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First Silver, Now Cotton: ICE Increases Cotton Initial And Maintenance Margins
As Zero Hedge pointed out, yesterday's CME rise in the silver margin served to crush the "speculative" mania in precious metals. Now it appears the exchanges are set on through going market after market, and making sure that only prices of stocks are going up, instead of actual commodities. Today's casualty: cotton, where the ICE just hiked initial and maintenance margins across the board (to $5,600 and $4,000). Next up - every item whose price is strategically evaluated by wall street as being "too high": coffee, soybeans, wheat, pork belly, hookers, strippers (especially those in law school), cocaine, and of course, gold.
h/t John, source ICE
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I don't understand. Isn't the price rise in cotton due to scarcity from poor crop yields? How will raising the margin do anything to stop the rise? It seems illogical to me, but I don't have a PhD, so...
c'mon Michelle, you and I both know economics is hard for us girls
wanna see my new Divorce Barbie? It comes with half of Ken's stuff!
Why is it females always get half of everything plus get the house. I don't get it. It just ain't fair.
you can keep the house
and choke on it :-)
Don't agree with the junks RR, you actually made me laugh out loud. Who needs a house that has more downside coming? Choke indeed!
Because men are inherently bad and deserve to be punished, ask any feminist.
Please send me a bad man that needs to be punished. Please, Please!!!
This is an gender based assumption that can no longer be validly made; my husband and I are both butch males married in MA (residing in México where our marriage is recognized.) If we divorced after our 7 years and counting, there's no girl to get anything.
So nya nya nya ;p
Females are like huricanes; When they come are wet and wild and when they leave they take the house and the car.
+1
They don't do that bullshit so much in Europe. Move there. Switzerland is awesome for divorces!
The whole world is not a conspiracy. As prices go up, there is more money at risk. As volatility goes up, there is more risk to exchanges and broker/dealers from traders going broke. Exchanges and brokers want to limit their own risk.
The simplest explanation is usually the truth.
Occam's Razor
Yes, changing margin requirements by the commodity exchanges is not abnormal. Has anyone looked at a chart of Cotton or Silver? I am surprised the margins are still so low.
Thesis: "The whole world is not a conspiracy."
Response: Fractional Reserve Banking
Thesis refuted.
The fact remains that they are changing the rules. Did the rule change not benefit the banks and the exchange? It appears that they did.
Given the lack of a real reaction in the silver market (despite the liarrhea coming out of Robo's mouth) makes me think that such moves are going to be in vain.
But hey, if it works, hyperinflation averted, right guys!?
IMHO it is time to let Robo go to the UE line. He has become less and less entertaining over time. Obviously he was not hired for any real content, so ROBO FAIL at entertaining means it is time he walks to UE. Tyler, seriously, time to let Robo go.
Strippers in Law School? How do you know Trixie?
Inflation is locked in...hyperinflation is a too-likely probablility. Physical, not bankster paper! Besides, they'll just pay you in LOLlars!
That's fine and dandy, let them have their increase, the metal is still heading higher. A retest of yesterdays highs is coming as early as today.
Forgive my ignorance, but.... I truly don't understand how this type of action can cause a collapse in prices on the silver (cotton, etc.) market? So I've gotta stump up a few sheckles more today, than I did yesterday...? It forces margin calls on people leveraged to the hilt, so their forced to liquidate (and sell at any available bid, ergo driving prices down)? But if the bid under silver/gold/cotton is so strong, doesn't it stand to reason that buyer's would be picking up on the dips?
Which is why both Gold and Silver are up so far today?
In the short/medium-run, no it will not do a whole lot as long as the fundamentals support the rise. So yes, you are correct that the dips should be bought as based on the fundamentals.
The immediate effect is a drop due to people forced to unwind some positions to raise their capital to meet the new margin requirements. The change in margin has nothing to do with fundamentals, but the exchanges want to limit their risk levels, so they want you to pony up more liquid capital is all. People that are able to buy on dips will be rewarded greatly.
It is not supposed to cause a collapse, just slow the explosions...which is NORMAL. This has been happening for DECADES in the futures markets. Indeed, it must happen. Futures are so heavily margined that once a mega-move occurs, the inevitable pullback will crush the small speculator and raising the margins protects the exchanges.
Odd how the Fed DIDN'T do this during the full-retard NASDAQ explosion leading to the 2000 crash. Insane amounts of leverage were used then - unabated.
Raising margins does nothing but reaffirm the bull trend....
Exchange margin req's were increased in Fall 2008 when commodities were crashing. Was that also aimed at stopping hyperinflation? LOL
I think margin reqs apply to long or short positions, so they can be raised to curb bearish or bullish breakouts.
No. It was aimed at volatility. Margins and especially option prices will also go up if short term interest rates are allowed to rise. To some extent, this is rocket science. You have to track several components to know how to price derivatives.
The underlying that's exchange traded is simply getting more volatile and as in most previous similar episodes the clearing corps are raising margin requirements in order to preserve the financial integrity of the settlement process between longs and shorts. They're doing their job right.... least someone is fer God's sakes!
No conspiracy theory needed here, and that's a strong statement when I make it.
Thanks for the rational perspective.
And BTW, some folks yesterday were ruminating, subsequent to silver margin boosts, along the lines of what about some ags, etc. Two thoughts;
1.) The ags have not been as volatile as the metals and in particular silver... good article with chart in front page of WSJ today.
2.) Betchyer sweet ass J Aron is long the commodity complexes out the whazooo, else Goldilocks wouldn't be makin' money most days.
Again, thanks for the injection of sanity
Exactly right knukles. As I said above, this must be done. And yes, thank God someone is doing their effin job - unlike EZ-Al and the NASDAQ bubble.
And Kudos to you Fidel, as to pointing out the vast difference in the exercise of mature responsibility displayed by the Clearing Corps opposite past Fed actions.
But then again philosophically, the Clearing Corps are independent non-political entities whilst the Fed is not an independent apolitical entity.
Might be a dot to connect, eh?
Did these adjustments take place while the markets were open, or outside of hours?
Rockets bitchez!
I guess oil is exempt from speculative mania control.
With actions against JPM & HSBC how soon before we see a class action against the CFTC who were/are complicit in the manipulation of silver and gold?
Must be on the cards if it can be shown that manipulation has been commonplace. Don't even have know who the perpetrators are, just the fact of blatant manipulation and zero, or negligble action by the CFTC to deal with it.
doesnt change a thing. i am trading out of fun bux and buying tangible worthwhile shit. will gladly make a trade for lets say back up generators, land, industrial silver, outdoor supplies..seller can have the funny money..bargain deals out there too!! did you see that oil report from API, waaay fuckin off!!
Sooner or later the action will just move somewhere else in the world.This is about confidence and Currencies,Central Banks and Politicians.However you officially disguise it,the results will be the same.Bankruptcy to the American and Western Economies caused by lack of Industries,Proper Jobs,Cheap untaxed,unregulated Imports from Dollar a day economies,Wars fought to no end,unfunded and unending,mass immigration of unskilled and unemployed workers,Poor Governance,Corrupt Central Banks and Banks,Corrupt Multinational Corporations,Untaxed Cash Exodus to Tax Havens,Racially and Economically Split Societies,Political Correctness above Common Sense and lastly a lack of any kind of Resistance to expose the Truth and stop the theft.
Banning short selling on equities must be next.
Just more evidence how the Federal Reserve is trying to micro manage the markets, our market are really screwed up.
Cocaine? That's so 80's. It's all about opiates now.
Support the troops.
I think you are giving the exchanges way too much credit here... They just are not that smart.
What does the Fed expect? They destroy the value of fiat forcing money into safer stores of value.... You think the luxury goods market is moving higher because good times are coming back? LOL! No way... luxury goods are currency! This type of "savings" will continue for those that have the means.
I've been trading commodities for years, and I've seen margins change many times. I check frequently for margin changes because they are a routine part of the business. I don't see a margin conspiracy here, just another adjustment based upon higher-priced assets.
And cotton is HIGHER after yesterda'sy limit up move. I've lost count how many times that's happened in the past six weeks.
Parabolic up, parabolic down! The higher the go, the harder they fall.