cme increases margin requirements to 100%, page-8

comment posted here

http://www.zerohedge.com/news/cme-goes-margin-defcon-1-makes-maintenance-margin-equal-initial-everything?page=6

I think the letter is being badly interpreted. There will not be armageddon on Monday except in the wet dreams of die-hard survivalists.

The letter means:

1. Current Existing Products have "various" initial/maintenance ratios

2. NEW products are required to have 1.0 initial/maintenance ratios



For example at 03:17 am Saturday, this is the performance bond published at the CME website for crude oil:

http://www.cmegroup.com/clearing/margins/#e=NYM&a=CRUDE+OIL&p=CL

Initial is 8100

Maintenance is 6000

That is an Intial/Maintenance ratio of 1.35

These tables have to be updated fairly real time so the brokers can update their risk management parameters real time as well. They will not likely use advisory letters to run their SPAN (Standard Portfolio ANalysis) algorithms provided by the CME with manual input but rather downloads from the CME ftp website such as:

ftp://ftp.cmegroup.com/pub/span/data/

This agrees with the list that Tyler provided (if anyone actually looked at it!!!!!!!!!)

http://www.scribd.com/fullscreen/71646141

Look at the list tyler provided. Scroll down to the Crude Oil section. It agrees exactly with what I saw on the CME Website as of 11/5/11 03:17 am.

And finally, I get a Friday night update on my futures account at InteractiveBrokers. Guess what, my initial and maintenace margins are not at a 1.0 ratio! In fact, they dropped my overall requirement with the updated prices. So no indication of a change in ratios for CURRENT products! The 1.0 ratios are for NEW products, not CURRENT existing ones.

Instead, I wasted time jumping on a non-news item fearing the worst.

Bottom line. The interpretation that this is armageddon is a stretch. Yes the financial markets suck and yes financiers and politicians are crooks, and yes, civilization may be ending, but let's not be like Reverend Harold Camping who predicted the end of the world several times a year for the last 17 years!

Let's not cry wolf on every news item or misinterpretation thereof. Doomsday will come, but if we keep jumping on every news item as if its the bitter end already, when the end really comes, we might not be looking.