old steel
16th November 2010, 12:12 PM
The Chicago Mercantile Exchange (CME) is continuing its assault to stem the speculation on commodities that threaten to go parabolic due to the Fed's QE2 and subsequent inflation.
Last week, silver took a plunge immediately after the CME raised margin rates 30% from $5000.00 to $6500.00, and it is affecting other commodities such as copper as well.
Today, the CME is again raising the margin rates and this is explained by Tyler Durden of Zerohedge.
If at first you don't succeed at killing the higher beta stock short hedge, try again. The CME has just raised its margin requirement on silver again, bringing maintenance margins up from $6,500 to $7,250, after hiking it less than a week ago for the first time and preventing silver from surpassing $30. Of course, why the CME is raising it more after the spot price of silver is now far lower than where it was at the first raise is a good question, but is most certainly due to the exchange's "risk mitigation" concerns, and has nothing to do at all with the intent to continue killing PM prices. Far more importantly, the CME has finally relented and also raised gold margins, as we had expected. The new maintenance margin is up from $4,251 to $4,500, a minimal increase just to allow the CME to have the option (and making speculators well aware of this) of hiking rates again at any point it so chooses. All in all, all is now fair in fighting excess record liquidity. Look for a second round of imminent margin hikes in cotton, sugar, coffee and wheat, as the exchanges are suddenly very concerned about what retail margin collapses may mean for the non-existent wealth effect.
One of the lesser speculations on why the CME is doing this is tied to the Federal Reserves fear of inflation and rise in commodities because of QE2. The new margins ironically will have little effect against the silver shorts such as JP Morgan and HSBC, but will cause a slowdown of metal longs and allow the manipulation by the banks to keep on running.
http://www.examiner.com/finance-examiner-in-national/the-chicago-mercantile-exchange-cme-raises-margins-on-commodities-again
Last week, silver took a plunge immediately after the CME raised margin rates 30% from $5000.00 to $6500.00, and it is affecting other commodities such as copper as well.
Today, the CME is again raising the margin rates and this is explained by Tyler Durden of Zerohedge.
If at first you don't succeed at killing the higher beta stock short hedge, try again. The CME has just raised its margin requirement on silver again, bringing maintenance margins up from $6,500 to $7,250, after hiking it less than a week ago for the first time and preventing silver from surpassing $30. Of course, why the CME is raising it more after the spot price of silver is now far lower than where it was at the first raise is a good question, but is most certainly due to the exchange's "risk mitigation" concerns, and has nothing to do at all with the intent to continue killing PM prices. Far more importantly, the CME has finally relented and also raised gold margins, as we had expected. The new maintenance margin is up from $4,251 to $4,500, a minimal increase just to allow the CME to have the option (and making speculators well aware of this) of hiking rates again at any point it so chooses. All in all, all is now fair in fighting excess record liquidity. Look for a second round of imminent margin hikes in cotton, sugar, coffee and wheat, as the exchanges are suddenly very concerned about what retail margin collapses may mean for the non-existent wealth effect.
One of the lesser speculations on why the CME is doing this is tied to the Federal Reserves fear of inflation and rise in commodities because of QE2. The new margins ironically will have little effect against the silver shorts such as JP Morgan and HSBC, but will cause a slowdown of metal longs and allow the manipulation by the banks to keep on running.
http://www.examiner.com/finance-examiner-in-national/the-chicago-mercantile-exchange-cme-raises-margins-on-commodities-again