We are sure you have followed, like us, with keen interest the recent activity in certain US stocks. On our EasyEquities platform, many of our users continue to display smart investor behaviour - diversification, taking opportunities and sticking to an investment strategy for the medium to long term. And as always, we work hard at ensuring that all members of the EasyEquities community are kept informed and educated about the options available to them.
We have today been informed by our US broker that the central securities depository in the US (DTC- The Depository Trust Company) has with immediate effect enforced a clearing fund premium in relation to certain US listed shares.
Simply put, this means that in the US, these brokers are obliged to meet the clearing house’s deposit requirements in order to facilitate ongoing trading activity. These requirements are determined in part by the volatility of holdings.
Given the unprecedented increase in volatility recently, specifically in Nokia (NOK), where short term volatility increased from around 14% to 450%, the deposit requirement has now increased by more than 250%. A consequence of this is that US brokers are compelled to restrict activity that increases trading risk in the market.
We have also been informed that as a result, we will not be able to facilitate any further buying of NOK shares. However, the closing (selling) of positions in NOK can still continue. Again, simply put, from the US opening today, Tuesday 2nd February 2021, EasyEquities users will only be able to sell NOK shares and not purchase any more.
We will keep you posted of any further developments. In addition, we encourage you to visit research.easyequities.co.za for ongoing topical notes on the markets - South African, American and Australian, all available on the platform. You may also find our FAQ portal useful, especially this information on liquidity.
As you consider what to buy and sell, it may be worth noting that February is traditionally a month where we see high volumes of TFSA activity as the tax year end. And with Emperor Asset Management, Coronation, Allan Gray and others also now providing unit trusts in your EasyEquities account, this may also be worth checking out.
We wish you ongoing success as you invest.
Best wishes
Nilan Morar - VP Trading
Mark Wilkes - VP Risk