A New Zealand foreign exchange broker was forced to close today after suffering "a total loss of operating capital" in the wake of Switzerland's shock move to scrap its currency cap.
Global Brokers NZ said the Swiss move, dubbed 'Francogeddon' by online commentators, resulted in "rare volatility and illiquidity" in the markets."The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity. When a client cannot cover their losses it is passed on to us," director David Johnson said in a statement.
As a result, he said the Auckland-based broker sustained losses that meant it could no longer meet New Zealand regulators' minimum capital requirements of $NZ1 million and was shutting its doors.
Johnson did not reveal the extent of losses suffered at Global Brokers NZ but said clients whose funds were not affected by the Swiss action would not lose their money.
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