27 October 2016

Margin changes

​On Tuesday, 8 November, the US electorate will go to the polls to decide who will be the next leader of the world’s largest economy. Due to expected uncerta...

​On Tuesday, 8 November, the US electorate will go to the polls to decide who will be the next leader of the world’s largest economy. Due to expected uncertainty inthe market, there is potential for heightened market movements, including possibilities of significant price gaps and periods of illiquidity.

In advance of the US election, Saxo Group is raising margins for a selected group of products as of Thursday, 3 November 2016 at 13:00 GMT. As part of our mission to provide responsible margin rates for our clients, we are increasing margins to protect against the potential high volatility, rapid price movements or gapping that may occur in the market during the lead-up to this event.

While the level of volatility is hard to predict, there is nodoubt that the outcome of the US election, and especially a surprise outcome, could lead to rapid price movements in certain stocks and indices, but also to a lesser degree in certain FX pairs.

It is our policy to ensure that our margin requirements to the extent possible reflect the market risks at any given time. We believe that risks at this point in time may be heightened by the general anti-establishment mood and an emerging trend of protest votes.

Analysts may be dismissing Trump’s chances, but the UK’s game-changing vote to leave the European Union in June has crystallized the anti-establishment mood and one should not underestimate the parallels in the protest vote between Trump and Brexit. In addition, markets will most likely soon turn their attention towards Italy and Prime Minister Matteo Renzi’s referendum on Senate Reform, which is already a cause of concern for both the EU and investors alike.

In light of this and given the prominence of exposure to the US economy in our clients’ trading strategies, we want to ensure that our clients take advantage of trading opportunities with responsible leverage.

Similar margin changes were implemented last June, to prepare Saxo clients for heightened volatility surrounding the UK referendum (Brexit) and help them mitigate their risk. The results were notably positive, with our clients showing gains despite the increased market volatility.

To see the upcoming changes to margin rates and collateral requirements for your margin profile, please go to Account – Margin and Collateral Changes in the trading platform.

 

If you have open positions in any of the affected markets, please ensure that you monitor your positions carefully and maintain sufficient funds in your account to meet the increased margin requirements during this period.

In addition, please keep the following in mind when trading during periods of potential market volatility:

  • Market liquidity may vary substantially, and trade/quote requests may be unavailable at times as existing resting orders and new market orders are filled as priority

  • Market orders are not guaranteed to be filled at any specific price – they will be filled “at best” according to available market price when processed

  • Stop Loss orders are converted to Market orders once triggered, so are not guaranteed to be filled at your stop order level – gaps in available liquidity can result in significant slippage on Stop orders

  • Buying options (i.e. puts to protect long positions and calls to protect short positions) could be a hedging vehicle suitable for market uncertainty such as the US Election since the Strike price is fixed in advance

  • Ensure that you are familiar with placing orders and initiating trade requests on the platform

  • Consider placing relevant resting orders well in advance of the US election

For further ideas and inspiration for your trading during the election period, we offer a dedicated US election page on TradingFloor.com, where you can find actionable strategies focused on managing risk and volatility, as well as expert views and analysis from Saxo’s team of strategists.