Margin Requirements: What They Mean For Commodities Market
This post is from CNBC energy producer Judy Gee.
Recent volatility for grains and oilseeds have increased significantly. And that's drawn increased market scrutiny along with it, sparking an initiative for wider trading limits from the CME. The CFTC (Commodity Futures Trading Commission) gave its stamp of approval, making the changes effective today after the close.
As for all the talk of margin requirements, CNBC's own Rick Santelli at the CBOT clarifies the issue, saying the story is about market movement and an increase in limits, which translates into a commensurate increase in margins.
While it's no secret that agricultural commodities are rising, the action behind the scenes of recent price volatility is much more mystic. While wider trading limits and subsequent increases in margin requirements make it more expensive to get into the business, the increase in limits allows the market to move.
As for the next stop, Dennis Gartman thinks it might be energy. The NYMEX is already boosting margins on natural gas today, and boosting the requirements for other energy futures may certainly follow.
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