FX brokerage firm Admirals (formerly Admiral Markets) has warned its clients about volatility surrounding the Swiss Franc pairs, which has the potential for creating sharp movements, including price gaps.
The Franc has made strong gains over the last few weeks which might trigger a positioning unwind and short squeeze volatility following a recent spike in investor demand for safe haven currencies.
Fueling the uncertainty, Swiss National Bank Chairman Thomas Jordan had undergone an urgent heart operation at the weekend. The SNB chief is reportedly out of action for several weeks as he recovers from the medical procedure.
In an email sent to clients, Admirals said it could raise the margin traders have to deposit with them to account for increased risks.
Other FX brokers may take special measures in anticipation of higher volatility and trading volumes. As Jordan could miss the central bank’s next interest rate decision, online brokers may have already ironed out their plans to protect themselves and their customers from any sharp market shifts that have the potential to wipe out account balances in an instant.
Apart from measures that have been taken by various providers to manage their exposure to risk, the majority of forex traders might make several adjustments to their trades or close their positions. The current geopolitical turmoil and coronavirus pandemic could swiftly have a knock-on effect on open trades, trigger stop-outs, and liquidate accounts as markets turn.
Forex traders, brokers, liquidity providers, and other concerned parties seem ready to draw on lessons learned from memories of 2015 unexpected Swiss franc volatility after many platforms failed when the SNB scrapped its fixed euro peg.
Many forex traders who lost money when the Swiss National Bank abandoned a trading band for the franc have sued their brokers to recoup part of their losses.
Some major banks also lost out when the Swiss National Bank scrapped its three-year-old cap on the franc against the euro without warning. Alpari UK filed for insolvency, while FXCM suffered $225 million of losses.
Admirals is licensed by the UK Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC). The regulatory approvals allow the brokerage firm to offer a set of financial services and also approved to provide cross-border services across the EU / EEA under European passport rights.
Earlier this year, the broker made headlines after undoing its previous decision to slash the fees it charges on some stocks and exchange-traded funds (ETFs) to zero.
Admirals decided to discontinue the zero-fee trading offer for Stock CFDs and ETF CFDs and started to levy a commission.
To put the move into context, Admirals was among trading platforms that took matters into their own hands amid unprecedented volatility in certain stocks. The company was getting tougher to restrict the trading of several highly shorted stocks following a trading frenzy led by amateur investors.
The multi-asset broker has also introduced dramatic changes to its trading terms around Stock and ETF CFDs, effectively banning purchases of the risky securities.