And so another exchange decides to follow in the CME's (clarified) footsteps, and lowers Initial Margins for all in order to facilitate the onboarding of just clients with orphan MF exposure. Probably more important is that the ICE demonstrates how this can be done in a way that does not generate speculation and confusion, and avoids follow up clarifications, due to the counterintuitive nature of increasing initial leverage in the aftermath of an exchange filing bankruptcy due to excess leverage. And as usual, the real question is what would happen in the counterfactual? Would the market really tumble and would liquidations truly be pervasive on Monday is the contract transfer price is not lowered? Is liquidity in the market (and hence leverage) really that low (high)?
Full statement (source):
Exchange Actions Re: MF Global Inc.
Effective immediately, ICE Futures U.S. is temporarily lowering the Initial Margin rate for all Speculative accounts to a level equal to the Maintenance Margin rate for all contracts. The Initial Margin rate for hedgers already is the same as the Maintenance Margin rate.
This action is being taken to mute the impact of the transfer of accounts from MF Global Inc. to other clearing members that was effected overnight, and thereby support the integrity of Exchange markets.
h/t Janet Tavakoli