The abrupt escalation of rhetoric between North Korea’s Kim Jong-un and US President Donald Trump has spooked markets in August. While the latter summer months are typically characterized by dormant markets, bombastic talk of a nuclear war has caused Saxo Bank to temporarily raise its margin rates on a number of select products.
The potential for a nuclear strike and consequent conflict, while still unlikely, has prompted Saxo Bank to take steps to protect its clients in a bid to better control risk. Indeed, an actual nuclear assault or action could potentially convulse markets as many instruments would be thrown into a state of rapid flux.
As such, Saxo Bank is implementing the following measures that will go into effect on August 16, 2017 at 8:00 GMT. The timing of the margin changes do not coincide with any specific action or upcoming event, but simply represent a preemptive and precautionary measure to which clients can be better shielded against any violent swings in markets.
Of note, the changes are also temporary and are expected to revert to normal should brinkmanship ultimately give way to more normalized state of affairs between the US and North Korea. A detailed list of changes at Saxo Bank is listed below:
Source: Saxo Bank
Saxo Bank’s Head of Markets, Claus Nielsen, commented on the changes: “We have decided to raise margin requirements on a range of instruments to ensure prudent protection of clients in the event of further escalation of tensions around North Korea’s nuclear programme.”
“An escalation of the situation is not our main scenario but looking at the signals and risk, we find it prudent to raise margin requirements to protect clients in the event of larger price moves following a potential escalation of the crisis. We always take a dynamic approach to leverage levels offered to our clients, adapting margin requirements according to volatility, available liquidity in the market and potential risk events,” he added.