jeudi 19 mars 2015
Citi Had No Time for Former Goldman Partners' FX Losses
Posted on 00:51 by nice news
Up until January 15, the Swiss franc was capped against the euro and was pretty quiet against the U.S. dollar, trading at about 1.02 francs to the dollar as of that morning. Then the Swiss National Bank removed the cap and the franc spiked to 74 centimes to the dollar, before pretty quickly bouncing back part of the way. It's now back around parity. If you were short the franc against the dollar at 4:30 a.m. New York time that day, you had lost more than a third of your money less than half an hour later. But half an hour after that, your losses were back to a more manageable 15 percent. And two months later they had pretty much disappeared.
Unless, of course, you closed out your position on January 15, in which case your losses were permanent. And obviously someone was buying francs (selling dollars) all the way up (down). Someone bought francs at the worst possible time.
Who? Well, for one thing, probably a lot of people with no choice in the matter. People like Tormar Associates. "Tormar is the joint family office of former Goldman Sachs partners Ron Marks and John Tormondsen" (get it?), and it did a lot of foreign exchange trading with Citi as its prime broker. Much of that FX trading involved betting against the Swiss franc, using leverage from Citi. When the bad thing happened, Tormar's equity vanished, and an awkward conversation became necessary:
On January 15, 2015, an employee on Citibank’s Foreign Exchange Prime Brokerage desk informed Tormar of a margin (or collateral) deficit of approximately $29 million. Under the parties’ Master Agreement, and the Credit Support Annex, that deficit required either that Tormar post additional collateral in the amount of $29 million or close out its positions in its foreign exchange transactions with Citibank.
Unless, of course, you closed out your position on January 15, in which case your losses were permanent. And obviously someone was buying francs (selling dollars) all the way up (down). Someone bought francs at the worst possible time.
Who? Well, for one thing, probably a lot of people with no choice in the matter. People like Tormar Associates. "Tormar is the joint family office of former Goldman Sachs partners Ron Marks and John Tormondsen" (get it?), and it did a lot of foreign exchange trading with Citi as its prime broker. Much of that FX trading involved betting against the Swiss franc, using leverage from Citi. When the bad thing happened, Tormar's equity vanished, and an awkward conversation became necessary:
On January 15, 2015, an employee on Citibank’s Foreign Exchange Prime Brokerage desk informed Tormar of a margin (or collateral) deficit of approximately $29 million. Under the parties’ Master Agreement, and the Credit Support Annex, that deficit required either that Tormar post additional collateral in the amount of $29 million or close out its positions in its foreign exchange transactions with Citibank.
Citi Had No Time for Former Goldman Partners' FX Losses
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