Saxo Bank’s Claus Nielsen looks at trading the Brexit period; reaffirms position on leverage
Saxo Bank Head of Markets Claus Nielsen examines how to trade the Brexit period, and how Saxo Bank carefully assessed the advent of the referendum.
One of the most astute companies in the industry, Saxo Bank, took very comprehensive measures during last week in order to ensure a stable position through the potential volatility that could have ensued following the results of the referendum in Britain yesterday in which the British public voted on the country’s membership of the European Union.
Today, Claus Nielsen, Head of Markets at Saxo Bank has explained the company’s perspective on trading through the immediate period following the results of the referendum
“Going into the UK referendum we have considered it important to take prudent measures to reduce our clients’ exposure to risk and to be fully transparent. It has been essential for Saxo Bank to explain to our clients that neither clients nor Saxo Bank benefit from overleveraging and that we, with our clients’ interest firmly at heart, are doing our utmost to educate on the range of options available” said Mr. Nielsen.
“This has proved to be the right decision as our numbers show gains for our clients despite the volatility in both FX markets and Asian equity markets. The German DAX index was down 10 % at open and we expect further volatility on European stock markets today and continue to recommend clients to be cautious in this environment” he continued.
“We definitely led the way by being transparent and prudent in regards to increased margins and looking at the performance of our clients, it was the right decision. We are content with the current margins and continue to monitor volatility closely” concluded Mr. Nielsen.
In the advent of the referendum, Mr. Nielsen explained to FinanceFeeds that trading unleveraged options is a potentially safe asset class to look at during times of such high potential volatility due to a geopolitical event of this magnitude.
“We are offering our clients full transparency on the temporary increase in margin requirements for GBP. We have been monitoring the implied volatilities traded in the FX Options market over the past 2 months which have led us to the conclusion that a Tier 1 margin level for GBP of 7% is rational and quantitatively fair” said Mr. Nielsen earlier this week.
“We are applying the same analysis methodologies when looking at equity-related products, specifically CFDs on UK stocks and indices, and will be applying an 8% margin on UK100 and UK250MID” he continued.
“Going into an event of this magnitude with less than a 5-7% margin requirement on any UK margin instrument does not seem responsible to us and gives the retail client a wrong impression of the underlying volatility and risk” said Mr. Nielsen
“I am glad to note that we were one of the first to announce such changes and have informed clients well in advance of the event. As soon as market conditions allow it, we plan to return margins to their normal levels” he said.
Indeed, prudent planning of this nature has most certainly proven to be a very sensible path indeed.
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