Securities financing (Leverage)

To borrow against collateral in your securities, you need to submit an application and get it approved.

Anyone with good experience of securities trading, enough collateral in their securities and who has submitted the MiFID form* can be approved for securities financing.

Note: If more than one year has passed since you last renewed your customer agreement, a new MiFID form must be submitted.

All investments in the finance markets involve risk. Even if a security has grown steadily in value over a certain period of time, this has no bearing on the future. The same applies to securities that have done badly over a long period of time.

Things can change quickly

You must always be prepared for quick changes in the market. Historical returns are no guarantee of future returns. Share prices can fluctuate from day to day, and some shares fluctuate more in value than others.

Securities financing, or gearing, is a powerful financial tool that increases your potential profits, but which can also increase your losses. If the value of your portfolio drops, your losses in a geared portfolio will be greater than if you had an ungeared portfolio. If the value drops to the level where it endangers the security of the loan you have taken out, DNB Carnegie will have to forcibly liquidate your positions.

Hence, gearing works best for investors with extensive knowledge and experience of the securities market, and who can afford losses.

Securities financing is financing (a loan) that uses securities as collateral.

You start with equity in the form of an existing portfolio of securities, or cash, which you pledge as collateral in order to borrow money to invest more.

Borrowing with collateral in securities is called ‘gearing’. You gear to afford to expand your portfolio.

How gearing works when you buy shares:

How much you can gear depends on the securities you have borrowed, and which securities you wish to buy.

The liquid markets (where it is easy to sell) are where you can gear most, e.g. the share market.

Let’s say you want to gear by a multiple of five. You then make an investment of NOK 250 000 with only NOK 50 000 in capital. You can then borrow NOK 200 000 with the NOK 50 000 as collateral against a potential loss.

If the price of the shares you’ve bought then increases by 10 per cent, you’ll have made a profit of NOK 25 000 before tax and interest. That’s five times more than you would have made with the original amount.

Unfortunately, the gearing also involves that potential losses will be five-fold. If the shares drop by 10 per cent in value (by NOK 25 000), you will suddenly loose half of your capital, in addition to the interest you had to pay for the loan.

Should the shares fall by 30 per cent (NOK -75 000), you’ll have lost more than you had. Now you owe the bank money.

When you’ve lost the whole amount you placed as security, you are then ‘in breach’. Read more about this under ‘What does it cost to be in breach?’

You can finance between 10 per cent and 85 per cent of the market value of every listed security that DNB Markets places a loan-to-value ratio on. This percentage (the loan-to-value ratio) can vary over time. The loan-to-value ratio is calculated, among other things, based on volatility (price fluctuations) and liquidity (volume of turnover) of the security.

You will find an updated list of securities and their loan-to-value ratios here.

Applying for a margin account does not cost anything*. Holding the margin account is also free. Interest is only charged on the amount used. The margin account currently has a variable interest rate. It is therefore important for the investor to keep track of any changes in interest rates. Changes to interest rates are announced in the traditional way in accordance with the applicable notification period rules.

See the securities financing price list.

*In addition, fees and charges will be applied by the Norwegian Central Securities Depository per Norwegian Central Securities Depository account. This means that for Securities Financing with a share savings account, where there are two Norwegian Central Securities Depository accounts, two pledges will be established and thereby two fees will be charged. See the securities account price list.

To get access to Securities Financing online, you must be an online equity trading customer. When you are logged in, you will find an application form on ‘My Page’.

If you only wish to trade via a broker, you can get an application form by asking your customer consultant (broker/client manager) in DNB. DNB Carnegie will forward your application to the relevant credit department.

If you are not already a customer in DNB, you can become one here.

If you are already a customer of our online equity trading service you can submit an application for Securities Financing when you are logged in. You will find the application form under the ‘My Page’ tab.

Alternatively, you can obtain the application form by contacting your client manager (broker/customer consultant) in DNB and send the pre-filled application directly to Customer Administration in DNB Carnegie, DNB Carnegie, Customer Administration, PO Box 7100, 5020 Bergen.

DNB Carnegie will forward your application to the relevant credit department.

Credit interest is credited to your trading account on an annual basis, as of 31/12.

The loan interest (debit interest) is charged to your trading account monthly. The charging of the debit interest will result in changes to your balance, and consequently also to the available amount and the available credit limit. Therefore, you must ensure that you have enough money in the account when this debit is made to avoid overdrafts. Should an overdraft still occur due to the charging of debit interest, the investor normally has 14 days to cover the overdraft.

If the market drops significantly, the collateral in your portfolio (the borrowed value) can become lower than the gearing.

We recommend that you always have collateral of at least 20 per cent of the mortgaged securities’ financing value. This is to ensure you have a savings buffer against changes in the market value and/or loan-to-value ratio and capitalised interest rates.

You can also be in breach if the loan-to-value ratio of a security decreases, reducing your portfolio’s financing value to a level lower than the credit amount drawn.

When you are about to lose more than you have pledged in collateral, you become in breach. You will then receive a so-called ‘margin call’ from the lender.

If you get a margin call, you must immediately adjust your portfolio to balance out the loan so it is equal to or less than you portfolio’s loan-to-value ratio. This can be done in doing the following:

• depositing cash into your trading account to reduce the amount of margin you are using;
• placing extra collateral in the form of securities to increase your portfolio’s financing value;
• selling parts of your portfolio to use the money from the sale to reduce the amount of margin you are using.

How do you find the amount you need to sell?

Here is the formula you can use to calculate:

Required sales amount = Breach / (1-loan-to-value ratio)

We reserve the right to forcibly liquidate

If we are the lender, we reserve the right to liquidate all or parts of your portfolio in order to reduce the amount of margin you are using, if you have not taken any action by the issued deadline (normally three trading days after notification of the margin breach).

DNB also reserves the right to be able to react earlier than the specified three trading days if we think the market conditions warrant it.

When transferring cash to your trading account, updates to the online equity trading solution will occur at the following times during the day – 08:00, 09:30, 12:00, 14:00, 16:00, and 20:00. Cash transfers made at 10:00, for example, will therefore not be updated in the online equity trading solution until 12:00.

MiFID II is a set of rules and legislation introduced to protect investors against making bad investments.

The rules state that a bank or investment firm must obtain information about every customer’s competence and financial situation, so that suitable products and advice can be offered.

Businesses must also have an LEI (Legal Entity Identifier) which identifies the company before a trade can take place.

Here you will find a customer agreement form and information about how you can apply for an LEI

As soon as your company has a VPS account, you can log in to the VPS Investor Portal. Here you can look up your company owner register, filter according to your chosen criteria and download this directly in an Excel format. You can also look up shareholders and see details of account operators, paid out dividends and transactions.

VPS Account and Investor Services

Log in to VPS Issuer Services

If you have any questions you can contact us by email at kua@dnb.no or by phone on +47 23 26 80 20.

Our Custody services are designed to give our customers robust and effective solutions with a high degree of automatic and machine-to-machine communication. In addition, we have excellent online solutions that give our customers easy access to money and securities accounts, transactions and holdings, and a very good solution for handling corporate actions.

For institutional investors and financial institutions

Custody is a collection of services in the post-trade area of the value chain. The products are aimed at institutional investors and financial institutions, and among other things, we offer excellent solutions for:

• securities settlement and custody for both Norwegian and international securities;
• handling dividends and corporate actions;
• newsletters and market information;
• help with tax rebates in reclaim markets;
• custodian services for asset managers who are subject to the UCITS and AIFM rules and legislation;
• securities lending through both Principal and Agent programmes;
• electronic subscription and redemption of Norwegian and international mutual funds.

More information about account management and Custody services

For more information you can also contact us at custody@dnb.no

On this page, you will find out more about short trading and securities issues.

Non-professionals who want to short trade can apply for securities financing through the online equity trading service.

This is easily done through the online equity trading service when placing a sales order. On the equity trading service, you will find a summary of which shares can be shorted under ‘Market’ and ‘Shares available for shorting’.

Log in to the equity trading service here.