To: Clearing Member Firms
From: CME Clearing
Date: November 5, 2011
Re: 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.
docs.google.com
Re: Margin Requirements? u2 - link? Nonstory IMO
From another less schizo ZH poster
So I just called the CME group at the number listed on their site, said I had questions on the performance bond notice, and was put through to a man named Ed Gogol. He said the effect of this is to temporarily LOWER the initial requirements to meet maintenance. He said this was done with the express purpose of decreasing the number of margin calls, likely because of MF.He also said, "We definitively did not raise margin requirements."
investorvillage.com
But with margins only due later Friday or next week, forcible liquidation looming on Monday morning, and thousands of accounts still unsettled, dealers were jittery. Great Pacific Wealth Management, an MF Global client whose accounts were transferred, was told it could not offset or liquidate positions for a day, said vice president Sean McGillivray.
Some were bracing for a potentially wild ride once electronic trading resumes on Sunday evening, a typically thin trading period when forced orders could roil prices.
"If clients have access to their accounts they are going to try to do everything they couldn't do during the week," said one MF Global employee. "It will be a thin session, it could be Niagara Falls through a garden hose."
investorvillage.com
CME increases margin call; markets will be under pressure
November 05, 2011 02:20 PM | 
Moneylife Digital Team
US options & futures holders will be forced to deposit billions in additional capital to the CME to avoid margin calls. This may pressure all asset classes on Monday
There is a liquidity crunch in the options & futures markets for commodities worldwide. CME, the exchange for such transactions in the US, had made the initial margin and maintenance margin equal for every commodity with options and futures. This implies that options and futures holders will be forced to deposit addition capital to the CME in the form of maintenance margin, simply to hold their positions. This will put markets under pressure on Monday. The lack of liquidity and additional margin requirement comes in the aftermath of the bankruptcy of MF Global.
The London Metal Exchange has suspended MF Global from trading with immediate effect, following a similar move by the CME Group, which operates the Chicago Mercantile Exchange, Chicago Board of Trade and New YorkMercantile Exchange. MF Global had filed for bankruptcy protection following bad bets on euro-zone debt. The brokerage’s meltdown in less than a week made it the biggest US casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in US history.
One of the biggest market concerns now is systemic liquidity, which is virtually non-existent. Interbank liquidity in Europe is at an all-time low, and possibly for the US banks. But this is just as true at the commodity exchange level, where it appears the aftermath of the MF Global collapse is just now being felt. CME's margin hike will force market players to cough up billions of dollars in a single day. Since this cannot be easily procured in onebusiness day, we may see margin calls and forced liquidations of margin accounts across America and the world.
moneylife.in
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