FXCM Inc (NYSE:FXCM) Working to Address Capital Shortfall

FXCM Inc (NYSE:FXCM) was one of the firms that suffered an adverse impact following a sudden move by the Swiss National Bank on currency peg. The retail forex brokerage warned that it was in danger of breaching regulatory capital requirements after its clients suffered massive losses. However, FXCM said it was working on alternatives, and alongside regulators, to address its solvency.

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Some business shut

The Swiss National Bank moved to remove its currency peg, leading to widespread currency market fallout that has already forced some companies out of business. New Zealand-based Global Brokers NZ, for instance, said it was shutting down because of the unprecedented losses caused by the surge in Franc.

$225 million adverse capital impact

On its part, FXCM Inc (NYSE:FXCM) said that its clients suffered massive losses following the surprise move by the Swiss National Bank. While the company didn’t hint at the risk of shutting down, it did warn that the losses incurred by its clients left it with a huge capital hole of $225 million. That loss meant that it was no longer in compliance with the regulatory capital rules.

In an effort to repair the massive damage to its capital position, FXCM Inc (NYSE:FXCM) said it was working on alternative ways to bolster its capital base. It was also in talks with the regulators to try and find a solution to the matter.

Shares of FXCM fell 15% in the last session after the Swiss National Bank made the surprise currency announcement. However, shares plunged more than 88% in the pre-market today as the market digested the bad news, especially the issues of capital breach.

FXCM Inc (NYSE:FXCM) is one of the largest forex change brokerages in the world. It handled $1.4 trillion of trades in the previous quarter.

Stock downgraded

Credit Suisse cut its rating on the stock of FXCM to “Underperform” from “Outperform” in the wake of the currency fallout. The firm also slashed its target price on the forex broker to $4, a massive reduction from $18.

 

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Cook Laurie

Cook Laurie

Laurie, a long-time member of the US Markets Daily general assignment reporter who has covered a variety of subjects from breaking news to investigative features, from stock markets to politics, and from neighborhood small business to global warming.