financefresh-blog

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Thus, Alexis Tsipras is in Moskow.  Claiming that Greece has prevented broader sanction and even speculates its further assistance in return for supporting Greek economy.  According t o Financial times chief political commentator Philip Stephens V. Putin also seeks to take advantage of as he defines it the “tale of two tragedies” one being the whole situation with Greek economy and on the other hand the weakness of “the Euro.”

On the other hand WSJ article cites Maja Kocijancic, the EU’s spokeswoman for foreign affairs who has stated that  “The European Union’s unity when it comes to restrictive measures has been confirmed regularly including with the new Greek government.”  Tsipras is currently being very cautious in establishing new ties without damaging relations with EU, which makes sense. However, the accorditn to FT political commentator the problem of Greece lies in the core and is more connected with initial intentions of the head of the state rather that pure fianantial situation of the country. according to Mr. Stephens,  nobody in EU believes that Greece seeks or can implement necessary reforms to eliminate corruption and build a truly legal European state  - “People do not think that Greece has the capacity to implement even the quite modest things .”

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WSJ comes up with some news

Credit Suisse Names New Global Heads of M&A, Other Changes

Credit Suisse Group  AGCS +0.48% announced  several changes to its investment banking team Friday, including naming two new co-heads of global M&A and a new global head of retail and consumer products.

The changes come days after Chief Executive Brady Dougan announced that he would be stepping down and the bank said Tidjane Thiam, the CEO of the U.K. insurer Prudential PUK -0.74% PLC, would take over.

Credit Suisse ranked ninth in announced M&A in both 2013 and 2014, according to Dealogic.

According to a memo distributed internally, Robin Rankin, the global co-head of retail and consumer products, and Greg Weinberger, the co-head of Americas M&A, have been promoted to take over as co-heads of the bank’s global M&A.  Scott Lindsay, the current global head of M&A, will become the chairman of global M&A effectively immediately. Mr. Lindsay joined a former unit of the bank, First Boston, in its M&A group in 1982.

Ms. Rankin, a 22-year Credit Suisse veteran, held the role of global co-head of retail and consumer products since 2011 and ran the business in the Americas since 2007.

Mr. Weinberger previously served as co-head of Americas oil & gas. Most recently, he was among the advisers to Halliburton  Co.HAL -1.98% on its pending $35 billion acquisition of rival Baker Hughes  Inc.BHI -1.44%  Mr. Weinberger joined the bank in 1996 from the law firm Cravath Swaine & Moore.

Jens Welter, a 20-year veteran of the bank, has been appointed the sole global head of retail and consumer products.  He has been one of the co-heads of retail and consumer products since 2011 and has advised clients including Nestle NSRGY 0.00%, L'Oreal LRLCY +0.33% and Lindt.

Additionally, the bank said Anthony Armstrong has been appointed head of technology for the Americas.  Mr. Armstrong joined the bank in 2000 as part of the bank’s merger with DLJ, but left in 2009 for a two-year assignment as head of M&A for Qatar Holding. He rejoined the bank in 2011 as co-head of Americas M&A.

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Hello we’re back with some salt and pepper from Greece left wing government shaking the markets, causing confusion and euro group and troika miserably failing to settle the situation.

The dollar is going up, while EU leaders are speculating on Greece leaving the Euro area and going back to solidarity rhetoric. Hnceforth markets respond accordingly with Shanghai shares edging up 0.2 %, China Central Bank refusing to take up extreme risks with credit creation.

Australia's main index wend down for 0.6 while Dow Jones closed at 0.79 percent, with S&P 500 went up for 1.07 %t and the Nasdaq 1.3.

The market pressure goes up as Greek Defence ministry is considering receiving assistance from Russia or China if EU is unwilling. Thus, FED is expected to raise interest rate by mid year.

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J.P. Morgan reaping profits from Swiss Franc Shock

So far there has been a lot of information on losers from Swiss bank decision, however, according to recent information J.P. Morgan Chase and Co. owed the Swiss Franc move and netted “$250 million to $300 million.” According to this article by WSJ that sites undisclosed source: “J.P. Morgan filled client orders at a certain rate, allowing them to quickly assess their position and continue trading when liquidity dried up in the market, this person said. The bank told clients it would fill orders at 1.02 francs per euro while the Swiss currency grew from 1.20 francs per euro to nearly .85 on Jan. 15, the person said. It is unclear how long the bank offered this rate to clients.”

As far as bank ability is considered it should be noted that during last 3 month 2014 JPMorgan accumulated $2.5 billion in fixed-income trading revenue. According to Bloomberg data this is a 23 percent drop compared to 2013, caused by “sale of a commodities unit and lower volume in credit and securitized products.” The average VAR (value at risk) f the division to $33 million in the quarter, that is $6 million lower that 2013 with $39 million.

For additional info on why the Swiss Franc fell please check out this article by Matthew Klein in FT.

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Swiss Franc Move Hits the Ordinary People

The Swiss Franc situation is continuing to have major impact not only on Forex Markets. Thus, FT informs on consequences for Swiss Franc  Mortgages in Hungary  thus “Hundreds of thousands of holders of Swiss franc mortgages across Poland, Croatia, Romania and Serbia suddenly found themselves facing repayments up to 20 per cent higher overnight.” The borrowers were attracted by low interest rates and not have to pay a higher price price.

This 2 percent became a devastating figure for Polish middle class, according to New York Times. The loans taken in Swiss francs were in many cases takes from foreign-owned banks, that offered lower interest rates. According ECB date Poland has almost “$40 billion in loans denominated in francs.” “The borrowing, which accounts for nearly 8 percent of the country’s gross domestic product, has left Poland weighing its options. On Wednesday, the Polish government urged banks to convert franc loans to zloty at market rates.”

Also the Impact on Austrian banks also appears to be tricky as many Austrian banks, such as  Erste, Raiffeisen and UniCredit Bank “were the biggest providers of Swiss franc loans,” according to last week’s Fitch Ratings the effects of Swiss move had “manageable immediate effects”. Nevertheless, the pressure on profitability is expected as there will be a rise in loan impairment charges.  

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Market Update

According to Reuters there is another major currency NZ dollar hitting its record low on Thursday.

So no there is an expectation for a rate cut. after the Reserve Bank of New Zealand possibly considers rate cut as the kiwi slipped to $0.7320 . “The kiwi last stood at $0.7323, hovering at lows not seen since March 2011. Against the yen, it slid to its lowest levels in three months at 85.88.”

  At the same time “The dollar stepped back from an 11-year peak against a basket of currencies after soft spending data and disappointing earnings cast doubt on underlying optimism about the U.S. economy, but it found some support against Asian currencies.”

However, there is an upcoming Federal Reserve Policy announcement do some analyst believe that this is just an adjustment in expectoration for the upcoming information. There are certain worries that Federal Reserve may be quite cautious when it comes to future rate rises, conditioned by robust data on consumer spending and home sales and other U.S. data. Also it should be taken into consideration that inflationary pressure is cooled down by the plunge in oil prices.

Also the Australian dollar leaped by 0.7 percent to $0.7988 after core inflation that surpassed expectations and investors had to decrease their expectation of upcoming interest rate cut next week.

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Swiss Frank show may cost too much to Saxo Bank

Saxo Bank is facing lawsuits from clients that are unhappy with the company efforts to compensate their losses. The clients had time until January 23rd to report how much they’ve lost in borrowed funds. According to estimates the company losses equal $107 million. According to the bank it may take a couple to moths to settle the issues with institutional and retail customers. However, Steen Blaafalk, Saxo’s chief financial officer states that there is a little chance for facing lawsuits and hopes that all matters will be settled though alternative channels.

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What’s in Greek Elections?

Recent results of Greece elections had a considerable impact on markets. Thus there is a lot of speculation around Euro and its drop in connection with EU political and debt relief crisis. However the quantitative easing of ECB leaves some hope that Euro is going to be back in the game again. According to some analysts the Greek elections inject more risk into markets, which makes some investors to pull back.

The crisis has impact on Gold prices, thus, according to Bloomberg gold traded near one week low. This is explained. According to HSBC analyst “gold market’s focus may shift to the upcoming FOMC meeting.” However, according to analytic the gold prices are overly affected by global monetary policy expectations and are less dependent on Greece policy developments.

In connection with gold prices it is noteworthy that Netherlands has increased its gold reserve. This tendency holds true for central bank globally. As they seek for asset diversification. According to World Gold Council “Gold can help reserve asset managers reduce portfolio risk and preserve wealth. It is routinely used as a long-term inflation hedge by investors.” Especially, taking into consideration the negative correlation of gold against US dollar, which makes it a perfect instrument to hedge a possible dollar downgrade. However, there is an expectation that the dollar is going to have a firmer position through 2015 and the gold trend may be short lived.

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Another Market Blow and Saxo Bank Margin Review

Bank of Canada hit the markets with another blow after the Swiss Frank losses “lowering its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.”

 The Bank explains its decision by sudden drop in oil prices which is considered to be “be negative for growth and underlying inflation in Canada.”

 According to CNBC news: “he benchmark index of the Toronto Stock Exchange jumped 252 points, or 1.8 per cent, to 14,560.” Another major news maker Bloomberg informs that “Credit Suisse Group AG and Saxo Bank A/S both said the move may hamper earnings.”

  Currently markets are waiting for ECB decision to pump in 1.3 trillion of quantitative easing into European economy. There are growing fears amongst investors for European economy to enter into stagnation phase and it is still a question if ECB is going to invest a big sum as a one time mitigation act, or there is going to be a step by step program, coming out in tranches. This tranches may be injected monthly similar to US style quantitative easing as there has been a proposal from ECB to provide a $58billion monthly tranches till the end of 2016.

 As far as volatility is considered according to Bloomberg  “JPMorgan Chase & Co.’s Global FX Volatility Index rose Jan. 16 to a 1 1/2-year high of 11.52 percent before declining to 10.62 percent today.” Thus average for this index has been 10.3 percent for the last 10 years.

This means riskier environment and “riskier environment means Saxo is still reviewing its margin policy.”

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Saxo Bank tightens access to leverage

Steen Blaafalk, Saxo’s chief financial officer gave an e-mail response interview to Bloomberg where he mentioned that during upcoming weeks is assisting its clients to manage swiss frank losses. However, according to Bloomberd, the bank requires its clients “to pay more to trade currencies using borrowed funds. The decision affects the euro, dollar, pound and yen, as well as the franc.”

  This is explained by volatility surge that is extraordinary and this is why Blaafalk informs that Saxo Bank tightens access to its leverage, for the clients to be “prepared for increased volatility and short-term shocks.”

  In connection with Swiss National Bank’s the same Bloomberg informs that “Citigroup Inc., Deutsche Bank AG and Barclays Plc suffered about $400 million in cumulative trading losses” citing ‘informed sources.’

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Follow up on How Swiss Franc Shock Impacts Forex Brokers

This is a follow up on an earlier post in connection with the  The Swiss National Bank (SNB) on 15 Jan. 2015. We will keep on updating this press review:

FXCM

FXCM on 19 Jan. 2015 has updated information on Leucadia National Corporation (NYSE: LUK) loan provision. More specifically, on 16 Jan. 2015, Leucadia National Corporation has provided  a two year the loan for $300 million for interest rate of 10% per annum. In case if the loan is outstanding this interest rate increases by 1.5% every quarter without exceeding arranged 17%. It is noteworthy that as a part of the credit agreement ‘ Holdings formed Newco and contributed all of the equity interests owned by Holdings in its subsidiaries to Newco.’ 

  ALPARI

Updated announcement on Alpari.co.uk website: “Alpari (UK) Ltd applied for insolvency on Monday 19 January 2015 following the decision on Thursday 15 January 2015 by the Swiss National Bank.

Dukascopy

Dukascopy as of 19 Jan. 2014 has published two press releases. One of the statements releases its clients from   obligation to cover negative balances and stating that there are no trade cancellations. The other press release, refutes earlier publication of FXStreet.com “that Dukascopy Bank would have suffered USD 40 million losses due to the CHF move on Thursday, 15.01.2015.” The broker explains this mistake with confusion between two Swiss Banks. 

Hot Forex on 16 Jan. 2015 media release stated that regardless significant losses on market participants the company has not suffer any significant material losses due to its risk management procedures.

Stay tuned for more…

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How Swiss Franc Shock Impacts Forex Brokers

On 15 Jan The Swiss National Bank (SNB) announced discontinuation of the minimum exchange rate of CHF 1.20 per euro. Simultaneously, it lowered the interest rate on sight deposit account balances which surpassed a specified exemption threshold by 0.5% to −0.75%. This announcement affected many leading brokers. Here is a list of major brokers and the overview of the CHF currency crosses impact. We will keep you informed on the further developments on the issue.

Saxo Bank

The largest and oldest Danish FX broker - Saxo Bank has made two announcements according to 16 Jan 2015  press release there has been an inflow of clients regardless the CHF currency crosses and that there are “insignificant proprietary exposures to moves in the market.” 

According to 19 Jan 2015 press release Saxo Bank meets the regulatory capital requirements and although some of its clients have suffered losses which are expected to be covered by the bank “even in the unlikely event that Saxo Bank would not be able to recover any of the outstanding amounts, Saxo Bank would still fulfil its regulatory capital requirements.”

FXCM

FXCM as of 15 Jan 2015 announced that after SNB announcements its clients “owed to FXCM of approximately $225 million.” 

According to company’s January 16 statement Leucadia National Corporation (NYSE: LUK) “would be providing $300 million in cash to FXCM” which makes it possible for FXCM to meet regulatory-capital requirements and carry on with its operations. 

ALPARI

Announcement on www.alpari.co.uk website states that due to lack of liquidity caused by high volatility due to policy SNB policy reversal “the board of directors are considering all options including a sale” in close liaison with FCA. According to this announcement: “retail client funds continue to be segregated in accordance with FCA rules.”

Interactive Brokers Group

Interactive Brokers Group as of 16 Jan 2014 announces that some customers lost the excess of their deposits which in total is around $USD 120million  (2.5% of company net worth.)

Dukascopy

Dukascopy as of 16 Jan 2014 has announced that it passed through CHF price shift due to its ‘advanced execution technology’ and reduced the leverage on EUR/CHF to 1:10. 

Excel Markets

New Zealand FX Broker Excel Markets on 15 Jan. 2015 has announced that it cannot cover the losses of the clients in CHF position, thus “it can no longer meet regulatory minimum capitalization requirements of  $1,000,000 and will not be able to resume business.” 

FxPro

FxPro – as of 16 Jan 2015 announced that negative balances from 15 Jan. 2014 have not affected the client funds. 

On 17 Jan 2015 the company confirmed client commitments.

OANDA

According to OANDA statement the company “did not re-quote any of our clients or amend any CHF-cross client trades” and forgave all negative balances.

London Capital Group

According London Capital Group statement as of 16 Jan 2015 the company’s balance sheet is well capitalised and there has not been any material impact  in connection with SNB announcement. Also the company’s  client debts “will not exceed £1.7 million.”

CMC Markets

CMC Markets has not suffered substantial material losses and carried on with strong balance sheet, 24% of regulatory capital ratio and fully segregated client funds. 

AVA TRADE

Ava trade on Jan 16 confirmed its strong market position, with no material effect on its balance sheet due to “robust risk management systems.c

Please, stay tuned for upcoming news.