Danish multi-asset brokerage Saxo Bank has shared with Finance Magnates that the total value of collateral held by clients of Saxo Bank has increased by €200 million ($221 million) throughout Brexit trading. With the overwhelming majority of retail traders usually losing funds around Black Swan events, Saxo’s traders have actually managed to eek out some gains.
The main reason for the positive development for clients is not only the massive volatility which we have seen across the board but also much higher collateral requirements which the Danish bank has put up for its clients.
Brexit could prove to brokers and traders that higher margin requirements are a good thing
While many may argue that leverage is increasing profits, the reality of the financial markets is that more conservative traders that use less leverage are over the long run much more successful than traders which are more aggressive.
Saxo Bank was amongst the brokerages which implemented some of the highest highest margin requirements for trading in the run up towards the E.U. Referendum in the U.K.
Saxo Bank’s clients saw gains of over €200 million ($221 million) since the client protection strategy by the Danish brokerage was implemented on June 16th. Throughout the same period, Saxo Bank stated that it executed a record amount of orders via the brokerage’s trading platform SaxoTraderGO.
Commenting to Finance Magnates, the Head of Markets at Saxo Bank, Claus Nielsen, commented, “It has been essential for Saxo Bank to explain to its clients that neither clients nor Saxo Bank benefit from over-leveraging and after our protective measures our clients went into the referendum with lower leverage."
It has been essential for Saxo Bank to explain that neither clients nor Saxo Bank benefit from over-leveraging
“We are extremely pleased to have facilitated our clients’ smooth trading activity by providing uninterrupted access to a broad range of asset classes and products through our systems that experienced 100% uptime throughout the historic and volatile event,” he elaborated.
Saxo Bank is still maintaining the increased collateral requirements which it implemented in the run-up to the referendum. The Brexit event could prove to brokers and traders alike that higher margin requirements are much more beneficial to the community overall, despite leading to somewhat lower trading volumes in the short term.
Commenting on the prospects for margin requirements at Saxo Bank going forward, Mr Nielsen elaborated, “We are satisfied with current margin levels and whilst we continue to monitor volatility closely, and will evaluate those margin levels on Monday, we will provide our clients with continued transparency around our margin requirements.”
If anything, the whole event is a testament that lower leverage equals higher returns. The data which brokerages that care about the profitability of their clients have gathered throughout the Brexit event, could prove to be the key to long-term retention of customers and the achieving of long-term revenue streams for the industry.
