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CME Changes Numerous Margin Requirements, Lowers Platinum, Palladium Outrights

Tyler Durden's picture




 

Thursday market close brings another release out of the CME which has changed a plethora of outright margins, intra-commodity spreads and tiering modifications. Probably the most interesting changes to those burned by the exchange's scorched earth campaign against silver speculators, is the margin decrease in Platinum, Palladium and Hot Rolled Steel futures. Additionally, a variety of nat gas and petrochemical outright margins were increased, even as crude intra spreads were decreased across the board (no outright crude margins were affected). Neither gold nor silver margins were touched in the presentation of this latest margin adjustment.

Chadv11-186

 

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Thu, 05/26/2011 - 17:24 | 1314499 Jack Mehoff
Jack Mehoff's picture

Probably intended to shift buying from Silver and Gold to Platinum and Palladium.

Thu, 05/26/2011 - 18:32 | 1314648 66Sexy
66Sexy's picture

Fuel cells an increasingly important part of platinum demand 25th May 2011

http://www.platinum.matthey.com/media-room/news-room/fuel-cells-an-increasingly-important-part-of-platinum-demand/800556532.html

Also, many miners are reporting Q1 declines in production this year, for various reasons....

Anyone consider the margin reduction is because of impending future necessity, and an expectation of higher prices?

The idea of 'monetary metals' hedging inflation is a bit of an illusion. In fact, Pt, Palladium are monetary metals, as governments have coined them as well as silver and gold... yet because of specualtive interest in Au Ag by peripheral level, seat of the pants, minimal research investors (hedge fund managers), Pt has largely been ignored.

Not to mention the rumors circulating about JPM hoarding Pt bullion... physical.

The concept behind gold and silver as a government hedge, or any metal for that matter, can be addressed simply by buying nickle boxes for 100 bucks a pop at the bank.... 25% nickle, 75% copper.

Ultimately, what will be important is the actual usefullness of the metal, its rarity, and how difficult it is to obtain.

The writing is really on the wall here folks. Silver will decouple from oils rise, and Pt will once again take its place at oils side... we saw $2,300 Pt on the 149 oil price, we could see that again as silver/gold regress to the mean.

Thu, 05/26/2011 - 18:37 | 1314721 disabledvet
disabledvet's picture

"and if general motors owns your friggin' mine."  that might matter, too.

Thu, 05/26/2011 - 19:34 | 1314875 rocker
rocker's picture

Find it interesting that Platinum and Palladium ETF's and Stocks pulled back last and this week. Looks like we have a reversal of sentiment to go with it.  I have suggested Rhodium as a investment idea over the past months. This week looks like a reversal for it also. Rhodium is used in the manufacturing of palladium and platinum to harden the two. Also used in jewelry to make platinum shiny. I will be adding to all three this and next week. Good luck all. Bought silver and gold last week. Screw the printing machines. Eh.

Thu, 05/26/2011 - 17:30 | 1314512 Stoploss
Stoploss's picture

Im shocked.

Thu, 05/26/2011 - 18:01 | 1314626 tellsometruth
tellsometruth's picture

needed a good laugh before I headed out for the night THANKS!

Thu, 05/26/2011 - 17:31 | 1314515 buzzsaw99
buzzsaw99's picture

just another tricky day

Thu, 05/26/2011 - 17:29 | 1314516 Josh Randall
Josh Randall's picture

Is this bad for the Morgue ? If not, it's window dressing...and I hate window dressing

Thu, 05/26/2011 - 17:30 | 1314524 disabledvet
disabledvet's picture

no more panic attacks at the CME?  BUMMER!

Thu, 05/26/2011 - 17:31 | 1314525 Yen Cross
Yen Cross's picture

  Who is the number 2 user of those metals? What are those metals used in? Germany is irritated with the PiiG(lets), so who is next on that list?

Thu, 05/26/2011 - 18:39 | 1314732 disabledvet
disabledvet's picture

anyone they feel has these metals and the Germans feel they can bankrupt in an underhanded and back handed way.  "gettin' the German rail line in there" is a bit of a challenge however.  "that costs money."

Thu, 05/26/2011 - 18:57 | 1314791 Yen Cross
Yen Cross's picture

  Good work!

Thu, 05/26/2011 - 17:51 | 1314590 ella
ella's picture

Interesting article on margin calls at the London Banker Blog.  http://londonbanker.blogspot.com/2011/05/concentration-manipulation-and-...

He argues that the credit crisis was not so much the Lehman bankruptcy but the 2T in margin calls by the largest holders of derivatives.  He thinks another liquidity squeeze may be occurring again.  

Thu, 05/26/2011 - 17:57 | 1314610 mogul rider
mogul rider's picture

Yeah great now we'll get the Platinum pumpers out in full force.

 

 

Thu, 05/26/2011 - 18:05 | 1314639 XenoFrog
XenoFrog's picture

Platinum bitchez?

Thu, 05/26/2011 - 19:21 | 1314845 Yen Cross
Yen Cross's picture

 NOT! I was discussing industrial production. Do you have any concept of the input costs of PLATINUM production. Your ring has a microgram in it!

Thu, 05/26/2011 - 17:57 | 1314615 NotApplicable
NotApplicable's picture

So, does GM buy Platinum and Palladium on margin?

Thu, 05/26/2011 - 19:07 | 1314815 AR15AU
AR15AU's picture

GM buys lunch on margin...

Thu, 05/26/2011 - 18:02 | 1314620 AR15AU
AR15AU's picture

Its a childish trick... they are trying to lure specs out of the monetary metals and into industrial garbage.

Thu, 05/26/2011 - 18:04 | 1314636 XenoFrog
XenoFrog's picture

It's going to take more than that to get me to come out of my physical silver fort.  *tosses grenade over wall*

Thu, 05/26/2011 - 19:09 | 1314828 Fiat2Zero
Fiat2Zero's picture

Yeah, although can we get the GS ratio closer to 1:16 or 1:10 (even 1:20 wouldn't be bad).  I want to arbitrage some to gold so I can RUN when the radioactive typhoon comes.

Best to be nimble.  Those 100 oz bars get unwieldy...

Thu, 05/26/2011 - 18:19 | 1314654 66Sexy
66Sexy's picture

Yours is one of the most ignorant comments i've read here.

Pt and Pd are the metals of the future. You need to educate yourself on what you invest in.

 

Thu, 05/26/2011 - 18:34 | 1314710 AR15AU
AR15AU's picture

WTF eva... I didn't mean they weren't good metals for industry.. I said they are not monetary metals. As in - gold *WILL* surpass platinum in price, within 1 - 2 years, there is no doubt.

Take Rhodium for example.  $10,000 -> $1000. Is Rhodium critical for the future? OF COURSE. Will you use a rhodium sponge as money on the black market? LETS GET REAL...

Thu, 05/26/2011 - 18:40 | 1314730 66Sexy
66Sexy's picture

Yes, they are monetary metals. Ever heard of Pt Eagles? Palladium Maple leafs? What makes a metal monetary is the same definition that can be applied to all 4 mainstream precious metals.

Again, educate yourself about what you invest in.

Thu, 05/26/2011 - 18:44 | 1314749 AR15AU
AR15AU's picture

It is true, mints are branching out into other areas. Platinum and Palladium coins are a well established niche market. You are even seeing things like Copper Bullion (LMFAO) hit the market...

But concentrated central bank buying of Aluminium / Copper / Nickel / Palladium / Platinum is not in the cards. Do you doubt my thesis that gold will overtake platinum?

Thu, 05/26/2011 - 18:53 | 1314777 66Sexy
66Sexy's picture

Speculative markets are unpredictable; the principles behind gold are the same as any equity.

I think there would be broad speculation in all metals if we see QE3, and more so in Pt, Pd and silver as time passes. Just mvho.

Thu, 05/26/2011 - 19:03 | 1314806 AR15AU
AR15AU's picture

QE3 will make all metals attractive. Some will outperform others. I guess we'll find out soon enough. Best of luck....

Thu, 05/26/2011 - 23:09 | 1315429 66Sexy
66Sexy's picture

Best of luck to you too.

I agree everything that is some form of equity will rise in QE3..

I feel forced to be close to 50-50 metal/cash as I dont trust the system... It is just as conceivable for us to see a significant pullback off a 'silent june' regarding QE3 as anything else.

50/50... might as well play blackjack in vegas; lot less stressful.. and sexy broads serve you free drinks...

Thu, 05/26/2011 - 19:05 | 1314817 Fiat2Zero
Fiat2Zero's picture

No one's saying these won't be worth something (or appreciate fantastically), the question is to what degree they'll act as money. Just because someone is stamping them into 1 oz rounds, doesn't mean they'll circulate.

Gold and silver have traditionally been the metals people use. Silver for trading, gold for wealth storage. Other things _have_ been used (like iron - imagine dropping 60 lb ingots for a case of bud lite).

Plato had 10 properties that the ideal money should possess. Gold and silver fulfill these, which is why we will revert to them (most of the world will not have to revert as they already recognize them as money - e.g. China and India).

If we have the big ones (gold) and the small ones (silver) why do we need any others? I'd argue platinum and palladium would replace gold if they are better (the big one), since they are similar in value. So gold must be preferable as a monetary metal.

Do you have examples from history where these were used?

Adoption. It's not always so simple.

Thu, 05/26/2011 - 19:14 | 1314833 AR15AU
AR15AU's picture

My thoughts are much the same.

Besides, with these moves by JPM and the CME, I smell a rat.

Can't you just see JPM setting up a Platinum etf to try to divert investment demand away from gold / silver? Or accumulating lots of Platinum and Nickel in order to precipitate a metals sell-off by liquidating it all into a market crash..?

Why is the CME being so accomodative with Pt / Pd here? Why are they saying, buy THIS metal, not THAT metal???

 

Thu, 05/26/2011 - 22:13 | 1315288 Manthong
Manthong's picture

It was mentioned in a thread not too long ago that JPM was into Pt in a BIG way.

Thu, 05/26/2011 - 23:11 | 1315440 66Sexy
66Sexy's picture

Try shipping the equivalent amount of Pt or gold to silver....

Gold and Pt are just so damned efficient! these days 5-6 ounces is 10 grand... Good to have this efficiency if SHTF and logistics or home storage become an issue.

You could conceivably carry 100's of k of metal on you in Pt... cant do it with silver.

Thu, 05/26/2011 - 18:10 | 1314646 speconomist
speconomist's picture

Could anyone explain what intra-spread are? Thanks in advance.

Thu, 05/26/2011 - 18:22 | 1314662 Yen Cross
Yen Cross's picture

 Intra day spread is the pip/handle change based on an average over a 24 hour period of time. You can break intraday spread into (GAP) over the 3 trading markets or you can break it into time duration over a day trade. M-15,M-30,M-1hr... ect  ( not the overall move)

Thu, 05/26/2011 - 20:08 | 1314961 speconomist
speconomist's picture

Thanks! Appreciate it.

Thu, 05/26/2011 - 18:12 | 1314649 XenoFrog
XenoFrog's picture

So if they raise margins on silver to prevent volatility, does this mean they're saying they wish to promote volatility in these other markets by lowering margins?

Thu, 05/26/2011 - 18:28 | 1314687 fellatio is not...
fellatio is not fattening's picture

I made a similiar post about 3-4 weeks ago...When they raise mgn req. it normally causes the price of the underlying commodity to drop, it forces out some weak hands and some who cannot afford the higher req. it causes more sellimg than buying, that we know.  So when they 1st raised the req. on crude (CL) I bought the July95 put as well as the $97.50 put, it dropped from ~$104 to ~$95.50 which has held 3x, I sold those at a profit and now own only the July $99.50 put. Instead of complaining about what the CME and others are doing, profit from it.  Play on their side of the field, let the whiners complain about how much $$ they are losing...You saw what happened to Silver (SI) when they raised req.  4x  they have raised crude 2x now, each time will mean another drop, Obama wants gas/oil cheaper as election gets closer, this is how they will do it, like it or not make $$$

Fri, 05/27/2011 - 09:58 | 1316316 bbtrader
bbtrader's picture

PL and PA are already volatile - what they want is more liquidity (among other things), as they are thinly traded - each trades less than 10K contracts per day.  Not sure where JPM's long cost is, but I trade PL and I know it's still having trouble breaching 1800.

Thu, 05/26/2011 - 18:13 | 1314653 honestann
honestann's picture

FRAUD.  FRAUD.  FRAUD.

This is all 100% fraud.

There are ZERO legitimate reasons that clear, simple, standardized margin requirements cannot exist.  All they need to do is specify (for each commodity if necessary, but better if "across the board") a simple formula for EXACTLY when margins are increased or decreased, and by how much each time.

To NOT have such an open, clear, simple, precisely defined formula for changes, the entire market has become nothing but a device for the huge financial predators to fleece everyone else.

Unless these kinds of honest, objective, non-artibrary rules are put in place, CME, CFTC and the rest are pure criminal enterprises.

Thu, 05/26/2011 - 19:13 | 1314831 Kiwi Pete
Kiwi Pete's picture

+100. This is so sensible it's frightening!

Fri, 05/27/2011 - 03:24 | 1315695 foofoojin
foofoojin's picture

In theory a wonderful idea. But in reality I can already see your idea being used for explotation of the little guy.

"Any fool can make a rule, and every fool will mind it. "

Henry David Thoreau (1817-1862) American naturalist, poet and philosopher.

Fri, 05/27/2011 - 07:50 | 1315821 tarsubil
tarsubil's picture

"But in reality I can already see your idea being used for explotation of the little guy."

How so specifically?

Sat, 05/28/2011 - 19:43 | 1319980 honestann
honestann's picture

How?  Explain.

Or just assert the status-ripoff-quo is best.

Thu, 05/26/2011 - 18:25 | 1314688 Yen Cross
Yen Cross's picture

 Ps who posted those CME charts? They are all light sweet crude spreads?

Thu, 05/26/2011 - 18:35 | 1314723 Blanc swan
Blanc swan's picture

Off topicing to the more liquid commodities, down here in Argentina experts are predicting that this year we'll tip over into becoming a net energy importing country, for the first time in... ever. I recall reading over the last few years how several countries have already made the switch, after half a century of being net exporters, such as Australia, or most ironically, Indonesia, the member of the oil exporting (lol) cartel OPEC.

Thu, 05/26/2011 - 19:01 | 1314807 Yen Cross
Yen Cross's picture

  Heavy crude! Get your govrenment to in vest in heavy (CRAKING) refineries.

Thu, 05/26/2011 - 18:59 | 1314789 AR15AU
AR15AU's picture

Thanks for the read. But honestly, that article was a joke...  

As you can see in the 100 year chart, below [iii], the price of both platinum and palladium was higher, in inflation-adjusted terms, in 1920, than it was at the end of the “Great Stagflation” in 1980. 

Uhhhhh yeah...  and what was the price of aluminum in 1920? Probably really high in inflation-adjusted terms compared to today. But that has everything to do with the tech level of the period and the lack of a deep and liquid market.

Thu, 05/26/2011 - 20:18 | 1314984 Quinvarius
Quinvarius's picture

I didn't mean pro or con platinum.  Just that JPM would like the price to rse.

Thu, 05/26/2011 - 18:58 | 1314798 Fiat2Zero
Fiat2Zero's picture

JPM being hammered on all fronts.  Thanks for the post.

Anyone else smell a "post holiday PM smackdown" coming up?  Or think they'll wait until silver gets closer to $50?

Let's just get to zero leverage contracts and make the COMEX irrelevant (for PMs) already.

Thu, 05/26/2011 - 20:30 | 1315030 Quinvarius
Quinvarius's picture

I think today was OPEX for PM options, wasn't it?  They will probably be unwinding the "loss leaders", AKA contracts used to push prices down for more profitable options trades over the next couple days.  Plus, this whole May Dollar intervention is getting long in the tooth.  I don't think the Chinese will stand for much more, as they are currently offering bailouts.  They pretty much marked their territory in the Euro the last time the US money machine tried to destroy it.

Thu, 05/26/2011 - 19:14 | 1314830 razorthin
razorthin's picture

If you are a fundie, a possible explanation for today's action in the wake of horrid economic data this week, is the expectation of QE3 or some likeness thereof.  If you are technical, the explanation is an oversold bounce in equites, and some profit-taking in commodities.  Silver, btw, is officially under accumulation again as of yesterday.

Thu, 05/26/2011 - 19:24 | 1314838 Yen Cross
Yen Cross's picture

  I smell, month end flows & a real q3 start! I smell Halloween early!

Thu, 05/26/2011 - 21:56 | 1315247 Bobbyrib
Bobbyrib's picture

Platinum may not be used as much as gold and silver as money, but it is more rare than gold and silver and is a good confiscation hedge (the market would be miniscule).

Thu, 05/26/2011 - 22:35 | 1315340 WmMcK
WmMcK's picture

I recommend diversifying across the various precious metals as you can.

It's more difficult to suppress when there are more targets.

Trading the ratios to accumulate more oz's takes patience (and some timing) but is worth it!  Even with the (fiat) premiums, you can build wealth in volitile markets like we are likely to see.

Thu, 05/26/2011 - 23:03 | 1315423 PulauHantu29
PulauHantu29's picture

all this means JPM and GS are long palladium and plt imho.

Thu, 05/26/2011 - 23:06 | 1315424 Jreb
Jreb's picture

Palladium eh?

Fri, 05/27/2011 - 00:00 | 1315517 WmMcK
WmMcK's picture

Nice intermediary between Ag and Au for new investors.

Look for Maple Leafs for ~$35 over spot.

(Compare to 20 oz Ag or a 1/2 oz Au)

Fri, 05/27/2011 - 00:07 | 1315526 boeing747
boeing747's picture

USmint.gov started selling 5 OZ American Beauty coin at $279.95, no Ebay headache.

Fri, 05/27/2011 - 05:30 | 1315743 fiftybagger
fiftybagger's picture

Next silver target: 68

Silver For The People

http://www.youtube.com/user/BrotherJohnF?feature=mhee

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