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?
For clients, two Netting Modes are available. In both cases, the timing of the trade settlement is unchanged but open and closed positions are displayed differently.
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.
For example, if you buy 10 shares of ABC company in the morning, sell the 10 shares in the afternoon and both trades are executed during the market open time. Immediately after the selling of the 10 shares you won't see any positions on this share on your account anymore.
Please note with Real-time netting, you won't be able to place related Stop loss or Take profit order on your positions.
End-of-day Netting (Legacy)
After trade execution, the positions continue to show open status in the Positions module and visible until end-of-day processing. That means, if you buy 10 shares and sell them like in the previous example, you will see two positions, 10 shares in the long position and -10 shares in the short position.
You will see the Status is Square which means you don't have exposure on this instrument anymore.
But the two positions of the long and short will stay until the end of day. So only next day you will see them gone.
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 > Real-time netting.
Which position netting methods are available at Saxo?
- Methods available for Saxo Bank A/S clients
- Methods available for Saxo Bank A/S clients resident in the MENA region
Methods available for Saxo Bank A/S clients
One netting method is available:
FIFO
If a new trade has the opposite direction of an existing position in the same instrument, First In First Out Netting closes eligible open positions in order of their creation date/time using the oldest ones first.
Methods available for Saxo Bank A/S clients resident in the MENA region
Two netting methods are available:
FIFO
If a new trade has the opposite direction of an existing position in the same instrument, First In First Out Netting closes eligible open positions in order of their creation date/time using the oldest ones 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 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.
Comparison of available Netting Modes & Methods