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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: C Hudson who wrote (17089)	8/31/1998 10:35:00 PM
From: Alex	Respond to of 116797

Brokers mock new margins STEWART OLDFIELD International speculators will be able to run circles around measures designed by the Hong Kong Futures Exchange (HKFE) to punish them for shorting the market with little or no difficulty, brokers said. Punitive margin levels and additional reporting guidelines presented few challenges to funds determined to stick with their positions, brokers said. Costs paled in comparison with potential profits. "Even if they limit open-interest to 10,000 contracts, the big guys will simply spread 9,999 contracts between different brokers," one broker said. The exchange has the power to insist members report clients with big exposures, but brokers said the reporting requirement could easily be circumvented through connected parties. Jardine Fleming director Tim Rainsford said the new measures could encourage investors to use the over-the-counter market. "It would be a commercial decision based on the cost of the margins," he said. Others said the increased margins would not greatly affect speculators who stood to make huge profits if the futures market maintained its present volatility. Speculators could shift their focus from the futures market to the options or money market where there was less regulatory intervention, one broker said. Activity in the futures market was muted yesterday in the absence of government intervention and ahead of the introduction of the new margins at the close of trading today. On Saturday, the HKFE announced a 50 per cent rise in margins for players with open positions greater than 10,000 contracts. It also cut the level at which members must report the identity of their clients from 500 contracts to 250 contracts. HKFE chief executive Randy Gilmore said it was difficult to anticipate the impact the new measures would have. If the measures failed to decrease speculators' massive open positions, the exchange threatened to cut the maximum open interest position per client to 10,000 contracts. Mr Gilmore conceded the measures could hurt turnover in the Hang Seng Index contract. "Even if we sacrifice a little volume in the next couple of months, we are in this business for the long haul," he said. Open interest on Friday was a record 150,585 contracts. Yesterday's turnover in the futures market was lower, with Lehman Brothers seen as the only big seller. The September note finished 210 points lower at 7,000. Arbitrageurs were unable to take advantage of the September contract's 275-point discount because of an unavailability of stock to borrow, brokers said. Mr Gilmore said response to the new measures was mixed with some saying the measures were unnecessary, and others that they did not go far enough. ING Futures and Options senior managing director Fred Hochberger said increasing margins was preferable to open-interest limits. The increased margins would help alleviate the possibility of default caused when the market "gapped" on opening, he said. Mr Rainsford said: "The exchange has every right to increase margins if it sees increased risk levels, and they feel there is increased risk in the big positions." scmp.com