Adam Smith

Saxo Capital Markets, the multi-asset trading specialist, has reinforced the importance of responsible leverage for retail investors trading in Contracts for Difference (CFDs) and Foreign Exchange (FX) in Australia, expressing concern that significant parts of the margin trading industry has not been sufficiently focused on protecting clients’ interests.

Saxo Group has a long-standing commitment to responsible leverage and client transparency. However, the firm has been concerned some providers still offer excessive leverage, resulting in the significant risk of frequent stop-outs, which leads to client losses.

The comments come as new laws have recently passed through Parliament allowing the Australian Securities and Investments Commission (ASIC) the power to intervene whenever there is a risk of significant financial damage to the consumer. The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) legislation has introduced product intervention powers for ASIC effective as of 3 April 2019.

Saxo Capital Markets Australia chief executive officer, Adam Smith welcomed the move by ASIC to enhance protection and bring Australia in line with other global markets.

“We look forward to seeing this new legislation being implemented in a practical sense, which will ultimately bring further protection for Australian traders and investors,” he said.

“While other major markets have moved to cap the amount of leverage brokers can provide to their clients for trading in CFDs and FX, retail investors in Australia are currently being offered leverage ratios as high as 500 times to 1 by major CFD providers, which means the client needs to put up only $1 to trade $500.

“This is an ultra-high-risk position because the underlying stock needs only decline by 0.2% for the clients to lose the amount they invested.”

In July 2018 the European Securities and Markets Authority (ESMA) imposed leverage limits on CFD and FX trading for retail investors in the European Union, bringing Europe into line with similar restrictions in Singapore, Hong Kong and Japan. Saxo Capital Markets offers 25 times to 1 on the Australian dollar, which is already in line with the ESMA standard.

“Saxo is committed to responsible leverage and client transparency in Australia and across the globe. We have been deliberate in taking a much more conservative approach than our competitors, keeping our clients’ best interests at the heart of everything we do,” he said.

Mr. Smith added that trading with CFD and FX instruments allows smaller retail investors to trade the full global macro cycle, build a diversified capital allocation, and hedge their market exposure in a flexible and efficient way – democratising access options, that have for a long time been largely reserved for institutional investors.

“Protecting clients while allowing them to take a responsible level of risk is important in all areas,” he concluded.

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Adam Smith

Saxo Capital Markets, the leading fintech specialist focused on multi-asset trading and investing, has announced the appointment of Adam Smith as its new Chief Executive Officer for the Australian market.

Mr Smith brings over two decades of experience working in the financial services and technology sectors. He joins Saxo from OFX, an ASX listed financial services / technology company, where he was the Chief Operating Officer for the past three and a half years. Prior to this he held a number of senior commercial and operational roles within ANZ Global Markets and Macquarie Bank in both Australia and Hong Kong.

Adam Reynolds, CEO of Saxo Capital Markets Asia-Pacific, said the appointment of Adam Smith would enhance Saxo’s existing market presence and would expand partnership opportunities with other financial institutions in Australia.

“The Australian market is of great strategic importance to Saxo Group. Adam’s proven track- record and broad experience make him well-qualified to deliver our vision and strategy in the region,” said Adam Reynolds.

“We see great opportunities in Australia’s burgeoning fintech scene. Adam’s depth of knowledge will be highly beneficial in driving further innovation and collaboration in the Australian trading and investment community,” he added.

Saxo provides a multi-asset trading and investing platform to private and institutional clients, prime brokerage services, and global markets technology infrastructure for fintech companies and financial services institutions via its Open API.

“For more than 25 years Saxo has strived to democratise trading and investing, providing our private clients with the same tools and market access as those used by large asset managers and financial institutions,” said Adam Reynolds.

“Today we’re dedicated to building relationships with other companies delivering financial services not only as a provider of markets technology but as a true partner who can augment those companies’ value propositions for their clients. Adam will lead our efforts in the Australian market to deliver this vision and share our capabilities with more businesses,” he added.

Adam holds a Bachelor of Economics from the University of Sydney and a Master of Business (Finance) degree from the University of Technology, Sydney.

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The move makes Saxo the only platform in the world to provide this service alongside a multi-regional and multi-asset trading and investing offering, enabling a more streamlined process.

As of today, Saxo clients will be able to hold Australian Equities with the Holder Identification Number (HIN) structure of the ASX’s Clearing House Electronic Subregister System (CHESS) in conjunction with the rest of the global securities available on Saxo’s platforms SaxoTraderGO and SaxoTraderPRO.

Commenting on the announcement, Ben Smoker, CEO of Saxo Capital Markets Australia, said: “Every other broker requires investors and traders to switch between accounts and platforms to access different asset classes and different solutions, which is clearly an inefficient and cumbersome process.

“By offering HIN capability for Aussie Equities alongside International Equities, Bonds, CFDs, FX and the rest of our current offering, traders and investors can access what they need, all from the same account,” he said.

Leveraging the power of partnerships

The HIN structure for Australian Equities solution is powered by online stockbroking firm OpenMarkets, as part of a reciprocal partnership established with Saxo in mid-2017. As part of this alliance, Saxo also provides the market infrastructure to allow OpenMarkets offer their own clients access to global equities under a white label model.

“Our alliance with OpenMarkets is a good example of how a partnership approach works in practice, for the benefit of the end-customer. Instead of investing heavily to build everything from scratch, companies can power each other offering their respective capabilities in a win-win,” he said.

In 2015, Saxo transformed its white labelling business with the launch of an open application programming interface (API), providing open access to its market infrastructure for third parties, like OpenMarkets in Australia and more than 120 other financial institutions around the world.

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Australia’s fastest-growing online stockbroker, OpenMarkets, and multi-asset class trading and investment specialist, Saxo Capital Markets, yesterday announced a reciprocal partnership to provide each other with technology solutions to build upon their respective market leading offerings.

The partnership will allow OpenMarkets’ clients to have access to Saxo’s extensive list of global equities with multi-currency settlement, while Saxo clients will now be able to invest in Australian shares through a Holder Identification Number (HIN) structure.

“This represents the collaboration of two Fintech powerhouses in the online broking industry in Australia,” said Saxo Capital Markets Australia CEO, Ben Smoker.

“We are providing the international equities trading engine and technology to OpenMarkets, giving them access to over 19,000 global stocks across 36 different exchanges.”

For OpenMarkets, the alliance with Saxo allows it to become a truly global trading platform, bypassing significant development time and expense to provide its clients with a broader range of trading options. This includes the ability to:

• Buy and sell exchange-listed securities in global markets, including US, UK and the major European and Asian markets;
• View all assets in one portfolio screen;
• Trade through a single platform, where Australian equities are still maintained on HIN;
• Settle all trades (Australian and international) via the client’s one linked cash account
• Consolidate all transactions and holding data, and feed this data to SMSF and portfolio administration reporting platforms.

Conversely, the integration with OpenMarkets allows Saxo to increase trading activity for global shares through its international equities platform.

On the customer side, Saxo will be able to meet market demand for settlement of Australian equities into HIN from a multi-asset platform. This means that Saxo clients will be able to hold Australian stocks through the HIN structure provided by the ASX’s Clearing House Electronic Subregister System (CHESS), alongside other assets within Saxo’s trading platform.
The alliance between OpenMarkets and Saxo also breaks a historical model in the Australian broking industry, where HIN-based stockbrokers for Australian share trading and custodian-based brokers for international shares have always been segregated.

Saxo and OpenMarkets are effectively bridging this gap by providing the first integrated solution for the Australian market.

“This is an alliance between two like-minded technology brokers that have complementary services and share a win-win philosophy towards third party integration. Our partnership with Saxo will result in us being able to offer trading in global securities from one cross-collateralised cash account and we will do this at competitive brokerage and FX rates,” said OpenMarkets CEO, Andrea Marani.

“This global markets trading offering, coupled with our range of reporting platform data feeds, will go a long way towards meeting the demand we are seeing from the SMSF market looking for global investment diversification.”

“Thanks to our new partner, Saxo will be the first broker to offer a HIN solution on a singular, consolidated multi-asset trading platform. This differentiates us from other multi-asset brokers who also offer access to local shares, but do not have HIN,” Mr Smoker said.

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Covering over 5,000 government and corporate bonds across developed and emerging markets, Saxo’s new electronic trading technology is the first of its kind to offer a direct, simple, efficient and transparent way for retail investors and mid-sized institutions to access bonds.

Saxo’s technology redirects client orders into an auction pool of 40 of the largest liquidity providers in the world to compete for those orders in just a few seconds. The result of this process is improved transparency, an improved execution rate and better prices.

Six months after the launch of its technology, Saxo clients have experienced an improvement in spreads of more than 25 basis points (bps). For corporate and emerging market bonds, one in five trades have seen their spreads reduced by 50 bps and some even above 100 bps.

In liquid government bonds, the majority of the trades are now executed on mid-prices or close to mid-prices, effectively cancelling the bid/offer spread in this bond category.

Execution speed has also improved. The time limit for any bond trade in the improved SaxoTraderGO platform is 45 seconds. However, approximately 30 per cent of the trades of government bonds now takes less than one second, while 30 per cent of corporate and emerging market bonds are taking less than 20 seconds.

“Saxo’s digital bond trading technology is making it possible for retail investors and mid-size institutions to directly access fixed income securities without having to go through the hassle of manual execution processes,” said Saxo Capital Markets Australia CEO Ben Smoker.

“The manual bond trading processes can be a challenge in Australia. Up until the recent launch of the Saxo Digital Bond Trading offering, accessibility to bond trading for Australian investors has been limited to only a handful of manual-process brokers offering a somewhat anaemic variety of bonds. The customer experience has been poor due to the time and cost involved,” he said.

Saxo Capital Markets’ decision to build a full digital value chain in the bond markets space has been validated by the reduction of spreads and improvements in the speed of execution.

“Both the spread of a bond trade and the time it takes to execute can be instrumental factors to the performance of our clients’ portfolios and can make a huge difference to potential returns – both in fixed income-only portfolios, but also as part of a multi-asset portfolio,” Mr Smoker said.

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What’s in store for Q2?

Saxo Bank, parent company of Saxo Capital Markets, the online multi-asset trading and investment specialist, has published its quarterly outlook for global markets and key trading ideas Q2 2017.

Europe to outperform the United States

European assets, with the exception of German fixed income, enter the second quarter of 2017 with small or large discounts, based on nervousness about the French and German elections, and expectations over the end outcome of Brexit. With the base scenario that the European economy will outperform the US economy over the next four years, Saxo sees a wide gap between perception and reality when it comes to European assets, which will present significant buying opportunities for investors in Q2 2017.

Commenting on the outlook, Steen Jakobsen, Chief Economist and CIO, Saxo Bank, says: “As we head into the second quarter of 2017, it is increasingly apparent that the European instability narrative may be overblown as the continent prepares to outperform the US which is overly dependent on the Trump-trade.

“What non-Europeans often fail to add to their assessment is the massive amount of political capital invested in Europe and the euro. With little or no chance of France leaving the euro – regardless of whether Marine Le Pen wins or not – we expect a significant move in the euro’s value once the elections are done in Q3.

“Europe runs a big current account surplus, the ECB is moving towards a less accommodative policy stance and the CEE region continues to outperform with average growth levels above 3%. However, while all this points to the fact that Europe will do better than the US in Q2, we maintain that recession is still likely in the 12-18 month period as we see the credit pulse peak simultaneously with the global inflation,” adds Jakobsen.

France could become ungovernable

With the French Presidential election likely to be one of the most closely watched events of Q2 2017, Saxo Bank urges traders and investors to look at the legislative elections in June which will provide a more accurate view of the future direction of France.

Christopher Dembik, Head of Macro Analysis, says: “There are essentially two possible outcomes here. Either Le Pen is elected President but she is deprived of real powers by not winning the legislative elections, or Macron is elected President but he has difficulty dealing with his overly-heterogeneous majority.

“For the first time since 1958, parliamentarians could make their great return which, given the experiences of the Third and Fourth Republic, is not a positive signal. In the end, France could become ungovernable,” added Dembik.

European equities will outperform US and Japanese equities

The reflation trade that started before Donald Trump’s victory in the US presidential elections accelerated in Q1 as global economic data improved and surprised against expectations. Saxo Bank points out that the reflation trade could end in Q2 with a healthy correction in global equities.

Peter Garnry, Head of Equity Strategy, says: “While investors are focusing on Europe’s political landscape with upcoming elections in France and Germany, they seem to have missed the fact that Europe’s GDP growth has surged to almost 3% annualised, estimated by the euro-coin indicator from Bank of Italy.

“The drivers are improving financial conditions, upward pressure on prices and increasing business confidence. This improved economic picture and outlook is at odds with the valuation discount to US equities and one of the main reasons behind our overweight Europe and underweight US theme. If Macron wins the French election we believe French equities will outperform in Q2 against other European equity markets.”

A more volatile FX market

Q2 could well see much of the uncertainty lifting on the EU political front and greater sense on whether Trump can rally the rare majority he holds in the House and Senate to pass policies that could boost the US dollar. In any case, the remarkable lull in volatility in Q1 could yield a more volatile market as we sort through important themes and after global complacency levels reached extremes in Q1.

John Hardy, Head of FX Strategy, says: “Risks are two-way for the USD in Q2, mostly depending on Trump, thought the upside potential has increased due to the market’s growing scepticism. We expect the euro will continue to be supported by the strength of incoming data from across Europe and the ECB eases off on fretting the downside risks. An important caveat though beyond the Q2 is how the weakest peripheral countries, most importantly Italy, will deal with an ECB taper.

“A discounted sterling may be justified given the UK’s still large twin-deficits and the overhanging Brexit uncertainty, although as the process could take many years to unfold, this could see the market gradually unwind the uncertainty discount. Lastly, Chinese liquidity withdrawal could weigh on the outlook for EM currencies in Q2 and beyond, likewise tempering enthusiasm for the reflation trade. “

Relative stability in the bond market

With the largest proportion of political risk disappearing after the French election, we expect a relief rally in riskier assets, but also an elimination of safe-haven premium in core markets like the German, Dutch or Danish bond markets, sending the overall core-yield levels higher. In September, the German election can restart another round of moderate risk-off, although we do not see the same market concerns regarding this election, at this point in time.

Simon Fasdal, Head of Fixed Income Trading, says: “This could be the quarter that sees relative stability in global bond markets, with inflation and yields moving higher, but a dive in the oil price or geopolitical risk could be the rock on which the steady ship founders.“

Sharp reality check for oil, and a bonus for gold

Commodities bulls may have entered Q1 on a wave of enthusiasm spurred by the great reflation trade, but there has been a sharp reality check that looks like being a bonus for gold and negative for oil.

Ole Hansen, Head of Commodity Strategy, says: “When it comes to oil, what became increasingly apparent during the first quarter was the lack of price momentum to justify this bullish build-up in speculative bets. We believe the best the market can hope for in Q2 is for Brent crude to stabilise around $50/b but cannot rule out a temporary drop to $45/b. We lower our year-end forecast to $58/b in the belief that demand growth and supply cuts eventually will positively impact the price.”

“Gold, where investors have maintained a lukewarm attitude with rapid build-ups of speculative longs reflating quickly ahead of FOMC, needs to see the bullish dollar and bond yield expectations face more that they have already. We maintain our end of year forecast at $1,325/oz and based on a pick-up in industrial metals, we could see silver reaching $19/oz. “

Read Saxo Bank’s full Q2 2017 outlook.

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Autochartist covers more than 50 currency pairs, including AUD/JPY, AUD/USD and AUD/NZD, 200 international stocks, the biggest indices, as well as the major commodities.

“With the integration of SaxoTraderGO with Autochartist we further enhance our range of analysis tools available to our clients,” said Ben Smoker, Saxo Capital Markets Australia CEO.

“For traders using Saxo’s platform, there’ll be no need to open other browsers, or run applications and third-party setups, in order to use Autochartist’s automated tools”, he added.

Autochartist’s advanced algorithms constantly monitor global markets and deliver live trade signals through a wide range of parameters based on technical analysis.

Each trade signal presents a simple overview of the underlying analysis and an automatically calculated entry price, take-profit target and stop loss that clients can trade directly in the platform as opportunities occur in the market.

Analysing the markets and finding trade signals using technical analysis is usually a time-consuming process and requires in-depth knowledge. This new tool integrated to Saxo’s platform lets technology do the work automatically and enables clients to cover and analyse the market across asset classes with much greater efficiency,” said Mr Smoker.

The depth of the integration of SaxoTraderGO with Autochartist allows clients to apply highly customisable filters to home in on opportunities aligned with their preferred asset classes and trading strategies, as well as alerting clients to important market events on their preferred assets.

Traders with experience in technical analysis can use the feature to cover more instruments and streamline market research. Traders less familiar with technical analysis can leverage Autochartist to enhance their trading strategies by including technical elements in the decision-making process.

This automated technical analysis feature was first rolled out in Europe in mid-January and is now available for traders in Australia. The service is free to access for all Saxo clients and will also be available to white-label clients later this year.

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Disrupt or be disrupted.

Developing partnerships between the disruptors and the disrupted is key to driving growth of the Australian financial services industry, according to Saxo Capital Markets.

Speaking yesterday at the inaugural Saxo Fintech Agility Conference at Sydney’s Stone & Chalk Fintech hub, Saxo Capital Markets Australia CEO Ben Smoker said: “The greatest success for both financial services companies and the end customers is when businesses with different capabilities combine efforts to deliver more value.

“Companies in finance are free to choose isolation over collaboration, but the fast-paced environment we’re witnessing in the industry today is sending a clear signal to opt for the latter.

“In this highly competitive sector, collaborating with a fast execution will be a defining factor for businesses to increase or even maintain market share.”

A clear advantage for forward thinking companies who chose to accelerate their growth by collaborating with other firms is the reduction of costs and time that would take building technological infrastructure on their own.

“Instead of spending energy and countless resources in developing technological infrastructure, a new model of collaboration suggests that companies can instead focus on their customer’s experience and outsource projects that could take years to build.

“Saxo has made a clear decision to collaborate with other companies in finance, because we know that there’s limited benefit for us in keeping our technological innovation just for ourselves,” Mr Smoker added.

In 2015, Saxo Bank Group opened the trading infrastructure of its latest platform SaxoTraderGO to institutional clients through the bank’s OpenAPI. SaxoTraderGO was entirely written in HTML5, pioneering the industry’s definitive move towards seamless trading across multiple asset classes and mobile devices, and away from legacy systems of the past.

Since its launch, Saxo has built relationships with more than 150 businesses in financial services around the world through its open source trading technology OpenAPI.

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As part of the launch, Saxo will offer its clients access to trading opportunities in over 5,000 investment grade and high yield corporate and government bonds from all over the world and in 20 different currencies, including AUD-denominated securities. The solution will be rolled out in October on SaxoTraderGO, Saxo Group’s multi-asset trading platform.

Saxo will combine its technological prowess and its relationship with 40 of the largest liquidity providers in the global bond markets to offer both retail and institutional clients more transparent, cheaper and more efficient access to fixed income trading opportunities.

The move is set to revolutionise the way investors trade bonds, a process which currently involves a manual “request for quote” (RFQ) from a very small number of banks, and in some instances a single bank. Such process is inefficient as it does not explore the depth of the liquidity and range of prices available in the marketplace.

“Saxo’s digital bond trading solution will connect traders with the entire global bond market in a direct, competitive, transparent, and efficient manner,” said Saxo Capital Markets Australia CEO, Ben Smoker.

Under the new online trading solution, each bond order will be directed to an optimised dealer auction which will comprise up to 40 of largest bond liquidity providers. Thanks to technology, most orders will be executed within seconds, but, most importantly, traders and investors will experience huge cost savings due to the competitive nature of this multi dealer environment.

Saxo’s new online solution will allow, on average, a price improvement for clients of 30 basis points in corporate bonds and a 5 to 10 basis points in government bonds.

“Large institutional investors have had access to fixed income electronic trading for a long time. We’re now enabling retail investors to access an efficient, cheaper and digitised solution, effectively disrupting traditional financial services and levelling the playing field,” Mr Smoker added.

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The outlook for Q3, therefore hangs in the balance, depending on the degree of fallout and EU peripheral contagion should Greece vote ‘No’. On the one hand, optimists say that the European Central Bank can simply print more money to cover the enormous debts to creditors. But on the other, a Greek ‘No’ vote presents the significant risk of contagion across the EU periphery and even global uncertainty that could send markets into a tailspin on the usual trajectory of global risk-off events. The Bank therefore stresses that much of what follows is contingent on the Greek “fire” burning out quickly.

Saxo’s investment outlook for 3Q 2015 warns investors that while current economic data is not supportive of suggested rate hikes by the U.S. Federal Reserve, they could increase anyway – a move the Fed may eventually regret.

The rate hike would be the first in the U.S. since 2006. Such move will put markets in a very challenging environment, says Kay Van-Petersen, Asia Macro Strategist at Saxo Capital Markets. Van-Petersen notes the global economy is experiencing increased dislocations with the US looking to raise rates while most of the rest of the world has an easing bias.

“I approach my third quarter trading views with a ‘parking-the-bus’ defensive stance in mind, and an expectation of a considerable correction and adverse moves across asset classes”, Van-Petersen said.

Van-Petersen added: “There is a time for going on the attack in markets and there is a time for manning the defences; a likely highly volatile trading environment in the third quarter definitely marks this out as a ‘protect-what-you-have’ three months.”

Saxo Chief Economist Steen Jakobsen said the prospect of a Federal Reserve interest rate hike represents the most significant market event in Q3 and expects the Fed will take a minimal pain approach in the form of a “one and done” rate rise in September.

“If this approach is taken, the dollar will weaken as the market sees the Fed as being done for now, and this will be supported by a rising marginal cost of capital which will kill the nascent acceleration of growth expected by the consensus in the second half of 2015,” Jakobsen said.

Further out over the horizon, Jakobsen is refreshingly upbeat as he sees the global economy pivoting for the better.

”We are in the final stages of this multi-decade cycle of ever lower yields and inflation. At zero policy rates, and even beyond, in some cases, nothing works. Water freezes to ice at zero degrees, and economies do as well. The warning reads: we are about to enter a major secular change in yields. The path will most likely be through higher interest rates into year-end, and this higher capital cost, combined with rising input costs to the economies – commodities, energy and capital – will slow growth in Europe and the US back toward zero growth again,” Mr Jakobsen said.

In a nutshell, Jakobsen concludes: “it will be a false start in the second half of 2015 based on hope, and then in 2016 we will begin to see the economy improving from the bottom-up.”

Against this backdrop, Saxo Bank publishes its outlook for the market and its key trading ideas for the coming quarter.

Commodities

Oil prices and gold have settled into a range of late. But oil bears are hoping that rising Opec output and rising US inventories after the peak demand season will allow prices to move lower, while a rate hike in the US could be a buying opportunity for gold says Ole Hansen, Saxo’s Head of Commodity Strategy.

Hansen expects the third quarter will be when the Fed’s chair Janet Yellen begins to turn off the liquidity tap and maintains his call for gold to finish the year at $1,275/oz., somewhat above the current consensus.

Macro

The US economy is slowly but steadily getting back on track after the Q1 doldrums and the question is no longer if the Fed will hike rates, but when. The answer to that question depends on who you ask. The market seems to stand on two legs, more or less split between September and December  says Mads Koefoed, Saxo Bank’s Head of Macro Strategy.

Koefoed also considers Europe saying the European Central Bank president Mario Draghi also has a handful on his plate in Q3, but it is of a different nature as a Greek euro exit looms large while sovereign bond yields have surged with the German 10-year rising to more than 0.8% from less than 0.2% in Q2. He sees growth in the region staying robust in the second half of 2015 albeit without much pickup.

FX

Head of Saxo Bank’s FX Strategy John Hardy says with the Eurozone still embroiled in difficulty, the USD may resume its upwards track – but this hinges on the numbers and whether the US recovery really is here to stay. After a quarter mostly spent consolidating previous heady gains, the US dollar will demand the market’s full attention in the third quarter of this year. It may rally afresh, provided US economic data and Federal Reserve rhetoric point towards a September rate move – in what would be the first rate hike in more than nine years.

Fixed Income

Saxo Bank’s Head of Fixed Income Trading Simon Fasdal says the recent rise in global bond yields has already established itself as a major theme in financial markets. He also considers what could go wrong this quarter. Besides Greece, there are no real signs of any critical market triggers, and now with the holy trinity for Europe – a lower oil price, a weaker euro and ECB bond-buying – this should boost the economy and send inflation expectations and yields into an upwards spiral in Q3.

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