With the immediate market risk of the US elections having diminished, Saxo Bank has returned its margin requirements to normal levels, with the exception of GBP pairs.
Saxo raised margin requirements ahead of the US election to try and ensure that its clients were appropriately leveraged going into what it expected could be a significant market event.
It raised the requirements on 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, comments: “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 crystallised 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,” he continued.
“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 7 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 emphasise 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,” Nielsen says.