In 25 of the most turbulent minutes on markets in years, the Swiss franc soared more then 40 percent against the euro then gave back half its gains, after the SNB scrapped its three-year old cap on the franc versus the single currency.

Some traders said it was "carnage" in the market as hedge funds in particular suffered huge losses. On the EBS trading system, one miss-hit saw the euro quoted at 0.0015 francs, having spent the last few months ranging between 1.20 and 1.21 francs. The SNB had capped the currency at 1.20 francs per euro since September 2011.

One smaller retail platform briefly suspended trade in francs.

"Out of nowhere, without any heads up, the peg has suddenly gone on a Thursday morning in mid-January. For market participants, that is just very difficult to deal with," said Chris Morrison, head of strategy for hedge fund Omni Macro which manages $550 million.

But despite fears of systemic failure, the market functioned without major problems.

EBS, one of the main venues for banks and other major players trading the dollar, euro, yen and Swiss franc, said normal trading conditions were maintained.

"EBS Market maintained normal trading conditions throughout this period of extreme volatility. A miss-hit occurred resulting in a market low being published," a spokeswoman for ICAP - EBS's parent company - said in a statement.

Currency trading platform Forex.com, the trading arm of Gain Capital, briefly suspended trading in Swiss francs due to a surge in the currency's volatility.

But other platforms continued to allow trades, despite liquidity drying up and the spread between bids and offers widening for euro/Swiss franc and dollar/Swiss franc pairs.

By late London trade, the gap between bids and offers had narrowed and currency pairs had stabilised, although many traders and some retail platforms were left with losses.

The swings in the franc on Thursday were the biggest since most major currencies moved to free-floating regimes in the 1970s.

Dealers said they had seen a number of major investors lose as much as 20 percent before managing to complete trades to close their bets on a stronger dollar against the franc.

The SNB's decision caught out speculative investors such as hedge funds, which entered the week with the greatest number of net short positions since early June 2013, according to CME Group data.

The latest data showed hedge funds and other speculative investors were net short 24,171 futures contracts and another 662 options contracts, for a combined short of 24,833, worth about $3.5 billion. Each contract is worth 125,000 francs.

British interdealer broker IG Group said many clients were able to close out their Swiss franc positions with IG more swiftly than the broker itself managed to close out its hedged positions on the currency in the forex markets. It forecast it would take a hit of around 30 million pounds.

Its shares ended 4.4 percent lower at the London Stock Exchange.

"This was really a meteorite crashing into the foreign exchange market," said Douglas Borthwick, managing director at Chapdelaine Foreign Exchange in New York. "A move like this is going to have reverberating effects across the board."

(additional reporting Nishant Kumar in London and Sam Forgione in New York, editing by Nigel Stephenson)

By Anirban Nag and Jemima Kelly