CME changes margin req to INITIAL = MAINTENANCE !?!?!?
- Thread starter DisciplinedHedg
- Start date
CME just put out a clarification on the margin changes. Initial margin reduced.
http://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv11-400.pdf
http://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv11-400.pdf
So that alarmist rag ZH breaks this story, all the comments insinuate this is some contrived margin call to squeeze long metals positions.
Now they flip-flop and imply the change will cause a gross expansion of risk as if speculators will suddenly open positions Monday with the windfall expansion of leverage the disparity between initial/maint offers them.
In their infinite stupidity ZH fails to mention with the exception of a few products "evil" exchange members never have to post initial margin to begin with (only maintenance). So IMO this is just a protection being offered to retail accounts facing liquidation through no fault of their own because of MF transfers.
I can't believe anyone reads this shit. This is a nonevent and just a small temporary added protection for the little guy, kudos to CME.
Now they flip-flop and imply the change will cause a gross expansion of risk as if speculators will suddenly open positions Monday with the windfall expansion of leverage the disparity between initial/maint offers them.
In their infinite stupidity ZH fails to mention with the exception of a few products "evil" exchange members never have to post initial margin to begin with (only maintenance). So IMO this is just a protection being offered to retail accounts facing liquidation through no fault of their own because of MF transfers.
I can't believe anyone reads this shit. This is a nonevent and just a small temporary added protection for the little guy, kudos to CME.
Agreed - the last thing I would expect CME to do is to disrupt orderly markets. That is the opposite of what they want.
This is a temporary accommodation, so that firms which require 100% of Initial margin for overnite positions are not forced to liquidate their newly-acquired MF clients' positions immediately upon receiving the account.
Many firms require 100% of Initial margin to carry an overnite position (mine does), but apparently MF did not - creating a problem for the transfer process.
Keep in mind that most risk-management systems would not trim a position until it was back within margin guidelines - it would just liquidate the entire position immediately. So rather than trying to re-write everyone's risk-management software over the weekend, it's just easier to lower margins to avoid mass auto-liquidation.