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CME Issues Clarification On Margins: To Usher More Risk, Less Liquidity In MF Aftermath
Yesterday, in what is the worst-phrased and most misleading press release to ever come out of the CME, the exchange issued a notice that going forward all Initial margin would be equal to Maintenance margin. Our gut interpretation was that "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." Judging by the broad response, our initial reaction is what a prudent, logical human being would assume: after all, it is precisely the undercollateralization of customer accounts, and general underfunding at MF Global that is what brought that particular company down. Well, we wrong wrong. The CME, it appears has taken a page right out of the European playbook, and less than a week after an exchange-cum-Primary Dealer collapsed due to excessive risk taking, the CME has followed up its vague press release from yesterday by inviting even more risk in lowering the initial margin. Why is this a cause for even greater concern? As the CME itself says, "Initial margins are set to provide an additional buffer against future losses in the account" - so going forward that buffer has been reduced by about 30%. But what is the reasoning provided by CME: "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." So basically the CME is implicitly putting all of its existing and current clients and customers at further risk by onboarding the accounts of those clients who, like lemmings, held on to their MF Global accounts until after it was too late. Because while the lower Initial margin may apply to MF accounts, it will also apply to any Tom, Dick and Harry beginning Monday, who will suddenly see a 30% reduced gating threshold to put on a position. Any position, no matter how risky.
Naturally, if enough people suddenly jump to put on risk, and the market flips and all new positions end up underwater, who will bail out CME accounts if, like MF, there is just not enough capital on the balance sheet? MF Global?
That the CME has opted for this highly disturbing path is very troubling, and just as in Europe, where three months after the financial short selling ban, financials are trading lower than they have ever been, so the unintended consequences from this action will result in even greater stress to the system, as not a single local will leave any excess money in their account, and likely will force all specs to trade within a hair of triggering maintenance margin, due to fears of what may happen at the CME itself, now that is has implicitly onboarded moral hazard from the otherwise insolvent MF Global accounts.
It also means the systemic liquidity is about to drop to even lower and more depressed levels.
And completing the symmetry with the recent action out of Europe, we learn that said Initial Margin reduction is a "short-term accommodation" which will apply until further notice. As an indication, Europe has extended its short selling ban several times and likely will keep it until the bitter end. We expect nothing less from the CME, where the new benchmark will be one of even greater initial position leverage which is what this margin reduction effectively accomplishes.
Yet what is most troubling is the complete lack of care to the wording ot the initial press release, as if it was thrown together by a 1 month intern who had heard his boss scream something at them from the conference room. That an event of this systemic importance requires not one but two releases, which still leaves many questions open (why does this apply to non-MF accounts? How long will this last and why it is open ended - after all the MF onboarding is a several day event at most? What happens to new non-MF initial trades which cover just initial and immediately see margin calls as maintenance is breached due to the lack of a 25% initial buffer) is by far the most surprising, and unfortunately leads to questions about both the CME's professionalism and competence.
Here is the CME's clarification.
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Funny that my "prediction" was actually a response to a hypothetical, reposted below.
But your hate is so great that it actually bends light away from your eyes when it contains facts that run counter to your opinons.
ROTFL, so you basically engaged in retarded mental masturbation?
I will make a prediction: you will continue to make retarded "prognostications" which will fall flat on their faces.
let's see if my prediction comes true before yours
Look at what you are.
I'll take "right" for $200, Alex
Uh-huh. Enough of your kind of "right" and you wind up left.
You are argumentative and abusive just to be argumentative and abusive. What does that say about you as a person?
Or do you not want to think about it? If not, feel free to continue lashing out at your betters to make yourself feel superior.
sorry, can't find any betters anywhere. Been looking for a long time.
All I find are inferiors like you
You aren't looking very hard, since you spend all your time here.
Emm?
What's defermation?
It doesn't sound nice.
That's when she gets old and they start to sag.
Huh. I thought that was when the smell went bad.
I think you are a hyperbolic hypochondriac that needs to stop predicting armageddon everytime a news release comes out that you don't fully understand.
If you're married your wife is probably constantly hiding under the bed clutching nickels waiting for the 4 horseman of the apocalypse. You're going to have a stroke if you don't calm down.
I think you need to stop stroking your ego and demanding that any and all predictions contain a date and time for which they will come true. I refused to do so last night BECAUSE this move didn't make sense. Thing is, even with this clarification, it STILL doesn't make sense. They could have jsut made this a one-time exception for MF Global clients, but they have made it the case for EVERYONE (supposedly). Why?
But if you can't see that this type of manipulation, and refusal to manage risk will lead to greater catastrohpe, then I invite you to blog about how stocks only go up, except when they go down, and how you always managed to get out just before they started falling. You can talk to Robo about how to do so.
First of all...what's with this obsession of yours with my ego? I think that's unhealthy and you should talk to a licensed professional about that.
Second of all if it didn't make sense you shouldn't have been touting "IMMINENT hyperinflation" and "many people will have their life savings wiped out come Monday" And this news release makes perfect sense.
This type of manipulation is completely understandable. The market has been manipulated since...well forever and it will continue to be so. I don't blog about how stocks only go up, in fact I am very short and will probably be caught flat footed come monday due to this manipulation. It's my bad for holding into the weekend.
I'm off to enjoy the rest of my weekend, have fun hiding in your closet clutching your rolls of nickels waiting for the end of the world.
Cheers
I guess you forgot that you goaded, no, practically BEGGED me to project the meaning of this announcement. Now you are mad at ME for explaining the imlications of the move.
Also, nice job on claiming that I collect nickels, when I specifically said that I do not do that. I do have a few silver nickels, but that's it. You see, people who continuously lie and make false accusations against others tend to lose credibility, which is why you have none here.
Enjoy your weekend with the other kids in the orphanarium.
Funny how Bob doesn't want to talk about his ego after attacking Tmosley for his work in real life, his grants, his time at the computer, his investments, his family, the state he lives in... i'm sure I left some out.
Paris, Snookie, kimmie K...are you 3 fighting again?
Tyler...you should screen for them better.
i can only hope this is the last we hear from your vitriolic ass for the rest of the weekend.
uh, douchebag, they aren't predictions if they don't contain any kind of timeframe. They're just bullshit.
You want credit for being a fucking sage and all you're saying is that the sun will burn out eventually. So fucking what?
A prediction, if not ACTIONABLE, is just illusory nonsense. Your lack of intelligence seems to prevent you from realizing this. You are so totally small and craven, and desperate for attention.
So buying gold and silver on a regular basis in anticipation of a COMEX collapse is in no way "an action" that one could take from following my advice, and in no way shields the buyer from all manner of trickery and market interference?
You are so full of hate you contradict your own venom.
Comex collapse is a red herring
You're the one spouting hyperinflation induced bankruptcies Bob. I didn't see a /sarc. It will take a wee bit longer than this weekend for hyperinflation to kick in. The worst I can see is a beat down on P.M.'s. Or put another way, time to BTFD!
Edit: Actually with lowered margins PM's should go up. Something fishy here, someone's trying to set the hook.
No, I was making fun of tmosely because that's what he was saying last night verbatim (which is why he responded so punctually to my post)
Okay Bob, it's cool. Besides TM who cares how long somebody has been here if they have something to say? Lots of newbies have valuable insight.
In my experience, "newbies" are usually trolls who have registered a new sock puppet, which is why when some guy I have never seen before comes out swinging for no apparent reason, I check the amount of time that name has been registered. If the amount of time is interesting, I make a note of it.
Note that Red Neck Repugnicant has had no fewer than four different user names, and each time he has changed, and was called on it, he denied being the same person. Until last night, when he admitted it.
If you're getting a lot of heat from "newbies" maybe it's because you're full of shit, rather than all of them being "trolls".
There are thousands of posters at ZH. Isn't it weird that YOU'RE always targeted? Maybe it's because you're full of hyperbolic, apocalypse-dreaming bullshit, and the only people who don't recognize it are the other PM lemmings who - like working ants - do everything to preserve their echo chamber.
Says the guy who has such an intense deep, and personal hatred of me that he has changed names no fewer than 4 times after being humiliated by me (and others).
Look, you are a liar, and everyone knows it. Time to change names again. Maybe I won't immediately spot you next time, lol.
Does that put you in the FRN lemming camp?
Someone with a Ron Paul picture dissing people who hold PM's. Yeah ummmmmmmmmmm SOCK PUPPET anyone?
The thread, in context, to defeat bobby-boys lies:
lolmao500Vote up! 0
Vote down! 0
What happens if CME goes UNDER?
tmosley
Vote up! 8
Vote down! -2
Paper commodities go to zero, physical commodities explode with the force of a thousand suns, as those who use the futures exchanges to lock in prices are suddenly forced to buy off the open market, eventually resulting in a "no offer" situation.
Hyperinflation, bitches.
bob_dabolina
Vote up! 3 Vote down!
-11
Care to entertain a time horizon for that hyperinflation call?
tmosley
Vote up! 5
Vote down! -6
The threat of hyperinflation is IMMINENT. Of course, those following MY advice are prepared for it no matter when it should come, while those following yours will be totally blindsided and robbed of their wealth, just like the clients of MF Global.
You should focus less on your ego.
bob_dabolina
Vote up! 3 Vote down!
-19
So tomorrow? Next week? Next year?
- reply
Fri, 11/04/2011 - 23:54 | tmosleyVote up! 8
Vote down! -2
I see you are unable to think in terms of probabilities. There is an elevated likelihood that this move will lead to a brief bout of deflation in paper, followed by rapid price increases in real commodities and then in real goods. The process will start Sunday night, but NOBODY knows how long it will take for real prices to spike. Could be day after tomorrow, could be next year. Either way, you are going to lose everything.
But you are so busy trying to box me into a definite answer that you can't even process your own thoughts, where you yourself have predicted the short term outcome of this move, if this notice isn't some sort of ruse.
- reply
Sat, 11/05/2011 - 00:14 | bob_dabolinaVote up! 4 Vote down!
-12
All your first paragraph said is that we will get volatility at somepoint in the future and prices will go up afterthat.
You said hyperinflation was IMMINENT. I want to know when is imminent?
- reply
Sat, 11/05/2011 - 00:21 | tmosleyVote up! 6
Vote down! -2
If you want a prophet, best go join some cult. Maybe buy some nice shoes and drink some tasty Kool-aid. They will never ask that you think for yourself, or ponder the likely outcomes of current events. After all, who cares when you will be zooming around on the Hale-Bopp Comet?
Only fragile egos have to "prove" themselves.
I could care less about "proving" anything. I just can't stand it when people lie, or tell half truths, or take things out of context. In this case, they used a theoretical argument out of context to claim that I said that hyperinflation was coming on Monday. A blatent lie.
dude, you DID call for a collapse on Monday and said hyperinflation was IMMINENT.
Look, it'd really be better for you if you didn't blame everyone ELSE for taking issue with the stupid shit you say. YOU can't seem to help yourself making brash, idiotic, and wild predictions only to try to retract them no sooner than they have come out of your dumbass mouth.
Read the first post in the above thread, idiot. The premise of the conversation was a hypothetical.
So stop lying.
so you have retroactively changed your prediction into just a bunch of hypothetical pinhead angel bullshit...got it.
No, you don't. You just refuse to see the truth, both about yourself and others.
ad hominem is it now huh? When cornered by the facts, you just try to pound the people hoping that everyone will focus on personality instead of the evidence.
You're a piece of shit
My post was not ad hominem. You refuse to acknowledge the simple that that the "call" you have been berating me for was a responce to a hypothetical question.
Your post describes your posting habits PERFECTLY. So much so that you make me think your whole shit is some sort of elaborate act. A farce of a right wing intellectual, as portrayed by a liberal.
Could it be that you are really Red Neck Repugnicant?
yeah and I am a psyop like Cogdis said too. I'm under your bed right now
So why is "he" popping up to your defense? Why do his attacks carry the same profile as his (out of the blue ad hominem, with references to out of context things I have said in the past, clouded by fake context that you have provided)? Why do you and he seem to have similar intellects, and both fail to use capitalization and punctuation properly when riled up?
Maybe you have a long lost twin!
well maybe i do, huh? I mean nobody questions how you manage to have people defending you or upping your green arrow count. None of us are paranoid idiots like you, man.
I usually use proper punctuation but I have become admittedly sloppy with my capitalization because I stopped giving a fuck to press the shift key. Can't speak for RNR and won't.
http://earthquake.usgs.gov/earthquakes/
See that big red square smack in the middle of oklahoma.
There's not a fault line for miles around that.
But who needs plate tectonics when there's a brown dwarf star core running around the solar system.
BTW black people can smell it when you hate them.
Uhh, who needs any of that crap when you have fracking and oil extraction causing subsidence?
Tiny earthquakes have become commonplace all around the south plains. Not because of some magical brown dwarf that is physically impossible, but because of oil and natgas extraction methods.
Note that if there WERE a magical brown dwarf "core" running around, you would see crazy nonsense tides long before you saw any earthquakes.
I think so too Bob. Probably a good time to go all in.
bobby boy planting seeds... one day they'll be a beautiful tree. The weird thing is that there are literally tens of thousands of panicky ignoramuses who skim the boards here will probably start heading for their banks now... I hope you're happy douchebag.
I just planted seeds. Should be ready in 12 to 13 weeks.
We need some sort of deflationary event or war first, even the sheeple would realize all the skipped steps on the path to hyperinflation if it started Monday.
Hyperinflation based on what? You'll see interest rates near zero shortly. Same thing that caused the Depression...banks not lending and people starting this week are moving money to CU's. It might fizzle and it might not. B of A was brilliant jacking up the card fee to $5...akin to the implosion of Netflix. Baby Boomers are baby busted and we have a Communist country manufacturing our garbage, we have it serviced in Pakistan by "Wendy", and it goes into a landfill here. The country is broke and strangled with debt. Deflation is on the horizon and folks are already onto it and have been leaving the market in droves.It won't take much to push this mess into the abyss. We do have this bit of refreshing assurance to stand on...
Ben Bernanke, the current Chairman of the Federal Reserve, agreed with Friedman in blaming the Federal Reserve for its role in the Great Depression, and stated on Nov. 8, 2002:
About 70% of typical production costs here are labor & until we start see that heading upwards....
Crash on monday is what I heard...heard it from the postal worker at the bar
Petite Hitler, at it again. Repeat the lie enough...
Th reasonn behind not telling the market this news yesterday is.......??
Why would you put the global financial world on red fucking alert like that?
Fucktards.
The world needs to realize how close this thing is to the wheels coming off.
Lowered margins? Wow, I'm gonna tell all my friends to double up on silver.
You would do better to tell them to wait for others to lever up, then wait for the next shakeout to buy PHYSICAL.
Seems that more money will be sucked into risk.
Then they hike margins?
TD. Good on you for fronting the clarification. your general view of financial system is correct, but calling defconX every weekend doesn't give enough respect to the momentum accompanying normalcy bias. Clearly your site has scale and scope, try for a tad more balance and you might change some things for real?
From my understanding this is meant to be a temporary measure to facilitate the transfer of MF global clients.
However we all know that speculators will see this as the new normal, and leverage further to the hilt while the temporary condition lasts.
When/If the CME then reverses back to a initial vs maintenance spread, all hell is going to break loose.
Agreed. But not if they do it in stages, instead of one move.
Heh. Perhaps. Of course the increased lack of liquidity will cause any unforeseen event to have a even larger effect. This is just adding gasoline.
Now if they weren't complete fucktards, their initial announcement should have been clear, as well as containing the timing for the re-initialization of the spread, and possible staggered percentages and timing.
But I digress.
2 weeks to do the transfer?
If people want to jump into this mess face first all-in on full margin, Im all for it! Splat!
QE Lite Plus.
I should buy more Groupon shares?
It seems pretty simple. Initial Margins were higher than Maintenance Margins as is obvious from the margins listings. It appears fairly obvious that MF Global did not have the same margin requirements and in transferring to CME, the transferred accounts would observe a margin call in effect. To alleviate that condition, CME is lowering their margin requirements. I expect this will be temporary, in order to acommodate the transferred accounts, after which, CME will again start weeding out the underfunded by raising their margins.
Of course, if the world economy is a big ponzi scheme and the financiers are trying to financially take down the world's population as I believe they are, then the MF Global situation was not accidental, and the CME increase in risk is also intentional in creating the avenue for greater losses. Anyway they can get more out of us, the more likely it is to occur. Keep watching.
Well theyre not getting anything out of me, I dont care what they adjust.
So you think Corzine is complicit in the event? If you can pick which domino comes down first then they think they can have an orderly outbreak of Chaos?
Thing is, the original release said nothing about MF Global. Nor did it say anything about it being temporary. As for having different margin requirements I would think that the standard move would have been to clarify the movement of JUST those accounts.
This whole thing stinks to high hell. HIGH HELL I TELL YOU!!!
LET'S LYNCH POTTER!
Yes initial margins were higher than maintenance, but that's only because when first taking a position they want to make sure crazy speculators have a buffer of capital in order to be able to weather a drawdown. If someone has $1000 in their account and takes a position that requires $1000 margin, if that position goes against them AT ALL, they've got a margin call. If they have to put up $1200 initially, then they have $200 of wiggle room.
Accounts aren't being transferred to the CME, they are being transferred to clearing firms other than MF Global. The CME is allowing these clearing firms to lower margins so they don't immediately generate margin calls, because a transfer of an existing position to a new firm is the same as taking a new position which entails the higher margin requirements. So someone might have had the initial $1200 margin required when they took the position with MF Global, but if their position has gone against them $100, they now only have $1100 of margin. So if the initial margin were left at $1200 and this position got transferred, they would be required to have $1200 margin all over again as if it were a new position. Because they are down to $1100 margin they no longer have enough to cover the position and get a margin call.
They are trying to facilitate getting as many accounts transfered as possible before the shit hits the fan. Think about it: How likely will a firm be to accept a transfer from MF Global knowing there's a really good chance they'll have margin calls on their hands right at the outset? I'm not sure how effective this will be however, because anyone thinking even a week ahead knows that the CME is going to have to raise initial margins again, at which point everyone is going to have to contend with the possibility that a bunch of new idiot speculators have come on board and gotten leveraged to the hilt based on the new, lower initial margins. Cluster, meet fuck.
They fear the wrath of Treasury Secretary Corzine.
uhhh so what theyre basically saying is "here come the margin calls!"
Oh! Too fukking harsh. Calling all margins...buy with equity bitchez. Go ahead and crash the system.
Got physical? The phony can pop, crash & burn. Got my lead/brass, PM's. farmable land, the means to farm it; and a support group.
Eat Shit Wall Street / Fed / Gummint dweebs.
Panic off.
Buy everything.
Works both ways doesn't it? Everyone seems to be assuming this will be a risk on trade.
Wont even be remembered by Monday morning, 20 other pieces of market news by then.
That didn't clear it up for me.
"no life"...This is your favorite hypnotist...
Forget everything you read past 48 hours.
WAKE UP NOW
temporary
I wonder which clearing house will be next to steal all their client's money?
wonder which ones haven't.
The story will change again. Someone will out JPM as having hacked their decision making process.
1. Ahem. We fear carnage, margins go up now
2. Ahem. We have seen carnage, margins to go down
3. Ahem, We are broke due to exposure to the 19 primary dealers. 17 primary dealers. 3, primary dealers, oh screw it.
Hehe, I called it correctly last night on the other thread. They weren't raising margin requirements. I was the lone voice on that thread arguing that they weren't raising margin requirements!
Not all brokers are giving their clients the opportunity to use less margin. As of right now, InteractiveBrokers is not budging and lowering initial margin on things like the WTI Crude Oil contracts. Apparently they don't want MF's former clients.
However, PFG has lowered there requirements already in anticipation of Sunday night market open.
Well done. I have trouble predicting what crazy people will do. You have the right mind for a trader. I wish you good luck in the future.
Don't be a drama queen. A bunch of readers gave the comment to which you refer a thumb's up.
http://www.zerohedge.com/news/cme-goes-margin-defcon-1-makes-maintenance...
you are right of course. My bad. Credit them as well...
I apologize for jumping on you...just, when it comes to CME etc the sweetness and light side of my character recedes.
and on a defensive note if they mean that initial will be reduced to maintenance they might have just fucking said that...funny thing, communication. The alternative meaning would never have occurred to them as that action would have blown up the markets...and that is what I am expecting any day.
JP: Thanks for getting back on the other thread-you NAILED IT in the reply as we now know. I'm nominating you for Honorary Tyler Durden!!
Well done Ploppy.
Now somebody chain this convict!
"Because while the lower Initial margin may apply to MF accounts, it will also apply to any Tom, Dick and Harry beginning Monday, who will suddenly see a 30% reduced gating threshold to put on a position. Any position, no matter how risky."
No it won't. Where did the CME say that? It seems pretty clear to me that this strictly pertains to accounts transferring from MF Global. It's essentially a non-issue. People are gonna trash me for pointing that out, but hey, it is what it is. I want the market to head lower too, but it seems this is really a non-event. Just being realistic here.
But is this because they can't get margins back from MF Global?
That is, had they not been able to transfer their contracts on favourable terms would this have caused a serious unwind?
Just asking?
I don't know anything about this for sure LW. All I'm saying is that ZH really went over the top in reporting about the initial press release and that it implied that margins were being hiked "on everything". Essentially this entire matter seems to be a non issue from what little evidence we've seen. Panic reporting. Even in the initial (and yes, poorly worded) press release, there was absolutely no evidence that margins were about to be hiked. It seems that it was nothing more than a statement saying that those who held accounts with MF Global won't be subjected to any "added" pressure caused by the fact that their accounts are now being handled by the CME. Nothing more than that.
Contrary to what ZH 'still' seems to be insisting, I don't see "any" evidence that this is a reduction of margins either for former MF Global clients OR new positions. True, the first press release was truly very poorly worded. But in that one I saw no evidence that would justify ZH to go spouting off like that. And in the second "clarification" press release, there is STILL NO EVIDENCE that margins are being reduced FOR ANYBODY, let alone "every Tom, Dick and Harry." And yet, ZH is still insisting that that is the case. I'll be honest, this type of reporting by ZH is totally irresponsible in my opinion.
They didn't go over the top. It's like seeing a press release that Israel was going to start a nuclear war with Iran in so many words, but they meant they were going to compete in the number of nuclear power plants they could build. The alternate interpretation didn't really make sense, as they are increasing their risk, and the risk for their clients, for no reason at all except to stop the markets from moving one way or another (which exchanges have NO business doing). The former interpretation made sense, because it follows a pattern of escalation that has been ongoing for a while, in addition to the fact that it would raise additional capital for the exchange, where it makes sense that they would need it.
If you are going to issue these types of announcements, they need to be clear. They should have stated that they were LOWERING initial margins. All it would have taken was one sentence.
Christ, if I sent out a letter like that to a client, I'd probably be fired, or at least disallowed contact with clients in the future.
I can see eye to eye with you on most of your points TM. For sure, the CME should have been far more careful and clear about their first press release. Somebody 'should' be fired. But I'll hold my ground on the "over the top" comment. Not only did ZH go "over the top" with their initial and totally unwarranted response to the first press release, but have done it again in this article. There are NO SIGNS WHATSOEVER that margins have be 'decreased' either.
shit dude, that sort of consideration has never stopped you from wild hyperbole and baseless conjecture in the past, has it? Why let it now?
Go ahead and make more hysterical predictions of imminent doom. It's quite entertaining actually.
$60 by next week.
$49 by the end of the week.
Evacuated or dead "two weeks tops."
Hyperinflation IMMINENT.
Collapse on Monday.
Keep them coming...this is just the abridged version of your greatest hits.
Yes, those are all examples of your half truths and statements taken out of context. You "abridge" them so well, after all.
Literally every one.
there's no saving your credibility now, cliff.
Everyone saw it. It's over. Just slink away instead of pathetically trying to pretend that you never said what everyone saw you say. It's futile.
Look at what you are, liar.
Hairdressers send letters?
ZH may have jumped the gun. But you agree that the initial press release was as clear as mud.
If I had to make a decision on who was at fault here I think I'd go with CME.
Even there second release is unclear.
Now unless you and others are saying that ZH is more powerful than CME it is surely up to CME to issue an unequivocal statement about
Why the measure was introduce.
To whom does the measure apply to.
How many contracts are involved.
When will the measure be rescinded.
If they don't they will have created uncertainty.
That would not be the responsibility of ZH.
As far as I am concerned, and I have no dog in this race, the ball is firmly with CME.
If they make another clarification that is not clear they risk the same reputation as the EU.
Agree. ZH pushes fear. I'm not a bull by any means, but ZH needs to back off the whole "the world is going to end" angle in every article.
I know I know. it's like ZH keeps saying that you're not going to be six years old for the rest of your life. WTF?
Tylers. you hear that? Perseus here demands more Cowbell
Why?
Are you looking for trading tips?
All you have to do is stop reading and it ends.
The Broker PFG is making the CME offer available to all Sheeples.
When running PFG's Risk Adjusted Margin Analysis Tool for the December S&P Minit contract ESZ1, you'll see that their intial margin requirment is now only $4000 for one contract. That is a reduction of 20% from their requirment of $5000 prior to the latest CME action. Readers with futures accounts can probe their accounts to see if their broker is participating in this temporary loosening. As of right now it seems InteractiveBrokers is not participating.....
So the pronouncent by the CME if for all sheeples alike -- every Tom Dick and Harry. But not every broker wants to participate, and not every broker wants to pick up MF clients and investments.
I have no idea which way the markets will move on Monday. I try to bet both directions simultaneously.
It could be a non-event Monday or not. Reuters said:
"A mass liquidation in the commodity markets wouldn't have the same effect as in equities, when most of the trade would be selling. For every long futures position there's an offsetting short, and therefore just as many customers should be selling long positions as buying back short ones.
But it may make for a wild session."
http://www.reuters.com/article/2011/11/03/us-mfglobal-margin-idUSTRE7A27Y020111103
Useful "coalface" information.
Seems some arm twisting is afoot.
They posted this on the @CMEGroup twitter stream:
CMEGroup CMEGroup
Our reduction of Initial Margin applies to all customers until further notice $CME ow.ly/7k4jI So I think it's at the discretion of individual brokers whether to lower the margin rates, but yes there is the real possibility of greater amounts of leverage being taken advantage of in the interim. Also it is obvious that the CME is clearly aware that there are major funding problems in these former MF Global accounts, which means there could still be large scale forced liquidation. From what I've read about the situation it sounds like the funds just aren't all there because they were stolen by MF Global.
Exactly.
There is a bigger problem here.
Thing is it's not just MF Global.
The Derivative Death Star is imploding.
http://www.eikongraphia.com/wordpress/wp-content/DeathStar.jpg
Sorry Tyler, your outrage is misplaced.
The initial margin doesn't actually provide any cushion meaningful cushion. It's idiotic to think that forcing higher margin on a position the first day you take it and then allow you to hold onto it (which is riskier) at a lower margin. But that's another discussion
This will help MF customers to avoid a technicality to move their positions to other clearing firms without disruption and without the risks you're panicking over. See, those positions are already held on maintenance margin.
MF customers who stayed did so because their funds are supposed to be segregated. Remember? Clients are supposed to be largely unaffected by these implosions. In light of this, it's kind of stupid to victimize them further at ZH.
And, no, I don't clear through MFG, so I have no dog in this race.
Agreed.
I could well be wrong, but ignoring all the comments, including Tyler's, it seems an insignificant policy change affecting ONLY former MF Global clients, and ONLY already open positions. I don't see it materially affect the markets, overall.
The first notice from CME was a mess, however, and still some ambiguity here?
[Looks like that new intern of Tylers' got loose again.]
So you ignore any impact of any paper games on market CONfidence then? Very rational, good trading skill. The only thing I will agree on is that paper will get you what it gets you until it doesn't and the the real issue (energy) continues to be ignored by all. Global energy production remains flat, the cost to recover or produce energy continues to climb, hence crushing the margin and real profits. the current ponzi relies on growth, period. Something has got to give and it will. Either way, thank god for the internet and the ability to play paper markets well away from any urban center.
No need to attack me because I think ONE issue has mistakenly been blown way out of proportion. In fact, clarity of thought that allows one to distinguish between what ARE, and ARE NOT relevant issues is a necessary precursor to rational thought.
Don't you think? Or, rather: Don't you agree?
http://www.zerohedge.com/news/cme-issues-clarification-margins-usher-more-risk-less-liquidity-mf-aftermath#comment-1849101
Thanks, I appear to have been wrong.
edit: Tyler comments more fully, further along in this same thread.
-Around $1billion (maybe more) is missing from MF cash position.
- Where is this and was it used by MF in their trading and leveraged up around 20 times.
- Maybe be the markets are short about $20 billion.
Thanks you, was about to write the same thing but much less eloquently.
This blog really, REALLY needs to start toning down the hyperbole.
As a matter of interest ... why?
If we tone down the hyperbole, world financial markets will implode in a nanosecond. The Earth's magnetic poles will flip, setting off dozens of simultaneous magnitude 9+ earthquakes. At least one and probably three supervolcanoes will erupt. The sun will unleash a string of coronal mass ejections that will make Shoemaker-Levy look like a snowball fight at a girl's school, destroying electrical infrastructure worldwide. Silver margins will go to 500% of contract value, the Israelis will nuke Iran, setting off a global thermonuclear war, and the Mayan calendar will end 50 days early, on Halloween, 2012.
Hyperbole is our only hope.
This is not investment advice.
that's downright mundane and unextraordinary compared to mosely-claven's predictions...try again but up the hyperbole by several orders of magnitude
At least you're keepin' it real.
BTW, Wednesday looks good for most of these things. Good as any, anyhoo....
Tee-hee
How can you ignore a late nite Friday announcement in response to admitted criminal actions by a company they are deeply involved with, a second suspected and a third, JPM creates an alibi for them that it also says is false. Then, their next press release mentions the same criminal entity and how money that no one has accounted for yet and is subject to law enforcement activity is being distributed to others or something incoherent. The corzini has lawyered up, claimed he won't be taking his bonus, and it is Saturday afternoon.
Are you being sarcastic? Because the alternative is that facts are keeping you from feeling good. But if we know any one thing they have said is not true, why would you assume any of it is? We already know enough to know some of the major players are making things up as fast as they can. If this comforts you, you must be the dog in the race.
So if its such a non issue then why did CME have to do anything at all then Kat?
Exactly.
The collapse of MF Global was going to cause a chain of events.
And here's another thing.
If CDS require cash collateral daily what does that say about Bank of America transferring trillions of risk (callable on a daily basis) to their depositors?
I think the derivative machine has begun to eat itself.
I think you're right. That's what this feels like. I wish I could make more predictions about likely next steps, but that world is too opaque to me. Probably too opaque to everybody, including the major players.
But if you (or anyone? ZH? anyone?) were to feel inspired to make some guesses, I would certainly be interested in hearing them!
Pure panic by the cme, urging all to remain calm... all is well..the margin call run has begun.!
At least Tyler kept the guys at CME busy on their weekend. Their clarification is obviously an answer to the initial ZH story.
They are making fun of us over at Clusterstock, ZH gets everything wrong all the time blah blah...
How many posts do that get in a day, in 10 mins at ZH it is double.
'They are making fun of -me- over at Clusterfuckstock'
Fixed it for ya.
Clusterfuck haters will never be players.
ZH sparks the greatest margin call event in history..this is going to be awesome.
The last one was in 1939 when everyone was all in fully margined. Heh heh.
Strikes me as a logical move by the CME, though poorly executed. One does wonder though, why they simply didn't make this a special exemption for those rolling from an MF Global account rather than make it apply to the whole world.
I never did understand, though, the logic of making the initial margin requirement higher than the maintenance margin anyway. Is the idea that those who can afford the additional initial margin presumably would have the extra funds available should there be a margin increase?
It's so people can use the "maximum margin" without fear that a single downtick will force a margin call. I have never heard of a futures exchange that did business this way (ie with initial==maintenence margins). It seems inherently unstable.
You are right, it would make sense for an exception to be made for MFG clients, but it seems they are making this a blanket policy, which just doens't make any damn sense.
could be. but barring any physical shortages, we get another opportunity to buy physical at a discount, period. Awesome.
Other houses might not enjoy teling their other clients, "no, it only applies to MF customers".
Exactly, how does this not shake confidence in an already irrational market?
CME Group makes margin policy, applicable to only ONE company, apparently? Wow talk about a micromanaged clusterfuck this market is.
Good point. That never occured to me. Thanks
I think the CME should consult with Margin Stanley first, on such delicate issues.
we all know how the rule of pooled assets works? in for a dime in for the duration. widows and orphans stand in line with triple leveraged futures traders at bankruptcy hearings. some brokers have firewalled bank accounts. MF did not. caveat emptor.
BAAAAAHHHHHHH, the sheeple are confused. Isn't that the point?
What? Looks like TD jumped the gun a bit. That is why you don't trade on emotion. Do your homework, stick to the plan and specific goals. Meet the goals, cash out, don't be greedy. Repeat.
It would be interesting if, despite it all, people DO issue margin calls. The market is gamed and irrational these days, these are perhaps the only two true statements one can make about the markets today. "Free" is certainly is not a true statement anyway.
In either case I vote that ZH underwrites a physical army of PM holders to institute a real bank that is just that, a bank and nothing else. No propietary trading, no bullshit. We loan funds backed by our gold at a reasonable interest rate, period (regardless of the fiat du jour). My guess is if the bank were properly located we would have people lined up to participate. With all other banks essentially corrupt, getting business would be easy. God I sound like the ultimate contrarian - encouraging the begining of a non-central, non corrupt bank in these times. Crap, better keep an eye out for drones.
So basically those who did our homework and stayed away from MF-Global see that it didn't matter. Again, I don't see how more policy changes that reward irresponsible behavior doesn't go un-noticed by others. Paper is only as good as the CONfidence behind it, period.
Oh yeah, each investor/owner is also a crack shot and very well armed, period. Who's in?
Who was trading anything 7 PM Friday nite? And anyway, who trades off of what 1 article on a blog says? I guess they deserve what they get.
During a subcommittee meeting on Nov 3 in regards to the CFTC oversight on excessive speculation, Gary Gensler stated that MF Global customer's positions ONLY are being transfered while the funds will take time to be dispursed by the trustee company. I assume this means that customers will not have access to their accounts, which pretty much means that if their losses are graeter then margin requirements, the only option is to put-up the money or CME will liquidate an adequate amount of positions. Remember only 30% (or 15 out of 50 thousand) of accounts or positions have been moved so far, meaning, they'll have to manage the risk of the frozen 70% while they're liquidating the 30%. This could send things into a frenzy.
You can watch it here if you cue up to Gensler testimony: http://www.senate.gov/fplayers/jw57/urlMP4Player.cfm?fn=govtaff110311&st...
BTW, in that video somewhere Gary Gensler said his father always told him it was good to buy a little gold. How ironic.
With 11/09/11 fema comm test; internet included, along with 11/11/11. I see nothing but a historic jiffy lube coming to all who have former money in the western bankstering system. Off the grid and out of it entirely; May '09. Good luck to the rest of you.
The 11/9 fema test and 11/11 event mean nothing. Just as 1/1/2000 meant nothing. So, enjoy Veterans day, and pray that YU55 isn't really 'slowing down' like the rumors have suggested as 'meteors' do not 'slow down' while approaching mass.... but Borg spacecraft do.
Yea, this is about to end 'not well' soon here, thats the overall picture no matter what 1 article based upon a misleading release from CME clowns said.
If you are posting on teh interwebs you are not exactly "off the grid".
I have heard that there are modems available that operate over short wave radio. They are terribly slow, of course.
Another option is satellite. If you put an incorrect address for your billing address, the company will never know where the actual installation is.
So what's wrong with this? Seems rather prudent to me..
I don't trade any of this nor does apply to me, but I think the canary in the coal mine
is staring us right in the face. Lower margins to move MF accounts!!
Lower margins to move MF accounts!
they can't just lower MF. Did you not see the ranking of MF in 3 exchanges..1
and 2
The CME's own words say theyre doing it due to MF Global accounts.
bullish!