The encyclopedia · Trading & Investing · Financial decision · 2015
Saxo Bank lost DKK 700M when the SNB removed the franc cap
Saxo Bank faced up to DKK 700M in losses when the Swiss National Bank removed the franc cap — a risk it had disclosed poorly and managed worse.
Saxo Bank · 2015-01-15
What happened
On 15 January 2015, the Swiss National Bank unexpectedly removed the ceiling on the Swiss franc against the euro, causing an immediate and violent appreciation of the franc. Saxo Bank, a Danish online trading and investment bank, held a large portfolio of CHF currency pair positions that swung sharply against the bank when liquidity vanished.
Saxo Bank disclosed potential losses of up to DKK 700 million (approximately US$107 million). In response, the bank retroactively adjusted execution prices for CHF currency pair orders placed during the period of extreme illiquidity — a move that angered clients and drew regulatory scrutiny.
The Danish Financial Supervisory Authority issued two reprimands in July 2015, one for inadequate disclosure of liquidity conditions and another for poor communication about execution difficulties. A Danish court later ruled in Saxo Bank's favour in a 2016 case brought by a corporate client, but the UK Financial Ombudsman Service ordered the bank to compensate a different client in 2017.
Why it happened
- Saxo Bank did not adequately disclose to clients that CHF pair liquidity could vanish entirely under extreme market conditions. The fine print was missing the one scenario that actually happened.
- When liquidity did vanish, the bank's retroactive price adjustments traded legal safety for reputational damage. The reprimands from the Danish FSA made the trade-off visible.
- The risk was one-sided: Saxo Bank profited from CHF speculation but carried the tail risk of a market structure change — the very risk that caused the loss.
The lesson
A market making platform that does not tell clients when liquidity can vanish carries the tail risk itself. The fine print that is never read becomes the loss that is never hedged.
Sources
spotted an error? The club wants to know.
More like this
Korea's 2x single-stock ETFs on SK Hynix and Samsung wiped out ~80% of retail money
eToro's $52 IPO broke down: shares fell 43% to below $30 within nine months
Winklevosses' Gemini crypto exchange IPO fell ~80% and drew a class action
Somewhere, someone solved the problem this company failed at. 2nd Opinion →
Comments · 0
Sign in to join the comments.