Warning! Flash-crash in CHF is coming!While all the attention of the participants of the foreign exchange market is focused on the Trump’s trade wars and the results of the G-7 meeting (which is already beginning to be called 6 + 1 because of the split among the participants), the political problems of Italy (the populist government is formed and its activity does not bode well) and Spain (corruption scandal in the government and its resignation), as well as the forthcoming meeting of the US President and leader of North Korea, a problem is emerging on the horizon that can outshine all of the above. But so far no one has noticed this problem.We are talking about a referendum in Switzerland that will be held on June 10 and hypothetically can lead to a revolution in the world of finance and banking, radically changing the alignment of forces in the banking system of Switzerland. On the agenda, the issue of so-called "living money" (Vollgeld) - an initiative according to which only the Swiss Central Bank (SNB) will issue money, and private commercial financial organizations will be deprived of this right. We are talking about non-cash money that is created by commercial banks (monetary aggregates up to M4), issuing a loan. In Switzerland, the share of electronic, or non-cash money, is about 90% of the total money supply. The authors of the Vollgeld initiative in fact demand to put an end to the practice of so-called partial reservation to deprive bankers of this opportunity and thereby limit the scope of financial speculations. If this monetary reform is approved, every loan that banks give out will have to be 100% guaranteed. In fact, we are talking about a radical strengthening of the role of the state in the economy and the attack on the holy-holy economy of Switzerland - the banking system.Why is there silence around the event in the information field? Nobody believes that the reform will be supported. The polls show a confident "no" following the voting results. In addition, both the executive (the government, the central bank) and the legislative branch (both chambers of the Swiss federal parliament are negative about this initiative) act against this initiative. Let's not say how much it reminds the state of things on the eve of Brexit: then, too, no one believed that they would vote for Britain's withdrawal from the European Union. But after all they voted, and the pound lost almost 2000 (!) points. A similar story we can quite observe and this time.What is the cause? The reform is too radical to be able to adequately assess its implications for the banking system and the economy of Switzerland. Accordingly, in the case of a “yes” vote in a referendum, the probability of a panic in the foreign exchange market vis-à-vis the Swiss franc is very high. The main reason for this is uncertainty. And this, given the status of the Swiss franc as a haven, in fact, the Achilles heel of the currency. According to some experts, the fall of the franc against the euro could be 10-15%. In total, we see an opportunity for great earnings. It is extremely rare to predict the time and place of flash crashes in the financial market. Now that rare case, when it is possible. One more interesting thing is that the situation is asymmetric. Rejection of the reform will not provoke purchases of the franc on all fronts, since it will mean the preservation of the status quo. But the vote "yes" about the reform will almost certainly provoke the sale of the franc. That is, sales of the Swiss franc on the one hand can literally gild, and on the other hand, practically do not carry any risks. Thus, there will not be a flash-crash, all the positions can simply be closed with minimal losses, or even in positive territory, if the markets decide to start a local correction in the franc. So, the deal looks very promising. Our recommendation is the sale of the Swiss franc from the current on all fronts.
