January 15 was an extremely challenging day for the whole FX industry due to the decision by the Swiss National Bank to remove the cap on the Swiss franc’s value against the euro. Even though it had a great impact on traders with CHF positions, it kicked the brokers far harder. Now about a month has passed since this event which allows us to make some conclusions about the event.
In this article, we split the brokers into known types and tell you our recommendations, yet the conclusions are on your side. We will not mention any brandname. Let’s look at the retail forex brokers below.
Brokers that lost a fortune (over $20 million)
Some brokers had to cover quite significant losses. This is especially true for the brokers that operate via the Agency Model. While some brokers lost as much as $40 million, the biggest was $225 million.
What to do if you are trading with one of these types of broker?
The general advice is – pack your stuff. Brokers that have lost a lot, will hardly be able to provide the same level of service as before. You may see such a broker placing a higher markup or commission just to survive the next few months.
Brokers that report ‘Business as Usual’
Don’t necessarily believe that your broker is doing fine if it reports business as usual. In most of the cases, business as usual can be translated to “we have lost less than we have”. This is not true for every single broker, but according to our knowledge, over 70% of brokers got into financial constraints.
What to do if your broker reports business as usual?
You should not necessarily close your account now, but you should be prepared. If you don’t have an account with another company – go ahead and get one. This way you will know that you can easily move your funds and start trading with a trusted broker, if your current one proves to be damaged. How to see if your broker is in trouble? Check its marketing activities. If a broker has started some extra large bonus campaigns recently, especially aimed for existing customers – it is probably time to leave.
Brokers that made money
It may be a bit surprising, but actually some brokers managed make substantial gains from the black swan event. So while the other brokers are trying to survive, these brokers made some excess profits. It is of course possible that the management will spend the funds on caviar and champagne, but we would expect some funds to be invested in technology, support and loyalty programs.
What to do if you are trading with one of these broker?
Keep calm, you are in the right place. You may of course mail your account manager and request a certain deposit bonus offer, telling him that you have been approached by one of the drawing brokers. Please check our list of the best forex brokers.
It is always risky to trade with unregulated brokers. Your money simply may disappear anytime, whatever the market conditions are. But with high volatility, your broker may be already down.
What to do then?
Run away, but slowly. Don’t try to take your deposit at once and go to another place, take it partially, while remaining to trade. This can help you eventually cash out the whole amount.