Realcent.org

I guess they haven't done enough lately

(Kitco News) -CME Group is hiking silver margins again, with a late-Wednesday notice the fourth such announcement in the last two weeks.

CME Group, which operates the Comex division of the New York Mercantile Exchange, announced margin increases that will become effective at the end of business on Thursday, with yet another increase to go into effect after the close of business next Monday.

As of the end of business on Thursday, the “initial” margin to open new speculative positions in the main 5,000-ounce silver-futures contract will rise to $18,900 from $16,200, according to a notice released by the exchange. The “maintenance” margin for exiting speculative positions, as well as both initial and maintenance margins for hedger positions, will rise to $14,000 from $12,000.

Then as of the close of business on Monday, the initial speculative margin will rise further to $21,600. The speculative maintenance margin, as well as margins for hedgers, will increase to $16,000.

Margins are also rising for Comex MiNY silver futures and E-mini silver futures.

The notice from CME Group, which operates the Comex division of the New York Mercantile Exchange, said the change is a part of the “normal review of market volatility to ensure adequate collateral coverage.” The market has been volatile lately, with the most-active July futures contract surging sharply to $49.84 an ounce last week but subsequently pulling back as far as $38.94 and posting a decline of 7.5% on Wednesday.

And, apparently, there are those who like to justify this as "business as usual." And not manipulative. Might be a good time to look at ZSL. They're getting pretty desperate over there, to be this frickin blatant about it.

Just to play devil's advocate; wouldn't increasing the requirements make sense as the asset price rises to ensure the position is adequate capitalized? Lets say the average futures contract requires a $12,000 margin. As the price of silver continues to rise you can control increasing amounts of wealth with that same $12,000, leading to a highly leveraged position. Why couldn't the margin requirements be expessed as a % of the spot price instead of a dollar amount?

Having said that, it does seem odd that they raised the margin again after silver aleady sold off sharply.

I suspect that there isn't enough physical silver to make delivery on all of the front month contracts that will expire this month. The majority of futures volume made in April were for May and June expiration.

RR GUY wrote:I suspect that there isn't enough physical silver to make delivery on all of the front month contracts that will expire this month. The majority of futures volume made in April were for May and June expiration.

Exactamente!