Saxo Capital Markets UK rolls out targeted spreads as gold price collapses

Saxo Capital Markets UK went live with fixed spreads for spot FX and precious metals over its multi-asset trading system SaxoTrader on April 15, in response to client demand for a reduction in execution risk linked to variable pricing, officials say.

The new pricing structure means the bank will aim to keep spreads on FX spot pairs consistent for 96–99% of the time, with some of the key crosses EUR/USD, USD/JPY, USD/CAD, AUD/USD, EUR/JPY and GBP/JPY seeing lower target spreads (see box).

"We conducted a comprehensive market survey last year, which concluded that the sophisticated trader preferred predominantly fixed pricing to variable pricing because of the certainty it gives in terms of execution risk," says Torben Kaaber, chief executive at Saxo Capital Markets UK in London.

As such, the bank is now retaining spread around the best bid offer spread it receives from an aggregated price feed from its 10 liquidity providers. Kaaber notes, however, that in exceptional circumstances it might not be possible to retain the spread but aims to hit its target 96–99% of the time.

The bank also narrowed spreads in gold and silver crosses versus the US dollar, yen, euro and Hong Kong dollar, to encourage trading on the platform in light of collapsing gold prices. Gold prices fell by more than 10% on April 15 to just above $1,350 an ounce, as fears over the eurozone debt crisis declined and expectations for a recovery in the US grow.

"Global clients did over six times the normal amount, representing a 515% rise in turnover," says Kaaber. "We saw four times more clients trading gold on Monday – the increase was 318%."

Fixed spreads

EUR/USD 2.0 to 1.5
USD/JPY 2.0 to 1.5
USD/CAD 4.0 to 1.5
AUD/USD 3.0 to 1.6
EUR/JPY 3.5 to 1.9
GBP/JPY 7.0 to 3.1