Did you know that you can use your shares as collateral for margin trading?

Saxo Bank now allows you to use your share portfolio, exchange traded funds and other investments as collateral for margin trading. PS, this feature is not exclusive to them and it is offered by other service providers as well. In short, they will allow a certain percentage of the value of your shares / ETF’s to be used for trading margined products, such as contracts for difference or currencies (CFD’s & Forex). The percentage that they are willing to extend depends on the rating they attach to each individual share.

How much? This is known as the collateral value.

This is available for all shares traded through Saxo, both local and offshore. As an example, for the JSE listed shares, there are around 60x Tier-1 shares on which they would allow you to use 75% of its value for margin lending. On the Tier-2 shares they are willing to extend 50% and there are another 50x shares in this category. The remaining 240-odd shares aren’t deemed for to use as security for margin lending.

  • Tier 1 = 75% (±60 JSE shares)
  • Tier 2 = 50% (±50 JSE shares)
  • Tier 3 to 5 = 0% (±240 JSE shares)

Tier 1 shares include

AGL, ANH, APN, AVI, BAT, BAW, BGA, BID, BIL, BTI, CCO, CFR, CLS, CPI, CPI, DCP, DST, DSY, GLN, INL, INP, INPP, INPPR, INP, IPL, IVT, KAP, MEI, MND, MNP, MRP, NED, NEW, NPN, NRP, NTC, OML, PIK, PSG, REM, RMH, RMI, S32, SBK, SBK, SBP, SHP, SLM, SNH, SNT, SOL, SPP, TBS, TFG, TKG, TON, TRU, VOD.

Tier 2 shares include

ADH, AFE, AMS, ANG, ARI, ASC, ASR, ATT, BLU, CML, COH, DSB, EMI, EOH, EXX, FBR, FSR, FSR, GND, GRP, GRT, HMN, HYP, IMP, IPL, ITE, ITU, KIO, LBH, LBH, MMI, MSM, MTN, NHM, NPK, NT1, NTC, OCE, OMN, PGL, RCL, RDF, REI, RES, RLO, SAP, SBA, SDO, SPG, TSH, VKE, WBO, WHL, ZED.

For example

75% of the value of a position in a Stock or ETF with Rating 1 can be used as collateral (instead of cash) to trade margin products such as Forex, CFDs, Futures and Options. Please note that Saxo Bank reserves the right to decrease or remove the use of Stock or ETF investment as collateral for large position sizes, or stock portfolios considered to be of very high risk.

Think outside the box

Even if you have a fully invested long only equities portfolio, you now have access to funds to open additional positions. It might be cheaper for you to hedge yourself with a short CFD position then to sell out of a long equities position. There are many options available and you do not necessarily have to gear yourself and take on more risk than you can stomach.

Correct at time of writing. Contact us for an update.

Saxo fees

  • Low: ∼¼% for CFD’s & ½% for shares
  • Easy funding (SABOR +/-3%)
  • No custody fees
  • Inactivity of 25GBP if no trades in a quarter

Leave a Reply

Your email address will not be published. Required fields are marked *

Scroll Up