Saxo returns margin requirements to default following US election with the exception of GBP

With the immediate market risk of the US Elections having passed, Saxo today announces that it will be returning margin levels to normal levels, with the exception of GBP pairs. Saxo Bank raised margin requirements well ahead of the US Election to ensure that clients were appropriately leveraged going into what Saxo Bank expected could […]

With the immediate market risk of the US Elections having passed, Saxo today announces that it will be returning margin levels to normal levels, with the exception of GBP pairs.

Saxo Bank raised margin requirements well ahead of the US Election to ensure that clients were appropriately leveraged going into what Saxo Bank expected could be a significant market event. Saxo implemented margin changes last week on products expected to be effected by the outcome of the election, such as some single equity, index and fixed income CFDs, and certain FX pairs. This included for example taking most major FX pairs up to 2%-3% with MXN and RUB going to 15% and 10% respectively.

Claus Nielsen, Head of Markets at Saxo Bank, said: ”We take a dynamic approach to our margin policy by ensuring that our margin requirements correctly reflect the market risks at any given time. Given the prominence of exposure to the US economy in our clients’ trading strategies, we wanted to ensure that our clients took advantage of trading opportunities with responsible leverage around the US Election.

Our Strategy team did point out the likelihood of both Brexit and Donald Trump winning the presidential election – both results not deemed likely by consensus views. When we raised margins ahead of the US elections, we said that analysts might be dismissing Trump’s chances but that the UK’s vote to leave the European Union crystallized a growing anti-establishment mood that should not be underestimated, and could parallel in the vote for Trump. We now look ahead to the Italian Constitutional Referendum on 4 December to see if this sentiment will further permeate through the international political landscape.

Market conditions broadly now allow us to reinstate margins to prior levels, but we will also raise margins on GBP pairs next week to 3% in the lowest notional tier with upward steps to 5% and 7% as position sizes increase. Considering evolving FX market structure and liquidity, including the 07 October GBP ‘flash crash’ as well as noting this week’s announcement by the NFA to take minimum margin levels to 5% on GBP for retail clients in the US, we felt a change was prudent. It is important for us to emphasize that neither Saxo nor our clients benefit from overleveraging and we feel a strong sense of responsibility to our clients and to the market to have margins at responsible levels to support and facilitate disciplined trading.”

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