CME Exec: Margin Increases Didn't Cause Silver Slide (SLV, SLW, AG, AGQ)

Despite increasing margin rates in silver futures contracts four times over the past couple months, Kim Tyler, president of CME Clearing said the margin increases were not responsible for the slide. Last week, silver plunged, dropping nearly 30% over the past week, as speculators, traders, and investors rushed to the exits as the precious metal, along with other commodities fell precipitously. "I don't agree that the margin change was a trigger for changes in the market," said Tyler, president of CME Clearing. "The market is well tuned so that if there's a market move that approaches or exceeds our volatility limits", market participants should expect a rise in the margin requirements, Tyler said. "We try to make changes in a way that we can telegraph to the market, so that participants have notice. We try to be routine and predictable and provide no surprises. When market conditions become more volatile we would increase margins in anticipation of that, and when volatility decreases we don't want to create unnecessary capital costs. We try to be proactive with either something we can measure or something we can judge to likely effect our markets, " Tyler said. On Thursday, the CME announced a margin increase of approximately 13%, enforceable on Friday. Due to the short notice time, silver SLV prices plunged, dropping 12% in 11 minutes during Asian trade. Silver is up sharply this morning, gaining approximately $1.40 an ounce to around $36 per ounce. As traders digest the recent margin hikes in the precious metal, plenty of silver related equities and ETFs have come down in price. If you believe that silver prices will start to rebound higher, names like Silver Wheaton SLW, First Majestic Silver Corp. Ordinary Shares AG, and ProShares Ultra Silver ETF AGQ should do well.