Jason Rogers
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On January 15, 2015, the Swiss National Bank (SNB) caused a flash crash that lead to historic dysfunction never seen before in the FX markets when it announced that it was completely (not gradually) removing the 1.2000 self-imposed floor on the EUR/CHF exchange rate.
FXCM has compiled data points which demonstrate the unprecedented and extreme dysfunction of the FX market on January 15th. For the full recording and presentation please click here.
FXCM has compiled data points which demonstrate the unprecedented and extreme dysfunction of the FX market on January 15th. For the full recording and presentation please click here.
* January 15 Was A Market Flash Crash - The Institutional FX Market Failed And Did Not Function:
* The majority of FXCM liquidity providers had stopped quoting prices during this time. Had FXCM's circuit breaks not engaged, the weighted average price of the same orders would have been much lower than the execution price of 1.05, at 0.9760.
* The January 15 flash crash saw the EUR/CHF drop 40% in seconds whereas the 2010 flash crash in the equities market saw about 9% drop in the Dow Jones Industrial Average over the course of a few minutes.
* The market data show that the losses on January 15 were not the result of FXCM technology or FXCM margin requirements, but rather due to the extreme market dysfunction resulting from the SNB's irresponsible and unforeseen announcement to completely remove the 1.2000 EUR/CHF floor.
* In light of the reckless actions of the SNB, FXCM has since ceased offering any currencies which carry significant risk due to potential manipulation by their respective governments either by a floor, ceiling, peg, or band.
- No Liquidity - There was almost no available liquidity for approximately 40 minutes
- Dramatically Low Pricing - External ECN prices went as low as 0.2000 and 0.5000
- Extreme Spreads - The average spreads of EUR/CHF were more than 2000-3000 pips
- Extreme Range - The average range of EUR/CHF was 6000 pips.
* The majority of FXCM liquidity providers had stopped quoting prices during this time. Had FXCM's circuit breaks not engaged, the weighted average price of the same orders would have been much lower than the execution price of 1.05, at 0.9760.
* The January 15 flash crash saw the EUR/CHF drop 40% in seconds whereas the 2010 flash crash in the equities market saw about 9% drop in the Dow Jones Industrial Average over the course of a few minutes.
* The market data show that the losses on January 15 were not the result of FXCM technology or FXCM margin requirements, but rather due to the extreme market dysfunction resulting from the SNB's irresponsible and unforeseen announcement to completely remove the 1.2000 EUR/CHF floor.
* In light of the reckless actions of the SNB, FXCM has since ceased offering any currencies which carry significant risk due to potential manipulation by their respective governments either by a floor, ceiling, peg, or band.