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However there are a few brokers that previously offered who decided to continue with it and are using it as marketing point to assuage traders of their worst fears. Of course, many brokers found themselves owed large negative balances by thousands of retail clients after the SNB crisis, and this debt was not much good on paper as the costs of pursuing the debts would probably have been greater than the total amount recouped.
The issue of leverage gained a lot of traction, as the large negative balances that some retail traders found themselves owing came to be seen — justifiably in the case of very inexperienced traders offered huge amounts of leverage — as a result of leverage. Therefore there was a lot of talk about regulators placing severe restrictions on leverage that would effectively strangle the industry in the aftermath of the SNB crisis. This has not happened, but many brokerages have now reduced their maximum leverage offered, if not across the board than at least on more volatile and risky currencies.
Some pundits looked at these kinds of issues, saw the attention that was coming from regulators, and concluded that the model of retail Forex brokerage was going to become significantly more difficult, which would lead to a winnowing out across the industry. These fears now seem to have been unfounded, as the amount of money that remains to be made from retail Forex traders looks to be enough to warrant and hopefully offset all these risks.
Adam is a Forex trader who has worked within financial markets for over 12 years, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy. Effect of SNB Crisis on Forex Brokers It was assumed within minutes of the SNB crisis hitting that there was going to be financial chaos in the brokerage arena, which would result in a sizeable number of Forex brokerages being forced into bankruptcy or takeover.
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However that was so long ago and occurred well before Forex became a retail market served by a plethora of retail Forex brokerages.
The issue of leverage gained a lot of traction, as the large negative balances that some retail traders found themselves owing came to be seen — justifiably in the case of very inexperienced traders offered huge amounts of leverage — as a result of leverage.