12 October 2016

Margin rate changes ahead of the US election

On 8 November 2016, the US electorate will go to the polls to decide the next leader of the world’s largest economy. Due to expected uncertainty in the mar...

On 8 November 2016, the US electorate will go to the polls to decide the next leader of the world’s largest economy. Due to expected uncertainty in the market, there is potential for heightened market movements, including possibilities of significant price gaps and periods of illiquidity.

In order to help protect clients in the face of heightened volatility, Saxo will be offering responsible leverage by changing default margin requirements, as we did previously during the UK referendum (Brexit) in June. Results were notably positive, with our clients showing significant gains despite the heightened volatility in the markets.

The new requirements related to the US election will be communicated to you during the third week of October. As we will be changing the requirements toward all of our White Labels, please prepare accordingly:

If your end-customers follow Saxo Capital Markets' standard margin profiles, both you and your customers will be changed automatically.

If you have defined customised margin requirements towards your end-customers, please contact Client Configuration at IAMSGP@saxobank.com no later than 28 October to agree the necessary changes. Please note that if you have different margin requirements than your end-customers, this may result in additional finance charges to you.

We expect these changes in margin requirements to be temporary, and anticipate a return to normal levels following the US election on November 8, depending on market conditions.

We suggest that traders place relevant resting orders well in advance of the election, as availability of liquidity on the platform for new trade requests and orders can vary substantially during periods of market illiquidity. We would also like to stress that Stop Loss orders are not guaranteed to be filled at client order level: Stop orders are converted to Market orders once triggered, and dislocations in available liquidity could result in significant slippage on Stop orders.

Therefore, 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.

 Please note that we will be informing Saxo’s private clients about these margin changes later this month. Until then, please keep this communication confidential and for internal use only.

 

US election support materials

Our dedicated US election landing page on TradingFloor.com offers new content daily focusing on actionable strategies, market commentary and webinars, which you can share or use as inspiration for your own marketing materials. Unbranded versions of our video materials are available if you have a Clipster account.

The US election campaign material is also available on our Institutional Marketing Portal.