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Margin requirement changes
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Margin requirement changes

  #11 (permalink)
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Probably pays to start reading the actual delivery reports etc...


http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsReport.pdf

http://www.cmegroup.com/delivery_reports/EnergiesIssuesAndStopsReport.pdf

http://www.cmegroup.com/daily_bulletin/Section62_Metals_Futures_Products_2011154.pdf

NYMEX Daily Reports

http://www.cmegroup.com/trading/energy/files/Gold_Stocks.xls

http://www.cmegroup.com/trading/energy/files/Silver_Stocks.xls

http://www.cmegroup.com/trading/energy/files/Copper_Stocks.xls

http://www.cmegroup.com/trading/energy/files/PA-PL_Stck_Rprt.xls

"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
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  #12 (permalink)
Market Wizard
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Big Mike View Post
There seems to be a pattern recently with margin requirements.

We've seen some pretty big increases, and then InteractiveBrokers completely did away with intraday day trading margins...

Today, ICE doubled the Russell margins...

My guess is CME is next for another round of margin increases.

Just wondering if any brokers care to comment about what this is doing to the retail businesses...

@Dale Box, @mattz, @BrianConnorCTS, @ApexFutures

?

Mike

Do you trade at IB? What is their CL margin on futures?

I know on selling options they were way above everybody else on margins.

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  #13 (permalink)
Market Wizard
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RM99 View Post
Call me a conspiracy theorist...but I think there's a number of reasons that could trigger a margin increase.

Political pressure, second handed pressure from manufacturers who keep getting pinched by higher Gold prices, large movers and shakers like Goldman trying to generate downward pressure in order to enter long positions.....could be any number of things.

Doesn't everyone find it curious that Soros is alumni with the head of S&P, recently dumped non-family capital in order to shroud from the SEC and there was an $850 bet with the downgrade?

Why would any of the exchanges want this? This hurts their bottom line. They're already complaining about the reduction in volume year over year. Hiking the margins hurts their comissions.

I just don't trust that there's any real/ethical motivation or sanity behind these types of decisions. There's always someone who's either pulling the strings or waiting to make a fortune off these events.

I agree with you. The raising of silver margins the way they did it, doubling in 10 trading days, back in May was very curious.

They didn't raise margin on silver from 27 to 47 at all, then they raise it ~100% in 10 days? Very strange.

If they followed a pattern in raising margin it would make more sense. But they don't.

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  #14 (permalink)
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ron99 View Post
Do you trade at IB? What is their CL margin on futures?

I know on selling options they were way above everybody else on margins.

Interactive Brokers Margin Requirements.

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  #15 (permalink)
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I understand some of the margin hikes as leverage is tremendous in futures markets. But I think these hikes affect the small guy much more than the big guy. I hated it years ago back when they took day trading of equities up to a 25k account requirement. They did it in name of protecting small guy. How about let small guys make their own decisions on how they want to trade. Hopefully futures markets don't eventually try to squeeze out smaller traders leaving nothing but hedge funds to make all the money.

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  #16 (permalink)
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Some contracts no excess, some a little excess and some a lot of excess on futures.

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  #17 (permalink)
Fortitudo et Honor
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liquidcci View Post
I understand some of the margin hikes as leverage is tremendous in futures markets. But I think these hikes affect the small guy much more than the big guy. I hated it years ago back when they took day trading of equities up to a 25k account requirement. They did it in name of protecting small guy. How about let small guys make their own decisions on how they want to trade. Hopefully futures markets don't eventually try to squeeze out smaller traders leaving nothing but hedge funds to make all the money.

Yes and no liquid.

What it does to affect the big guy is that just like when they hiked crude/silver, it forces the large positions to either increase their capital or liquidate some of their positions.

So if the pervasive sentiment is that "speculators" are propping prices up to high, a way you can TEMPORARILY provide some relief is to up the margin requirement.

A large block/institutional position with 2000 contracts open, would have to add a large some of their money in order to maintain their current position.

In the case of crude and silver, it caused a lot of large position holders to sell some of their long positions in order to meet the margin requirement (rather than reallocate additional capital away from other ventures). which in turn results in a selloff and a reduction in price.

As we saw with crude and silver, it results in a pretty stark/immediate decrease in volitility and a temporary respite from the prevailing trend.

Crude is scheduled to gradually decline back to original margins ($5k) over time. These sudden margin adjustments in my opinion, are used as market maintenance tools against price action and volitility. I don't think they're targeted at small or large traders per se.

"A dumb man never learns. A smart man learns from his own failure and success. But a wise man learns from the failure and success of others."
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  #18 (permalink)
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The gold margin increase raised the margin needed to cover positions by over a billion dollars. That is a lot for even the large specs.

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Honestly on gold they probably needed to increase margins. 50 plus moves in a day is just to big to be over leveraged whether small or big trader.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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  #20 (permalink)
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I wonder if HFT invading silver led to the large margin increases. Before 4/11/11 silver vol was roughly 50-80k /d.

On 4/11 it jumped by 50k/d to 132k. A couple of days it traded over 310k. More than double OI.

It stayed over 100k until 5/13. The last margin increase was on 5/09. Rarely over 100k since.

Silver is the only major traded commodity that I have seen the vol be larger than OI by more than double.

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