New Zealand Forex Broker Shuts after Swiss Franc Move

A New Zealand foreign exchange broker announced it was closing Friday after suffering "a total loss of operating capital" in the wake of Switzerland's shock move to scrap its currency cap.

Global Brokers NZ said the Swiss move resulted in "rare volatility and illiquidity" in the markets.

"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 on to us," director David Johnson said in a statement.

As a result, he said the Auckland-based broker sustained losses that meant it could no longer meet New Zealand regulators' minimum capital requirements and was shutting its doors.

Johnson did not reveal the extent of losses suffered at Global Brokers NZ but said clients whose funds were not affected by the Swiss action would not lose their money.

"10 percent of positive client equity or balance is safe and withdrawable immediately," he said.

The move on Thursday by the Swiss central bank SNB to stop pegging the franc against the euro caught the market by surprise, sending the currency up more than 30 percent immediately after the announcement.

"News of the impact of this event on companies and traders is just beginning to come to light," Johnson said.

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