By Anjani Trivedi, Lucy Craymer and Tommy Stubbington 

Brokers around the world are crumbling in the wake of the Swiss National Bank's shock decision to remove the cap on its currency.

A major U.S. currency broker warned its equity was wiped out, a U.K. retail broker entered insolvency and a New Zealand foreign-exchange trading house failed after the Swiss central bank stunned markets Thursday by triggering a massive rally in the franc.

On Friday, regulators in Japan, Hong Kong, Singapore and New Zealand sought information from brokers about what happened. In Japan, the Finance Ministry was checking on trading firms amid concerns that the country's army of mom and pop foreign-exchange traders suffered big hits.

The losses were caused when big wholesale banks stopped quoting franc rates, liquidity dried up and volatility spiked in the foreign-exchange market Thursday, making it impossible for brokers to execute trades while losses spiraled. Many of these brokers offer 100 to 1 leverage, allowing clients to stake large sums with relatively little cash, meaning a 1% loss can wipe out a client.

The Swiss franc jumped 30% against the euro in minutes after the SNB scrapped its cap on the nation's currency against the euro. The surprise move caused big losses for traders who had bet against it.

FXCM Inc., the biggest retail foreign-exchange broker in the U.S. and Asia, said in a statement that the unprecedented volatility in the euro against the Swiss franc triggered losses that left it with a negative equity balance of about $225 million and that it was trying to shore up its capital.

FXCM was operating normally in Hong Kong on Friday with employees trying to sort out trading positions and answer questions from clients about their trading losses.

"As a result of these debit balances, the company may be in breach of some regulatory capital requirements. We are actively discussing alternatives to return our capital to levels prior to today's events and discussing the matter with our regulators," the company, which has a market capitalization of about $701.3 million, said. Shares of the company fell 15% in U.S. trading Thursday. The Nasdaq website was quoting the stock 82% lower in the premarket.

A U.S. official said markets regulators were monitoring the situation with FXCM but downplayed the systemic ramifications, citing the relatively low dollar figures involved.

Global Brokers NZ Ltd., which is registered in New Zealand, said it would close its doors as it could no longer meet regulatory minimum-capitalization requirements of 1 million New Zealand dollars ($782,500).

In a statement, Global Brokers said the SNB's decision resulted in rare volatility. "Losses incurred on trades that couldn't be exited due to illiquidity were losses incurred directly with the liquidity provider and we do not have the ability to reimburse those," it said.

Andrew Park, a spokesman for New Zealand's Financial Market's Authority, said the financial markets regulator was seeking assurances that client funds have been protected and segregated.

Hong Kong's de facto central bank said it was following up with banks on their online banking services practices. Regulators in Singapore, too, were in contact with banks and foreign-exchange brokers.

In the U.K., retail broker Alpari Ltd. said it had entered insolvency. "Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm...that it has entered into insolvency," the firm said. Fellow U.K. broker IG Group PLC said it was facing a negative impact of up to GBP30 million ($45.7 million) after the "sudden and extreme movement" in the franc.

To prevent losses from spiraling out of control, investors and trading firms often put automatic buy or sell orders in place when currencies move a lot. But the very large jump in the Swiss franc happened so fast that everyone tried to close out their trades at the same time. Liquidity disappeared, making it impossible to execute the trades and allowing losses to spiral upward.

Brokers "couldn't possibly have covered [these positions] because the market moved instantaneously," said Mirza Baig, head of Asia FX and interest rate strategy at BNP Paribas in Hong Kong. "There was no liquidity in the market at the stop loss level," he said referring to orders that are triggered once a currency breaches certain levels

HSBC PLC, one of the biggest wholesale dealing banks in the market, said in a statement Friday that it suspended its trading in the franc for a time Thursday. Trading has now resumed. A person familiar with the matter said Citigroup Inc. did the same. A spokesman declined to comment. Deutsche Bank AG also suspended trading in the franc for a time, according to a person familiar with the matter.

Trading in foreign exchange markets averages $5.3 trillion a day, according to the Bank for Intentional Settlement's most recent central bank survey from April 2013. Swiss franc transactions account for average daily volumes of $275 billion.

The trading losses occurred within minutes of the Swiss central bank's announcement. Because major currencies rarely move more than 1% or 2% in a short period, investors are able to borrow large sums to juice their bets. Traders can put down $50,000--or even less--and make a bet worth $1 million or more. Excel Markets, which is connected to New Zealand's Global brokers NZ, advertises 400 times leverage. The downside: a small adverse move can lead to a wipeout.

When the Swiss bank's decision was announced, the euro fell almost instantaneously from 1.2009 Swiss francs a euro to 1 with barely any opportunity to trade in between. From there, it hit 0.9750 and then 0.85 before rebounding somewhat.

That meant anyone who had bet on the euro to rise, with insurance in the form of a sell order at or around 1.20, was stuck. It also means that any retail brokers whose systems still appeared to offer the ability to buy or sell at those incremental levels, couldn't deliver those rates in reality.

Denmark-based Saxo Bank A/S, which offers trading in a number of financial products to retail customers, wrote to clients saying it was taking a fresh look at all its clients' franc trades Thursday, and "this may result in a worse execution rate than the originally filled level."

"I think it was a fair way of dealing with it," said Steen Blaafalk, CFO at Saxo Bank. "The move was just so extreme. I've been in the market 30 years and have never seen anything like it. Clients that lost money can blame us, or they can blame themselves. We have always helped and guided them on their risk management of the Swiss franc and warned of the risk."

Retail currency house OANDA also said it suffered losses amid "vanishing liquidity" in the market. It said it forgave all negative client balances that were caused when traders couldn't close out positions quickly enough.

Ewen Chew

and James Glynn contributed to this article.

Write to Anjani Trivedi at anjani.trivedi@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

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