The unexpected announcement by the Swiss National Bank (SNB) that it would withdraw the cap on the Swiss Franc’s value against the Euro took many in the industry by surprise and resulted in extreme volatility in the forex markets.
We were surprised by the extreme volatility after the announcement, however fortunately in December, 2014 we assessed the risks associated with this pair and reduced the leverage offered to clients. As a result of this pre-emptive measure we were able to minimise the impact of negative client equity and provide additional protection for our clients. Despite the significant volatility during the announcement we were able to maintain pricing during periods of low liquidity.
The new paradigm in the forex market could be characterized by periods of low volatility followed by extreme episodic volatility as we saw with the Russian Rouble in December and now the Swiss Franc last week. Two such events happening within a month of each other should be considered as a sign of the times. We are expecting more volatility like this although not of the same magnitude throughout 2015. We would like to assure you that we will continue to focus on pre-emptive risk management so that our clients remain unaffected by future volatility.