Focus: From rebound to rescue: how Argentex collapsed on untested currency swings
LONDON, May 6 (Reuters) - In early April, Argentex's (AGFX.L), opens new tab chief executive Jim Ormonde and chief financial officer Guy Rudolph were buying shares in the London-listed foreign exchange broker as the stock rebounded from a March slump.
Ormonde, installed 18 months earlier amid a flagging stock performance, said, opens new tab in an April 2 statement on the company's annual results that Argentex had "reset" in 2024 and was now "well placed to return to profitable growth." In the year to date, its shares had rallied more than 50%.
What followed was a dramatic swing in financial markets and a dizzying decline in the company's liquidity position.
Within weeks, Argentex would become one of the first high profile corporate victims of market volatility set off by the global trade war. IFX Payments took over Argentex in a rescue deal for just a fraction of what it had been worth, and the CEO and CFO have gone.
Argentex declined to comment. UK-based IFX did not respond to requests for comment.
April 2 was also "Liberation Day," when U.S. President Donald Trump unveiled sweeping reciprocal tariffs against numerous countries, triggering heightened volatility for trading firms as currency markets moved widely.
The safe-haven Swiss franc surged roughly 7% against the U.S. dollar during April, while Deutsche Bank's currencies volatility index (.DBCVIX), opens new tab, a measure of currency swings, rose as much as 28%, to its highest level in two years.
Argentex had navigated previous big market routs such as the fall of sterling against the dollar in 2022, Brexit and the COVID-19 pandemic.
But while it had done scenario modelling and stress testing, it hadn't planned for the dollar's rapid devaluation against many major currencies, according to two people familiar with the company. They spoke on condition of anonymity because the information was private.
Argentex was most exposed to a sudden strengthening of the pound, Swiss franc and the euro against the greenback, one of the people said.
ZERO-ZERO LINES
In its 2024 annual report,, opens new tab Argentex said that "regular stress testing is performed to ensure the group has sufficient collateral pledged and other unencumbered resources to cover its current and potential obligations in the event of a significant market movement."
Yet when the market moved against it, Argentex was left exposed to cash calls from its liquidity providers and unable to call margin from many of its clients due to its use of zero-zero lines, according to the person.
Barclays and Citigroup, which are among Argentex's liquidity providers, declined to comment.
This business model, used by some of London's smaller FX brokers, according to one ex-forex trader, does not require customers to pledge initial margin upfront on trades or extra funds for intra-day market volatility. Instead, smaller brokers include margin costs in the prices they charge during the trading day.
In the 12 working days from April 3, Argentex paid out over 20 million pounds ($26.65 million), the person said.
According to its full-year accounts, at the end of December, Argentex had 18.4 million pounds in net cash.
The company said in its accounts that its cash position varies significantly month to month due to margin calls and working capital movements.
"Zero-zero contracts aren't the devil per se," said one Argentex employee said, who spoke on condition of anonymity because they were not authorized to speak publicly. The issue is "making sure the business is in a healthy enough position to take on those contracts," they said.
The reasons for Argentex's liquidity crunch were complex: it lacked the hefty balance sheet of its bigger rivals and was unable to adequately hedge its positions, one of the two people said.
When the markets were plunged into turmoil by Trump's tariffs, the company was in the process of simplifying its relationships with liquidity providers, rolling out a treasury function to manage its positions and trying to bolster its cash position with new products, they said.
The company said in April it was planning to launch digital accounts and payments businesses in the summer.
Started in 2012, Argentex was authorized, opens new tab by the UK's Financial Conduct Authority (FCA) as an electronic money institution (EMI) in 2018. About a quarter of its clients are in the financial sector, according to the Argentex website.
In 2013, it won the backing of the family office of John Beckwith, one of Britain's wealthiest financiers, according to 2024 company filings. Beckwith's Pacific Investments Management was the company's leading shareholder with a 17% stake before the deal with IFX was announced, according to LSEG data. A representative for Pacific Investments declined to comment.
EMIs flooded London over the last decade, offering payments services and benefiting from a lighter regulatory burden compared to banks.
FCA rules, opens new tab require EMIs to keep in check counterparty and liquidity risks, including the possibility that a party doesn't fulfil its obligations.
In a letter,, opens new tab published in February, to all CEOs of payments firms, including EMIs, the FCA said that it remained concerned there were still risks to consumers and financial system integrity. It had given EMIs until March 2025 to adequately test their operational resilience for any shock.
The FCA declined to comment when contacted by Reuters for this story.
Other regulators of Argentex in Australia, Dubai and the Netherlands either declined to comment or did not respond to requests for comment.
FIELDING BIDS
On April 22, the company asked regulators to suspend trading in its shares, revealing near-term liquidity had been hit by margin calls linked to its foreign exchange forward and options books after a rapid devaluation in the U.S. dollar in the wake of U.S. tariffs and government spending cuts.
The next day the company said it needed "an immediate cash injection to ensure the Company's continued solvency."
It had received three takeover proposals including from IFX Payments, two of which were rebuffed by the board. The board pursued a deal with IFX Payments for a bridging loan to meet liquidity needs.
By April 25, Argentex, which had been worth 52 million pounds when its shares were suspended three days earlier, said it had agreed a deal with IFX to be bought for about 3 million pounds and CEO Ormonde would be leaving with immediate effect.
This week, Argentex shares resumed trading and plunged 91%. The company said it had secured a 20 million pound loan from IFX and announced finance chief Rudolph had resigned along with several board members.
($1 = 0.7505 pounds)
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