Forex Broker Alpari UK Announces Bankruptcy With Heavy Losses On Friday

Billions of dollars were lost yesterday when the Swiss National Bank surprised the market with its decision to unpeg Swiss franc from euro. Swiss franc CHF appreciated suddenly 41% in one day. USDCHF lost 1867 pips in just 1 day. Traders trading without stop losses got the lesson of their lives yesterday with most of them going heavily in the negative. There are forex brokers who also became insolvent due the market surprise yesterday. Famous forex broker Alpari UK amongst those brokers who went belly up yesterday as its clients suffered massive losses and all those losses were passed on to the broker.

“The recent move on the Swiss franc caused by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity,” Alpari UK said in a statement.

“This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover this loss, it is passed on to us.”

Other brokers were more fortunate. Some of them suspended trading USDCHF and other CHF pairs. Alpari UK was unlucky. New Zealand Brokerage Excel Markets also announced bankruptcy.

“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 onto us.”

This is an example of an event that is popularly known as Black Swan. Black Swan events can happen all of a sudden and can cause systematic failures if proper risk management measures have not be put in place. Friday will be a lifelong lesson for those traders who were trading USDCHF pair without a stop loss. It will also be a great lesson for forex brokers who didn’t go bankrupt. They should firm up their risk management systems.

This type of black swan event is by definition completely unpredictable and you have seen how it had a knock on effect on seemingly unrelated pairs, as well as the wild swings on stock markets et al. “Experts” & commentators around the world were pontificating on what was going to happen next, when in reality no one knew. The problem is further exacerbated by the fact that the big hedge funds & banks have automated systems and algorithms that kick in without any clue what is happening in the market and make the situation even more erratic.

There are many forex traders who lost their whole account balance yesterday trading USDCHF and other Swiss franc pairs. Important lesson never ever trade without a stop loss. But there are some forex traders who got lucky yesterday and made a lot of money. This type of event is a once in a lifetime event that shouldn’t make them overconfident.