LONDON (Reuters) - Barclays has warned clients of its foreign exchange trading platform that a sharp drop in liquidity and “dislocations” in the euro could occur on Monday amid uncertainty about Greece’s position in the euro zone.
In a letter seen by Reuters and sent to clients of Barclays’ electronic trading platform BARX on Thursday, it said there was a risk that currency markets, especially the euro, could open at a significantly different level from Friday night’s close.
According to foreign exchange veterans, such warnings are highly unusual and reflect extremely high volatility in the market following last month’s removal of Switzerland’s franc/euro cap and the fraught Greek debt negotiations.
Euro zone finance ministers drafted an outline agreement on Friday that could form the basis for extending Greece’s financial rescue package, officials on both sides said, but stressed there was no formal deal on a common text in the full 19-nation Eurogroup of ministers.
The Barclays warning came a month after the Swiss National Bank’s shock removal of its cap on the Swiss franc against the euro caused price swings that some trading platforms had trouble coping with.
“As a result of current uncertainty surrounding the ongoing position of Greece in the euro zone, there is a chance of dislocation and highly illiquid conditions in the euro FX market,” the letter said.
“We will continue to watch client orders in BARX from our normal opening time of 5 a.m. (6:00 p.m.) in Sydney. However, there is likely to be an impact on the service offered by BARX. In particular, BARX may only be available at wide spreads, and there might be delays as a result of low levels of liquidity due to the disrupted market conditions.”
It added the platform would begin to fill orders gradually as liquidity builds up and voice orders will not be fulfilled before 5 a.m. Sydney time.
A spokesman for Barclays confirmed the letter was sent.
“The letter is consistent with Barclays’ client-focused approach, keeping our clients well-informed of potential risks and ensuring they have all the information needed to make good risk management decisions,” the spokesman said.
Barclays, Citi, Deutsche Bank and UBS together control more than 50 percent of the FX market, in which daily volumes average $5 trillion.
FXCM, a retail broker, also warned customers to take protective measures against the risk of euro volatility on Monday, such as reducing the size of euro open positions and increasing the funds in their accounts.
Reporting by Anirban Nag, Patrick Graham and Eric Burroughs; editing by John Stonestreet