By now most of the brokers, traders and investors are already aware of what happened on the 15th of Janaury during the SNB’s EURCHF “Pipsunami” Black Swan Event.
Obviously the aftermaths of the CHF’s EURO floor interventions are yet to be over. On January the 20th AtoZ Forex highlighted a request sent by a client of the Danish Forex giant Saxo Bank that "Saxo Bank is liaising with loss making clients to settle unsecured amounts". That story is not over yet!
Investors are examining Saxo Bank lawsuit after the SNB’s CHF move
Multiple investors claim to have lost over 100 million kroner (15 million USD) worth the SNB’s decision to abandon its 1.20 EURCHF floor on the 15th of January. Earlier in February Andersen Partners law firm announced that "It is the opinion of Andersen Partners, that the investors have suffered extraordinary losses as a result of Saxo Bank's handling of their investments," furthermore on this subject those traders who lost their funds due to rapid movement of the Swiss Franc demand Saxo Bank’s Swiss Franc repricing to be reversed.
Saxo Bank Chief Financial Officer Steen Blaafalk commented on the subject that “Saxo was aware its decision to reprice would probably trigger lawsuits”.
Jakob Ravnsbo an attorney at Andersen Partners law firm commented that “They shouldn’t have repriced. They’re not allowed to reprice,” he continued that “I don’t see it in their terms and conditions or in their agreements with customers.”
What about Saxo Bank?
SNB did not only put Alpari UK or FXCM under difficult circumstances. As a result of SNB’f floor abandonment decision leading banks such as Citigroup Inc., Deutsche Bank AG and Barclays Plc suffered some 400 million USD in cumulative trading losses. Meanwhile Saxo Bank relatively small bank but definitely a key Retail Forex industry player suffered some 107 million USD according to the company announcement. 107 million USD translates roughly a third of Saxo’s equity capital.
Saxo Bank: “We kept taking franc orders to avoid being sued”
As traders line up with law firms and attorneys trying to recover their losses from Saxo Bank, Denmark’s FSA also are scrutinizing the bank’s actions with one big question:
“Why it took more than 2 1/2 hours to notify clients of the extraordinary conditions in the Swiss franc market, and why the bank didn’t stop trading amid a sharp increase in volatility?”
An official letter sent to the Danish Financial Supervisory Authority by Saxo Bank claims the following: “Some customers could potentially have sought to make Saxo Bank liable for such a decision that, under the conditions, could have led to significant losses”
So you might be wondering what the problem is now?! In the aftermath of the SNB;s CHF intervention Saxo bank did not stop proceeding with its CHF orders and told its client that their entries would be processed but “at less favorable levels”. And then the big thing happened, the bank repriced those prices almost 12 hours later. That is a huge difference!
In the same letter to the Danish FSA Saxobank said: “Currency isn’t traded on a central exchange, so even if Saxo had decided to suspend trade, there would have been a market via other market participants which Saxo Bank doesn’t have an influence on”
What do the clients think?
One of the Chinese clients of Saxo Bank, Mr. Xin shared his opinion with AtoZ Forex calling the official Saxo Bank response as "extremely thin defense" while another Saxo Bank client who preferred no to disclose his identity commented that "Very cheap way of defending their actions"
What next? What will happen to those losses?
Law firms defending clients with a total loss of some 15 million USD are asking Saxo Bank to reverse its Swiss Franc repricing decision and announced that the dispute will end in court if Saxo doesn’t reimburse those clients.
Saxo Bank Chief Financial Officer Steen Blaafalk said that the firm has been “liaising with each client on an individual basis to clarify what is possible with respect to each client’s situation and agreeing to an individual plan of action for the repayment”
Danish FSA will decide the faith of those who lost as a result of Saxo’s repricing decision and there is strong possibility that there is Saxo Bank class action lawsuit coming up ahead of us. One thing is for sure that the retail FX industry will not be the same after the SNB’s Black Swan event