Ratings are used to determine the margin requirements and collateral value for an instrument. Instruments with higher ratings are typically linked to lower liquidity, smaller market capitalization, and higher volatility hence higher risk. However, other factors also influence the rating.
Instrument ratings on Saxo platform usually range from 1-6. A rating 1 stock will provide the highest collateral value for margin lending and a rating 1 CFD will require the lowest margin requirement for margin trading.
Where can I view the rating of an instrument?
You can view the rating of an instrument in multiple ways as shown below:
1. Choose an instrument and open a trade ticket by clicking Trade > Click the "i" in the top right corner next to the instrument name to view the Trading Conditions > Click the Instrument tab > Rating
2. In the Product overview, click "i" in the top right corner > Click the Instrument tab > Rating
How does Saxo determine the different ratings for instruments?
Saxo determines the rating of an instrument by evaluating factors such as market capitalization, liquidity, volatility, country of incorporation, industry, and mergers & acquisitions activity of the underlying instrument.
Determining ratings is an ongoing process which is why the rating on an instrument might change over time.
Why are some instruments "reduce only"?
Some instruments are designated as "reduce only" which can be caused for various reasons. This designation means that you can only reduce your existing positions and not open new ones in the instrument.
It's important to note that this status does not necessarily correlate with the rating and may be associated with other factors such as low liquidity.
Why can I suddenly only reduce my position?
You might be unable to increase your previously held or current positions for several reasons, such as changes in your exposure, the liquidity of the instrument, or an increase in the rating of the instrument.
What does a rating of 6 imply?
Instruments with a rating of 6 implies higher margin requirements and lower collateral terms than lower ratings. CFDs with a rating of 6 are disabled for short selling. Options with a underlying stock rated 6 are restricted from short selling.
Read also: Why has my order been rejected?