Morning Commentary: FXCM plunges as shares halted after Swiss franc peg dropped; GAIN Capital lower

By Rebecca Melvin

New York, Jan. 16 – FXCM Inc.’s convertibles dropped like a lead balloon Friday as shares were halted pending news of how the New York-based foreign exchange trading firm will cope with massive client losses related to a spike in the Swiss franc on Thursday after the Swiss National Bank moved to drop a cap on its currency.

FXCM said it may be in breach of capital requirements following the bank’s surprise move.

FXCM’s 2.5% convertibles due 2018 fell to as low 30 and were recently trading at 49 bid, 50 offered, which was down from 95, market sources said.

FXCM shares were halted but fell about 90% to $1.49 in pre-market action.

GAIN Capital Holdings Inc.’s 4.125% convertible senior notes dropped to 85, which was down 18 points, according to Trace data. But shares of the Bedminster, N.J.-based trading services provider were recently higher as the company appeared to be somewhat buffered from the sharp currency move.

The havoc caused by Swiss National Bank’s move Thursday didn’t seem to hurt many other names in the convertibles market, a Connecticut-based trader said.

FXCM said in its release late Thursday that due to unprecedented volatility of the EUR/CHF pair, clients experienced significant losses, and generated negative equity balances owed to FXCM of about $225 million.

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