The firm has increased the amounts traders using its platforms must post ahead of any potential increase in market volatility before or after 8 November.

Saxo Bank announced today it is tightening margin requirements on certain products such as forex contracts in the Mexican peso and Russian rouble ahead of next month’s US election, as a measure to guard against market turbulence.

Changes will be made to products expected to be affected by the outcome of the election on 8 November, such as some single equity, index and fixed income CFDs, and some foreign exchange pairs, the Copenhagen-headquartered firm said. The changes apply as a percentage of total positions.

This will include taking the majority of major FX pairs’ margin requirements up to 2 to 3 per cent, with RUB and MXN rising to between 10 and 15 per cent respectively, while the minimum margin requirement on CFD indices will be 4 per cent based on market volatility and liquidity during the run-up to and through the election.

However, the bank noted that its default – aka normal - margin rates will be reinstated “once market conditions revert to normal”.

Recent episodes have highlighted how, during periods of market stress, such as immediately following the UK’s Brexit vote in June, firms sometimes require more collateral to be set aside by market participants.

“We take a dynamic approach to our margin policy by ensuring that our requirements correctly reflect the market risks at any given time,” Claus Nielsen, head of markets at Saxo Bank, said.

“As we enter the crucial few weeks ahead of the US election, and given the prominence of exposure to the US economy in our clients’ trading strategies, we want to ensure that our clients take advantage of our trading opportunities with responsible leverage,” he said.

Nielsen cited the outcome of the UK’s recent decision to exit the European Union as an example of why Saxo Bank’s approach to market-moving events is necessary during times of high volatility.

“A surprise outcome of the election can create strong volatility, rapid price movements, potential for temporary illiquidity in certain stocks and indices, and to a lesser degree, in certain FX pairs, he said, adding: “Analysts may be dismissing Trump’s chances, but the UK’s vote to leave the European Union has crystallised a growing anti-establishment mood that should not be underestimated, and there may be parallels in a protest vote for Trump.”

Nielsen also said neither Saxo Bank nor its clients benefit from overleveraging, adding that a “multi-asset strategy is a good way to manage exposure and hedge risk around such geopolitical events as the US election”.

“Black swan”
While most polls suggest that Hillary Clinton is on course to win the White House in November, uncertainties and Donald Trump’s ability to upset conventional opinion to date means the outcome is far from certain. For example, Swissquote, an online financial trading platform, has warned there remain “black swan” events that could send markets awry.

“However, while it is unlikely that perception or polling numbers will shift organically, a treasure trove of skeletons in both candidates’ closets raises the probability of a black swan event. WikiLeaks continues to churn out new documents, on health issues, terrorist attacks, meaning that shifts in millennial voting habits and corrections in stock could all be easily imaged and would result in shifting polling data,” the firm said in a briefing note today.

“The highly unfavourable rating of both candidates leaves both susceptible. In addition, the lingering elevation in emerging forex implied volatility post-election, indicates that expectations for a disorderly transition of power remains high. We caution traders from becoming to compliant, especially vis-a-vis Trump's ability to shoot himself in the foot each time he gains momentum. Two things to remember are that all things considered the race remains tight and historically the tails are closer than we calculated,” Swissquote said.

In other recent developments, Saxo Bank appointed Ashok Kalyanswamy as chief information officer, replacing Ashley Latham, who stepped down. Kalyanswamy most recently served as division director and CIO for Macquarie Securities Group, based in Hong Kong.