The broker of Global Retail FX and CFD warned its clients of increased volatility in the trading pairs which include the Swiss Franc currency.
According to Forex brokers and Admirals, rising speculation in financial markets regarding anticipated Swiss National Bank measures in the coming weeks could lead to an increase in price fluctuations in the currency pairs which include the CHF.
The Admirals hinted at a repeat of the extraordinary action around the Swiss Franc in Jan 2015 in its warning. In the earlier part of 2015, the markets were surprised by the Swiss National Bank which signaled that it will no longer maintain the CHF’s value against the Euro, that resulted in an instant 20% rise in the value of CHF and also created chaos in terms of liquidity in the market. Many big FX brokers went bankrupt as a result of the ‘Black Swan’ incident, which led to immense profits and losses for a number of unprepared institutional and retail traders dealing with the Swiss Franc with any leverage.
Though no instant modifications to its client services are planned, Admirals has stated that it reserves the right to decide what happens to trade terms as it sees fit in order to improve investor protection and organized trading during periods of extreme volatility in currency and other markets.
Among other risk factors, Admirals advised clients to be cautious of high risks in the period leading up to and following the Swiss National Bank’s intervention:
- Sharp price fluctuations and substantial price gaps, particularly in Swiss index and CHF pairs
- Restricted liquidity, which could lead to wider spreads and a higher number of slippage and rejections
- A decrease in available leverage
- Significantly higher Overnight fees (‘Swaps’).
- Without notice, relevant instruments and/or overexposed accounts enter ‘close only’ trading mode
- Changes to Supported trade session times and trade size.
- Limits on CHF exposure per account are being implemented.
- Changes in the business conditions of the CHF or other closely related currencies can happen at any time, with or without notice to you.
These steps are the indications of the effects due to volatility, and the brokers said that during these exceptional circumstances, any temporary or permanent actions and trading restrictions can be introduced.
Customers were also warned about stop-loss orders, which are a tool for automating position exit routines rather than guarantee of a precise position exit price, and the significant risk of price gaps in the markets during periods of volatility.
The broker asked clients to ensure that they are satisfied with their CHF positions. It also asked them to reduce exposure to the financial market, if required and to avoid adding funds to theur accounts due to the possibility of great price fluctuations.