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  • Citigroup Said to Lose More Than $150 Million on FX Turmoil

    From bloomberg.com

    Citigroup Inc. (C), the world’s biggest currencies dealer, lost more than $150 million after the Swiss central bank’s surprise decision to let the franc trade freely against the euro, according to a person briefed on the matter. The losses occurred on the New York-based bank’s trading desks and aren’t tied to its relationships with FXCM Inc. and other retail trading platforms, said the person, who asked for anonymity because the information hasn’t been disclosed publicly. Citigroup’s head of European investor sales, foreign exchange and local markets, Alex Jackson, left the firm this week, another person ... (full story)

Ok, with all these brokers and clients losing money over the Swiss ordeal...I have only one question. Where did all the money go? If so many lost...then someone was a winner!
Exactly! Whose the winner here :-D reminds me of the story of John Henry.. who owns the Boston Red Sox and Liverpool.. he made a killing on a I wanna say British Pound trade.. in the news was talk all about the loser.. which happened to be some major bank that dealt with the Royal Family.. but later after John Henry bought the Red Sox it was revealed he made a lot on that uptrend move.
LOL... surely the winners were the long Swiss guys... But doubtful you'll find very many gloaters among them.

While we're on the subject of "gloaters", here's something comPLETEly different to end what must be the most gawdawful shitty mess we've seen in recent times...

https://www.youtube.com/watch?v=kjJ1bsnxxhs
I'm not trying to convince anyone. I'm not in the "convincing" business.
im a newbie when it comes to fundamentals.. as what i know, if the country raise its interest rate it should be bullish and if it cut its interest rate it will be bearish. but what happened in CHF is opposite.. correct me if im wrong
bull/bearish for what? For every bull there's a bear, for every winner there's a loser, turn, turn, turn, ...

https://www.youtube.com/watch?v=pKP4cfU28vM
"If The Fool persists in his Folly he will become wise." - William Blake
Sorros....????
Quoting cyd09
im a newbie when it comes to fundamentals.. as what i know, if the country raise its interest rate it should be bullish and if it cut its interest rate it will be bearish. but what happened in CHF is opposite.. correct me if im wrong
Forex market is more than just fundamental or technical hence don't put your focus just on bull or bear.
Quoting PA is King
Ok, with all these brokers and clients losing money over the Swiss ordeal...I have only one question. Where did all the money go? If so many lost...then someone was a winner!
same question
Quoting The Fool
bull/bearish for what? For every bull there's a bear, for every winner there's a loser, turn, turn, turn, ...

https://www.youtube.com/watch?v=pKP4cfU28vM
Nice song.
For me, it's Euro that was peg to SFR. Swiss is a small country. It's GDP is less than 1/5 of Germany. About 1/25 of US. Why is SFR traded heavily?
Quoting frx_trader
For me, it's Euro that was peg to SFR. Swiss is a small country. It's GDP is less than 1/5 of Germany. About 1/25 of US. Why is SFR traded heavily?
Simply because SNB was one of the most aggressive gold, Euro and USD buyers (mainly after 2008 L.B crisis)!
Quoting cyd09
im a newbie when it comes to fundamentals.. as what i know, if the country raise its interest rate it should be bullish and if it cut its interest rate it will be bearish. but what happened in CHF is opposite.. correct me if im wrong
Moving the deposit rate to -0.75 was in an attempt to mitigate the really drastic move, that was abandoning its policy of buying euro denominated assets in an attempt to depress the value of the Swiss franc. In reality the Swiss franc should have been significantly stronger than it has been (at the old floor of €1.2000). However in the past few years to prevent the Swiss franc from appreciating considerably due to the strength of the Swiss economy, the SNB has been buying up swathes of euro assets. The problem is that the ECB is seemingly set to engage in QE of what could be potentially up to €1 trillion (which would theoretically significantly weaken the euro and which the SNB would need to match in order to maintain the floor of €1.2000), the SNB simply felt that it could not afford it, hence it has abandoned the floor. The market has since been trying to re-rate the Swiss franc to where it should be valued.
Quoting PA is King
Ok, with all these brokers and clients losing money over the Swiss ordeal...I have only one question. Where did all the money go? If so many lost...then someone was a winner!
You won't hear of this.
If there were winners on "the inside", you won't find it mentioned in the press that's for certain.
Come with me if you want to live....
I would imagine that the Swiss banks were the winners, having piled around 8-10% of their gold reserves defending the CHF they decided it would be pay back time. Took the long bets and cut the rope, off they went on the ride.

The swiss bankers don't lose.
Quoting Ill-b-back
You won't hear of this.
If there were winners on "the inside", you won't find it mentioned in the press that's for certain.
Quoting Mike Haran
I would imagine that the Swiss banks were the winners, having piled around 8-10% of their gold reserves defending the CHF they decided it would be pay back time. Took the long bets and cut the rope, off they went on the ride.

The swiss bankers don't lose.
Exactly what I was thinking.
  •  Guest
  • | IP XXX.XXX.166.31
If there was greater risk involved with trading the swissy pairs it should have been more greatly acknowledged by the trading world. That includes brokers, liquidity providers and information sites like this one. And if this were the case the spreads on swissy pairs would have been higher which would have discouraged trading these pairs.
The winners are the unseen masses of Switzerland, their central bank rightfully returned their wealth to them instantly making them all 15-20% richer at the expense of financial institutions,investors and speculators.

For ONCE the little guy won.
Twitter: @TrendersGame
a bunch of non-leveraged average Joes in the picture above... looking to save 20 CHF in profit. Waiting with their umbrellas... pathetic. Go cut some coupons in the grocery store mag as well! There might be 0.50 coupons on the bread.
Invest in alarm clocks
Citi is the most corrupt bank in the world. Sorry GS, you are now in 2nd place. So, if a Citi operation loses money, good! It couldn't happen to a more deserving bunch of thieves!
Quoting HantecRich
Moving the deposit rate to -0.75 was in an attempt to mitigate the really drastic move, that was abandoning its policy of buying euro denominated assets in an attempt to depress the value of the Swiss franc. In reality the Swiss franc should have been significantly stronger than it has been (at the old floor of €1.2000). However in the past few years to prevent the Swiss franc from appreciating considerably due to the strength of the Swiss economy, the SNB has been buying up swathes of euro assets. The problem is that the ECB is seemingly set to...
Hello HantecRich:

Can you please explain why the Swiss had the peg to the Euro in the first place ?

It seems to me that having a fixed exchange rate would have been a bad idea for the Swiss in the first place since it opens their economy up to the very problem which caused them to abandon the peg, namely having to devalue the franc to prop up the euro.

In other words with a a fixed exchange rate the ECB creating more and more euros requires the SNB to create more and more francs as more and more Euros are exchanged for francs to escape the Euro devaluation. This in turn just means more inflation for the Swiss with no real advantages that I can see. While this disadvantage seems obvious in hind sight it also seems obvious from the very beginning. So why have a fixed exchange rate in the first place ?
May the Forex be with you.
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  • | IP XX.XXX.18.155
Yet no media coverage of the ecb's role as counterparty in that swap agreement. After all it was bilateral as mentioned in the official SNB's press release 3 years ago.
Quoting Borg
Hello HantecRich:

Can you please explain why the Swiss had the peg to the Euro in the first place ?

It seems to me that having a fixed exchange rate would have been a bad idea for the Swiss in the first place since it opens their economy up to the very problem which caused them to abandon the peg, namely having to devalue the franc to prop up the euro.

In other words with a a fixed exchange rate the ECB creating more and more euros requires the SNB to create more and more francs as more and more Euros are exchanged for francs to escape...
Hi Borg
Well, as you allude to, hindsight is a wonderful thing. When the SNB started buying Euro assets a few years ago, I expect that they would not have imagined it would come to this, as the economic malaise surrounding the Eurozone has been far more prolonged than most have anticipated. But this meant that an attempt to maintain competitiveness that was presumably only meant to have been a near term solution whilst the Eurozone recovered, turned into a negative spiral as the Eurozone economy continued to deteriorate.
This is one of the key reasons behind why there was the recent "Swiss Gold" initiative referendum in Switzerland. The near term prospects of the economy were being put ahead of a depreciating fiat currency and the potential storing up of inflation in the coming years.
The SNB clearly thought it could fight the market. As per usual, the market will always win in the end.
Quoting HantecRich
Hi Borg
Well, as you allude to, hindsight is a wonderful thing. When the SNB started buying Euro assets a few years ago, I expect that they would not have imagined it would come to this, as the economic malaise surrounding the Eurozone has been far more prolonged than most have anticipated. But this meant that an attempt to maintain competitiveness that was presumably only meant to have been a near term solution whilst the Eurozone recovered, turned into a negative spiral as the Eurozone economy continued to deteriorate.
This is one of the key...
Hello HantecRich:

Thanks for the reply, but I am a little fuzzy on what the near term benefits for the Swiss economy that were suppose to result from the fixed exchange rate in the beginning. Please explain.
May the Forex be with you.
For those that think that some traders made all the money that was lost, hundreds of millions, that's not what really happened. Some made money, but not because they were trying to.

The banks and retail brokers such as FXCM & Citigroup lost huge amounts of money, which they wouldn't have if they had the time to issue margin calls & close out trades. So, who is moving the market if not them?

The prime liquidity providers such as EBS, Currenex, Integral, etc. all moved the price of all CHF pairs instantly to a level that made the CHF much higher.

No one, even the banks, had time to put out margin calls & close trades before they were under water.

It's unprecedented, & there was no warning, though some brokers, like Dukascopy had seen it coming (they're Swiss. Were they warned?) So did Martin Armstrong who warned about it several times in 2012.

Those liquidity providers did make money, but that's not what they were trying to do.

If the news that Fort Knox had been audited & contained only 20 oz. of gold in stead of many hundreds of metric tonnes, & you were a seller of gold, knowing that the price was going up instantly, you would raise the price that you would sell it at. If a huge number of traders were short gold, they would now be in trouble.

Did you make money? Of course, but it hurt your customer base, also. Basically, you had no choice because of market conditions, in this case the news release of the Swiss National Bank with no warning.

It seems very likely that the SNB wanted to hurt traders that were costing it billions to maintain the peg. It was their chance to get back at traders.
The mind thinks, the heart knows...
Yes certainly the SNB screwed alot of traders by dropping the peg. But its not the first time SNB manipulated the market and caused damage. Before the peg back in 2009 they were conducting billion franc market raids to manipulate the Franc and of course they crashed many traders when they imposed the peg. It is just the most recent and obvious case of what central bankers do all the time - they speculate and manipulate markets. You can never trust any of them as they conspire against free market economics at every opportunity. If you trust a Govt or Central banker then you are stupid and will get destroyed by them - its what they do!
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  • Posted: Jan 16, 2015 9:24pm
  • Submitted by:
     Newsstand
    Category: Forex Industry News
    Comments: 25  /  Views: 8,521