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Swiss National Bank scraps minimum exchange rate vs euro


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http://www.businessweek.com/ap/2015-01-15/swiss-national-bank-scraps-minimum-exchange-rate-vs-euro

 

BERLIN (AP) — Switzerland's central bank says it is ending its minimum exchange rate policy that was meant to keep the euro from falling below 1.20 Swiss francs.

 

The Swiss National Bank said in a statement Thursday that the measure, introduced in Sept. 2011, "protected the Swiss economy from serious harm" but is no longer justified.

 

The bank says the euro peg meant that the franc has dropped sharply against the U.S. dollar because of the euro's recent fall in the value. It said in a statement that it would also lower its average interest rate to minus 0.75 percent from minus 0.25 percent.

 

VIDEO: SNB Introduces First Negative Interest Rate Since 1970’s

 

EURCHF down almost 30%!

 

 

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I don't understand why it's a positive for Swiss stocks

for example, NSRGY rose a lot today (in USD)

 

Anyone picking some Swiss stocks?

 

There are two forces, the fundamental price of the stock (in CHF) and the change in exchange rate. The value of the company is declining by X% but the currency is strengthening by Y%, and generally today Y>X

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I don't understand why it's a positive for Swiss stocks

for example, NSRGY rose a lot today (in USD)

 

Anyone picking some Swiss stocks?

 

There are two forces, the fundamental price of the stock (in CHF) and the change in exchange rate. The value of the company is declining by X% but the currency is strengthening by Y%, and generally today Y>X

You cannot separate the two factors, and measuring the value of an international company in CHF is pretty random since most costs and revenues will be in other countries. I have no idea why international Swiss stocks gained when measured in USD or EUR. Doesn't make sense.

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Well, trying to cap exchange rates was doomed to fail anyway at some point. My guess is that interest rate decreases are (viewed as) a positive thing and possibly QE is expected and priced in? Another reason could be that asset managers were restricted in investing in Swiss stocks due to the cap mechanism and that that restriction is gone now. Maybe a bit too far-fetched but I'm just trying to make sense of things.

 

Almost all large Swiss names (Novartis, Nestle, Credit Suisse, ABB, Syngenta) outperform today in USD / gold / EUR / terms on huge volume. EWL up 4% over the day. I don't believe that the market is so inefficient that these moves are just arbitrary.

 

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Guest Schwab711

I'm pretty sure the Swiss ADR shares that went up today should be the ones that end in "Y" (as opposed to "F"). See links below, but you are buying an asset denominated in USD whose underlying asset is denominated in CHF (you are forced into a FX swap when purchasing the OTC stock). We can measure exactly what the benefit of the strengthening of the CHF vs. USD was while the effects of the the currency appreciation on the business can only be estimated at the moment. The market clearly believes most Swiss companies will experience lower operational effects due to currency appreciation then the actual appreciation of the currency. This is a pretty important concept for anyone purchasing foreign companies on the US OTC market since the difference between F and Y shares can be pretty substantial. There can be legal issues when owning ADRs so you should always know the local laws related to equity investments for foreigners.

 

http://www.investopedia.com/terms/a/adr.asp

 

http://www.investopedia.com/ask/answers/06/nasdaqfifthletter.asp

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

Saxoband found a neat solution, stealing some money from customers to make up losses... http://brontecapital.blogspot.nl/2015/01/it-is-time-to-close-saxo-bank-down.html

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

 

My coworker is one of those guys.  The wall of his cube buts up to mine but we are in different divisions.  He's in a technical training capacity.  About 2 years ago he took a week seminar about trading FX.  For the last 6 months he sets up daily trades at this desk and says he does day trading but hold each position 1-3x.  He has been telling his staff for the past few months that he was picking up pennies as the Swiss defend their currency and he trades it as they will bring it back in line once it starts to move away.  He has been out sick the past few days. 

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

 

My coworker is one of those guys.  The wall of his cube buts up to mine but we are in different divisions.  He's in a technical training capacity.  About 2 years ago he took a week seminar about trading FX.  For the last 6 months he sets up daily trades at this desk and says he does day trading but hold each position 1-3x.  He has been telling his staff for the past few months that he was picking up pennies as the Swiss defend their currency and he trades it as they will bring it back in line once it starts to move away.  He has been out sick the past few days.

 

Wow...feel bad.  Saw that 70% of FXCM's clients lost money last year, this isn't a retail game.

 

Had a co-worker years ago who was into day trading.  Would send out these IM messages thought the day "just made $800 in a few minutes" "another $1k".  I was derided for being a long term investor who didn't know squat.  Then suddenly one day the IM's stopped.  A couple days later I asked how he was doing he said "I lost interest" or as another co-worker put it "he took a bath on a few trades and his wife found out what he was doing and told him to stop."

 

Seemed like the currency market was perfectly setup for a blowup.  Bloomberg Markets magazine had a big article on currency trading in the last issue.  The ones making the money in this market are the brokers and those selling seminars on how to get rich.

 

How do you get rich trading foreign currency?  Start a seminar series telling people they can get rich trading.

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Banks decision to abandon the francs cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

Saxoband found a neat solution, stealing some money from customers to make up losses... http://brontecapital.blogspot.nl/2015/01/it-is-time-to-close-saxo-bank-down.html

 

This is standard for the forex brokers.  You get what is called "slippage" and a certain percentage of trades get reworked at another price.  Usually not more than a few percent of total trades, but it happens a lot when things get volatile.

 

Speaking of which, this has impacted Interactive Brokers (IBKR) to a fair degree.  Something I have on my list of things to buy at the right price (not there for me yet) but thought it was worth mentioning since some others on this board were interested in the stock.

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

Saxoband found a neat solution, stealing some money from customers to make up losses... http://brontecapital.blogspot.nl/2015/01/it-is-time-to-close-saxo-bank-down.html

 

This is standard for the forex brokers.  You get what is called "slippage" and a certain percentage of trades get reworked at another price.  Usually not more than a few percent of total trades, but it happens a lot when things get volatile.

 

Speaking of which, this has impacted Interactive Brokers (IBKR) to a fair degree.  Something I have on my list of things to buy at the right price (not there for me yet) but thought it was worth mentioning since some others on this board were interested in the stock.

 

IB lost $120 Million in this saga. I am pretty concerned whether I should move my stock account back to Fidelity. I don't want to wake up one day to find out that IB is bankrupted and affected my account. Thoughts? ::)

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I have no idea why international Swiss stocks gained when measured in USD or EUR. Doesn't make sense.

 

Probably because the currency markets are more responsive to currency issues than stock markets are. Stock markets, like any market have some amount of price momentum or stickiness, so they don't immediately fully rerate to changes in currencies.

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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

 

My coworker is one of those guys.  The wall of his cube buts up to mine but we are in different divisions.  He's in a technical training capacity.  About 2 years ago he took a week seminar about trading FX.  For the last 6 months he sets up daily trades at this desk and says he does day trading but hold each position 1-3x.  He has been telling his staff for the past few months that he was picking up pennies as the Swiss defend their currency and he trades it as they will bring it back in line once it starts to move away.  He has been out sick the past few days.

 

Wow...feel bad.  Saw that 70% of FXCM's clients lost money last year, this isn't a retail game.

 

Had a co-worker years ago who was into day trading.  Would send out these IM messages thought the day "just made $800 in a few minutes" "another $1k".  I was derided for being a long term investor who didn't know squat.  Then suddenly one day the IM's stopped.  A couple days later I asked how he was doing he said "I lost interest" or as another co-worker put it "he took a bath on a few trades and his wife found out what he was doing and told him to stop."

 

Seemed like the currency market was perfectly setup for a blowup.  Bloomberg Markets magazine had a big article on currency trading in the last issue.  The ones making the money in this market are the brokers and those selling seminars on how to get rich.

 

How do you get rich trading foreign currency?  Start a seminar series telling people they can get rich trading.

One of the smartest guys at my job went through the same thing. Currency trading makes penny stock day trading look easy!
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FXCM Inc., which handled a record $1.4 trillion of trades by individuals last quarter, said clients owe $225 million on their accounts after the Swiss National Bank’s decision to abandon the franc’s cap against the euro roiled global markets. Global Brokers NZ Ltd. said the impact on its business is forcing it to shut down.

 

Ouch.  And that folks is how people get taken out of the investing game.

Saxoband found a neat solution, stealing some money from customers to make up losses... http://brontecapital.blogspot.nl/2015/01/it-is-time-to-close-saxo-bank-down.html

 

This is standard for the forex brokers.  You get what is called "slippage" and a certain percentage of trades get reworked at another price.  Usually not more than a few percent of total trades, but it happens a lot when things get volatile.

Thats not what people generally mean with slippage: http://www.investopedia.com/terms/s/slippage.asp

 

Saxo (and other fx boiler rooms) make money by trading against their customers. This time some of their customers apparently got on the winning side of the trade. Changing execution prices after a trade has been completed should be a criminal offense. I bet that Saxo wouldn't adjust prices if they suddenly had made an abnormal amount of money instead of losing it.

 

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That is slippage.  Every broker has their own set of prices when it comes to forex because many of them are setting the dealing rates.  Your execution at the market and confirmed later will vary depending on who you do business with.

 

Like I said this comes with the territory of dealing with some of these brokers.  I agree it is stealing but that is the norm.  I had started a thread on Plus500 which is also in the business of screwing their gamblers but mostly in the form of CFD's. 

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