Press Release

 
 

Spread-betting specialist Spread Co was unaffected by yesterday's unprecedented surge in the Swiss Franc and in contrast saw one client rack up a six-figure profit during the turmoil.

The Swiss National Bank's shock decision to remove its euro cap sent the Swiss Franc soaring and crippled a number of spread-betting firms, the highest profile casualty being Alpari, sponsor of West Ham United.

The SFr1.20 ceiling previously made the currency look like a relatively safe bet in the volatile foreign exchange markets so when it skyrocketed, the majority of spread-betting firms, traders and their clients were caught unawares, losing vast sums as they struggled to unwind their positions.

Ajay Pabari, founder and chief executive officer of Spread Co, said: "Prior to the mayhem of yesterday, many speculators saw the Swiss Franc as one of the safest trades on the planet.

"I've been around long enough to remember when the UK came out of the ERM so we felt it was inevitable that the Swiss National Bank would at some point decouple from the euro, given the pressures it was under.

"We'd discouraged clients from taking up these positions through higher margin requirement and as such we had relatively limited exposure to the Swiss Franc crosses.

"We have very rigorous risk controls. Where we did have clients trading, we were able to unwind their positions very quickly when the carnage began to prevent them from being too badly hit.

"Throughout the day we were able to offer two-way positions – in fact, one of our clients bought in at the bottom and made a substantial six-figure profit from his trades."

Explaining why so many spread-betting firms are suffering, he said: "In the modern FX markets a trader can get £1 million of exposure for just £10,000, meaning that it is very easy to become over-leveraged.

"Normally when a market moves against a client, a firm will close the position quickly to limit losses but many firms were unable to do this because of the lack of liquidity in the interbank markets and the speed at which the market moved.

"Even though the traders are still liable for the debt - and administrators will be chasing them for that - the FCA requires a spread-betting firm to have sufficient cash in the bank at the close to cover any client deficits.. If they don't, they are effectively insolvent."

Following yesterday's FX upheaval, Spread Co is considering expanding by acquiring one or more rival spread-betting firms.


 
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Spread Co Limited is a limited liability company registered in England and Wales with its registered office at 22 Bruton Street, London W1J 6QE. Company No. 05614477. Spread Co Limited is authorised and regulated by the Financial Conduct Authority. Register No. 446677.

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