Swiss shock breaks NZ broker

New Zealand registered foreign exchange broker Global Brokers NZ Ltd collapsed on Friday after the Swiss National Bank's shock decision to remove its peg to the euro wiped out client accounts.

Director David Johnson announced the closure of the broker, which traded as Excel Markets, in a statement on its website.  Johnson said most of its clients with Swiss Franc positions lost more than the equity in their accounts and Global Brokers was then forced to cover the extra losses.

"GBL can no longer meet regulatory minimum capitalisation requirements of NZ$1 million and will not be able to resume business," Johnson said.

"As directors and shareholders we would like to offer our sincerest apologies for this devastating turn of events," he said.

Johnson said all client funds were in segregated accounts and "100 per cent of positive client equity or balance is safe and withdrawable immediately."

GBL outlined a progressive series of client withdrawals over the next week in a separate statement on its website. On Friday Johnson called on all those clients with open positions to close them immediately or they would be closed automatically at the close of New York trading on Saturday. No details of the size of the positions or losses were given.

New Zealand Companies Office records show GBL is headquartered in Auckland, but that founding directors Johnson and Jason Peterson reside in Ireland. On its website Excel Markets says it has 30 employees. The shareholdings in the company are owned by companies based in the British Virgin Islands.

New Zealand's Financial Markets Authority had registered GBL as an authorised securities dealer and said it had sought assurances that client funds had been segregated and protected.

The collapse of GBL was the furthest flung of several collapses after the Swiss National Bank shocked foreign exchange markets late on Thursday by abandoning its peg of 1.2 francs per euro. The franc then jumped as much as 40 per cent, wiping out the positions of some traders and cascading on to several brokerages.

UK broker Alpari, which sponsors Premier League football team West Ham, was forced into insolvency. New York based broker FXCM was bailed out with a US$300 million cash injection from investment bank Jefferies over the weekend.

Citibank and Deutsche Bank are reported to have suffered losses of US$150 million each, while Barclays is reported to have lost NZ$50 million. Bankers are reported to have warned that further losses by banks and broker insolvencies are expected in the wash-up from the event, when liquidity dried up for a period reminiscent of trading at times during the Lehman crisis.