Over the last couple of weeks, there have been a series of increases in the margin for almost all futures.
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What we're doing is putting together, in one margin calculation, both futures positions that are traded on New York Stock Exchange's futures exchange, NYSE Liffe US, and the fixed income securities positions that are currently cleared at DTCC FICC, the fixed income clearing corporation.
For those who need to come up with quick cash to boost their margin accounts, they may turn to the selling of their futures contracts as a way to raise the cash needed to replenish their margin accounts.
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Margin calls occur in the futures markets and traders are forced to abandon their already weak long positions.
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Options and futures often carry higher commissions than equity trades and investors in futures will be required to maintain a minimum margin.
People often use futures because the commissions are very low, and the margin requirements are much lower than in traditional equity investments.
Futures and other derivatives trading is a much higher growth and higher margin business for exchanges.
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News the CME Group again raised its margin requirements for gold also prompted long liquidation in the futures market.
This money, called the margin, is roughly 4.5% of the value of the futures contract on which the option is written.
Margin requirements in the spotlight this week again after the CME Group, owner of futures exchange NYMEX, announced a 25% hike in collateral requirements for crude oil futures, putting initial, and short-lived, pressure on WTI and Brent prices.
Margins are collateral that traders put up to hold a futures position, and they have to either ante up more or exit a position when they get margin calls as a market moves against them.
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In addition, some are exiting due to margin calls in which they otherwise would have to ante up more money to retain a leveraged futures position.
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The markets that do the sort of high volume, low margin trades that would be affected by an FTT are the foreign exchange (FX), futures, options and stock markets (with special reference to high frequency trading of the often demonised computer algorithm type).
Futures brokers were required to disclose the holders of large positions to regulators in real time, and to strictly observe margin limits.
"I'm sure there are a lot of margin calls being triggered and positions being blown, " said Bob Haberkorn, senior commodities broker with RJO Futures.
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