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Foreign Exchange

FX comment on the flash crash: SNB = Still Not Behaving

After EUR/CHF had been driven back to 1.4300 on Wednesday, one observer on Zero Hedge expressed the opinion that “the SNB is a clumsy source of systemic risk in Europe. Their actions in the days preceding the flash crash along with their actions on the day of the crash made them a significant factor in the crash.” I’ve been occasionally been critical of the way the SNB intervenes but even I thought that a bit excessive.

There might well have been some concern at the SNB of a full-scale post-short-selling-ban EUR rout; it would make some sense to knock the market back, drive out a few weak shorts and give the EUR some support.

But it is ironic that while the CFTC and SEC are investigating one instance of a disorderly market, there are myriad instances of the SNB creating them at will.

Regardless of the SNB’s role in market disorder, the continued intervention in EUR/CHF is having a big impact on Swiss FX currency reserves, which increased by 23% in April to CHF153.6 billion, according to provisional figures.

The market accepts as fact that all SNB FX intervention goes through EBS. While EBS has been declaring near-record single-count volumes lately – such as the $393.1

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