Netting is the process of consolidating positions in the same instrument and on the same account that have opposite directions and thus fully or partially reduce the total market exposure. It is the process in which a buy and sell position are matched to close each other out, or yield a remainder if they are of different value. As an account can have positions in the same instrument opened at different times, the netting can be applied in different ways (Netting methods) and at different times (Netting modes).
Which position netting modes are available at Saxo?
Two Netting Modes are available. In both cases, the timing of the trade settlement is unchanged but open and closed positions are displayed differently.
1. Real-time / Intraday Netting (Recommended)
The positions are netted immediately upon execution and will disappear from the Positions module and will be visible as new entries in the Closed Positions module.
2. End-of-day Netting (Legacy)
After trade execution, positions continue to show as open in the Positions module until end-of-day processing. The Closed Positions module is not available in this Netting Mode.
You can update the netting mode by going to the main menu > Settings > Platform settings > Platform > Position netting.
Which position Netting Methods are available at Saxo?
Two Netting Methods are available:
First-In-First-Out (FIFO)
If a new trade has the opposite direction of an existing position in the same instrument, FIFO netting closes eligible open positions in the order of their creation date/time, using the oldest first.
Weighted-average
With Weighted-average netting, open positions are shown at their volume-weighted average cost (i.e. a synthetic Position Open Price is calculated and displayed).
If a new trade has the opposite direction of an existing position in the same instrument, the profit and loss (P&L) is calculated using the synthetic Position Open Price.
This simplified example illustrates how the Netting Methods work:
As illustrated above, the selected Netting Method can influence the split between realised and unrealised P&L. However, the overall P&L of the entire position remains the same regardless of the Netting Method used.
Understanding position adjustments after corporate actions
Corporate actions such as stock splits, reverse stock splits, mergers, and conversions etc can significantly impact how your investment positions are reflected on your account. These events often involve changes to the number of shares you hold and their corresponding prices. When such a reorganization event occurs, your existing positions are typically removed at their average price and then reinstated with adjusted quantities and prices based on the terms of the corporate action. This ensures that the total value of your holdings remains consistent, even though the number of shares and their individual prices may change.
The adjustment process also affects how trade matching methods like FIFO (First-In, First-Out) or APN (Average Price Netting) are applied. While FIFO may govern trade matching before the corporate action, it does not carry over afterword. Similarly, even if APN is used and only one position exists, the system still replaces it with a new synthetic position using an average price, and all subsequent trades are matched against this new baseline.
The following examples illustrate how this works in both FIFO and APN scenarios, helping you understand how your positions are recalculated and why behavior may appear different after such events.
Example 1: FIFO netting before and after corporate action
Scenario one: Before corporate action (FIFO Method)
Trade details:
Trade 1
- Buy 100 shares at 10 dollars each
- Position ID: POS12345
Trade 2
- Buy 50 shares at 12 dollars each
- Position ID: POS12346
Trade 3
- Buy 150 shares at 11 dollars each
- Position ID: POS12347
Corporate action: 2-for-1 Stock Split
Scenario two: After corporate action
-
Sell 300 shares at 10.84 dollars each (closing original FIFO positions)
- Position ID: POS12345, POS12346, POS12347
-
Buy 600 shares at 5.42 dollars each (New Average Price)
- Position ID: POS67890
Example 2: APN Netting before and after corporate action
Scenario one: Before corporate action (APN Method)
Trade details:
- Buy 100 shares at 20 dollars (Average price)
- POS22334
Corporate action: 2-for-1 Stock Split
Scenario two: After corporate action
- Sell 100 shares at 10 dollars each (closing original APN position)
- Position ID: POS22334
- Buy 200 shares at 5 dollars (New average price)
- Position ID: POS88991