Yesterday, in what is the worst-phrased and most misleading press release to ever come out of the CME, the exchange issued a notice that going forward all
Initial margin would be equal to Maintenance margin. Our gut interpretation was that "Unless we are completely reading it incorrectly, it is nothing short of a margin call for tens if not hundreds of billions worth of product." Judging by the broad response, our initial reaction is what a prudent,
logical human being would assume: after all, it is precisely the undercollateralization of customer accounts, and general underfunding at MF Global that is what brought that particular company down. Well, we wrong wrong. The CME, it appears has taken a page right out of the European playbook, and less than a week after an exchange-cum-Primary Dealer collapsed due to excessive risk taking, the CME has followed up its vague press release from yesterday by
inviting even more risk in
lowering the initial margin. Why is this a cause for even greater concern? As the CME itself says,
"Initial margins are set to provide an additional buffer against future losses in the account" - so going forward that buffer has been reduced by about 30%. But what is the reasoning provided by CME: "
The intent and effect of these changes is to decrease the size of any margin calls resulting from the bulk transfer of MF Global customers to new clearing members, not to increase them." So basically the CME is implicitly putting all of its existing and current clients and customers at
further risk by onboarding the accounts of those clients who, like lemmings, held on to their MF Global accounts until
after it was too late. Because while the lower Initial margin may apply to MF accounts, it will
also apply to any Tom, Dick and Harry beginning Monday, who will suddenly see a
30% reduced gating threshold to put on a position. Any position, no matter how risky.
... quindi saliranno 
