[thetradingdoctor]

Aug. 16 (Bloomberg) -- CME Group Inc., the world's largest futures exchange, will increase margin requirements on some securities traded on its markets from today's close.

CME raised margin requirements on some currency, interest rate and stock-index futures, according to a notice sent by the exchange to members. CME, formed last month by the combination of the Chicago Mercantile Exchange and Chicago Board of Trade, cited financial futures traded on both markets. Agricultural contracts weren't affected.

http://quote.bloomberg.com/apps/news...d=aNPXSQYMopGk

[Soultrader]

I think its definitely a good thing. Especially after hearing the interview posted here: http://www.netcastdaily.com/broadcas...007-0721-2.mp3.

Here's the link to the up-to-date SPAN requirements for margin (performance bond) for both the CME and CBOT:

http://www.cme.com/html.wrap/wrapped...mePage.htm?h=2

[brownsfan019]

Interesting development. This is called 'we have to increase the margins b/c too many retards are over leveraged'. :rolleyes:

The question becomes is this a temporary 'fix' to the increased volatility or is this going to be the standard... time will tell.

[Minetoo]

The increase in volatility and consequent bump in margin requirements is not just caused by the recent sub-prime fallout but also the largely overlooked abolition of the up-tick rule. No one is paying attention to this or studying its profound impact, yet.

Originally Posted by Minetoo »

The increase in volatility and consequent bump in margin requirements is not just caused by the recent sub-prime fallout but also the largely overlooked abolition of the up-tick rule. No one is paying attention to this or studying its profound impact, yet.

Listen, the futures markets - where these margin requirements are being increased - were never subject to the uptick rule to begin with. The uptick rule was only in effect on U.S. equities (i.e. the stock markets). The primary enforcement mechanism for this was the SEC and NASD, not the CFTC or NFA.

Since many funds also hedge the cash market with the futures, they move with the same volatility as a result. Is it any coincidence that these new margin requirements were announced the evening before the recent Fed action on the discount rate at 8:15 this morning? How many accounts that were short into options expiration were blown out because of this?

To say that no one is paying attention to this is clearly wrong; chances are that the major players and hedge funds lobbied successfully for removal of this rule, so as to bring back the "bear raids" of many years ago. However, those quants running complex trading models in their black boxes apparently didn't adjust for the impact of this change on their methodologies, and thus you see the implosion of many funds that can't keep up with the volatility of the new market.

Just call it the thinning of the herd, or culling of the weak hands.

[Minetoo]

Originally Posted by cooter »

Listen, the futures markets - where these margin requirements are being increased - were never subject to the uptick rule to begin with. The uptick rule was only in effect on U.S. equities (i.e. the stock markets). The primary enforcement mechanism for this was the SEC and NASD, not the CFTC or NFA.

Thanks for stating the obvious. The futures markets and the equities markets do not function independently of each other. Consequently, when a fundamental change occurs in one, it impacts the other.