1. When does schedule monthly rebalancing takes place?
Scheduled monthly rebalancing takes place on 1st day of each month. If the first day of the month is a non-business day (weekend or when European markets are closed) then scheduled monthly rebalancing will get triggered on the next business day.
During scheduled monthly rebalancing, order proposal calculation starts at around 0900 GMT*. So, at around 0900 GMT* algorithm will start the process of comparing weights of individual instruments in client portfolios to the weights assigned in the linked model. Once all order proposals are calculated, orders get automatically routed to market for execution on the same day.
2. Can model manager automatically invest new cash deposited by client in between scheduled monthly rebalancing?
Any new cash deposited by the client in between monthly scheduled rebalancing will get invested during weekly cash breach rebalancing. This cash breach rebalancing is triggered once a week (every Tuesday for most IAM partners) or twice a week (every Tuesday and Friday for other IAM partners). For details, please see FAQ on Cash Breach rebalancing.
3. What is cash breach rebalancing?
Cash breach rebalancing occurs on client portfolios that are breaching either minimum or maximum cash allocation specified on linked model.
This type of rebalancing gets triggered on specific days of the week and defined partner by partner.
For IAM partners, cash breach rebalancing gets triggered once a week (every Tuesday for most IAM partners) or twice a week (every Tuesday and Friday for other IAM partners).
Unlike monthly scheduled rebalancing, not all client portfolios participate in this rebalancing. Only the ones that are breaching on cash get rebalanced.
It is important to note that, cash breach on a client portfolio can occur not only because of cash deposited/withdrawn but also due to market movement. Cash breach rebalancing will not differentiate between these underlying reasons and will rebalance all portfolios that are breaching on cash irrespective of why cash breach occurred in the first place.
4. When does cash breach rebalancing takes place?
For IAM partners, cash breach rebalancing gets triggered once a week (every Tuesday for most IAM partners) or twice a week (every Tuesday and Friday for other IAM partners).
Every Tuesday (and Friday for some partners) at 0830 GMT* rebalancing engine will pick all accounts that are breaching on cash allocation (either min. or max. cash allocation specified in linked model). Order size will then be calculated, and orders will be routed to market on the same day. Rebalancing engine will only perform full rebalancing on clients that breach on cash weight. If Tuesday is a non-business day, orders will be routed to market on the next business day.
5. By when should I update my model so that changes are picked up during next scheduled monthly or weekly ‘cash breach’ rebalancing?
Models can be updated any time before the start of the rebalancing process.
6. When does Cash Withdrawal request on model linked accounts get processed?
Cash withdrawal, on an account linked to model, can be initiated using ‘Deposits and Transfers’ module on single client view in SaxoPartnerConnect.
Once cash withdrawal is triggered on a model linked account, rebalancing engine will process it on the next weekday (at 0830 GMT*) by calculating order proposals and routing them to market. The morning after all order(s) get executed (at 0830 GMT*), rebalancing engine will assess if sufficient cash is available in account and will then move cash to external account belonging to client to complete the cash withdrawal process.
It is important to note that, even if an account has enough extra cash readily available for withdrawal, cash withdrawal request on a Model Managed client will always go through rebalancing engine and will be processed on the next weekday (at 0830 GMT*).
7. What are the most common reasons for rebalancing failures?
The most common reason for rebalancing failure is open order(s) on the account. If a client account has unexecuted order(s) in the market, rebalancing engine will not be able to accurately calculate deviation from linked model and thus rebalancing will fail.
If the rebalancing that failed was triggered by monthly scheduled or weekly cash breach, the account will get rebalanced again on the next monthly/weekly schedule.
If the rebalancing that failed was an outcome of cash withdrawal or full liquidation request, the rebalancing engine will try and retrigger it on the subsequent weekday.
Another common reason for rebalancing failure is the presence of non-tradable instrument in model composition.
8. Can I cancel a cash withdrawal request that has been triggered on an account linked to a model?
No, once a cash withdrawal request has been triggered, it can’t be cancelled.
9. When does full liquidation of a model linked account get processed?
An account can be fully liquidated by delinking it from the model.
Once liquidation is triggered on a model linked account, rebalancing engine will process it on the next weekday (at 0830 GMT*) by generating sell orders and routing them to market. The morning after all order(s) get executed (at 0830 GMT*), the rebalancing engine will check if there are any open orders and if there are none then will turn the status of account to fully ‘liquidated’. Once the account is in fully ‘liquidated’ state, all cash can be moved out.
10. When I liquidate a model linked account, will the cash be automatically moved to the external account belonging to the client?
No. When full liquidation is triggered on an account, rebalancing engine will sell all open positions but will not move cash to external account linked to this client.
If a partner wants to move cash out, then a cash withdrawal need to be separately triggered once liquidation of account is complete.
Its important to note that any cash withdrawal request on an account that has been fully ‘liquidated’ will not go through rebalancing engine. Instead, it’ll be processed immediately exactly the way it is on an account that is not linked to model.
11. During scheduled monthly or weekly cash breach rebalancing, will my clients linked to different models get the same execution price?
Yes. During either rebalancing, all clients (accounts) participating will get the same execution price no matter if they are linked to same or different models.
12. What if my Model has an instrument that is delisted or is no longer tradable?
If a model has an invalid instrument in its composition, rebalancing on all accounts linked to this model will fail. An instrument can become invalid because of reasons like delisting, corporate action event etc.
So, it is important for partners to keep a tab on their model composition. Non-tradable instruments can be easily identified as our market data team amend the name of that instrument by adding * as a prefix in the name.
13. What if I want to add a new ETF or Mutual Fund to my model but the instrument is not searchable in instrument finder in Model Manager?
Please raise a request to our Institutional Service or Market Data Management team (through case management module) to make new ETF/Mutual Fund available in Model Manager.
14. What if I want to move an existing client (being managed through a model) to a discretionary or advisory setup?
As the client will no longer be managed using a Model, before sending a request to Saxo to move the client (that’s being managed through model) to a different sub-house, always remember to remove linked model from the client.
If you don’t remove model from this client, there is always a risk of client getting rebalanced even after being moved to a different sub-house (advisory or discretionary setup).
15. When will the orders generated by the model manager be sent to the exchange(s)?
Orders generated by model manager are routed to market on the same day as soon as all the order size calculations are done across all accounts that are getting rebalanced.
16. Orders generated through rebalancing are calculated based on a certain market price for the specific instrument. What happens if the markets open with a big gap? How is the market risk being taken care of in the model manager?
Rebalancing orders get executed at ‘market’ and engine doesn’t place any limit orders. So, there is always a possibility that engine uses one price for calculation and execution happens at another price.
Model Manager has several inbuilt measures to reduce the risk of non-execution (or account going negative in cash) because order size calculation was done using a price different from execution price.
Firstly, order size calculation is now triggered only after the markets have started trading for the day and is done based on the latest price coming in from exchange (for exchange traded instruments). The earlier process of using last traded price from previous trading session has been discarded.
Secondly, order size calculated by rebalancing engine has a build in buffer to take care of price changes. The engine deflates the ‘Buy’ order size by 2.5% (value of the order) and inflates the ‘Sell’ order size by 2.5% (value of the order) to ensure that even during volatile markets clients do not end up with negative cash balance.
17. How will corporate actions (when applicable) be managed/distributed for model managed portfolios?
There is no difference whatsoever between model linked accounts and other discretionary and advisory accounts so far as managing corporate action events is concerned.
18. Will Model Manager allow me take fractional positions in instruments?
During rebalancing, when calculating order size, model manager will always check if the client is allowed to take fractional positions on the specific instrument being traded and if so then it’ll create fractional order(s). So, if an instrument can be traded in fraction in Saxo and if the client account has been setup correctly for fractional trading then model manager will route fractional orders for that client account.
At the moment, Saxo support fractional exposure in the following assets:
- ETFs
- Mutual Funds
- ETNs
- ETCs
We do not yet support fractional trading in Stocks.
19. Is there a limitation as how many models can be created ?
At the moment there are no limitations.
*Timings of rebalancing runs are subject to change.