Fortress Prime elaborates on impact of unexpected removal of Swiss Franc exchange rate cap against the Euro by the Swiss National Bank

Fortress Prime Clearing, (“Fortress Prime” or the “Company”), a division of Fortress Capital Investments L.L.C. headquartered in Dubai, UAE, is the leading clearing house and a provider of institutional trading liquidity for various financial products including but not limited to forex, precious metals, commodities, global indices and CFD's, did not suffer any losses on its forex trading business from the events of January 15, 2015, where Swiss National Bank’s (SNB) surprise decision to remove its cap on the Swiss franc (CHF) against the Euro (EUR).

This announcement resulted in the rise of CHF by 40% and 18% against EUR and USD respectively. The decision of SNB came as a shock to all forex market participants as SNB had continued to defend and maintained their stance to protect EUR against CHF until the announcement.

As a result of this gap price movement in the value of CHF against majors, most retail forex traders who were short CHF, not only lost their account deposits but also their stop loss orders did not come into play to protect their account balances.

For at least an hour and twenty minutes, most banks and non-banks liquidity providers (LPs) were unable to honour trades with their retail FX brokers and in turn retail FX brokers could not fill orders of their retail trading clients resulting in negative balances in retail trading clients’ respective accounts.

These negative balances are mostly uncollectable or it requires significant effort and time from FX brokers’ legal department to enforce any type of meaningful collection. Furthermore, FX brokers with straight-through processing (STP) model suffered deficit on their hedging accounts at their respective LPs. In most cases, these deposits were either completely wiped out or became liability for the FX broker, where now they owed money to the LPs. Consequently, many FX brokers became insolvent or were in violation of minimum regulatory capital requirement.

Mitch Eaglstein, CEO explained Fortress Prime’s approach in managing risk during such market swings: “We take tremendous pride in keeping our trading clients’ interest foremost. When liquidity became non-existent during post announcement, we managed the risk internally and honoured all trades of our clients.

We did not make any trade adjustments in our favour and also did not re-quoted our clients. We were able to support our clients as we are highly capitalized backed up by strong balance sheet of Fortress Capital Investments and our sponsors. In the aftershock of SNB’s announcement, we quickly identified and immediately reduced leverages on certain risky instruments so that our trading clients can enter/exit trades seamlessly.”

In further elaborating on Company’s growth strategy, Eaglstein added: “This was an unfortunate event, however, we are extremely positive in expanding our business as this has created several opportunities for strategic alliances and partnerships among market participants. We are also in a strong position to conduct M&A activities as industry will undergo consolidation in the near term.”