Jefferies in Talks to Rescue Cash-Strapped Currency Broker FXCM (FXCM)

After plunging nearly 90% in pre-open trading after disclosing losses tied to the Swiss Franc's surge against the Euro Thursday, currency broker FXCM (NYSE: FXCM) is said to be in talks with investment bank Jefferies for a $200-$300 million lifeline.

In a statement overnight, FXCM said, "clients experienced significant losses, generated negative equity balances owed to FXCM of approximately $225 million." The firm said as a result of these debit balances, it may be in breach of some regulatory capital requirements. The company said it was discussing alternatives to return capital to levels prior to these events.

Now Jefferies, owned by Leucadia National Corp. (NYSE: LUK), is said to be in talks to provide $200-$300 million to the ailing currency broker.

Analysts at Credit Suisse believe FXCM's liquidity provider stopped making markets in the Swiss Franc leaving the company unable to close losing client positions as the cushion provided by client collateral was absorbed.

The firm downgraded shares from Outperform to Underperform amid the news but pointed to tangible book value of $3.15. Shares of FXCM, however, traded below $1.40 per share amid the crisis. The analysts said they believed distressed investors would be interested in the company's brand and large client foot print. They also recalled Knight received 90+ offers post their unfortunate error.

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