As market players in the UAE brace for fallout from the Swiss currency turmoil, one forex trader is assuring clients that it is wholly insulated from its UK affiliate’s collapse.
On Friday, the Alpari group’s UK business went into insolvency amid what the unit described as “exceptional volatility and extreme lack of liquidity”.
But the group’s Dubai unit says it is unaffected by the troubles.
A statement from the Alpari group’s Dubai operation – registered as Alpari Middle East DMCC – on the website of the Dubai Gold and Commodities Exchange (DGCX) said that the unit is “completely independent and isolated from Alpari UK.”
“Therefore the recent developments will not affect our clients’ trading business and deposits at all with Alpari ME DMCC.”
Gaurav Kashyap, head of dealing at Alpari, said in an interview with The National yesterday that Alpari in Dubai "was continuing its operations, business as usual and the company has not faced any issues with regards to trading".
Alpari has businesses in Dubai, the UK, the US and Russia. Each unit is an independent entity. Alpari’s Dubai division is a registered broker on the DGCX and is regulated by the country’s Securities and Commodities Authority.
Alpari UK and many other global forex players were thrown into turmoil on Thursday after the central bank of Switzerland suddenly abolished its exchange rate controls against the euro. The effects have been far-reaching. In New Zealand, Global Brokers NZ said it had suffered “a total loss of operating capital” and would shut down.
In New York, shares in the currency brokerage FXCM sank as much as 92 per cent on Friday.
The brokerage then received a US$300 million lifeline from the holding company Leukadia National, with a 10 per cent interest rate.
“The recent move on the Swiss franc caused by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity,” Alpari UK said in a statement on its website.
“This has resulted in the majority of clients sustaining losses that have exceeded their account equity. Where a client cannot cover this loss, it is passed on to us,” the statement added.
Alpari stated that any funds held on behalf of clients were kept in separate accounts as required by the Financial Conduct Authority.
Alpari UK is the shirt sponsor of the Barclays Premier League club West Ham United. On Friday, West Ham said it was in a solid financial position and was already in talks with potential new shirt sponsors for next year.
Analysts say questions should be asked in terms of the extent to which UAE operations of Swiss companies are exposed to the forex turmoil.
“It’s obviously a major development globally in FX markets and no one is sheltered, whether you are in Abu Dhabi or in Paris,” said Muneef Tarmoom, founder and managing partner at Abu Dhabi Equity Partners. “It’s sensible to ask why these guys would not get affected and others are affected, to what extent are commodities exchanges in the region exposed and what are their capital requirements.”
A Dubai-based trader who spoke on condition of anonymity said: “[Friday] was just a start. There is a lot more going to be happening over the next two days in terms of acquisitions, and movement, fire sales in the industry in general.
“It was an unfortunate and irresponsible move by a central bank of a government because usually they are very coordinated with the financial services industry, they don’t shock markets,” the trader said.
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