January 20, 2015 / 6:13 PM / 3 years ago

UPDATE 2-Market gives thumbs down to FXCM after rescue deal

3 Min Read

* FXCM shares fall 87 percent as rescue loan announced

* 40 percent jump in Swiss franc last week hurt short sellers

* Saxo Bank imposes higher margin requirements on clients (Updates with analyst quote, volume details)

By Patrick Graham and Gertrude Chavez-Dreyfuss

LONDON/NEW YORK Jan 20 (Reuters) - Shares in retail currency broker FXCM lost two-thirds of their value on Tuesday as the company laid out details of a rescue loan after $200 million of losses on last week's shock removal of the cap on the Swiss franc.

The U.S. firm is among the biggest online brokers that have prospered over the past decade from a rise in small-time currency speculation, often by helping individuals to leverage small sums into large bets.

FXCM agreed to an emergency loan with Leucadia National Corp last Friday, and laid out more details, including maximum annual funding charges of 17 percent, in a statement overnight on Monday after European and U.S. markets closed.

"It was a survival situation for FXCM. They did what they had to do," said Rich Repetto, financial services analyst at Sandler O'Neill & Partners LP in New York.

"Will they be able to pay back the loan? It would depend on a lot of things such as the recovery of customer losses, the sale of assets, things like that."

FXCM's Frankfurt-listed shares fell 70 percent to 1.456 euros.

The stock resumed trading in New York after its suspension late last week and a U.S. market holiday, falling 89 percent to $1.37 early Tuesday afternoon. About 70 million shares changed hands in the stock's most active day since its December 2010 debut.

"The company issued details of the deal overnight and the stock has fallen in response," said one New York-based analyst, who asked not to be identified because he had not yet published his advice on the stock.

Major investment houses, including Citi, JP Morgan and Credit Suisse, downgraded the stock.

Other firms are also dealing with the franc's 40 percent jump last Thursday, which shattered thousands of "short" bets from speculators expecting the currency to weaken against the dollar.

Alpari UK appointed administrators on Monday and was believed to be seeking buyers for its assets or the entire company.

Danish-based Saxo Bank, FXCM's main competitor, suffered losses and said it would adjust rates to clients, potentially generating more losses for customers.

Saxo has also announced higher margin requirements, a letter seen by Reuters on Monday showed.

"We want to signal and prepare our clients to have sufficient margin to support for potential bigger and more extreme short term shocks," the letter said.

Reporting by Patrick Graham in London and Gertrude Chavez-Dreyfuss in New York; Additional reporting by Anirban Nag in London; Editing by Sam Wilkin and Richard Chang

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