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In the world of modern media, stories are told as headlines, with one replacing another in rapid sequence, often creating a public impression that the story is over. Reality is quite a different thing. The stories continue to unfold for weeks and months – and even years – beyond the initial headlines. The decision last week by the Swiss National Bank to un-peg the Swiss franc from the euro is one that already feels like old news, but only the first chapter has been written.
This week the drama will continue to play out, especially as we approach Thursday and the end of the week. There was purportedly a meeting last week between German Chancellor Angela Merkel and Mario Draghi, the President of the European Central Bank. The purpose of that meeting was to discuss the implementation of quantitative easing. While currency trading houses are still reeling and dealing to get back to their feet this week, French President Françoise Hollande has announced that, “On Thursday, the ECB will take the decision to buy sovereign debt, which will provide significant liquidity to the European economy and create a movement that is favorable to growth.” (Just a short time later, he back-pedaled, saying that his statement was one of hypothesis.)
Lest we forget the reason that the SNB chose to un-peg from the euro, I refer you to the ADVFN article “SNB Deal Euro & USD a Nasty Blow,” published last Thursday, January 15th. In it, we read between the lines of the sudden SNB announcement, citing one possible reason for the bank’s move was “in anticipation of the ECB introducing quantitative easing as early as next week.” Now next week has become this week, and Hollande seems to have confirmed that what the Swiss Bank has done will prove to be the right move, if not for others, for its own well-being.
While some currency brokers have simply stopped operating, others are recovering from the initial shock and taking more judicious approaches to staying in business. FXCM has got new funding in place (see ADVFN article “UPDATE: FXCM Lives to Trade Another Day“). Now Alpari UK, which was reportedly insolvent, has posted an announcement on its website:
“The recent move on the Swiss franc caused by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity. Retail client funds continue to be segregated in accordance with FCA rules. For the avoidance of any doubt and notwithstanding previous announcements by the company, Alpari (UK) Limited has not entered a formal insolvency process. The board of directors are urgently considering all options including a sale and are liaising closely with the FCA. We hope to make a further announcement shortly.”
Alpari actually did enter into special administration today. KPGM LLP has been appointed as the company’s administrator. To wit, KPGM has made a statement that,
“We have had a number of enquiries from interested parties in relation to the company’s business. We will be speaking with these parties and others over the next few days, and hope to secure a deal to preserve the business and jobs as far as possible.”
We believe that those interested parties include Pepperstone Financial Services and IG Group Holdings PLC. Pepperstone, an Australian currency trader, is considering acquisition, whilst IG Group is likely to prefer bidding on selected Alpari assets.
On a final note, FXCM appears to be ready to open their doors for business as usual, but that will not happen until tomorrow, as the U.S. markets are closed today. And let’s not forget to watch for what transpires on Thursday with the ECB.
This story has only just begun.
