Interactive Brokers Sent Out This Today:


Aug 03, 2011 10:43 EDT

NOTIFICATION - Margin Increase on Silver Derivatives

In light of recent unprecedented volatility in silver markets, the exchanges that offer trading in silver derivative contracts are increasing the margin requirements on these products. In an effort to adequately address the inherent risk resulting from this volatility, IB is increasing margin requirements on silver derivative contracts to a level exceeding that which the exchanges are implementing.

Please monitor and manage your risk accordingly.

Interactive Brokers Customer Service

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To Refresh Your Memory, Here's What They Said Back in May:


To NYMEX,NYSELIFFE traders:
Wed May 4 10:50:37 2011 EST
Margin Increase: Silver Derivatives
In light of the recent unprecedented volatility in silver markets, the exchanges that offer trading in silver derivative contracts are increasing the margin requirements on these products. In an effort to adequately address the inherent risk resulting from this volatility, we are increasing margin requirements on silver derivative contracts to a level exceeding that which the exchanges are implementing.

You will be notified as more information becomes available.
Please monitor and manage your risk accordingly.

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So... Are we going to get another 25% discount window? Or are we going to see their weapons fail the second time around? I eagerly await the opinion of the Bulls here. Right now, I don't like it.

With Citibank calling for $100 silver earlier, and now this... I don't know which banking oligarch to believe.

Interesting post, Joel!

In fact, because of the utter lack of transparency in the derivatives market we can only GUESS at what is really taking place here.

Note that IN THEORY such margin restrictions SHOULD be extremely bullish for silver. We MUST assume that the ratio of short-versus-long "bets" in the silver derivatives run at about 100:1 (or more) in favor of the shorts, thus the margin increase SHOULD hammer the shorts more than 100 TIMES as hard.

Of course for this announcement to be "bullish" for silver involves making an ENORMOUS assimption: that the rules will be ENFORCED for longs AND shorts.

Note that when margin requirements were raised for REGULAR silver trading (i.e. contracts SUPPOSED TO be backed by actual metal) that this SHOULD have also impacted the shorts.

My own presumption is that the CME Group (like ALL other corrupt, U.S. regulators/administrators) ONLY enforces rules against the banksters COMPETITORS and/or "enemies" (i.e. the longs).

Thus, while this move in the silver derivatives market SHOULD send silver soaring toward that $100/oz figure you quoted, IF the rules are only enforced against LONGS, then we COULD actually see a modest pull-back in the sector.

LOL !!!!!!!!!!!!!!!!

Just remember what I keep telling people each time these criminals commence another "operation": DON'T curse them!! Just open your wallet, BUY some of the suddenly-cheap silver - and then have a good LAUGH at the fabulous BARGAIN which the banksters provided you with...

Seems to have made no difference to the silver price overnight: still gently climbing.
I'm not sure how this plays out with derivatives, but surely the margin increase back in May means that there's little scope left for further increases and anyone who was living with the previous increase is unlikely to be a forced seller this time around.
If the market in paper silver is so much greater than physical, how much extra does a trader have to pay not to take/provide physical delivery? Is there another hidden market here where ever-increasing non-delivery premiums are having to be paid?

Wow, crazy stuff. Silver is really volatile.....um not really, it's been going straight up for the past month. How does that equate to volatility? LoL

Whoever is steering the boat is heading for a big surprise...

Norbull, if I previously created some confusion about "margin" levels, then my apologies.

The fact is that even at the PEAK of the CME Group's margin-raising madness the actual requirements on a Comex contract required less than 10% of the amount of the contract to be posted.

This has to do with two factors. First, the general "margin requirements" at the Crimex are insane: between 1% and 2% on most contracts. Thus when the silver margin requirements were jacked-up, though they DID reduce the level of margin considerably in PROPORTIONATE terms, in ABSOLUTE terms the margin requirement is STILL quite low.

Note that the LUNATICS who run this futures market do NOT post margin requirements as PERCENTAGES. Rather, the required margin to post on a contract is a straight dollar amount. What this means mathematically is that ANY/EVERY time that a commodity rises in price that "margin" INCREASES automatically - because that dollar figure represents a steadily smaller and smaller percentage.

Thus AFTER a big run it would be quite NORMAL for the CME Group to raise the margin requirement ONCE.

Understand HOW the scam was perpetrated in May. First the shorts DROVE UP the price of silver radically - through their own short-covering. But the CME Group did NOTHING until the shorts had ran-up the price all the way to $50. At that point the CME Group emerged from its SELF-INDUCED COMA, and claimed that it had to MAKE-UP for its own NEGLIGENCE - by raising margin requirements SEVERAL TIMES.

The problem with that LIE is that silver prices were FALLING STEADILY after the first margin hike - and thus the level of margin was also falling steadily. This price-action meant there could be NO POSSIBLE JUSTIFICATION for any of the other FOUR margin-hikes.

As I pointed out yesterday, in HONEST markets raising the margin requirement on silver DERIVATIVES should be BULLISH for silver prices - since the derivatives are likely stacked roughly 100:1 (or more) in favor of the shorts.

Thus if the derivatives market were managed HONESTLY, then increasing the margin on silver derivatives would drive UP the price of silver. Of course, we know that at the Comex IF "honesty" ever occurs that it is COMPLETELY by accident.

This is why I said it would not surprise me if raising the requirements for silver derivatives pushed the price DOWN slightly - since if the rules were ONLY enforced against the "longs" (which is what I suspect) then it would tend to put downward pressure on the price

Thanks for that explanation Jeff.
Silver has taken a 7%+ plunge this afternoon. Just another buying opportunity!

Lol, Norbull!

I had to head out for a couple of hours just as the markets were doing their REAL nose-dive, so I had to wait until I got home to find out the "reason" for the sell-off.

"Fear" was the best these liars could do???

NOTHING happened today. A few U.S. corporations "missed" on their earnings (which is a fairly regular occurrence) and all of a sudden WE are supposedly "in a panic".

Today's move was at least 80% illegal trading algorithms, and then 20% Pavlov's Dogs responding to the "cue" given to them. Note something I've said again and again: in the "panics" EVERYTHING goes down.

Understand what is really happening here. U.S. markets had been pumped-up absolutely as high as they will go. So the market-riggers on Wall Street could no longer make money "long", thus it was simply a matter of waiting until they decided to "whiplash" investors (including all of their own clients).

Since the clients are NEVER told that these criminal Oligarchs are SHORTING AGAINST THEM, they can even USE their clients money to get particular stocks ESPECIALLY over-extended - and then short the hell out of them.

There are two scenarios now (unless/until more "official" Bernanke money-printing):

1) "Crash" the markets, similar to '08. I've rejected this scenario on many occasions, as it is the BANKSTERS who would be hurt even more badly, and PRECIOUS METALS which would hold up much better. However, as I always remind people: these are PSYCHOPATHS, and thus never completely predictable.

2) VERY "choppy" markets. Up 300 points one day, down 300 the next. In other words, instead of trying one "big short" (which would likely blow-up in their faces), they are just going to opt for "death by a thousand cuts" - whipsawing retail investors again and again and again...

Just so we're clear here: the 300 point moves (or close to it) that I'm talking about are NOT going to be "panics". There will be OCCASIONAL days like today, but the majority of these massive swings will be dubbed "volatility" by the talking heads (but never "manipulation - LOL!).