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Asia FX brokers hit hard by Swiss franc shock, regulators probe

Reuters
A man and his dog walk past the building of the Swiss National Bank (SNB) in Zurich January 15, 2015. REUTERS/Arnd Wiegmann

By Elzio Barreto

HONG KONG (Reuters) - Some retail foreign exchange brokers and trading houses in Asia have been hit by massive losses from Swiss National Bank's (SNB) sudden move to abandon a cap on its currency that led to heavy volatility, with one even being forced to close.

Regulators in New Zealand and Hong Kong said on Friday they were looking into the situation of brokers and banks trading the Swiss franc, following reports of the volatility and losses.

The Swiss currency surged as much as 30 percent to a high of 0.8500 franc per euro after the SNB suddenly ditched its commitment to cap the franc at 1.20 per euro on Thursday.

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The surprise move caused New Zealand foreign exchange dealer Global Brokers NZ Ltd to close due to hefty losses incurred from the volatility.

New Zealand's Financial Market Authority (FMA) said it would "be seeking assurances that the client funds have been protected and segregated" after Global Brokers said it sustained a total loss of operating capital.

BROKER WOES

FXCM Inc, one of the biggest platforms catering to online and retail traders of currencies, said it may be in breach of some regulatory capital requirements after its clients suffered $225 million of losses.

"We are following up with the banks on their practice in this regard including the relevant governing terms and conditions to understand the implication, if any, but we would not comment on the situation of individual banks," the Hong Kong Monetary Authority (HKMA) said in an emailed statement.

Foreign exchange broker OANDA said in a statement it "will pardon our clients' negative account balances associated with this market event" and vowed not to "re-quote or amend" clients' trades on the Swiss currency.

"Today's events are sure to trigger broker consolidation, which as an extremely well capitalized broker, interests us greatly," OANDA added.

OANDA's move contrasted to Denmark's Saxo Bank, one of the biggest players in retail foreign exchange trading, which said late on Thursday it would potentially set different rates for its clients' transactions.

Meanwhile, Hong Kong media reported clients of HSBC Holdings were able to buy the Swiss currency at below-market rates for several hours through its online system, making several thousand dollars in profits on the trades.

HSBC said online foreign exchange trading for the Swiss franc "is currently operating normally and we will investigate reports that customers could trade at old rates initially after the cap was lifted."

(Additional reporting by Michelle Chen in Hong Kong and Lincoln Feast in Sydney; Editing by Jacqueline Wong)