Prime brokerages use its VAR model to set margin requirements for hedge fund clients.
Margin requirements, variable capital requirements have to be re-introduced, that is my personal position.
The other justification for tougher margin requirements is to protect individual investors from themselves.
Perhaps, but some of these firms have voluntarily raised margin requirements on many shares.
StreetInsider.com contends the fall relates to clearing firms raising margin requirements for positions in Apple shares.
There were rumors all day long about other firms also potentially raising margin requirements on Apple.
But not from the CDS market for the CDS market is already posting those daily margin requirements.
Exchange operators often raise so-called margin requirements at times of large market swings.
News the CME Group again raised its margin requirements for gold also prompted long liquidation in the futures market.
The site says that the firm COR Clearing upped margin requirements for positions in Apple from 30% to 60%.
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People often use futures because the commissions are very low, and the margin requirements are much lower than in traditional equity investments.
Moreover, if people want to borrow to buy shares, raising margin requirements would probably send them to the plentiful other sources of credit.
Part of the selling was caused by CME raising margin requirements.
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This has also triggered higher margin requirements for those holding Italian bonds the effect of which is simply to encourage more selling, lower prices and higher yields.
Big banks and asset managers will have to do a better job of keeping track of margin requirements and the available stock of eligible collateral they have.
They have raised margin requirements for both silver and gold.
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The Fed foolishly left margin requirements too low, fueling over-speculation.
Increasing margin requirements would have a symbolic impact at best.
And gold has been made subject to 3 sets of rising margin requirements, making it more expensive to buy, because you are are having to put up more money.
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The CME Group hiked margin requirements four times in two weeks in silver, mandating that people who wanted to trade it needed to post a greater amount of collateral than before.
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The main reason why margin requirements make little difference to share prices is that most prices are set by institutional investors, and not, as popular myth suggests, by crazy day traders.
If my basic premise is right, the declining price will force traders to sell their commodities contracts to raise the cash to raise the extra cash needed to satisfy the higher margin requirements.
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Margin requirements are heading in the wrong direction.
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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.
Indeed, were it not for the feeling that the Fed ought to be doing something about share prices, there would be grounds for asking why, rather than leaving margin requirements unchanged since 1974, the Fed has not scrapped them.
When equity prices decline steadily as they have been these last few days, margin accounts get restricted and in the worst case, if cash or stock is not deposited to meet margin requirements, sales can be forced by the brokers to pay for margin debt used to buy the stock.
Asset purchases by the Fed normally lead to a multiple expansion of money since, at the margin, reserve requirements are only about 10 percent of deposits.
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