Margin Call

[cottonpicken]

http://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv11-399.pdf

We are screwed.

I see a big big gap down,if i'm understanding this right.

Nothing like having the rules changed on you.

[cottonpicken]

http://www.moneylife.in/article/cme-increases-margin-call-markets-will-be-under-pressure/21187.html


The problem i see is that people without margin will be trying to hit the exit to.

Damn,damn,damn

I hope i'm wrong

[mbratrud]

Do you think the market is that Long? I thought we were evened up pretty good right now. Margin requirments effect long and shorts why do you think it will be just the longs scared off?

[mcfarms]

But wait its worse than that

Beware Nov 7th

.By: Peter J. Meyer, AgWeb.com

Pete is a 30 year veteran of agricultural markets, an agribusiness consultant, and the publisher of Opening Print.


« Previous Blog PostingBeware the 7th of November: At Least $1 Billion Needed.
Nov 04, 2011
A rough week for MF Global clients may turn into quite a few rough days for all futures market participants. Yes, MF accounts are being transferred and while that solves one problem, it has created an even larger $1 billion problem. That’s billion, with a "B".

5,300 ex-MF accounts woke up this morning in a new clearing firm, with a new margin clerk, and a 40% margin deficit, never mind a 100% excess capital deficit. More should wake up to this reality on Monday morning. Exactly how many more is still in question because at this pace it would take until Thanksgiving to move every account. That won’t happen however as many smaller accounts risk liquidation within days if they don’t transfer successfully.

It’s important to remember that just because you had an account at MF that does not guarantee you another clearer before the hammer comes down and your positions are liquidated, which looks like it may happen sometime Monday.

Look at the ratios in today’s CME Press release. 5,300 of the reported 100,000 accounts have been transferred but $410 million of the $1.449 billion that CME Clearing expected to move in total has gone with those accounts. 5.3% of the accounts had 28% of the available capital attached. Big guys done, middle guys still moving, little guys out of luck? Issue 1: Risk of "homeless" positions being liquidated "at the market".

As discussed on Wednesday, CME Clearing is "holding back" 40% of MF’s segregated funds on deposit. This 40% was used for initial and maintenance margins on positions held at MF as of last Friday and throughout the past week. Mingled into this 40% is quite a bit of margin premium that had already been fully funded at the time of the option trade. Now the margins and option premiums are only 60% funded. The result is a collective $1 billion dollar deficit, the exact amount that CME Clearing is holding onto. Add that number to the very real possibility that the "new" clearers will be charging double margin in the near term and the $1 billion figure becomes a blip in the rearview mirror.

Interest rates are historically low but it’s about as easy for a trader to borrow risk capital as it is for some folks to get a home mortgage. Ex-MF traders may have collateral for a risk capital loan, but it’s tied up in a bankruptcy court with no release date in the offing. If your mortgage falls through, you don’t buy a house. If your risk capital loan gets denied, you have no choice but to liquidate your positions. Either you liquidate or someone will do it for you. Issue 2: Risk of "under-funded" positions being forced into liquidation.

If something like this had happened in the equity markets, chances are pretty good that the market would have traded in one direction, down. Futures markets are obviously different as there’s a buyer and a seller on each trade. It would have been impossible to determine if the legacy MF positions were slanted one way or the other even if they weren’t spread all over LaSalle Street.

While the markets may not go in a specific direction as a result of Issue 1 and Issue 2, liquidation could flood the market with no regard for prevailing price action. Forced liquidation orders are always market orders and as such could lay bare the liquidity air pockets that the very MF traders liquidating their positions prevent from happening on a day-to-day basis in every futures market. Pure irony.

Not quite the Ides of March but best to take that intra-trading-day nap with one eye open.

[charliep]

Will note that changes in margin requirements during periods of higher risk/volatility are not unheard of. Happens all the time in periods of limit moves on futures markets.

The risk environment has changed not because of fundamentals in Ag Commodities but rather overall markets. Ag is just a small part of the overall system.

[cottonpicken]

But......this is not good news.

Some are going to be forced to liquidate,and some
who don't have to still will in the interest of self
preservation,then the technicals break down,then
the computer black box trading programs will
trigger sells then we hit the ****in floor of the old
high and spend the next 18 ****in months
rebuilding the wall of worry.

God i hope i'm wrong.

At least i never grew a crop to sell or pre bought
fertilizer,lol.

[BreadWinner]

New week new disaster getting used to all the
crying wolf.

[rbrunel]

Good thing I'm sold out of 2011 crop minus oats.

[cottonpicken]

CME Group Clarifies Maintenance Margin Ratios; Exchange to Reduce Initial Margin
Ratio to 1.00

CME Group today is clarifying its notice to clearing firms regarding margins. In light of the issues customers transferring out
of MF Global are facing, while still maintaining appropriate risk management protections for the market, CME Clearing is
setting the "initial" margin upcharge at zero. This upcharge is normally applied to customer accounts when they are receiving
a margin call.

The intent and effect of these changes is to decrease the size of any margin calls resulting from
the bulk transfer of MF Global customers to new clearing members, not to increase them.

Yesterday, CME Group successfully transferred MF Global customer positions to a new clearing member with part, but not all,
of their funds, as approved by the bankruptcy trustee and the court. By reducing the initial margin “ratio” to 1.00, we ensure
that margin calls that are issued to these transferred MF Global customers will be limited to bringing their accounts into
compliance with the lower, “maintenance” margin levels. Maintenance margins are set to provide appropriate risk
management coverage. Initial margins are set to provide an additional buffer against future losses in the account.

This is a short term accommodation to maintain market integrity and provide temporary relief to customers whose accounts
have been disrupted by this event.

We apologize for any confusion our initial advisory may have created.

Read more: http://www.businessinsider.com/cme-margin-changes-on-monday-2011-11#ixzz1cxJlzPnO

[sumdumguy]

American Bulls has posted a buy if signal for MF
Global at approx 36 cents. What you think
cottontail?

[sumdumguy]

No that's 26 cents

[cottonpicken]

You tell me dumsum