Admirals warns clients of Swiss Franc volatility

Global Retail FX and CFDs broker Admirals has sent out a note to clients, warning them of potentially increased volatility in currency pairs involving the Swiss Franc (CHF).

Admirals stated that due to increased speculation around potential Swiss National Bank actions in financial markets in the weeks ahead, there may be an increase in market volatility in all Swiss Franc (CHF) currency pairs as a result.

The Admirals warning of course was a strong hint to clients that the quite incredible action around the CHF in January 2015 could repeat itself. Back in early 2015 the Swiss National Bank surprised the markets by signaling that it was no longer going to hold down the value of the CHF versus the Euro, which led to an immediate 20% spike in the value of the Swiss Franc against most other major currencies – alongside general liquidity chaos in the markets. That “black swan” event led to the bankruptcy (or near bankruptcy) of a number of leading FX brokers, and outsized gains and losses to quite a number of unsuspecting retail and institutional traders who were trading the CHF with any leverage.

Although there are no immediate changes to its services to clients, Admirals stated that it retains the right to introduce changes to trading terms as it deems necessary to ensure better investor protection and orderly trading during highly volatile periods in currency and any other relevant markets.

Admirals told client to be aware of increased risks within the period leading up to and following the potential intervention of the Swiss National Bank, among all other risk factors:

  • Sharp moves and significant gaps in market prices, especially in CHF pairs and Swiss index;
  • Limited liquidity, which may result in much wider spreads, and an increased amount of order rejections and slippage;
  • Reduction of available leverage;
  • Significantly higher overnight fees (‘Swaps’);
  • Relevant instruments and/or overexposed accounts going into ‘close-only’ trading mode without notice;
  • Changes to supported trade sizes and trading session times;
  • Introduction of per-account CHF exposure limits;
  • Further changes of trading conditions of CHF or other closely related currencies on a very short or even without any advance notice to you.

These measures are just an indication of typical adverse effects that are inherent to greater volatility, and Admirals said it reserves the right to introduce any other temporary or permanent measures and trading restrictions as may be required during these exceptional circumstances.

Admirals also reminded clients that stop-loss orders are a tool intended to automate position exit routine – they are not a guarantee of a certain position exit price, and clients should still be aware of the high risk of gaps in market prices during volatile periods.

The broker added to please ensure that you’re comfortable with the size of your CHF positions heading into the new trading week and, if required, consider either reducing your exposure to financial markets or adding funds to your accounts to withstand possible greater price fluctuations.

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