Tuesday, May 3, 2011

Silver's down nearly 20% since the CME raised margin requirements

The Chicago Mercantile Exchanve raised margin requirements two times since Friday and guess what? Silver has taken a nearly 20% tumble.

See how easy it is to get speculation out of the markets?

The Fed or Congress could require the exchanges do it for oil and agricultural commodities, but they don't. In the meantime consumers suffer needlessly.


Matt Franko said...


We are just 15 cents away from the 2008 highs in Gasoline.

In 2008, it went up looks like to about $3.40, now it is approx $3.25.... no fiscal help this year though vice 2008 when Bush/Cheney and Dems in Congress pushed through the $650 per taxpayer rebate in May June timeframe....



Anonymous said...

Note that the increase in margins is not outside of the exchange parameters. The exchanges have discretion on setting margins, but they usually hew to the rules quite closely.

They usually have rules that say something like: Calculate close to close volatility over the last 90 days, last 30 days, and last 60 days. Take the highest of these and take a 99% confidence interval as the range. Translate this to dollars to get the margin amount.

I doubt if this is the exact calculation used by the CME, but it is probably quite close.

This is common futures clearinghouse practice - while it is not widely known, the calculations used toset margins are very similar from clearinghouse to clearinghouse.

googleheim said...

Daniel Frischberg and co were constantly badgering people about silver last month ... where are they now ?

mike norman said...


The exchange has a formula for setting margins and its based on volatility, not price. In any case, ever since they have become "for profit" publicly traded entities, there is strong resistance to margin increases because it's bad for business and profits. That for profit designation incentivizes more speculation and less self-regulation. Another bad development to come out of the deregulation mania.