Written by: Keith Tully
Reviewed: Friday 16th January, 2015
The currency brokerage firm Alpari UK has closed down amid forex market turmoil with company bosses blaming unforeseen changes in operating conditions for forcing it into insolvency.
A statement released by Alpari, which sponsors the Premier League football team West Ham United, said the Swiss National Bank’s decision to end its policy of capping the Swiss franc against the euro left it facing “exceptional volatility and extreme lack of liquidity”.
“This has resulted in the majority of clients sustaining losses which has exceeded their account equity,” the company’s statement went on to say.
“Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm today, 16/01/15, that it has entered into insolvency.”
Alpari’s business is based on providing a variety of foreign currency exchange services and its position is now known to have been very badly impacted within hours of the Swiss National Bank announcing its change in policy. The bank revealed on Thursday that, after three years of doing so, it would no longer be capping the value of the Swiss franc at a value of 1.20 per euro.
The decision appears to have been almost universally unexpected with the Swiss franc soaring in exchange rates against the euro by more than 30 per cent shortly after the bank’s announcement on the issue.
A number of other foreign currency exchange companies are also counting up major losses as a result of the Swiss bank’s decision, with the US-based brokerage firm FXCM having seen its share price plunge spectacularly in recent days. The company is apparently facing up to client losses worth around US $225 million as a direct result of the Swiss bank’s decision and the ensuing turmoil on forex markets around the world.
The the same issues have already forced the New Zealand-based company Global Brokers NZ Limited to cease trading. The firm said that losses resulting from the removal of the Swiss franc cap forced it into insolvency and into a completely unsustainable financial position.
“I would be astonished if we do not see more casualties,” Nick Parsons, head of research for the UK and Europe at the National Australia Bank told Bloomberg on Friday.
“This was a 180-degree about turn by the SNB. People feel hurt and betrayed,” he said.
For its part Alpari UK, which is just over a year into a three-year deal to sponsor the matchday shirts of West Ham United, has said that all its retail client funds are being segregated in accordance with relevant regulatory rules as the company prepares to go out of business.