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Interactive Brokers Buries Chinese Reverse Mergers: Announces 100% Margin Increase

Tyler Durden's picture




 

This is the beginning of the end for Chinese reverse mergers. Alas, after having been the single most profitable trade in the market for the past 5 months when Chinese reverse merger frauds would guarantee up to 50% gains in the span of hours after people refusing to drink the kool aid and actually do their homework would expose one after another of these abortions which the flailing domestic exchanges (NYSE and NASDAQ) would gladly list in exchange for much needed fees, the party is coming to an end. Interactive Brokers has just announced that it will hike margin requirements from 50% to 100% over the next 3 days on virtually every single Chinese reverse merger name. Shortly, everyone else will follow through with a comparable increase. Timber ahead... and time to find the next "sure money" shorting scheme.

From Interactive Brokers:

Dear Trader,

IB regularly monitors individual securities and imposes ‘house’ margin requirements which exceed regulatory minimums when we believe the risks of holding such securities on margin to have increased. Given the recent market volatility and risk factors associated with a class of securities formed via a method known as ‘reverse merger’, IB will be increasing the margin requirement on certain such securities effective with the April 11, 2011 market open. You are receiving this notice as one or more of the securities currently held in your account will be impacted by this change. The initial margin increase will be reflected in your account shortly after the close of trading today, Friday, April 8. Please manage your risk accordingly.

The scheduled increases are as follows:
April 11, 2011 – 50%
April 12, 2011 – 75%
April 13, 2011 – 100%

The list of names about to get crushed:

ADY
AUTC
BORN
CAAS
CAGC
CAST
CBEH
CCME
CDM
CEU
CGA
CHBT
CHNG
CHOP
CIL
CMFO
CNET
CSKI
CTEK
DEER
DGW
FEED
FSIN
GFRE
GPRC
HEAT
HOGS
HRBN
JGBO
LIWA
LTUS
NEP
NEWN
NIV
ONP
PUDA
RINO
SCEI
SDTH
SKBI
SOKF
SYUT
UTA
VALV
YONG
YUII
ZSTN

h/t Keith

 

 

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Mon, 04/11/2011 - 09:51 | 1157468 tek77blu
tek77blu's picture

great interview with technical trader gary savage on the coming return of the bear market, plus gold and silver comments: http://www.youtube.com/watch?v=9om-PVB4ICM

Mon, 04/11/2011 - 09:55 | 1157474 Id fight Gandhi
Id fight Gandhi's picture

Ancient Chinese secret no more.

Mon, 04/11/2011 - 10:00 | 1157499 narnia
narnia's picture

Did you know that the Chinese pick stocks based on numbers issued to a company by the exchange?  It has more to do with superstition and little to do with what the companies actually do.  Is that better or worse than listening to talking heads at CNBC or throwing darts as is done in the USA?  Probably not. 

Mon, 04/11/2011 - 09:59 | 1157500 Horatio Beanblower
Horatio Beanblower's picture

Marc Faber is a guest today on the Peter Schiff Show.

 

schiffradio.com

Mon, 04/11/2011 - 10:10 | 1157540 AG BCN
AG BCN's picture

Doomfest.

Mon, 04/11/2011 - 10:01 | 1157507 RobotTrader
RobotTrader's picture

I don't know a single person who trades for a living who touches those Chinese junkers.

The only guys who game that crap are the Yahoo message board daytrading action junkies, most of who don't make a dime trading.

Those stocks are for gambling addicts only.

Mon, 04/11/2011 - 10:10 | 1157541 firstdivision
firstdivision's picture

So how are the IBD top 50 that you post a lot not gambling as well?

Mon, 04/11/2011 - 10:09 | 1157545 Tyler Durden
Tyler Durden's picture

That's odd coming from a momentum trader. Every single Chinese fraud exposed on Zero Hedge plunged between 30 and 50% within hours of the disclosure posting.

LOL

Mon, 04/11/2011 - 11:13 | 1157794 Muir
Muir's picture

So, are all trend followers momentum traders? Is tape reading a fiction to sell books? Is the concept of overbought / oversold (not technical indicators) and hysteria pure hype?

Or do I need to have a "fundamental" reason to buy/short otherwise I am an unthinking push button lemming?

-

p.s. And I do not mean stochastics or chart patterns (as I use neither.) 

Mon, 04/11/2011 - 10:08 | 1157529 Cdad
Cdad's picture

The criminal syndicate known as Wall Street strikes again.  And of course, can any of these issues be borrowed for shorting?  Nope...because we all know who is there already.

Duncan Niederauer needs to be interviewed on this issue...today.  He won't be, of course, but rather the BlowHorn [CNBC] will continue only to celebrate his efforts to sell the floor of the NYSE to the Germans.

Does any of this surprise anyone?

Mon, 04/11/2011 - 10:14 | 1157562 tallen
tallen's picture

I'm holding a bunch of put options on PUDA, with expiration in 4 days and it just got haulted. Any of you clever guys on zerohedge got any ideas? I was ITM already and had a 50% profit.

Mon, 04/11/2011 - 10:20 | 1157587 firstdivision
firstdivision's picture

Risk: you just got a lesson in it.

Mon, 04/11/2011 - 10:25 | 1157611 Tyler Durden
Tyler Durden's picture

From our PUDA post: "Those buying puts are cautioned that the stock may halt and never reopen."

Mon, 04/11/2011 - 10:32 | 1157648 tallen
tallen's picture

I got in contact with my broker and you can ask to have it exercised so you have a short position.

It's a T1 hault anyway, news pending..

Mon, 04/11/2011 - 11:16 | 1157815 Muir
Muir's picture

Curious, let us know how that goes.

ZH did do that warning (very spot on)

Mon, 04/11/2011 - 12:18 | 1158029 tallen
tallen's picture

Looks like the Little report was right on Puda!

I've been in touch with Thinkorswim and they now say they won't tell me anything till options expiry. They said Usually the case is that of last trade price. Even at this I make a good profit, but obviously I'd rather be given the short position. I guess I'll just have to put my crazy hat on and see what I can do.

Mon, 04/11/2011 - 10:26 | 1157618 bhakta
bhakta's picture

IB has integrity which is why my account is with them...

Mon, 04/11/2011 - 11:18 | 1157822 Muir
Muir's picture

I love them.

Even learned to love their charts.

Mon, 04/11/2011 - 10:30 | 1157631 Can2001
Can2001's picture

http://www.zerohedge.com/article/latest-alleged-chinese-fraud-puda-coal-...

 

 

I strongly "...believe $2.66 is the most this stock is worth today." Those buying puts are cautioned that the stock may halt and never reopen. Place your bets appropriately...."

Mon, 04/11/2011 - 11:28 | 1157863 lolmaster
lolmaster's picture

Solid move by IB

Mon, 04/11/2011 - 12:55 | 1158155 gosh
gosh's picture

I would like to thank ZH for the great opp in these chinese names.  Made 40% last week in heat, sold on friday.  Looked at TSTC, didnt buy.  Bought GSI - it's not in the list and very undervalued.  There is some real value in these stocks.  Most are turning a profit and dont have any accounting issues.  There's huge potential here.

Mon, 04/11/2011 - 16:22 | 1158925 Quantum Nucleonics
Quantum Nucleonics's picture

Someone needs to come out with a fund focused on shorting these Chinese reverse mergers.  There isn't enough time in the day to research all these piles of crap.

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luckly123's picture

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