One year ago the Forex world was rocked by the terrible SNB crisis when on January 15, 2015 the Swiss National Bank suddenly announced it was abandoning its currency’s peg to the Euro. The Swiss franc very quickly rose by almost 30% in value against most major currencies and for a period lasting about 45 minutes there was practically no liquidity in the currency, making it impossible to exit trades or indeed for most brokers to square their exposures. Stops were not honored, so all traders short CHF with leverage of more than about 3:1, which is quite low in Forex terms, had their accounts wiped out. Several brokers lost millions, with the most notable victim being FXCM, one of the largest and most reputable Forex brokers in the world. FXCM were seen as at risk of bankruptcy, which they avoided by taking several measures including a $300 million loan from Leucadia.

This SNB crisis is now regarded as the wildest and most dangerous incident in the modern Forex era. For a major global reserve currency such as the Swiss Franc to move in value by more than 25% in minutes during a period with practically no liquidity even from major banks was practically unthinkable. The nearest precedent is probably “Black Wednesday”: the day the British Pound was forced out of the Exchange Rate Mechanism in 1992 by George Soros’ Fund winning battle with the Bank of England over its peg to the German Deutschmark. However that was so long ago and occurred well before Forex became a retail market served by a plethora of retail Forex brokerages.

As its now been one year since this SNB crisis, we ask how this event has changed the behavior of Forex traders and Forex brokers.

Effect of SNB Crisis on Forex Traders

Most Forex traders were not personally hurt by the SNB crisis. However those that were long CHF in line with the prevailing long-term trend at the time were hit hard, with any leveraged by at least 4 to 1 wiped out completely. Some traders leveraged by greater amounts found themselves with negative balances, owing their brokers five or even six figure sums far well in excess of their deposits, if they had been generous with the amount of true leverage they were allowing themselves.