CME issues an all products margin change on Friday to make initial = maintenance
roadrunner
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CME notice
I got this off Zero Hedge which is interpretating the CME's after hours Friday memo on "all products" to suggest than effective yesterday, all maintenance and
intitial positions go to the same value. I would assume that means the higher of the two but it could also mean a lowering of the initial to match the maintenance price.
Considering their products number in the thousands this be a massive liquidity shift if the ZH interpretation is true. And knowing that this stuff always leaks out ahead of time,
why was there no massive dumping of all the markets on Friday? Anyone have thoughts on this? If CME were really trying to ease the liquidity squeeze caused by MFGlobal
and others, one would think they would reduce margin levels at the moment across the board, not exacerbate the problem by raising them. I guess it boils down to which side of
the trade gets more affected. I think banks that hold a higher % of contracts short will find it easier to maintain their short positions by ponying up more money on their
maintenance contracts. But everyone else that doesn't have a link to the FED's cash drawer will be reducing positions. MFGlobal's futures contracts have to be transferred and
apparently the CME doesn't want any confusion as to what price they transfer in at.
Gold: from $8,500 to $11,475, a 35% hike (or inverse if initial is being dropped to match maintenance).
Silver: from $18,500 to $24,975, also a 35% hike
Considering that the huge silver and gold shorters tend to be on the maintenance side, this would affect them as well. But JPM and those guys could find the liquidity needed
quite easily while your average spec or industrial commercial hedger could not and might have to close out some contracts. CME has given at least 1-2 days notice on stuff like this
before. This time it was zero notice as the change is retroactive to end of Friday's trading.
roadrunner
I got this off Zero Hedge which is interpretating the CME's after hours Friday memo on "all products" to suggest than effective yesterday, all maintenance and
intitial positions go to the same value. I would assume that means the higher of the two but it could also mean a lowering of the initial to match the maintenance price.
Considering their products number in the thousands this be a massive liquidity shift if the ZH interpretation is true. And knowing that this stuff always leaks out ahead of time,
why was there no massive dumping of all the markets on Friday? Anyone have thoughts on this? If CME were really trying to ease the liquidity squeeze caused by MFGlobal
and others, one would think they would reduce margin levels at the moment across the board, not exacerbate the problem by raising them. I guess it boils down to which side of
the trade gets more affected. I think banks that hold a higher % of contracts short will find it easier to maintain their short positions by ponying up more money on their
maintenance contracts. But everyone else that doesn't have a link to the FED's cash drawer will be reducing positions. MFGlobal's futures contracts have to be transferred and
apparently the CME doesn't want any confusion as to what price they transfer in at.
Gold: from $8,500 to $11,475, a 35% hike (or inverse if initial is being dropped to match maintenance).
Silver: from $18,500 to $24,975, also a 35% hike
Considering that the huge silver and gold shorters tend to be on the maintenance side, this would affect them as well. But JPM and those guys could find the liquidity needed
quite easily while your average spec or industrial commercial hedger could not and might have to close out some contracts. CME has given at least 1-2 days notice on stuff like this
before. This time it was zero notice as the change is retroactive to end of Friday's trading.
roadrunner
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it will probably revert back the other way. So maybe this might actually give a brief pop to the markets?? Gold and silver futures initial positions on sale for a brief period at
26% off might spark some day trading/speculation. If some traders misinterpret the new margin requirements they just might liquidate anyways fearing the worst.
roadrunner
CME Group Clarifies Maintenance Margin Ratios - Exchange to Reduce Initial Margin Ratio to 1.00
CHICAGO, Nov. 5, 2011 /PRNewswire/ -- CME Group today is clarifying its notice to clearing firms regarding margins. In light of the issues customers transferring out of MF Global are facing, while still maintaining appropriate risk management protections for the market, CME Clearing is setting the "initial" margin upcharge to zero. This upcharge is normally applied to customer accounts when they are receiving a margin call.
The intention and effect of these changes are to decrease the size of any margin calls resulting from the bulk transfer of MF Global customers to new clearing members not to increase them.
This is a short term accommodation to maintain market integrity and provide temporary relief to customers whose accounts have been disrupted by this event.
We apologize for any confusion our initial advisory may have created.
As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.
CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com. CME-G
SOURCE CME Group
assumed this was a margin hike to 1.0 and not a lowering to 1.0. After all, when volatility increases, like it has been this past week, those guys have raised margins, not
decreased them.
Yeah, it would seem a metals pops would be in order. But shorts can buy contracts on the cheap as well. Though for someone with nearly unlimited liquidity like JPM you
wouldn't think the margin drops would make much of a difference to them. It will come do to where the shorts and longs are positioned and how strong their hands are.
CME is actually levering up the volatility to the same MFG accounts that helped to get them into this position in the first place. One has to question just what the heck the
CME, CFTC, and others are doing.
Sunday update: ICE Futures are now doing the same deal as well.
roadrunner
I'd like to see all leverage go away. If you cant pay for something in full, then dont buy it.
Knowledge is the enemy of fear