Barclays attempted to cancel Swiss franc trades

Bank and buy-side counterparties are renegotiating euro-franc trades executed with Barclays after the British firm looked to cancel some forex trades following events on January 15

Barclays under fire for executing trades at prices that it later withdrew

Barclays tried to cancel EUR/CHF trades placed by counterparties in the immediate aftermath of the Swiss National Bank's decision to remove its 1.20 currency floor, before re-evaluating and trying to negotiate new price levels, according to industry sources.

The British bank told counterparties, which include Societe Generale and buy-side clients, that trades executed electronically between 9.30am and 9.40am London time on January 15 – straight after the SNB made its decision to remove the 1.20 floor – would not be honoured, warning it wanted to cancel trades that went through above 1.10. Societe Generale declined to comment.

The next day, on January 16, counterparties say Barclays went back to them to try to negotiate the execution of EUR/CHF trades at 1.06. The clients say they are now discussing this with the bank. One buy-side participant, which asked not to be named as it is still in negotiations, said it is considering its future relationship with Barclays following the SNB events.

"We haven't agreed anything yet and we're trying to figure out what value there is in having Barclays as a relationship if that's what it comes down to. I think it's appalling what they're trying to do – they send out their e-commerce to everyone in the world and want everyone to trade with them in FX. Obviously, it was a major event, but they were showing prices and they got dealt on," says the source.

"Following the exceptional circumstances surrounding the moves in CHF last week, Barclays has offered to honour all trades during that period of dislocation. We are working closely with affected clients to resolve any issues that may have resulted," says a spokesperson for the bank in New York.

We're trying to figure out what value there is in having Barclays as a relationship if that's what it comes down to

It is understood Barclays was showing prices at 1.14 and even 1.15 during the 10 minutes following the SNB's decision, which many counterparties were executing on. EUR/CHF fell to a historic low of 0.85 during the dramatic appreciation of the Swiss franc, before stabilising around parity. 

Another counterparty says they received a notice from Barclays saying its trades executed between 9.30am and 9.33am London time were under review. "We negotiated and they negotiated very hard, but we eventually agreed on a price," says the industry source.

Having their trades cancelled meant these counterparties would have needed to hedge out their risk at a time when the currency pair was extremely volatile. Despite some participants not having large positions on, the size of the move was so great that even if a client was to execute a relatively small trade there was still a sizeable P&L implication.

Other banks were showing prices between 1.10 and 1.20 after the floor broke, and in the aftermath they also wanted to renegotiate the rates at which trades were originally executed with clients, say sources. Barclays was reported to have lost under $100 million as a result of the Swiss franc turmoil.

The reputational damage to Barclays has been felt across the Street as a result of the bank trying to cancel trades, with one price-taker saying it would think twice about trading with the bank in the foreseeable future.

"We have cut off our trading with Barclays right now. This is a real concerning issue," says one non-bank market-maker.

The difficulties in processing client trades were felt throughout the industry, with the speed of the drop in EUR/CHF causing serious issues for market-makers and price-takers alike. Saxo Bank said on January 16 that some clients had their prices placed back into the market.

"Some of our clients affected in yesterday's events had their prices restated in a careful review of all transactions in accordance with industry practices. Due to the Swiss currency floor being removed, we experienced a significant number of stop-outs in a few minutes. There was very little liquidity in the market, which caused a significant price gap. Our best execution policy mandates that we trade all orders in a fair and equitable manner," said Saxo Bank in a statement.

This article was originally published in sister title FX Week.