While much of the focus on the Swiss Franc spike has been on losses and the ripple effects on the institutional sector and retail FX brokerage industry, there is another side to the story. The massive swissy generated volatility and rise in trading volumes that is sure to be generated this month.
Getting a glimpse into the potential for February volume reports, we heard today that CLS Group, the largest multi-currency cash settlement system, reported that Forex trading volume recorded the biggest ever day by number of deals after Switzerland’s abrupt removal of its cap on the Euroswiss exchange rate last week, the CEO of CLS told Patrick Graham of Reuters on Wednesday.
The figure of 2.26 million transactions given by CLS chief David Puth underlines the stakes in a record day’s trading that led to the collapse of a handful of brokerages and even one hedge fund thus far, not to mention hundreds of millions of dollars of losses at major global banks.
CLS is noting last Thursday was the second biggest day ever on currency markets by volume of trade for the company, topped only by the $10.67 trillion recorded on December 17th, when Russia’s ruble was collapsing.
CLS is used almost universally by the banking industry to process or settle trades and hence provides the best running count of the scale of forex trading.
Forex and investment managers are still processing the chaotic few minutes in which the franc surged by as much as 30 plus percent against the euro, one of biggest moves in a major currency since the world moved to market exchange rates in the early 1970s.
There are some rumors from sources that there may be more high-profile casualties to come from the fund management industry. With those losses likely stemming from bets that the franc would weaken as many put their trust in the Swiss National Bank upholding the EUR/CHF 1.20 currency peg. We witnessed one such shock on this trade already sustained by Everest Capital’s Global Fund, which wiped out over $800 million.
Stay tuned to LeapRate for more Swiss franc fallout and breaking FX industry coverage, which is sure to throw a few more surprises at us before the end of the month…