of the year so far was the unprecedented move across Swiss franc pairs on January 15. The historic movement occurred as a result of the sudden removal of the 1.20 floor by the Swiss National Bank, which was the minimum exchange rate limit since 2012. Right after the news EUR/CHF pair tumbled not only below 1.20 but all the way to 0.80 levels.
The bank also lowered interest rate to –0.75% on sight deposits which exceed a given exemption threshold by 0.5 percentage points, to −0.75%. It is moving the target range for the three-month Libor further into negative territory, to between –1.25% and −0.25%, from the current range of between −0.75% and 0.25%.
The event resulted in multiple casualties in the industry for independent traders, brokers, prime brokers and even banks. One of the high profile cases is that of the Forex industry giant, New York based FXCM. The company ended up with about $225 million client losses, leading to a 90% plunge in the company’s shares. The company received a rescue funding from Leucadia, a subsidiary of New York-based investment bank, Jefferies Group. to the tune of $300 million with the following terms of agreement: An initial interest rate of 10% per annum
- 5% quarterly increase for as long as it stays
- The loan would not exceed a total of 20.5% interest
The event also led to multiple changes in brokers’ platforms, especially regarding trading terms of currencies which are susceptible to external influence from its government. Exness is one of such firms. Today, Exness has clarified that it is reversing margin requirements for currency pairs with CHF to correspond with the ordinary rules for providing leverage at the firm since markets have now stabilised in the aftermath of the historic event.
The report states that:
“Dear clients and partners,
EXNESS is pleased to inform you that beginning June 4, 2015 margin requirements will be lowered for currency pairs with the Swiss franc (CHF). These changes will apply to all account types.”
Now that Exness relaxes CHF margin requirements, the firm sited the example that when trading with 1:2000 leverage, the margin requirements are 0.05% of the transaction volume.