The spot foreign exchange market, at times, exhibits extreme price
volatility, a condition known as a "fast market". Fast
market conditions may be caused by various factors including, but
not limited to, news releases such as non-farm payroll numbers,
order imbalances-significantly greater orders of one type (e.g.,
"buys") than another type (e.g., "sells").
During the extreme price volatility in fast markets, currency
pair prices will "gap" and spreads widen. A price gap
occurs when the price of a currency pair either jumps or plummets
from its last bid/offer quote to a new quote, without ever trading
at prices in between those quotes. As an example, the Euro/US
Dollar currency pair may move from a bid/offer of 1.1891 – 1.1894
and begin trading at 1.1941 – 1.1944, without ever trading at
the prices between those quotes.
The standard industry practice for currency dealers, including
dealers on the interbank market, during fast market conditions
and price gaps, is to set market levels and execute orders manually
without the use of automated systems or services. The process
during fast markets is typically:
Initially, major money center banks and other online price
providers halt all direct dealing and their pricing engines are
suspended,
Currency dealers analyze event and determine the correct price,
Prices enter market 20-30 pips wide or more,
Spreads in market narrow as more currency dealers enter the
market.
In such an event, there may be a delay in trade execution, which
may be significant, while rates are cross-referenced to ensure
valid execution. Further, stops placed close to a market that
has traded through the stop price are re-priced on the next best
tradable price. Thereby, a specified rate order does not provide
a fixed-price guarantee to the counterparty.
Templer Holdings, like all currency dealers, is a "instant
execution" dealer, and follows industry standards for fast
market conditions. However, Templer Holdings’ clients that elect
to trade during fast market conditions are responsible for losses
incurred by their account because of such trading, as clients
are responsible during normal trading conditions. These responsibilities
are the same responsibilities that Templer Holdings has with
its interbank counterparties during normal and fast market conditions.
Templer Holdings will not be held liable for any losses due
to fast or volatile markets, electronic disruption in service,
service delays, incorrect information received from service
vendors (i.e., quotations, news services) and/or customers (i.e.,
client profile data, updated data).
