News in 60 Seconds

On May 6 2010, we experienced extremely volatile market conditions across all financial markets.

We would like to give you a summary of what occurred to explain the reasons behind today’s market volatility.

First, institutions were very cautious due to tomorrow’s UK Elections, US Nonfarm Payrolls, and the Canadian unemployment rate announcement.

In addition to that we had several market moving events. These include:

7:45 ET – European Central Bank Interest Rate Decision

8:30 ET – Trichet speaks at ECB Monthly News Conference

14:46 – Dow dropped almost 1,000 points and the bulk of the drop happened in less than an hour. The reason behind this drop was reported to be that Citi Bank’s trading desk accidentally sold 16 billion US Dollars worth of e-minis, when they were supposed to sell 16 Million.

After the big drop, two Fed officials came out with back to back announcements to help stabilize the market.

15:04 – Report that Fed’s Hoenig states that tomorrow’s jobs report will be positive

15:06 - Report that Fed’s Evans sees 3.5% economic growth in the US this year

Over the recent months, there has been a strong correlation between the US stock markets and the Japanese Yen. When the Dow plunged today, so did the Japanese Yen crosses. We saw JPY crosses drop between 350 (USD/JPY) and 1248 (GBP/JPY) points. We saw comparable volatility in non Yen crosses as well.

As a result most major banks that provide liquidity to the currency market turned off their FX price feeds for up to 30 minutes. This led to rejected and hanging orders for many FX traders. During this time FXCM immediately routed orders to any remaining banks, however FXCM clients were still subject to the thin liquidity and poor execution being provided by the market.

Market volatility and liquidity has returned to close to normal levels. However, there are still some major market moving events coming up tomorrow so manage your market exposure accordingly.

While FXCM cannot make any overriding statement on adjustments to positions that were negatively affected by today’s events, if you would like us to look into one or more of your trades, please submit an audit form through this link Audit Form and our audit committee will follow up with you as soon as possible.