Swiss franc's massive surge claims brokerage firm scalps

LONDON - The staggering ascent of the Swiss franc, one of the most acute moves in decades by a major currency, has hurt financial firms around the world, with at least two brokerages going out of business.

Though currency markets were a bit calmer Friday, with the euro down 1.1 percent at 0.9824 francs, the repercussions from the previous day's move were being felt at financial firms from New York to New Zealand.

On Thursday, the franc surged by as much as 30 percent against the euro in the minutes after the Swiss National Bank (SNB) said it was ditching a policy that limited the rise of franc. It adopted the policy in 2011 to keep the franc's rise from hurting exports.

Derek Halpenny, a currency strategist at Bank of Tokyo-Mitsubishi UFJ, described the currency move as "unprecedented." He's not alone in thinking that. The scale and speed of the move in one of the world's most-traded currencies caught many financial firms unprepared. While holders of francs gained, those with sizable holdings of euros or dollars against the franc suffered heavily.

While big banks can absorb big losses, for some smaller firms, the volatility in the franc proved too much.

Alpari, the London-based brokerage that sponsors the shirt of English Premier League football club West Ham United, said it had to shut down.

In a statement, the firm said the majority of its clients sustained losses that exceeded their account equity. "Where a client cannot cover this loss, it is passed on to us," it said. "This has forced Alpari (UK) Ltd. to confirm today that it has entered into insolvency."

The scale of anger within the firm was evident in a note that its market analyst, Craig Erlam, published Friday before news of the wind-down. Bemoaning "idiotic actions of the SNB," Erlam wonder about the "longer-term impact on the markets."

Alpari's demise follows that of Global Brokers NZ, a small currency trading house in New Zealand.

Its director, David Johnson, announced on the website of affiliate Excel Markets that it could no longer meet the regulatory minimum to continue business.

"News of the impact of this event on companies and traders is just beginning to come to light," he said. "As directors and shareholders, we would like to offer our sincerest apologies for this devastating turn of events."

FXCM, a New York-based currency broker, said late Friday that it was getting a $300 million rescue loan from financial firm Leucadia National Corp. It had warned that it could be in breach of regulatory capital requirements following a $225 million loss.

Even so, FXCM shares fell 70 percent to $8.86 in after-hours trading Friday.

Other firms, such as CMC Markets in London, said they could absorb the hit. Though its chief executive, Peter Cruddas, conceded that the firm sustained losses, he said the overall impact has not materially impacted the group.

And Greenwich, Conn.-based retail trading platform Interactive Brokers revealed it lost $120 million. Still, the firm said that was only 2.5 percent of its net worth.