The removal of its trading floor of 1.20 franc per euro by the Swiss National Bank (SNB) yesterday created a financial tsunami. ADS Securities Executive Managing Director, Philippe Ghanem is calling on the industry to work together to make sure that events like this do not happen again.
The announcement by the SNB led to unprecedented trading and a record day for Abu Dhabi based ADS Securities. The company's next generation technology helped turn a potential disaster into a successful trading day, but Philippe Ghanem is very aware that many clients, businesses and suppliers have all been badly affected, and it will take time to repair the damage.
He believes that major questions will need to be asked about how and why this was allowed to happen. He commented: "Yesterday was not a good day for our industry. We tried to do everything we could to stay with and support our clients, trying to get the best price we could to them as EURCHF fell by 30 per cent. But traders, banks and brokerages were all hit extremely hard. The modern FX industry has been developed around state-of-the-art, fast electronic systems and when an announcement of this scale hits the markets, the shockwaves are instantaneous and global.
"In the next few days, weeks and months we will see regulators, central banks and financial companies looking at the way things unfolded and how the risk was managed and handled. Unfortunately as they sit down to discuss what happened a number of brokerages will have already closed and many thousands of clients will have lost significant amounts of money. The FX industry is now highly sophisticated and has moved from being a boutique operation to a trillion dollar asset class. There are huge volumes and great volatility and it is no surprise that an announcement of the magnitude of the SNB's produced these results. It is only through our investment in technology and great team work that we were able to maintain our position and avoid any losses." added Mr Ghanem
During the trading yesterday ADS Securities was one of a small number of large brokerages which chose not to stop price the CHF after the announcement was made. If there was a price in the market new generation technology was used to try and get this to clients. Rejection rates were high, but at times almost all banks stopped pricing the Swiss franc because of the unprecedented level of volatility.
"The discussions going forward will be about capital requirements for brokerages as a number of firms will have exceeded their limits and will be forced to stop trading. Based in Abu Dhabi we have always been one of the most highly capitalised companies in this market and can easily withstand this type of event. Our real concern is over clients who we feel have been unfairly treated by the way this announcement was made. As an industry we need to work together to try and help clients recover their losses. Everyone in the industry will remember this day."