Swiss currency crisis claims casualties across the world

West Ham FC sponsor Alpari UK has become one of the biggest casualties of Thursday’s turmoil on currency markets sparked by the Swiss central bank abandoning its attempt to peg the franc against the euro.

Alpari UK, an online foreign exchange dealer, said it was insolvent because of the scale of the losses suffered by its clients after the shock move by the Swiss sparked wild swings in the £3.5tn-a-day foreign exchange markets.

The repercussions of Thursday’s drama were being felt across the globe on Friday. In New Zealand, Global Brokers NZ said it was closing down as it could no longer meet local regulatory requirements and in New York the US foreign exchange brokerage FXCM was scrambling to raise funds to avert collapse. Shares in FXCM slumped 40% ahead of a formal announcement about its future after it admitted it faced $225m of losses.

In London, rumours swept through dealing floors about potential losses following the surprise decision on Thursday by the Swiss to stop holding their currency at SFr1.20 against the euro.

The move led to a temporary seizure in the markets and the franc leaped an unprecedented 30% against the euro.

Late on Friday the euro was trading at SFr0.98, above the SFr0.80 it had slumped to at one stage on Thursday but far off the Sfr1.20 that dealers had assumed would remain in place.

There were reports Barclays and Deutsche Bank had lost millions.

Sterling jumped to its highest level against the euro for seven years, prompting foreign exchange dealers to recommend that holidaymakers lock in now. The pound rose to €1.315 to the euro, 9% higher than this time last year and nearly 20% above the rate holidaymakers paid in summer 2011.

In the immediate aftermath of Thursday’s move by the Swiss central bank, analysts at Alpari had described the decision as “idiotic” and by Friday the firm had announced it was insolvent. “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,” said Alpari.

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

It said any funds held on behalf of clients were kept in separate accounts as required by rules imposed by the Financial Conduct Authority. Some clients were said to have accounts of £2m to £3m.

Alpari, which signed a three-year £9m deal with West Ham in 2013 is not the first of the club’s sponsors to run into trouble. In 2008 XL, then Britain’s third-largest package holiday group, collapsed.

IG Index was the first broker on Thursday to announce it could face £30m of losses, and similar announcements followed yesterday from other firms. Spread-better London Capital said it had £1.7m of exposure as its shares fell 16% while other firms, such as City Index, were issuing statements reassuring their clients.

“It has come to our attention that a number of retail brokerages have announced that this has resulted in them experiencing acute financial pressure. Following this and queries from customers, we would like to take the opportunity to reassure our clients and confirm to the market that City Index has not suffered any material impact as a result of yesterday’s volatility and our financial position has not been affected,” City Index said.

CMC, the money broker which is run by former Conservative Party treasurer Peter Cruddas, said it too had incurred losses but said the business was still strong. “It’s business as usual,” Cruddas said.

Companies such as Travelex, HiFX and CaxtonFX which allow customers to exchange currency or transfer cash overseas to order rather than offering customers trading accounts said they were unaffected.

“We are very different to Alpari, which was designed for people who want to speculate,” said James Hickman, managing director of CaxtonFX.

“But I’m surprised they went bust so quickly. Ultimately, they should be able to go back to the client to recover the money they lost. But all the brokerages will be hurting today. They have been offering huge leverage and will now be cutting back the amount of leverage they allow clients to have.”