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CME Goes To Collateral DefCon 1: Makes Maintenance Margin Equal To Initial For... Everything!?
Update: Based on unofficial statements by the CME, it appears that the exchange has gone the way of inviting more risk by lowering Initial to meet existing Maintenance margin across the board. We will likely only know for certain on Monday. We suppose the proposed explanation will be to minimize margin exposure for onboarded MF positions. Of course, that this is very much counterintuitive at a time when risk is spiking and vol readings per SPAN are soaring, and instead is inviting even more risk, is apparently irrelevant to the exchange.
The most important news announcement of the day was not anything to came out of Cannes (as nothing did), nor from Greece (the merry go round farce there continues unabated). No, it was a brief paragraph distributed by the CME long after everyone had gone home, and was already on their 3rd drink. It is critical, because not only is this announcement a direct consequence of what happened with MF Global several days ago, but because also it confirms one of our biggest concerns: systemic liquidity is non-existanet. We confirmed interbank liquidity in Europe was at an all time low earlier today, and can only assume the same is true for US banks. But what is very disturbing is that this is just as true at the exchange level, where it appears the aftermath of the MF collapse is just now being felt. What exactly was the announcement. Unless we are completely reading it incorrectly, it is nothing short of a margin call for tens if not hundreds of billions worth of product. Because as of close of business on November 4, today, the CME just made the maintenance margin, traditionally about 26% lower than the initial margin for specs, equal. For everything. Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America... and the world. Just like when Lehman blew up, it took 5 days for Money Markets to break. Is this unprecedented elimination in the distinction between initial and maintenance margin the post-MF equivalent of the first domino to fall this time around?
From the CME (source):
And for those asking, here is a complete breakdown of all CME products and associated margins:
»
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No the main goal is to consolodate and grow. TPTB want to centralize all power to a one world global government. To deny this motive is to disregard all signs to the fact.
This is not the South Sea Bubble of 1720. It is a million times larger. If the banks fold, so does the government's money and then it's "secret" plans go out the window.
I think you cannot control the coming chaos.
I think you failed to grasp my allusion.
1720 saw the CONCURRENT failure of schemes wherein governmental debt was farmed into corporate hands in order to complete an integration of public-private insider trading which ruined the investing classes of the times in Britain, France and the Netherlands. It also involved an incipient USA insofar and the Mississippi Company was the vehicle by which public risk was institutionalized via the crown takeover of a public company's risk.
I don't have the time right now to go into all the details of Jon Corzines channeling of John Laws template of corporate fascism aka statist ponzi schemes. But I can assure you that everything is completely under control. It's the people who are at greatest risk of 'folding' not the banks.
For now.
I have grasped your allusion and found it lacking in understanding the complexity of a global meltdown that will be recalled with horror for a thousand years.
Joyful,
I agree up to a point. The TBTF banks have gotten so complex that they don't fully understand their risks and capital requirements. It has been proven by AIG fiasco that they do not understand the linkage of the counterparty risks in the derivatives market. I suspect that if TSHTF the CDS holders will not honor their commitments, and we are looking at possibly a quadrillion dollar market. Now that will be some mess to clean up and yes, banks will fail, as will currencies and economies. We will see the irony in this later, but the very institutions that allowed Europe and US to create the welfare state (banking cartel) will not be saved by gubmint because the politicians are now beholden to the entitlement population (50% of US citizens do not pay taxes). The unholy alliance between banks and government will be brought down by the spawn it has created, although the sheeple who do it don't realize the amount of pain they are going to absorb in the process.
You're sayin that since OWS demonstrates the people are gutless and disinterested, then that equates to the banks being in the exponentially better position? I tend to agree, that this current OWS thing does look pathetic in that (as Max K has identified) their "demands" are nebulous and easily laughed at. Yes, I agree with your statement that the OWS thing makes the banks look more powerful, they know they can drop a dime and have 100k cops and sheriffs pour in from the local municipalities at any time.
If you were wrong, then there'd be more OWS people peacefully displaying arms (unloaded rifles and such) which I am not saying that would be GOOD, just that it would be more honest. And it would cause a sort of "price discovery" as to what the real nature and reality of OWS, actually is. I think if there were 1000 OWS people with unloaded rifles, then quickly there'd be 2000 cops with loaded ones. I am not advocating revolution, because it's a shitty game. Just saying that even peaceful display of iron, is gonna cause the true nature of the authority to be revealed. Why would any cop be threatened by an open-bolt rifle? Well obviously, an unloaded rifle is cause under Terry v. Ohio, to search your person, to see if you have a round on you. The law of today says plainly, if a cop feels afraid, he has the right to mobilize himself in any direction he likes, to make himself and his peers, feel less afraid.
JOYFUL, Stop sugar-coating it! I'm tired of you Panglossian optimists clogging the blogging.
Great post. Hats off.
That's quite a bit further down the rabbit hole than I'm willing to run. I don't believe in any grand conspiracy as much as I believe that the 1% have amassed too much power for their own good - and that politicians are by their very nature incompetent and corrupt. You add unbridled greed, genuine growing fear and debt 10x that of global GDP and this is what you get.
The uber wealthy fear social unrest in their country. A little more taxes to them will not even dent large personal fortunes. The politicians fear being voted out of office. Use these two realities to assess what comes out of their mouths (either side).
Thank- God you can pro- nunciate! Well done +1
Looks like the ole slot machine is gonna come up three black swans on a day that started out like any other.
smells like qe3
+1, but how will they disguise it?
With a mustache?
London has been at war with Middle Awareica since the inception. CME has and will always be an affront to, how does won say it, certain members of the party.
Warren Buffett’s conglomerate Berkshire Hathaway Inc reported a smaller third-quarter profit on Friday after losing more than $2 billion on derivatives related to stock market performance.
That was nearly three times what Berkshire lost on the same instruments a year ago. Buffett has sharply criticized derivatives in general, but has said these particular contracts were safe and would ultimately be lucrative.
http://ibankcoin.com/news/2011/11/05/old-man-buffetts-profit-falls-on-wa...
Berkshire Hathaway, the conglomerate controlled by Warren Buffett, spent only $18m to buy back stock in the third quarter.
The billionaire investor has received an outsized return for his buy-back plan, announced in September, shortly before the quarter’s end. Shares in the candy-to-cargo train conglomerate are up by 15 per cent since Mr Buffett announced the move, the first such purchase in the more than four decades he has controlled the company.
http://www.ft.com/intl/cms/s/0/7107ad16-074d-11e1-8ccb-00144feabdc0.html...How do we get out of these problems. Print money. How else? This is why gold and silver will always be bought.
Oh there will be printing, lots and lots of printing.
Maybe CME needs cash because MF blowup slammed their books. Maybe the hikes provide covering fire for a retreating JPM and complicit CME in re silver manipulation as the case gets legs. See Bart Chilton's remarks on KWN.
It looks like an across the board 25% margin bump. As a PM freak who is beginning to feel a llittle paranoid about takedowns, this one seems more democratic to me. After all, every contract is affected.
I would be surprised to learn that longs are fully invested into a knife-edge G20 weekend after all this wacky HFT volatility. Could turn out to be a stupidity tax on the foolhardy. Or it's nuclear. Dunno. CME Godfather Leo Melamed has not confided in me.
If you're worried about silver, then this is the woman who will smash it again.
Harriet Hunnable http://www.washingtonpost.com/business/hunnable-defends-cmes-adjustment-...
I'm no financial guru, I'm just a 22 year old history major looking for answers when it comes to the economic turmoil. I do find a particular quote to be rather interesting:
The lamps are going out all over Europe. We shall not see them lit again in our time
-Sir Edward Grey
I think we can interchange Europe for the Western Ponzi scheme. It's rather strange that massive changes in terms of global political and economic power has shifted during the early parts of the past few centuries. In my judgement, this liquidity issue is just another stage before the global economy goes supernova. Social unrest is increasing and it's not finished.Is peaceful revolution becoming imposible at this point? If that's the case, I hope we all understand what it means to be fighting for "freedom" and truth. I don't know how so many of my contemporaries don't seem to care. It's my generation that will be condemned to slavery in order to pay for the binge of the past few years. It is cathartic to be able to talk with folks on these issues, as most others in my life think I am crazy. In the short term realistically speaking, what does everyone think will happen next? I'd argue some very pissed off Greeks are going to overthrow their government and will refuse to pay up with more Austerity.
Every time I hear a young person like you who is trying to sort through this, I feel a bit of hope. Your friends will come around once things start to crumble further.
Having tracked all this for 8-10 years now, I spend less time trying to make blow-by-blow predictions and more trying to understand the overall gestalt we are experiencing. There will be big events and most of the people here are already primed for them without knowing the exact timing/outcomes.
The big question now, which you can see reflected in various comments, is whether:
a). Events are following a pre-determined script and are strongly under control for purposes of creating a world central bank, govt, etc (as the Vatican recently called for),
b). A major plan such as above is underway, but not going well and the PTB are struggling to maintain a semblance of control, changing their plans on the fly as they scramble to keep up,
c). Events are largely out of control, and there is simply a free-for-all among power players to maintain a piece of the pie as the system crumbles.
I know peole here have strong feelings one way or the other. The insanity of events along with statements of power groups suggests a) or b) above, but you know, scientists for years thought that the queen bees or queen ants controlled the highly organized activity of the hive. In fact, it is all self-organized behavior. There is no central brain, but rather the organization arises spontaneously from the interactions among members.
It would be a bit of gallows humor if the PTB only thought they were in control, but in fact are simply part of something bigger than they themselves understand. We'll see.
It's pretty depressing. I'm hooked into a large group of young people (20 somethings) through my offspring, and the fact that I'm in the music business. Last week, another of these young people committed suicide. If I drop by a party, the drug use is just incredible. It seems everyone at the party is doing it, several different kinds of drugs and constantly. Occasionally someone in this group will talk to me about the future. Most of them have a very low understanding threshold of what is actually happening, but they all have an unerring sense of doom. I think they all just know at this point. The unemployment in this group is so bad as to be numbing.
So, I don't have a lot of hope for these young people. It's going to be really hard on them.
I keep searching around the net for confirmation of this article, but am unable to find it. WTF? Is this really happening on Monday?
No, it's just people here doing what they always do which is screaming, "the sky is falling the sky is falling!". Yes there will probably be some margin calls. No, it will not affect any of us.
You think it is mindless worry amplified by panic? Or is it that people here are just thinking through the consequences of an event that has not yet occurred (and certainly may not occur)?
Be hopeful and glow with peace and passion for doing right and great. In a few years things will be Different. You will be wiser and stronger. Having lived through what is to come with valor, you will then lead others.
Many lessor men have known much worse times in war and famine. Your generation is upon its great test. Thrive.
My heart goes out to those in their twenties. But also to the other generations. I find the Gen-X'ers and Boomers are also way out of touch. The Gen-X'ers never fully synched in as the train was too far gone by the time they came along. The Boomers did for most of their careers, but still mostly do not have a clue what is going on. They are going to be devastated financially as most are not preparing beyond the normal channels of retirement funds, etc.
Those in their twenties and below should still be open enough to adjust as things unfold except for those too rigid, terrified, or blasted on drugs. The drug route is such a bad idea right now. For all of our talking and speculating, no one knows how this will unfold. If you are into advanced math, it's best described as instabilities (or unstable fixed points) in the system. Outcomes are subject to major changes depending on minor inputs, and you simply cannot predict the future far in advance.
For the young people reading, I suggest to do your best to get away from (or have a quick way to get away from) big cities and dangerous areas. Try to build some survival flexibility into your plans and be creative as events unfold. Almost anything could trigger a major event (like this issue with MF and CME), but it may just be another chapter in a slow-motion meltdown.
Make sure you find some people to talk to to relieve the pressure. These days and months ahead are part of our lives and not retrievable once spent. Living in anxiety is bad for your health and it doesn't help you prepare for anything. Creative people will get through this somehow. The key is to accept that this is where we are and to not cling to how things were or "ought to be".
"C" is correct.
I'm 26, and I have been preaching this idea that "America is in bad shape, and it will end in tears" stuff for a couple years now. In the process, I've alienated a lot of friends and family as well. People are completely blind to what is really happenning and I'm not sure if its because they are in denial or they just don't want to hear it, or they just don't know. Most of my friends are very well educated so naturally this amazes me, how they can't put 2 and 2 together. They always think I'm going crazy by the way that I think and expose the truth of the system upon them and it bothers me. I just want my peers to wake up and see what is happening. I suspect that they will, like you said "when things crumble futher , they will start to come around."
"Most of my friends are very well educated so naturally this amazes me, how they can't put 2 and 2 together."
Don't mistake education for intelligence. Ever. After all, Paul Krugman is very educated.
Sounds like my circle of friends.
after making my first purchase of gold eagles in 1999 i was exiled to the back porch steps at every social function i attended if i even mentioned any concerns for globalization or later the mortgage debacle. now i am accosted by total strangers wishing to discuss economic concerns at unlikely places such as self service filling station pumps.
an entire generation of waiters and waitresses, a servant class, has been created in recent years who have no practical skills beyond asking if there is 'anything else i can get for you'. their education debts are being run up in what are essentially diploma mills that deliver little educational value in return for the student loan money they are approved to receive.it seems prophetic now but fight club's depiction of a pissed off underclass may be right on the mark.
your peers will wake up eventually, when they tire of having nothing with no prospects. that is of course unless they aspire to making their existence on the backs of their children drawing welfare and food stamps.
the future is bleak my friend, they best wake up to wanting more soon.
Well, it's happeneing here now...
http://finance.yahoo.com/news/Unable-to-pay-bill-Mich-city-apf-292016147...
I do find it funny that they blame vandelism and theft on poor lighting. I think you should blame the vandals and crooks, but that's just me.
I actually think it's great to tone down the lighting. It would be nice to see stars.
Oh, we are all going to be seeing stars very soon
Pious: try some Armstrong re: the future...
http://www.martinarmstrong.org/economic_projections.htm
So the Greeks, (and other cluelessly entitled, petulant arrested-adolescents of this rarified era), somehow think they can just "not pay", and not "submit" to austerity (a.k.a. reality) ?
Really? It's that simple, is it?
Good luck getting anyone to fund/extend credit to that profile ever again in this decade or next.
And without that source of funding, they will learn something about reality that they will pass on to their children, and maybe their civilization will one day be re-set(in, say, 30 years).
As the sheep blame eachother instead of the dog for running their herd down the wrong path.
And the answer to that is Iceland.
Yes, it really IS that simple... IF... they are willing to forego borrowing for several years. And the simple fact is, Greece would be VASTLY better off defaulting on all its debts and cutting government spending so they don't need to borrow. VASTLY, VASTLY, VASTLY better off. Don't forget, what they borrowed was "nothing" (that is, it was fiat, fake, fraud, fiction, fantasy, fractional-reserve stinky-debt-loaded toilet-paper created out of thin air, not something with any real value).
This is what people need to understand, both borrowers and lenders. Time for a worldwide government debt jubilee... followed by massive budget cuts and balanced-budget requirements henceforth. That is the only solution... other than permanent slavery of mankind to a bunch of craven predators who produce nothing and create fiat, fake, fraud, fiction, fantasy, fractional-reserve misery at zero cost or effort.
the need for speed has become
the need for weed has become
the time to bleed
amen
I think the letter is being badly interpreted. There will not be armageddon on Monday except in the wet dreams of die-hard survivalists.
The letter means:
1. Current Existing Products have "various" initial/maintenance ratios
2. NEW products are required to have 1.0 initial/maintenance ratios
For example at 03:17 am Saturday, this is the performance bond published at the CME website for crude oil:
http://www.cmegroup.com/clearing/margins/#e=NYM&a=CRUDE+OIL&p=CL
Initial is 8100
Maintenance is 6000
That is an Intial/Maintenance ratio of 1.35
These tables have to be updated fairly real time so the brokers can update their risk management parameters real time as well. They will not likely use advisory letters to run their SPAN (Standard Portfolio ANalysis) algorithms provided by the CME with manual input but rather downloads from the CME ftp website such as:
ftp://ftp.cmegroup.com/pub/span/data/
This agrees with the list that Tyler provided (if anyone actually looked at it!!!!!!!!!)
http://www.scribd.com/fullscreen/71646141
Look at the list tyler provided. Scroll down to the Crude Oil section. It agrees exactly with what I saw on the CME Website as of 11/5/11 03:17 am.
And finally, I get a Friday night update on my futures account at InteractiveBrokers. Guess what, my initial and maintenace margins are not at a 1.0 ratio! In fact, they dropped my overall requirement with the updated prices. So no indication of a change in ratios for CURRENT products! The 1.0 ratios are for NEW products, not CURRENT existing ones.
Instead, I wasted time jumping on a non-news item fearing the worst.
Bottom line. The interpretation that this is armageddon is a stretch. Yes the financial markets suck and yes financiers and politicians are crooks, and yes, civilization may be ending, but let's not be like Reverend Harold Camping who predicted the end of the world several times a year for the last 17 years!
Let's not cry wolf on every news item or misinterpretation thereof. Doomsday will come, but if we keep jumping on every news item as if its the bitter end already, when the end really comes, we might not be looking.
well fuck
Attention. This is a drill. Repeat this is a drill.
Passengers on decks 1 through 3 please line up at Lifeboats 1A to 5A......
'Will you be ready when the real thing happens...?'
Were you ready?
In hindsight, anybody who did their homework would have known who built it and planned for it to go down. It's almost inconceivable that a captain like Smith would ram his own ship full speed through a sea of bergs, yet he did just that. Perhaps that is why Solomon of the bible when offered riches or wisdom, chose wisdom instead?
But who can do the homework necessary to avoid Titanic-like scenarios? I mean, people need to cross oceans, don't they? It's tough to have wisdom, and its tough to know it when you see it.
Maybe you're right but how can you be sure that the "new" refers to products and not to ratios. Just because the news ratios haven't been updated on these websites after the close of trading on Friday doesn't mean they didn't change. People want to go home for the weekend, not stay longer at work updating websites.
wrong...when they changed margins in the past it was never for "new positions only and existing positions exempt"
Maintenance margins on all products will be the same as intitial margins come Monday.
Pony up, bitchez.
Edit: your platform is not the Comex
So the ship really is sinking?
Well, they are pumping liquidity into this particular ship...let's see if the pumps can keep up.
Has to be related to MF Global...but I thought that was supposed to wash-out Friday. Oh, to be a fly on the wall.
Doubtful the ship is sinking on Monday. Eventually it will sink, but not on Monday. I share Hugh Hendry's outlook.
1. CME published tables which I linked to does not indicate an immediate maintenance margin hike.
2. InteractiveBrokers must abide or exceed CME margin requirements at all times, and as of this morning, there is no indication from IB that margin requirements on existiing producs must be across the board equal to 1.0. Ergo, they aren't interpreting the letter as doomsday either. Further, such letters are not how brokers download margin requirement (SPAN) data, they do it by downloading SPAN parameter files from the CME which I linked to. You can either pay $3000 to own a SPAN interpreter or simply find a broker's platform and run their version of SPAN (and thus save yourself $3000).
3. I just ran SPAN through the PFG Best platform and guess what, they interpret the letter as LOWERING initial margin. I ran their Risk Ajusted Margin Analysis which must meet or exceed the CME SPAN margin requirements, and they are actually LOWERING initial margin requirements!
I ran PFG RAM/SPAN for ESZ1 (the december 2011 ES contract):
initial margin 4000
maintenance margin 4000
which is LOWER margin requirement than Friday's close.
So after the letter this is what happened:
1 broker (IB) keeps the initial margins the same
1 broker (PFG) LOWERS the initial margins
Joe Ploppy: Then what are the effective changes? Do they often reiterate terms as effective changes at the close of business at the end of the day?
We will all find out around 6pm Sunday night. But here is my take. There is reason for the CME to LOWER, I repeat LOWER, margin requirements so that other brokers can aborb the accounts of MF Global. If they want to liquidate MF Global accounts, they need suckers (ahem, I mean buyers) on the other side to buy assets in MF accounts. Thus there is reason to loosen standards. Once they MF Global accounts are transferred or liquidated, then then can screw everybody (ahem, I mean raise initial margin requirements) later....
So the letter suggests, that brokers can lower initial margin requirements, and brokers have the freedom to require more margin than what the CME requires.
Hence brokers like InteractiveBrokers chose to keep margin requirements stricter than the CME's standards, and PFG is apparently lowering the standards!
Right now, traders setting up for monday moring at PFG will be pleasantly surprised to see, that they need less money in their accounts to buy more futures! I also have an account with PFG, and it reported I need less initial margin to buy S&P mini than I would have a few days ago.
I also just did an order preview at Interactive brokers, and saw nothing to suggest that margins were hiked, but my positions are complicated by the existence of derivatives in my portfolio, so it is not as straight forward. We will know in 26 hours.
I have a different take on matters. If there is the financial crisis, the standard policy is to loosen credit requirements so that we can avoid short term pain at the expense of long term disaster. CME is taking its cue from Bernanke and friends -- loosen credit standards in the interim so financeers can find suckers (ahem, I mean buyers) to unload their assets on.
We'll know in about 26 hours when the markets open Sunday night.
It is possible I was wrong in my interpretation, because I UNDERSTATED the effect of the CME letter. Not only may it mean there is no change to existing accounts, but even LOOSER standards to new positions. It's obvious the financial borg collective needs suckers (ahem, buyers) to purchase assets out of MF Globals frozen accounts.
Great insight thanks
European tsunami in Lake Michigan?
you don't meet nice girls in coffee shops... hold on
http://www.youtube.com/watch?v=r_U377vst5o&ob=av2e
This guy's got no problem with nice girlsin coffee shops.
NOTHING WILL HAPPEN ON MONDAY FOOLS
The sun won't rise? How are my roosters going to know when to crow?
Golly gee wiz. I'll oversleep and miss it all.
Shuckeydarns
My 0% interest for 1 year check from Chase won't clear? ( Will clear?) I'm so confused.
Something fishy going on indeed. Here in the US the msm is really covering the "move your money from the banks day". Today CNN showed a segment about the pros and cons of closing your bank acct. they even showed a website where u could search for your local credit union... Ows can't get the time of day but this movement is on the daily rotation of he msm. Anybody else notice this?
I sure have noticed it, mighty strange lately. So glad I haven't kept my money in a bank for some time now.
This story STILL isn't on bloomberg or CNBC front page...
CNBC had a guy on across the pond yesterday who was a futures trader who was locked out of
everything because of MF. He was so panicked that they cut him off quickly. It was extremely telling in
the 60 seconds they allowed him to tell how bad it was.
Saw that, the guy was definitely flustered. He said he had contracts expiring that day (yesterday) and it sounded as if he had been pleading with someone to allow him to close his positions.
Bank account update My cash is still there.
Stay tuned. Next update at 10
My cash has not been on my bank account for a while. For a good reason...
your wife's got it?
i miss Rule 48 mornings
I would still prefer to have a ZeroHedge which prints stories like this, even if it is grossly mis-interpreted (and I'm not saying it is!) than to have him second-guess himself and not post it until well after it's been verified by dozens of "experts".
It's our responsibility to determine whether it's real or unreal, and it's our choice to panic and force the whole family to drink the Jonestown Kool-Aid, or to remain calm.
Either way, keep posting away ZH!
And, hey, whenever you get seven pages worth of comments from foaming-at-the-mouth people, that's a sign that you've hit a nerve. Well done.
Which begs the question:
Which posting has had the most comments on ZH?
Just curious. I know there is a way to find out but I'll rely on CD or TF too enlighten. They probably keep records next to their stash.
I am going to make a killing on Monday after shit hits the fan. These leveraged ETF fund managers are picking their place in the cemetary right about now. Pigs get slaughtered every time you know.
Please explain why ETF managers are screwed?
Mayans saw this coming 2012 anyone??
also check out the hopi indians and webbot! no coincidence!!!
http://www.youtube.com/watch?v=Z0GFRcFm-aY There must be a short cut key for this song on this site but here it is anyways.
Given the fact that margin requirements have been raised repeatedly for gold and silver in the last couple of months, wouldn't it be common sense if all traders sold everything, EXCEPT gold and silver long positions?
If they want to keep their long positions on everything else, they'll probably have to come up with much more cash (in nominal terms) than for gold and silver.
But hey, I don't understand much about this kind of trading, but willing to learn...
Margin calls can and will force liguidation of any and all positions regardless of security type to simply raise cash in order to reduce their margin.
... even so that the most profitable positions are liquidated first.
The mother of buying opportunities may be there early next week. Just remember: if someone has to sell, then you may have to buy!
Whats to understand? There are no "free markets", the whole rotten system is corrupt to the bone and if you are caught holding paper with counterparty risk then I hope you are in the outhouse.
Does anybody knows who owns CME?
If we indeed crash on monday, this is the question to be asked.
Satan
Not exactly, I think you'll find he put it in his wifes name as a tax dodge
Not sure who owns it, but I am reminded of the judges for the CBOE agreeing to never rule against them.
So when this all rolls out, there will be judges who go to jail, one assumes.
http://dailybail.com/home/wendy-gramm-judge-bruce-levine-criminal-behavi...
I know the COT data is lagged but for what its worth...
Commercial positions seem to be net long, non-commercial net short.
Trouble is, it sounds as if the big commerical positions have been moved first (no surprise there), leaving the net short retail traders to the mincer.
This would suggest any forced selling of positions could spike the market upwards. For the conspiratorally inclined, this may have been engineered deliberately.
Bad news for weak shorts. Good news for people looking to short from a greater height. Prepare for a mega-fade.
(see 'Big guys done, middle guys still moving, little guys out of luck?' in article below)
http://www.agweb.com/blog/opening_print/beware_the_7th_of_november_at_least_1_billion_needed/
COT
E-MINI S&P 500 STOCK INDEX - CHICAGO MERCANTILE EXCHANGE
Commitments of Traders - Futures Only, November 1, 2011
Non-Commercial
Long Short
243,818 541,626
Commercial
Long Short
2,318,838 1,976,387
Thanks, a number I was looking for.
But what matters more are the ability to absorb a margin hike on either side and the degree to which ES positions are speculative or hedge.
While I have no idea about the former, I would think the majority of (commercial) ES positions are hedges of some sort, which would eventually cause major cash position liquidation on Mon. More disturbing than the net effect or the direction of the liquidation IMO is the turmoil associated with it. I just don't believe, cash markets are sufficiently effective to absorb such major instantaneous position shuffling.
Here comes the mother of all Rule 48 events. Turmoil won't stop there, though. The initial reshuffling will trigger action in portfolios initially not affected by the margin hike.
The resulting uncertainty will IMO only lead in one direction, down. I would look for early indications in VIX.
no way; all products?!
Farmers in coldwater Kansas "bent over by Corzine", these people are so far removed from the "Machine" and yet it is eating them alive through no fault of their own. In the good ol days futures were used to help insure against catastrophic crop failurers, now they are the cause of cataostrophic financial failures because criminals like Corzine roam free even after years of corrupt and criminal activity.
"It's wrecking the ag industry," said Lynn Wagnon, a broker at Wagnon Commodities in Coldwater, Kansas. He said 200 of his customers' accounts had been transferred, but they were now scrambling to come up with $800,000 in additional margin.
http://finance.yahoo.com/news/MF-Global-rivals-race-to-rb-2560818873.html?x=0&.v=3
--Ex-customers of MF Global are gaining access to frozen accounts moved to new clearing house
--Some traders fear new margin calls after the move
--Not all money backing current market positions moved with accounts
So not only did their money not move, they have to face increased margins and come up with extra money in one day. Crony capitalism has degenerated into outright fraudulent capitalism and no one has gone to jail. 40% of the world's wealth got wiped out by the subprime fraud and now they are going after the remaining.
How can you trade if you are at the whim and caprices of the CME all the time? It is well know that gold and silver trade lower before margin increases. The fraud is in blatantly in your face - but nothing gets done about it.
It makes more sense that they are reducing initial margins than increasing maintenance margins to ease former MF Global customers' transition.
http://www.foxbusiness.com/industries/2011/11/04/ex-mf-global-clients-fear-margin-calls-after-transfers/#ixzz1cqQ2WHEa
Yes, ALL
Too bad CDS isn't exhange traded.
You would think if it were something of the magnitude being presented here CNBC or Bloomberg would have picked up on it by now.
LOL
Who'da thunk.
Is an interbanking freeze like a brain freeze?
If there is going to be any reaction, one might guesstimate by looking at the latest COT Report to see which markets are net long or short specs. Given that everyone will have to post an additional (approximate) 20% margin (difference between initial and maintenance), the net position should provide the tell on direction (opposite the net). Of course, if the specs are not highly leveraged in their accounts, then it is merely a bookkeeping entry for the CME Group, that is, simply blocking another piece of the funds in the account, and the impact would be minimal. It all depends on how tightly traders run their funds. Often it's just TBills.
Here are some quick numbers from the latest COT. This is spec only, not commercials, and numbers are in thousands, longs first:
Silver 24-12 (plus not reportable positions of 22-11)
Gold 183-43 (plus NR of 64-21)
E-minis 244-542
Crude 324-162
Natgas 141-303
10-Yr Notes 179-308
Euro 26-86
Yen 44-18
Aussie 57-31
Wheat 76-128
Corn 384-115
Beans 120-67
For those confused, silver reports 24,000 spec longs vs. 12,000 spec shorts, so the specs are net long. Specs are net long gold, WTI, yen, Aussies. Specs are net short e-Minis, Euros, 10-Yrs, Natgas.
you all see now why the HFT's were going after all the shorts lately! this was all planned to have everyone go long, and then rape 'em 'till it hurts! the plan is to have everyone in poverty! and, of course this info was released on a friday, after markets close! how many longs will be tossing and turning 'till monday morning, when the markets plunge so quickly, no stops will be triggered, no shorts left to make a bid! well planned bernank, well planned!
C3X portfolio perfomance for thid consecutive month beats every fund and analyst on the street.
http://capital3x.com/performance-page/performance-for-month-of-october/
+2000 pips made with a risk at loss capital of mere 2.3%.
You know what else CME stands for?
That's right: Coronal Mass Ejection
Looks like there may be some next week.
Ouch.
Edit: http://www.foxnews.com/scitech/2011/11/04/largest-sunspot-in-years-obser...
Can someone say "Carrington Event?"
http://science.nasa.gov/science-news/science-at-nasa/2008/06may_carringtonflare/
Something about a house built on sand (silicon) comes to mind....
enter the fed discount window, some"special operations" fund or something. What teh cme takews away the fed will supply!!
WTF am I missing here? Futures markets are a zero sum game, correct? So they raise the maintenance margin, there should be just as many buyers meeting margin calls as sellers. Shorts will buy, longs will sell, cash will stay the same, just flow from the shorts to the longs minus commission.
If there was not the difference between speculative and hedge positions. Specs may have no further impact whereas hedge positions cause liquidations in cash markets, which in turn affect all positions in cash markets.
Hence, such instant deleveraging in futures will infuse some more risk back into cash markets. That risk can only be mitigated by liquidation, resulting in lower valuations.
No
What you are missing is that the total amount of money (margin by customers) at CME increases. If you and I both have offsetting $100,000 positions in corn and you are an institution and I am a gambler we both need 5% to enter a position so - $5,000 each. You use 2x leverage so fund your account with $50,000. I am a small speculator so only had $5,000 in my account. Say that corn moved against me this week and my notional value is $99,500 (yours is 100,500). Now my margin is $4,500. Under old rules I am fine unless account drops another $500. Under new rules I have to come up with an additional $500 on Monday or the CME will liquidate my corn position on mondays close. For you, this doesnt matter because your $50,000 margin is way more than you needed.
To me one of 3 things is happening, in decreasing likelihood:
1)CME recognizes some players are stretched and increased volatility is on horizon. They want to nip in bud any blowups and this is way to give them a bit more cushion (92%)
2) Some systemic risk involved with MF carrying over to CME. requiring more liquidity/funds. (5%)
3)CME is under some pressure from regulators, especially in Europe that want to get off of 'turbo-capitalism' and eventually get rid of the 'gambling' leveraged nature of our market system. Gradual rule changes will come about to reduce ability to speculate. Eventually futures trading will be for producers, hedgers and users only. (3%)
edit: here is a professional silver traders opinion, which I agree with:
http://www.robertsinn.com/2011/11/05/margin-misunderstandings/
TPTB will never let this collapse and they will never allow the holders of PMs to be "the winners." They will enforce fiat to the end. The power source of the USD lies in guns and gasoline, not gold. Or, as I've said before, the only real precious metal in the current arrangement of our society is lead.
Yes, but there will be serious bumps (bouts short lived deflation) in the road on the way to hyperinflation bliss.....This will certainly be one of those times
Increasingly I agree with you. The gold/silver meme is looking one step ahead and the rationale is just an extension of the current 'accumulating wealth equals social status' paradigm of marker capital.
You are looking 2 steps ahead...
I must say: gold didn't work out for Gaddafi.
Makes total sense...I leave for vacation and the whole fucking place is going to fall apart.
Today I learned that there are an amazing amount of weather futures products available. I will hedge my next picnic.
http://en.wikipedia.org/wiki/Margin_(finance)
"In the 1920s, margin requirements were loose. In other words, brokers required investors to put in very little of their own money. Whereas today, the Federal Reserve's margin requirement (under Regulation T) limits debt to 50 percent, during the 1920s leverage rates of up to 90 percent debt were not uncommon.[2] When the stock market started to contract, many individuals received margin calls. They had to deliver more money to their brokers or their shares would be sold. Since many individuals did not have the equity to cover their margin positions, their shares were sold, causing further market declines and further margin calls. This was one of the major contributing factors which led to the Stock Market Crash of 1929, which in turn contributed to the Great Depression,[2] a troubling financial time in the 1930s. However, as reported in Peter Rappoport and Eugene N. White's 1994 paper Was the Crash of 1929 Expected,[3] all sources indicate that beginning in either late 1928 or early 1929, "margin requirements began to rise to historic new levels. The typical peak rates on brokers' loans were 40-50 percent. Brokerage houses followed suit and demanded higher margin from investors."
.
was the crash expected? (1929)
http://www.jstor.org/pss/2117982
.
so it seems the fractional reserve money system, leveraged use to
amplify and gain access to other peoples money, is consolidating its
position, calling the sheep home for sheering? the temporary winner
will be the bond market? no? metals look to take one to the head.
btfd. no?
and that is the thing about this system of confidence money where
there is nothing there but your own and your neighbors confidence
in an authority that doesn't think you have the right to any real information
of value. doesn't require any insiders to adhere to any rules or public
determinations of fact. coup. Coup d'état. we're left with hopechange or
chumpchange? in a confidence game. the evolutionary step was one from earned or somehow
accomplished assistance and support of people to systemic access to other
peoples "money", fiat and otherwise, and now the disconnect results in
popular revulsion for the systemic stealing that is just the expression of
the money system by design, structure and function.
.
it is impossible for anyone to know what they are doing when it
comes to institutional behaviours. unintended consequences become
predetermined outcomes. the euro and the dollar in a double helix
dance, spraling around the metals, oil, and commodities. all the
telomeres are burned out and the mutations and random mistakes
are about to manifest, (institutional) and now, my wife hates me too ! anyway...
the people have all the power. period. i hope we don't lose that insight
.
Nick Lowe - I Live On A Battlefield
http://www.youtube.com/watch?v=d_0dQ9cCfxU
.
ZEITGEIST: MOVING FORWARD | OFFICIAL RELEASE | 2011
http://www.youtube.com/watch?v=4Z9WVZddH9w
I stopped believing in unintended consequences a long time ago. Not only do those corporations that make alarge campaign donations benefit but congress has made themselves exempt to insider trading rules.
In the words of the church lady, "How convenient".
Nice post! I was thinging along the same lines.
The CBs will make out like bandits (that is what they are) and will get a ton of PMs and farm land cheap.
This one will make Nathan Rothschild proud.
Smile at the thought that the "PMs" they will get will consist of largely empty vaults, or vaults full of encumbered tungsten.
Frankly, in my humble opinion, i think the memo from CME is a little bit ambiguous and it means that:
1. the rato for the current holding positions remains various
2. the ratio for new positions has been adjusted to 1.0 after Nov 4
Is there anyone echoing my interpretation for the memo from CME???
I think all it means is that the current INITIAL requirement is $5,000 and the "maintainance bond" is $4,000.
The "new" is that the MAINTANANCE is ALSO $5,000. So one needs an extra $1,000 to initiate and maintain a position if the price of a contract does not change.
Wasn't the ratio for New Positions always 1.0?
This looks like a job for Major Kong!
http://www.youtube.com/watch?v=wcW_Ygs6hm0
This is a repost of my earlier comment for the benefit of those of us who are not well schooled in finance and are wondering what this all means in simple language. With Bank Transfer Day just around the corner, you can help spread the word by reposting to your favorite blogs and the social media sites.
"Remember Lehman? Well it's worse than that. Way worse. This also means that CME needs capital. A LOT of it. If CME goes under, you ain't see nothing yet. And what's funnier, people getting their money out of the big banks tomorrow will screw the big banks even more, they'll have even less cash to cover the margins... when you can't cover your margins, you are forced to SELL... which means EVERYONE will have to sell. Finally, the whole freaking scam ends MONDAY MORNING! ... a lot of people will go bankrupt monday morning." IF you didn't plan on moving your money out of the big banks tomorrow... DO IT... Seriously. Especially Bank Of America... If you are in one of the top banks...
- Bank of America
- JPMorgan
- Citigroup
- Wells Fargo
- Goldman Sachs
- Morgan Stanley
- Met Life
- Barclays
Even in Europe, if you are in a big bank, get out of there, the domino effect could be epic."
http://www.abovetopsecret.com/forum/thread772182/pg1
please, enough with the fearmongering now.....
One man's 'transparency' will always represent another man's 'fear mongering.' Case in point:
http://en.wikipedia.org/wiki/Zero_Hedge#Readership_and_influence
"Beginning in early 2009 Durden had been on a jihad about Goldman, having sifted through trading data to make what he insisted was an airtight case proving that the bank's high-frequency or "flash" trading desk was engaged in some sort of large-scale manipulation of the New York Stock Exchange. Durden drew his conclusions by scrupulously analyzing trading data the NYSE released each week. So what happened? Naturally, the NYSE on June 24 changed its rules and stopped releasing the data, seemingly to protect Goldman from Zero Hedge's meddling." —Matt Taibbi, Griftopia
abovetopsecret? You're kidding, right?
They cite zerohedge for the point. But abovetopsecret would not be any less 'respectable' than anything from the mainstream media, which represents a complete joke. I'll take my chances with the blogosphere any day over anything the corporate media disseminates.
http://www.youtube.com/watch?v=TsIQj8gZeo0&feature=relmfu
Sovereign CDS's = we renege our bets, sorry we are not paying.
MF global = Margin hike
ZIRP = strangle BHC's and slowly nationalize them.
Translation - The Bucket Shop is now closing...please bring your purchases to the register in the next 15 mins.
http://www.youtube.com/watch?v=hwYcsMiB2UM
gs_
How will this effect our twin nuclear silos of low-rate, long duration mortgage debt known as Fannie Mae and Freddie Mac?
All is well! Freddie Mac ONLY lost $4.8 billion in derivates trading last quater. Watch the hillarity ensure when they try to hedge increases in interest rates!
A Closer Look at Mac’s Q3 Earnings of -$4.4 billion: Derivatives Losses of -$4.8 Billion and Lower Mortgage Insurance Recoveries
http://confoundedinterest.wordpress.com
me thinks this is related to the ~1.0 bil missing client funds at MFG.
we few, we happy few, we band of silver holders . . .
Who owns CME besides Blackrock and FMR?
Who regulates them? CFTC/FED? What's their play? Why go 1-1 so abruptly? Is the bank cartel shorting their clients again for one big play? How can this decision enrich the masters?
nothing gets done without reason, in an election year, recall Goldman rejiggered their commodity index in 2006 and DROPPED gasoline, which caused all the fund managers who mimic the index to SELL their contracts and drive the price of gasoline DOWN, this done in spring for the fall event. nothing new here ducklings, Obama is every bit as corrupt as Bush, (and maybe more so). we are now officially the Mussolini Fascist Business Model Jim Willie talks about. just keep guessing what rotten corrupt and hamhanded thing they will do next, and you too can be a trader.
My take on interpretation:
If they wanted only apply the "new" margin on the "new" products, they could simply say so: "for all new products, the margin will be 1" or something like that.
Thay didn't have to use a small table to explain.
To me, it was obvious that the "new" margin applies to "ALL PRODUCTS".
But anyway, it looks like there were larger spec short than longs, it could be an incredible equity rally coupled with huge drop in oil price.
There will be some chaos regardless.
CME has subsequently refreshed initial and maintenance margin values. They made them equal by lowering the initial margin.
You mean on Saturday?
Had to surf for a while to find charts to compare to yours. Found them on www.ccstrade.com/future/margins.
They are tagged as "Updated 2011-11-04 for the markets on Monday, November 7th 2011".
http://twitter.com/#!/CMEGroup
CME is recommending people check out a blog that indicates that margin requirements are being LOWERED to PREVENT margin calls.
http://kiddynamitesworld.com/
Nowhere has the CME implied even remotely it is lowering initial margins. Furthermore, it achieves absolutely nothing vis-a-vis existing risk exposure. We will only know without any doubt what it has done when it announces a product by product update on Monday.
CME is linking people to that blog through their twitter account.
@CMEGroup CMEGroup
An explanation of yesterday's margin announcement from @KidDynamiteBlog: The $CME
They are in the middle of transfering over 15k clients and want to avoid margin calls. They don't care about "risk exposure" on those accounts. They are giving those MF accounts a chance to get re-established and are trying to minimize the impact. If anything, you should be thankful because quite a few of those accounts were SHORT the Euro
Yep. That info release was retardedly ambiguous, and doesn't mean jack shit in the bigger picture. lol.
it is. initial down to maintenance.
Help me out here Tyler, can you interpret this for us? From the CME website...
CME Group Clarifies Maintenance Margin Ratios; Exchange to Reduce Initial Margin Ratio to 1.00 To Clearing Member Firms From CME Clearing Advisory # 11-400 Notice Date November 05, 2011 Effective Date November 05, 2011 CME Group today is clarifying its notice to clearing firms regarding margins. In light of the issues customers transferring out of MF Global are facing, while still maintaining appropriate risk management protections for the market, CME Clearing is setting the "initial" margin upcharge at zero. This upcharge is normally applied to customer accounts when they are receiving a margin call.
The intent and effect of these changes is to decrease the size of any margin calls resulting from the bulk transfer of MF Global customers to new clearing members, not to increase them.
Yesterday, CME Group successfully transferred MF Global customer positions to a new clearing member with part, but not all, of their funds, as approved by the bankruptcy trustee and the court. By reducing the initial margin “ratio” to 1.00, we ensure that margin calls that are issued to these transferred MF Global customers will be limited to bringing their accounts into compliance with the lower, “maintenance” margin levels. Maintenance margins are set to provide appropriate risk management coverage. Initial margins are set to provide an additional buffer against future losses in the account.
This is a short term accommodation to maintain market integrity and provide temporary relief to customers whose accounts have been disrupted by this event. We apologize for any confusion our initial advisory may have created.
So, how long until someone finds out who piggy-backed on to this "temporary relief" after all the "confusion our initial advisory may have created?"
I was thinking about who this would affect.
Don't the ETFs use futures to back their funds?
This should hit them hard, no?
So, take whatever liquidations are forced to cover these margin changes, and add the liquidations of the "homeless" and underfunded positions over at MFG (Only 5.3% of the accounts have been moved to other dealers. Guess which ones. Not the mom and pop accounts.). We should have a nice spike in volume on Monday. But as noted above, will that move the markets? And if so, in which direction? I can't wait to see.
So I just called the CME group at the number listed on their site, said I had questions on the performance bond notice, and was put through to a man named Ed Gogol. He said the effect of this is to temporarily LOWER the initial requirements to meet maintenance. He said this was done with the express purpose of decreasing the number of margin calls, likely because of MF.
He also said, "We definitively did not raise margin requirements."
We can all untwist our panties now. That wasn't too hard, was it? I'd like to thank Herman Cain for the idea- with his suggestion to just call the Fed to ask where the money went.
So.. they are lowering initial req to the main req...... wow. From uber bearish to full on retard bull.
The guy also said this was for spec customers only, but I'm kind of a n00b to the whole investing world and don't know exactly what that means.
That's what i've been saying.
Look how the ratio is listed...
Initial:Maintance
Normally you have initial being larger than maintance.
Gold for example was 1.25:1
So now, it's 1:1 effectively lowering the requirement on new positions to the same as maintance requirement.
Once again the imminent system collapse is put off another day.
And Mr Gogol, an important person, works on Saturday?
No wonder ZeroHedge is lovingly referred to as the "panic room".
It's entirely possible this margin note only applies to the accounts transferred to the CME from MF Global, as per this article:
http://www.foxbusiness.com/industries/2011/11/04/ex-mf-global-clients-fe...
I'm not suggesting this is a small deal, but it sure doesn't look like the panic inducing nightmare that this ZH article makes it out to be. Don't get me wrong, I expect the market to move lower and hope it does because I'm short. Nonetheless, let's be realistic here.
It's entirely possible this margin note only applies to the accounts transferred to the CME from MF Global,
Oh horses*it