Comex silver futures add to losses
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) — China’s leading market for precious metals trading increased its silver margin requirements Friday to a fresh high amid heightened volatility in precious metals.
The Shanghai Gold Exchange lifted silver margin requirements to 18% of a contract’s value, up from 15% previously, according to data provided by ScotiaMocca, the metals unit of Scotia Capital.
It’s not clear when the new margin requirements come into effect, but a report by Reuters said it would likely be from Monday.
Reuters also reported that the margins would change further if price swings breach daily trade limits on Friday.
Brokers said the margin changes would affect Shanghai retail investors who have margin trading accounts.
“It is extraordinarily high — it’s higher than most other exchanges,” said ScotiaMocatta managing director Sunil Kashyap in Hong Kong, referring to the new margin requirements.
He said the hikes appeared intended to prevent sharp losses among small traders.
“It’s a continuing reaction to the problems that took place earlier this year in May and April and when there was extreme volatility in silver,” said Kashyap. “The exchange is a little bit skittish that we may have further volatility.”
The move appeared to drag on internationally traded Comex silver futures, as silver for December delivery traded down 1.1%, extending its retreat in early afternoon trading in East Asia.
The contract had tumbled 6.9% in regular Comex trading Thursday, joining a sell-off by gold and other commodities amid resurgent euro-zone worries.
Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.
Such a reaction on such a trivial thing is in itself a clear indication of the extremely weak hands at play in these markets. Call it manipulation or whatever, the fact is that the buyers were the weak hands in this market.
After all for every long futures positions there is a short position as well and margins are applicable to both!
The message is strikingly clear, yet others are in hope this economy has legs to stand on. Tsk, Tsk, Tsk.... They will be in my prayers,,,