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LONDON, Feb 20 (Reuters) - Barclays has warned clients ofits foreign exchange trading platform that a sharp drop inliquidity and "dislocations" in the euro could occur on Mondayamid 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 wasa risk that currency markets, especially the euro, couldopen at a significantly different level from Friday night'sclose.
According to foreign exchange veterans, such warnings arehighly unusual and reflect extremely high volatility in themarket following last month's removal of Switzerland'sfranc/euro cap and the fraught Greek debt negotiations.
Euro zone finance ministers drafted an outline agreement onFriday that could form the basis for extending Greece'sfinancial rescue package, officials on both sides said, butstressed there was no formal deal on a common text in the full19-nation Eurogroup of ministers.
The Barclays warning came a month after the Swiss NationalBank's shock removal of its cap on the Swiss franc against theeuro caused price swings that some trading platforms had troublecoping with.
"As a result of current uncertainty surrounding the ongoingposition of Greece in the euro zone, there is a chance ofdislocation and highly illiquid conditions in the euro FXmarket," the letter said.
"We will continue to watch client orders in BARX from ournormal opening time of 5 a.m. (1800 GMT) in Sydney. However,there is likely to be an impact on the service offered byBARX. In particular, BARX may only be available at wide spreads,and there might be delays as a result of low levels of liquiditydue to the disrupted market conditions."
It added the platform would begin to fill orders graduallyas liquidity builds up and voice orders will not be fulfilledbefore 5 a.m. Sydney time.
A spokesman for Barclays confirmed the letter was sent.
"The letter is consistent with Barclays' client-focusedapproach, keeping our clients well-informed of potential risksand ensuring they have all the information needed to make goodrisk management decisions," the spokesman said.
Barclays, Citi, Deutsche Bank and UBS together control morethan 50 percent of the FX market, in which daily volumes average$5 trillion.
FXCM, a retail broker, also warned customers to takeprotective measures against the risk of euro volatility onMonday, such as reducing the size of euro open positions andincreasing the funds in their accounts.
(Reporting by Anirban Nag, Patrick Graham and Eric Burroughs;editing by John Stonestreet)
