CME Increases Trading Margins Amid Silver's Volatile Ride
MsMorrisine
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CME Increases Trading Margins Amid Silver's Volatile Ride
NEW YORK (Dow Jones)--Exchange operator CME Group Inc. (CME) raised margins for Comex silver futures for the second time this week as silver prices soar amid much volatility.
The higher margins take effect at the close of trading Friday, the exchange said. The CME revises its margin requirements as a normal course of business, and has previously raised bond requirements during times of high volatility to guard traders against additional risk. The operator owns New York Mercantile Exchange, which trades silver on its Comex division.
For speculators in the benchmark 5,000-ounce silver futures contract, the exchange is raising initial margin requirements, or the deposit required to purchase a contract, to $14,513 per contract, up from $12,825. Maintenance margin requirements, or the additional capital needed to keep the contract overnight, will increase to $10,750, from $9,500.
For hedgers and exchange members, both the initial and maintenance margin requirements will also increase to $10,750 from $9,500 per contract.
CME also raised margins for the Comex silver trade at settle contracts, which allow traders to lock in the day's settlement price for their purchases or sales.
Additionally, the exchange raised initial and maintenance margins for Comex Miny silver futures and the E-Mini silver futures contracts.
Thursday's increase follows a similar margin increase Monday, and comes during the astonishing volatility in silver prices. Silver posted another huge price swing Thursday, with the front-month contract rising 3.4% to a record settlement of $47.520 a troy ounce. Investors have been flocking to this relatively small market to take advantage of the metal's much lower price than that of gold, which is sky high.
NEW YORK (Dow Jones)--Exchange operator CME Group Inc. (CME) raised margins for Comex silver futures for the second time this week as silver prices soar amid much volatility.
The higher margins take effect at the close of trading Friday, the exchange said. The CME revises its margin requirements as a normal course of business, and has previously raised bond requirements during times of high volatility to guard traders against additional risk. The operator owns New York Mercantile Exchange, which trades silver on its Comex division.
For speculators in the benchmark 5,000-ounce silver futures contract, the exchange is raising initial margin requirements, or the deposit required to purchase a contract, to $14,513 per contract, up from $12,825. Maintenance margin requirements, or the additional capital needed to keep the contract overnight, will increase to $10,750, from $9,500.
For hedgers and exchange members, both the initial and maintenance margin requirements will also increase to $10,750 from $9,500 per contract.
CME also raised margins for the Comex silver trade at settle contracts, which allow traders to lock in the day's settlement price for their purchases or sales.
Additionally, the exchange raised initial and maintenance margins for Comex Miny silver futures and the E-Mini silver futures contracts.
Thursday's increase follows a similar margin increase Monday, and comes during the astonishing volatility in silver prices. Silver posted another huge price swing Thursday, with the front-month contract rising 3.4% to a record settlement of $47.520 a troy ounce. Investors have been flocking to this relatively small market to take advantage of the metal's much lower price than that of gold, which is sky high.
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"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Last week's margin increase by CRIMEX (two of them) and CME were designed to hammer spot price, which it did tonight. Lower spot won't stick, that's why they have to keep raising the margin. >>
No, not at all. It's designed to keep up with a desired leverage ratio. 5000oz@$48 is $240k, or about 1:20 leverage. Just a week ago @$38 it was $190k, or 1:16. The new ratio, before tonight's crash restored the ratio to ~1:16. As we learned with the mortgage crisis, it's crucial to keep leverage ratios within reasonable ranges.
<< <i>No, not at all. It's designed to keep up with a desired leverage ratio. 5000oz@$48 is $240k, or about 1:20 leverage. Just a week ago @$38 it was $190k, or 1:16. The new ratio, before tonight's crash restored the ratio to ~1:16. >>
The side affect is crashing the price and they know that. Look for it to continue.
<< <i>As we learned with the mortgage crisis, it's crucial to keep leverage ratios within reasonable ranges. >>
What we SHOULD have learned from the mortgage crisis it to eliminate leverage in banking all together, particularly fractional lending.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>This explains the drop in silver on Friday. --Jerry >>
and Monday, and Tuesday, and Wednesday, and.......Silver is getting no love whatsoever.