Saxo Bank Introduces Segregated Margin Lending Accounts for Singapore Clients

Saxo Bank has launched standalone margin lending accounts for clients in Singapore, allowing leveraged positions to be separated from standard investment portfolios for the first time.

The rollout includes three updates to Saxo’s two-year-old margin product: dedicated accounts for leveraged trades, improved collateral rates for medium-risk securities, and a shift from full to partial liquidations when margin requirements are breached.

Mahesh Sethuraman, CEO of Saxo Singapore, said the changes respond to client demand for greater control over borrowed funds. He noted that the updates aim to increase flexibility and transparency for investors using leverage strategies.

The enhancements follow Saxo’s introduction of fractional share trading in June, which covers more than 1,000 instruments across asset classes and enables clients to purchase partial units of high-priced equities.

Strategic Push in Singapore

The new product comes 15 months after Saxo closed its Hong Kong and Shanghai offices, citing geopolitical risks. The bank reported a USD 4.3 million loss from Hong Kong operations in 2023 before its exit last September.

The standalone margin lending feature adds a separate section within each client’s account, allowing investors to borrow against existing holdings to trade stocks, ETFs, bonds, and stock options. Segregation ensures leveraged trades do not mix with unleveraged positions on account statements.

Saxo also restructured its collateral model to apply differentiated leverage ratios based on asset-risk categories. Securities within risk levels two to five now qualify for higher borrowing capacity, though specific ratios were not disclosed.

The shift to partial stop-outs replaces Saxo’s previous policy of liquidating an entire margin account when collateral fell below minimum thresholds. The new approach liquidates only enough positions to restore compliance.

Margin Lending Dynamics

Saxo’s example shows how margin lending can amplify dividend strategies. A client with USD 5,000 in cash could borrow USD 15,000 to build a USD 20,000 position in a dividend-paying stock. Based on a 3.02% interest rate and a 5.5% dividend yield, the leveraged trade would generate USD 647 in net income versus USD 275 without borrowing, resulting in a 12.94% effective yield.

The scenario assumes benchmark SORA rates remain near 2.02%. Rising funding costs or declining asset values could reduce returns and trigger forced selling. VIP-tier clients pay a 1% markup on borrowing costs, while standard retail rates may be higher.

According to a report released in early December, Saxo Bank now serves 1.5 million clients, and its 2024 profit increased nearly 300% to DKK 1.005 million.