Friday, November 4, 2011

CME Goes To Margin DefCon 1: Makes Maintenance Margin Equal To Initial For... Everything!?

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?

CME Group hiking margins across the Board

Trader Dan at Trader Dan's Market Views - 41 minutes ago
If I am reading the communique from the exchange correctly, the margin requirements for ALL CME products is being raised by hiking the MAINTENANCE MARGIN requirements to the SAME LEVEL as INITIAL MARGIN requirements, effective as of the opening of trading Sunday evening/Monday morning, November7. The changes were implemented as of the close of trading Friday, November 4th. If this is correct, and I think I am reading it correctly, this is the first time that I can recall seeing something like this occuring. It will also precipitate some very volatile trading conditions. I suspect t... more » 

HUI pushing into Chart Resistance

Trader Dan at Trader Dan's Market Views - 53 minutes ago
The HUI had a strong showing this week as the return of the risk trades drew money into the sector. Along with that, many investors have come to view the sector as generally undervalued based on the good numbers being reported by several miners and the fact some were raising dividends. The result was a move back into the large gap region formed in September when gold and silver were both taken down quite hard. Last week the index mounted its first push into the gap and managed to hold the level going into the weekend. This week after some initial weakness, it found willing buyers wh... more » 

Silver Chart improving but still bearish

Trader Dan at Trader Dan's Market Views - 1 hour ago
Let's start by examining the weekly chart for a bit longer perspective. For starters, silver remains held under the 50 week moving average so strictly speaking it is still bearish. Once it climbs above this level, funds generally become more involved in the market so that will be the first achievement which the bulls will have to pull off to get the speculators more interested in the market. Note that the over the last two weeks, this level has effectively capped any upward progress although the bulls are working on securing a breach of this important technical level. You might al... more » 
Phoenix Capital...
11/04/2011 - 15:48
So the EFSF is supposedly going to raise 1 trillion Euros… in an environment in which it struggles to even stage a five billion Euro bond offering?  Give me a break. 
11/04/2011 - 20:31
The G-20 expected relaxed photo ops, handshakes, and fancy dinners, interrupted by rubber stamping the Grand Plan of bailing out Greece, bondholders, and banks. But then Papandreou fired his bazooka... 
11/04/2011 - 20:18
In his letter today, Cummings requested that the firm provide all documents relating to: preparing for, carrying out, or communicating about the firm’s 2010 Halloween party and much much more... 
"Once the euphoria of the initial announcement faded and as people have begun to closely examine the details of the European debt deal, they have started to realize that this “debt deal” is really just a “managed” Greek debt default. Let’s be honest – this deal is not going to solve anything. All it does is buy Greece a few months. Meanwhile, it is going to make the financial collapse of other nations in Europe even more likely. Anyone that believes that the financial situation in Europe is better now than it was last week simply does not understand what is going on. Bond yields are going to go through the roof and investors are going to start to panic. The European Central Bank is going to have an extremely difficult time trying to keep a lid on this thing. Instead of being a solution, the European debt deal has brought us several steps closer to a complete financial meltdown in Europe." - Michael Snyder


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