While we are almost five years away from the , the shockwaves from Switzerland’s decision to scrap its currency ceiling against the euro are still felt. One of those traders that were left in a case of a negative balance after the sudden leap in the franc’s exchange rate was Singapore-based company Innopac Holdings.
is demanding the firm to repay S$14.7 million ($10.9 million) to settle the negative equities incurred in the accounts maintained by its subsidiaries. Saxo Bank is alleging Innopac is liable for the losses, but the holding company filed counterclaims, stating that the negative balances were incurred without any guarantee by the company.
“The company continues to believe that Saxo Bank’s claims are without merit and shall expend all efforts to defend its rights while seeking damages in our own counterclaim,” Innopac further explains.
The Denmark based broker was just one among hit hard after the SNB withdrew its floor for the euro against the franc.
Most forex brokers have forgiven loans made to clients or their negative balances and didn’t demand them to deposit more money. However, some other brokers have taken an aggressive approach and were pursuing the money, including which has taken a hard line against customers, blaming them for losses.
More specifically, Saxo has repriced some CHF trades, which had initially been confirmed as completed at better rates, and is chasing its clients for about $100 million in losses. The foex bank claimed that its platform published incorrect prices by failing to represent the complete absence of liquidity in the underlying financial market. It also added that its business terms explicitly grant it the right to revise prices after trades have been closed.
The aftershocks are still felt
The Danish broker may have been encouraged to revive its claims after the Danish Supreme Court, one of the country’s two high courts, had in the latest lawsuit stemming from the SNB’s crisis.
In January 2015, the Swiss National Bank’s surprise decision to remove the Swiss franc’s euro peg has left brokers and their clients on treacherous ground. Saxo was already left with a capital hole after losing as much as $107 million when the Swiss National Bank abandoned its exchange-rate cap on the franc.
In a counter-move, a group of Saxo Bank clients who lost money as a result of the Swiss franc’s appreciation have sued their broker to recoup part of their losses, particularly after scoring a victory against some firms such as IG Group.
The FX market volatility resulting from the Swiss Franc drama prompted heightened regulatory scrutiny of the retail brokerage sector. Many regulators, led by Europe’s ESMA, ordered brokers to , put negative balance protection measures in place and stop providing trading bonuses to market their services.
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