January 20, 2015 / 3:38 PM / 3 years ago

UPDATE 1-Market gives thumbs down to FXCM after rescue deal

3 Min Read

* FXCM shares fall 70 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 after New York opens; adds background, details on more changes by rival Saxo Bank)

By Patrick Graham

LONDON, 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 one of the biggest of the online brokers that have prospered over the past decade from a rise in small-time currency speculation, often by helping individuals to leverage relatively minimal sums into large currency bets.

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

Frankfurt-listed shares in the company fell 70 percent in value to 1.456 euros per share, according to Reuters data.

In New York, where the stock has not traded since late last week due to a suspension of the stock and U.S. market holiday, prices fell 87 percent in heavy volume.

"It's pretty obvious what has happened today: 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.

A raft of analysts at major investment houses, including Citi, JP Morgan and Credit Suisse, downgraded the stock in newly issued recommendations.

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

Alpari UK, another of the most recognised players in the sector, appointed administrators on Monday and was believed to be searching for buyers for its assets or the company as a whole.

Danish-based Saxo Bank, seen by many as FXCM's main competitor, also suffered losses but said it would adjust the rates given to clients, potentially generating more losses for customers than those already seen.

Saxo has also announced new higher margin requirements on clients, according to a letter seen by Reuters on Monday.

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

Additional reporting by Anirban Nag; Editing by Sam Wilkin

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