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