“As a result of these debit balances, the company may be in breach of some regulatory capital requirements,” the company said. “We are actively discussing alternatives to return our capital to levels prior to [these] events and discussing the matter with our regulators."
Global Brokers NZ Ltd, which operates Excel Markets, closed client positions yesterday evening as the ripples continued to travel through forex markets.
It cited “rare volatility and illiquidity”, adding: “Both our primary and backup liquidity providers became unresponsive or illiquid for hours after the event.
“The majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity. When a client cannot cover their losses it is passed onto us…
“GBL can no longer meet regulatory minimum capitalization requirements of N$1,000,000 and will not be able to resume business. Losses incurred on trades that could not be exited due to illiquidity were losses incurred directly with the liquidity provider and we do not have the ability to reimburse those.
“Please note the interbank market for francs was illiquid for hours after the event and no traders with an open franc position were able to close it for a significant period of time, at any broker.”