Saxo Bank brought in higher margin requirements ahead of last week's US elections. But with the result out of the way, most of those margins are being relaxed to pre-election levels - with a notable exception.
Copenhagen-headquartered financial group Saxo Bank has restored margin levels on a variety of products traded on its platforms to the older, lower levels seen before the US elections, although margins required for sterling-based currency pairs will not be restored to prior rates.
The firm had pushed up margin requirements because of an expected hike in volatility immediately before, during and after the US elections last week.
Margin changes that had been made affected some single equity, index and fixed income contracts for difference and certain forex pairs. This included, for example, taking most major forex pairs up to between 2 per cent and 3 per cent, with the Mexican peso and Russian rouble going to 15 per cent and 10 per cent respectively.
"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," said Claus Nielsen, head of markets at Saxo Bank.
Saxo Bank said its team did point out the "likelihood of both Brexit and Donald Trump winning the presidential election - both results not deemed likely by consensus views."
It added: "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."
On sterling currency pairs, however, margins will go up this week to 3 per cent in the lowest notional tier with upward steps to 5 per cent and 7 per cent as position sizes increase.
"Considering evolving FX market structure and liquidity, including the 7 October sterling ‘flash crash’ as well as noting this week’s announcement by the NFA [National Futures Association] to take minimum margin levels to 5 per cent on GBP for retail clients in the US, we felt a change was prudent," the bank said. "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."