Saxo Bank
launched standalone margin lending accounts for Singapore clients this week,
letting traders separate borrowed-money positions from their regular portfolios
for the first time.
Saxo Rolls Out Separate
Margin Accounts in Singapore
The Danish
broker introduced three changes to its two-year-old margin product: dedicated
accounts for leveraged trades, better collateral rates on medium-risk stocks
and ETFs, and a shift from full to partial liquidations when positions go
underwater.
The moves
follow client requests for more control over borrowed funds, according to
Mahesh Sethuraman, Saxo’s Singapore CEO.
“We
are constantly listening to our clients and evolving our platform,”
Sethuraman said. The changes “will provide greater flexibility,
transparency, and strategic control, whether clients are looking to amplify
their buying power or optimize dividend income.”
This is
another product update following Saxo’s introduction of fractional share
trading in June. The service covers more than 1,000 instruments across multiple
asset classes, allowing clients to buy partial units of high-priced stocks with
limited capital.
Singapore Push After Hong
Kong Exit
The product
rollout comes 15 months after Saxo shut its Hong Kong and Shanghai offices,
citing “geopolitical changes” that made the former British colony
less attractive. The firm posted a $4.3 million loss from Hong Kong operations
in 2023 before pulling out in September last year.
The margin
lending accounts work by creating a separate “Margin Lending” section
within each client profile. Traders can borrow against their existing holdings
to buy stocks, ETFs, bonds and stock options. The segregation means leveraged
bets won’t mix with unleveraged positions in account statements.
Saxo
revamped its collateral structure to offer different leverage ratios based on
asset risk levels. Securities rated between risk levels 2 and 5 now qualify for
improved borrowing capacity, though the firm didn’t specify exact percentages
in its announcement.
The partial
stop-out mechanism marks a bigger operational shift. Previously, Saxo would
liquidate an entire margin account if collateral values dropped below minimum
requirements. Now the platform sells only enough positions to restore
compliance, leaving remaining holdings intact.
How Does It Work?
Margin
lending lets investors borrow money secured by their portfolio to increase
position sizes. A client with $5,000 cash could borrow $15,000 to buy $20,000
worth of dividend-paying stock, according to Saxo’s calculations. Using a 3.02%
interest rate and 5.5% dividend yield, the leveraged position would generate
$647 in net income versus $275 without borrowing – a 12.94% effective yield.
The math
assumes SORA rates stay near 2.02%, which Saxo used as a benchmark in late
June. The firm adds a 1% markup for VIP-tier clients, though retail borrowers
likely pay more. Rising rates or falling stock prices can quickly erase the
dividend advantage and trigger forced selling.
According to a report published in early December, Saxo Bank reached 1.5 million clients, and its 2024 profits grew by nearly 300 percent to DKK 1.005 million.
This article was written by Damian Chmiel at www.financemagnates.com.
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