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And Here They Go For Round Two: CME Hikes Brent, Crude Margins By 25%, First Of Many Such Moves
Some brilliant Chicago-based exchange apparatchik just ask himself this simple question: "If it worked so well with silver, why not do it with crude?" The answer is here: the CME, as we predicted last week, just hiked initial and maintenance margins on Crude and Brent by 25%, as well as FX, and other petrochemicals. And, oh yes, this is prudent risk management, because while the CME kept margins flat when WTI was at $115, the massive spike from $97 to $102 is unbearably destabilizing. At this point one can only stand back and watch as the CME proceeds with hike after hike, in an absolute vacuum from the administration, which certainly had nothing to do with this decision. And really who cares: free capital markets died on March 18, 2009.
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http://www.youtube.com/watch?v=iUSaMYqDPJg - Margin hikes explained
Specualtors assume the US dollar and treasury market is collapsing and buy hard assets( or fake hard asset futures) with a dollar that is presumed valueless. They also assume commodities are goimg straight to the moon, so they borrow and leverage what they have to use the dollar to carry commodity borrowings. They also assume they can pay the dollar back, with profits from speculation.
Even if they are correct, nothing goes in a straight line. So, when the dollar hits a massive short interst position, look for banks and the government to lure speculator suckers into a killing field with even cheaper dollar panics. Then, WHAM, the dollar starts going up as the futures markets start hiking up their borrowing margin requirements and they force a short squeeze that destroys hedge funds and dollar haters.
Coincidentally, the bond market perked up too.
Totally orchestrated by the dubious use of the "rule of law" by approved institutions.
The best thing to do is to avoid leverage because the players use weak players to smash the market by dropping their positions in a hurry- and at a loss.
Excellent answer, thanks.
Where can one get the earliest mention of margin hikes? Is there a listing or announcements page somewhere?
Seems like zero hedgers could jump on these announcements with timely put buying or call selling.
Seems like one could hedge the hedgers with these cheap shot announcements. One could achieve Uber-Hedge status...
USE ALL HEDGE FUND CRONIES TO RUN MARKET UP.
Then crash the market, crash the hedgies out of business and the large institutional investment bankers will have 0.0 competition.
Enter 200% perfect trading days per quarter...
Can we raise margins on the Federal debt ceiling..? Maybe that 'll come down as well.....hehe.
It is important to note that today Cramer appearing on Morning Joe made a 5 minute whine fest to Haines during the "Check in with Wall Street segment" about how the President should pressure the exchanged to raise margins on Oil. I just cannot help but laugh at these attempts because it removes an arrow from the quiver once again of all the central planners.
They are leading us down the road of price fixing. If you really wanna drop prices indict Bernanke for manipulation and the excess "liquidity" he gives to Wall Street.
Why are ES ramps speculation and not crude ramps?
Spot on John,
The arrogance in the financial sector and the financial MSM is stunning. They are so long down the road of believing the things they say, firing arrows of thought on an ad hoc basis has become structural in their belief system. It is either this, or there is an actual Oz behind a curtain somewhere between Wall Street and Englewood Cliffs. It is a hard call to make considering how many Marxists are inhabiting the WH just now.
Coverage over at the BlowHorn literally set records today in the category of obtuse, with irrelevant bringing up a close second. There was simply zero attention today on the matters at hand. Gearing up for earnings in the retail sector, it seemed. Cranking up the LULU and the ANF HFT games to come.
And as for Cramer...he is such a sad case that I simply cannot tolerate that guy on my TV anymore. That tail chaser will finally topple on this next leg down...now that he has ushered his sheep into the slaughter houses...for his ego and need for acceptance. The Cramer story is shaping up to be quite the public tragedy.
Well said comment, can I quote you on that?
Quote me to who?
As for that, there is nothing proprietary here. Were it not me, it would be another brother.
Knew it !
Those speculators..and everyone else who needs to hedge the oil price to budget their business activities and prices charged during the next few months - WILL LOVE IT.
...Or Else.
Time to run an add on the 'craigslist' ..will rent a tanker )
p.s. It is not the lack of any meaningful energy policy or our deed however indirect (or otherwise) it could be, it's 'em speculators. Ramble, ramble, ramble.
I just took my own advice and bought 5 July 100 puts @ $3.60 and 2 June 100 puts @ $1.80
What symbol?
CLM11 and CLN11 (june=M july=N)
Its workin'!
Margin hikes are sweet.
More shorts get put on and then they all cover at the same time and we can get some real vol here; 100-150 - 95- 200, etc.....
Hedge funds get torn apart, margin calls come in, counterparties get scared, cut off lending, and panic selling across all risk assets occur.
This is brilliant.
Shhiiit, wonder when they're going to hike NG?
They just lowered margins on natty a couple weeks ago.
Sorry, just a wee bit of sarcasm there...
Woops...
Sorry, I shit the bed there....my accident.
Typical bull, Just turn off the Bernanke. All problems solved
CME= Crime Management Exchange
Can someone please answer why you silver freaks care about margins? If the dollar does die and the world sinks into a horrible depression, silver will be a great source of wealth. If the dollar does not die, silver will revert back to its historical norm of 5 to 10 dollars. So, if you are an end of the worlder, having paper wealth held on margin will not help. And if you are just gambling like the rest of the pasty-faced basement dwelling day traders; fuck you! Get a real job.
Well, if you are thinking like that than silver isn't your best investment. You would probably be better off with a .45, and it has great stopping power to boot.
I have a very simple answer. I want PMs to be someway fairly distributed across the different income classes. "End of worlders" do not have the capital to compete with the big boys. The big boys can therefore in the current frenzy, secure a monopoly. I think, that mainstream involvement is at least slightly necessary (not everyone and your mom buying, but also not it being as obscure as now).... however, i do not believe that this involvement will happen, as long as certain benchmarks do not get broken (in the case of silver, about 50$).... why? Purely psychological and symbolic reasons.
When the tanker pulls into port to buy a zillion barrels of Brent, the price on the CME at most informs the price negotiation. At most.
It does not define it. There is less and less oil coming out of the North Sea. The tanker that offers the most money gets filled first.
I wish I was early to this post, but this tyler of ZH is a douche bag of great proportions. ZH has a manifesto, the goal was to fix the financial system, etc. margin requirements should be increased all around. it makes for a much more stable financial system if it is mainly real money. it's the leverage that kills, and in the long run the inability to use leverage will hurt the big boys much more than the retail investors. So, this post is fucked up!!!
Now, the BS from the big boy level is that they could have stated this stuff from the bottom and instituted leverage limits on things. that way banks source of profits would not be leveraging up, but commercial lending, (you know the whole glass stegal shit). so what ever tyler is reading this you can suck my you know what. the entire financial system needs to be drastically deleverage for long term stability. So don't complain a bout this, work to get it every where. no options with 5% down, no real money, all paid for no margin, that us the way things should work.
lets also be clear, ZH has endorsed position limits as well. It's about time margin requirements were increased across the board. after all lets look at whom the system benefits. the boys who get access for free fund at the discount window, and the hedge funds who get credit, but not the real people.
ZH has also talked about how debt/ leverage in the system creates instability. Well, then this is a start!!
so this tyler needs some reeducation!!
Jerk
By the way I have never in 3-4 years said onthing like this on the site, but it is deserved in this case. the goal is to fix the system. increased margin requirements all around are good!!
the person posting this is an ass. By the way, I am sure aI have been reading and writing on this blog more than this douche has been putting up comments.
ZH used to have a purpose. deleveraging was an essential componenet of it. it has taken too long, more to go!!!!
Let me push just one button, and see the entire argumentation chain of your post collapse:
1. You say, that margins should generally be higher
2. You also imply that how arbitrary and nontransparent margins are now handled, is what causes unfair leverage
BUT: The entire criticism about the recent margin hikes IS that they are done selectively and purely as a means of leverage and marketmanipulation. Thus, 1. hasn't even been questioned, instead the outcry was about 2.
Consequence: YOUR POST MAKES NO SENSE!
Please help me to understand this. If CME raise the margin, does the money reside in CME ? Could there be a shortage of money in CME, and they need some liquidity ?
I read somewhere that JPM and Comex are paying huge preminum for May silver contracts. Are they raising fund to pay off silver contracts ?
I'm hoping your just new to this, but in case not, NO, the money goes to your broker/dealer as more collateral for your posn. to reduce their exposure against loss if the trade goes against you. Your $$ goes into your acct. just increases the % of equity you have
Continued antics of this sort will result in the COMEX losing its international status, and becoming a defacto regional bourse, unless others raise their margin requirements in unison. Why continue to trade in a marketplace, which changes the rules on you in midstream, while there are alternatives. Maybe the Hong Kong mercantile exchange can broaden it's offerings to replace the CRIMEX. Pretty soon there may be more oil shipped to China than the US. Not a bad place to make, or take delivery, if you ask me. If there was ever a time for the Iranians to make a go of their Kish oil market, the time is now. I wonder what margin requirements would be under Islamic law. Maybe you would not be able to sell a contract, to keep it from being gambling. Only proper, Godly hedging allowed, take that speculators
Of course this might be the final blow to the dollar. If contracts are offered in the Chinese currency, or in grams of gold, for that matter. The Arabs would like being paid in the shiny stuff. Maybe that's the plan. A plausibly deniable way to severely devalue the dollar. I can hear it now "absolutely no one could have seen it coming".
We got rid of Osama bin laden - when do we get rid of that other Muslim criminal, Obama bin laden?
You mean Obama Debt Laden.
I warned you guys.
Uncle Gorilla smells blood in the water.
They will raise margin requirements on anything and everything that is inflationary to the U.S. consumer.
And make sure that every "Peak Oil" hedge fund is obliterated and Amaranthed.
There is no inflation problem that cannot be solved with a torrent of paper.
Supply of oil and gasoline is finite. Supply of "short NYMEX" order tickets is infinite.
I warned you guys over and over.
Always the short-term-obsessed shit-for-brains, eh RobotLemming?
Yeah, your statist and fascist heroes can continue to print everything and anything they want --- but they can NOT create anything real! Their criminal manipulations WILL fail, and the common man WILL win this war, and you will die, literally or figuratively, with the former --- and I will laugh and laugh at your pain and agony.
You, and they, deserve to die a traitor's death: swinging from the end of a rope.
There is a method to Robo's apparent madness. They, actually some ultimate bad bank bag holder, will short the oil market until they can't. Call it a Mexican standoff, first one to blink will lose, and if/when the dollar gives up the ghost, it won't really matter. Will it?
That is why I advise owning the cash flows on oil/NG via royalty trusts. Ultimately you win. It is almost like owning physical.
I am on record here saying that within 5 years the oil futures market will be a thing of the past. Either margin requirements will go to 100% or they will just be shut in the name of national security.
What a bunch of douchebags-- when can the CME/Crimex/Crymex be reined in for obvious conflicts of interests and market manipulation-- of course don't forget about the true speculators: the fed.
every action a reaction
margin req higher = price lower
but what are some of the unintended effects?
why not price = higher? remember that the shorts have to place margin as well for their side of the contracts
I have been thinking aloud about these unitended consequences.
I think the announcements of margin hikes could be de-stabilizing to that commodity. Imagine the desire to short said commodity immediately following the announcement. How would a producer respond to said announcements? Could an industry lobby against CME margin hikes and who would benefit from these lobbyists?
Increasing margin requirements overall as a general policy could reduce liquidity.
This whole thing reeks of crony capitalism!!!
Somebody lifted the TARP on the corpse of capitalism and is sticking a fork in it.
"And really who cares: free capital markets died on March 18, 2009."
Just thought that line was worthy of a re-read.
free capital markets died on March 18, 2009.
I haven't been a member of ZH for very long. Can anyone tell me what the significance of the above statement is? What significant event occurred that day to kill the capital markets?
On the gold stuff, I don't remember which animal it was, but I remember my father's speech to my mother on her Beanie Baby Collection: "Darling, Freddy the Frog is just a little stuffed animal. He is only worth $100 if you find someone who thinks he is worth $100. So if you get stuck with him, you better be prepared to get $100 worth of cuddles or something out of him."
I wonder if you can cuddle gold???
Squeeky Fromm, Girl Reporter
Exactly, which is why stocks like ABX trading for a fraction of their worth makes no sense. Buy the producers and the supply chain, not the product. The Beanie Baby company made off with a fortune, while the owners of Beanie Babies made off with little other than stuffed toys.
Wheres the silverbugs, pour it in your pool, store it in your garage, add it to your coke. LOL