CME Raises Margins for Non-Hedged Accounts to Meet CFTC Rule

pmbug

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CME Group Inc. (CME), the world’s largest futures exchange, is raising futures margins for non-hedged positions to comply with new regulations.

Members will be treated as speculators for outright positions, paying a higher margin, said the exchange, which trades everything from energy, agriculture and metals to interest rates and equity indexes. Members are now treated as hedgers rather than speculators even if they have a speculative position. The change is effective May 7, it said in a statement.
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“Guys that are highly leveraged would have to find more capital or they’ve got to bring their position size down,” Adam Davis, a commodity trader at Merricks Capital Services Pty, said from Melbourne today. “You can reduce a position size in two seconds. Finding more capital might take you two months.”

The exchange is implementing a Commodity Futures Trading Commission rule for all speculative trading accounts that are regulated as futures or swaps, said the CME yesterday.

“The CFTC rule takes away the implicit hedge status of members, forcing them to pay a higher margin to take flat price and spread positions home overnight,” said Roy Huckabay, the executive vice president for the Chicago-based Linn Group, a CFTC-registered futures clearing firm for individual traders, hedgers and funds. “This would by nature reduce the number of contracts they trade unless they put up additional collateral.”
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http://mobile.bloomberg.com/news/20...or-non-hedged-accounts-to-meet-cftc-rule.html

It's not clear (to me at least) what impact this will have on precious metals. :shrug:
 

pmbug

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Oh wait...
The CME Group was granted a 90-day reprieve from imposing new rules that will hike margins for some exchange members by as much as a third, one day after news of the increase riled locals and roiled markets.

The new rules, which would have increased trading costs for exchange members who are classified as speculators, will now come into effect on August 5 instead of on Monday, it said in a release.
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http://www.reuters.com/article/2012/05/04/us-cme-margin-idUSBRE84300620120504
 

ancona

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I don't know what impact this will have either Bug, but rest assured, it has probably been designed by and for the likes of JP Morgan et., al.
 

swissaustrian

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I don't know what impact this will have either Bug, but rest assured, it has probably been designed by and for the likes of JP Morgan et., al.
Dingdingdingding :clap:

"Non-hedging" is the key word. JPM claims that they only hold hedging postions. They are therefore in the "commercial" category of market participants which is the CME language for "hedgers" as opposed to "non-commercials" aka speculators.
 
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