Alpari UK: what happens when your broker goes bust?
Alpari UK is the first big forex broker to fall victim to the Swiss National Bank's shock decision. John Stepek looks at what it means for Alpari's customers.
The Swiss National Bank's surprise decision to stop effectively pegging its currency to 1.20 against the euro (after three years of doing so) has claimed its first major scalp foreign exchange broker (and West Ham sponsor) Alpari UK.
Why did this happen?
This happened so rapidly that stop-lossor not, anyone who was short' the Swiss franc against pretty much any other currency would have lost a huge amount of money, almost certainly more than any worst-case scenario they'd have considered.
As a result as Alpari put it in a statement "This has resulted in the majority of clients sustaining losses which has exceeded their account equity. Where a client cannot cover this loss, it is passed on to us."
While Alpari had indicated last week that it was insolvent, an announcement on its site now says that it "has not entered a formal insolvency process." Instead "the board of directors are urgently considering all options including a sale and are liaising closely with the FCA."
What happens now?
In the case of Alpari UK, the company specifically stated that "retail client funds continue to be segregated in accordance with FCA rules." In short, regardless of the eventual outcome,if you had money with the company, it should be safe (bar any investment/trading losses actually related to the Swiss move).
So who'll sponsor West Ham now?
What about brokers in general? What if the worst happens?
This will cover you up to a £50,000 limit to be clear, this is not about covering losses on your investments, it's about protecting money (or assets) you had on account with your broker. If you were owed more than that, then you would not necessarily get all the money back.