SMN
As of September 12, 2016 Danish brokerage Saxo Bank will introduce a simplified equity rating model to determine the margin required for trading CFDs and stock options. The brokerage also plans to launch intra-day margin on popular CFD Index-trackers, lower by 50%, starting from August.
Recategorizing equity margin requirements
The new model rates equities into five categories, depending on the risk associated with them.
| Rating | Margin | Collateral |
| 1 | 10% | 75% |
| 2 | 20% | 50% |
| 3 | 40% | 25% |
| 4 | 80% | 0% |
| 5 | 100% | 0% |
In other words, for low-risk CFD stocks in category 1, clients of Saxo Bank have to maintain only 10% of the market value of the position as collateral, allowing them to leverage up to 10 times. And as regards high-risk CFD stocks in category 5, traders are required to maintain the full value of the position as margin.
What is more, with category 1 stocks you can use up to 75% of the value of your position as collateral for trading margin products such as FX, CFDs and futures. The value of positions of stocks in categories 4 and 5 cannot be used as margin collateral.
Saxo Bank said it will be re-rating the positions on a daily basis in order to be in line with the ever changing market conditions. The broker has probably planned this move in order to help clients avoid over-leveraging high-risk stocks and ETFs.
Note: The margin requirements for CFD on indices will not be affected by this change.
Lower Intra-day margin on popular CFD Index-trackers
From 1st August 2016, Saxo Bank will launch intra-day margin on CFD Index-trackers, lower by 50%, which will enable traders to aggressively leverage during Intra-day sessions. Lower margins will apply when the main market is open until shortly before its close.
We remind you that Saxo Bank was among the first major forex brokers to announce it is hiking margin requirements on select instruments in relation to the Brexit vote and after that reported a boost to the gains of its clients, despite the increased market volatility.
The new equity margin requirements and the lower margin for intra-day CFD Index-trackers will apply to the broker’s two platforms – SaxoTrader (desktop version) and the mobile application SaxoTraderGo. As we have informed you earlier, Saxo Bank intends to discontinue its web-based platform in mid-September.
Saxo Bank holds a banking license from Denmark’s Financial Supervisory Authority (FSA) and acts as a brokerage firm and a market maker, offering trading in more than 30 000 instruments, including currency pairs, binary options, contracts for difference (CFDs), stocks, futures, and bonds. It serves both retail and institutional clients.
The group operates 25 offices and has subsidiary companies across Europe, Asia and the Middle East, Australia, South America, and South Africa. The Saxo Bank group also offers traditional banking services through its unit Saxo Privatbank.
