OzForex shares dived by more than 10 per cent after one of its major banking partners decided to sever ties to the foreign exchange business.
The company's shares slumped on news Westpac would no longer provide banking services to OzForex as part of a broader withdrawal from the money service industry.
OzForex has been a customer of Westpac since 1998 and the bank holds its Australian dollar cash balances and provides it with access to the wholesale foreign exchange market.
It also uses Westpac to make and receive some payments for its clients.
Westpac's decision means OzForex will need to transfer its banking arrangement to other partners, which include National Australia Bank and Macquarie Bank.
The company's shares sold off following the announcement and finished the day down 28 cents, or 10.3 per cent, to $2.43.
CMC Markets market strategist Michael McCarthy said the sell-off was an overreaction.
"OzForex has 14 other inter-bank partners so Westpac pulling from that market will have very little impact on their operations," he said.
He said the sell-off could also be the result of a misunderstanding about OzForex's business and the impact of the Swiss central bank's decision to let its currency, the franc, rise more than 20 per cent against the euro last week.
The move has deeply wounded many currency trading businesses.
But OzForex is involved in foreign exchange transfers and payments, rather than trading, and says it has not been affected by the events in Switzerland.
"OzForex can confirm that it has not been adversely affected by this event," the company said in a statement.
"OzForex is an international payments business, it does not participate in proprietary trading and it does not offer leveraged transactions."
Meanwhile, OzForex boss Neil Helm said Westpac's decision to exit the money service industry would have minimal impact on clients.
"Whilst OzForex is disappointed to lose Westpac as a partner given our long history of working together, it will not impact our ability to continue providing an industry leading service to our clients," he said.
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