Wondering what caused the dramatic plunge in gold and silver earlier?
Wonder no more: the CME’s counterpart in China, the Shanghai Gold Exchange, decided to follow through with an identical, if more substantial, action to that undertaken by the CME on Friday, and announced an increase in the Silver T+D contract margin from 15% to 18%, a 20% bump; the SGE also noted an increase in the price range limit from 12% to 15%, which will be promptly fulfilled, as margin hikes traditionally tend to lead to a sudden spike in vol, contrary to well-meaning expectations.
There was a second announcement, slightly more cryptic one, noting that if volatility were to persist, the SGE would outright halt silver trading (although the Google Translation of this previously unseen form announcement is a little sketchy).
Expect to see more exchange intervention in precious metals today. Regardless, those who bought silver 15% lower a whopping, oh, two hours ago, courtesy of the out and out sheer panic, are quite grateful to the Chinese.
The Margin hike announcement – link:
Member Unit: silver Ag (T + D) contract Sept 23 close to seal the lower limit. According to “Shanghai Gold Exchange Risk Control Measures” of the relevant provisions, such as Ag (T + D) contract on Sept 26 (Monday) close to limit the same direction (ie, a second consecutive unilateral City), end of the day from the date of liquidation from the Ag ( T + D ) contract margin increased from 15% adjusted to 18% , the next trading day Ag ( T + D ) contract price limits range limit from 12% adjusted to 15% .
And the more cryptic one – link:
Silver Ag (T + D) contract Sept 23 close to seal the lower limit. If Sept 26, Sept 27 days Baiyin Yan swap transactions to limit the same direction, namely to reach the daily limit for three consecutive days, there will be the third consecutive unilateral City. According to “Shanghai Gold Exchange Risk Control Measures,” the relevant provisions of Chapter II, once the third consecutive unilateral City, Spet 28 Exchange will suspension of silver Ag ( T + D ) the contract day, and the implementation of the following two measures to resolve any of the market risk.
Measures one: 9 months 28 days to decide whether to take unilateral exchange or bilateral, in the same proportion or in different proportions, some members or all members to improve trading margins, some members or all members suspended new positions, adjust the up (down) circuit breakers rate to restrict some or all members of the withdrawal of funds, the deadline open, forced open, suspension and other measures to resolve in one or more of the market risk. Exchange of relevant measures will be Sept 28 12 -point first through the exchange website, Spet 28 at end of day settlement will go into effect.
Measures II: Setp 28, the Exchange’s trading positions held by members of Baiyin Yan period open for an agreement. Specific methods are: Exchange of the Sept 27 (third unilateral City) daily limit price at closing time to declare the transaction Baiyin Yan swap transactions did not open declaration to Sept 26 (second unilateral City) settlement The contract price and the net profit of customers by profitability position to match the size of the transaction, not in Sept 27 to declare open daily limit price does not enter the agreement positions open range. Recommended to prepare closing out of long positions will, in Sept 27 prior to the closing price to sell positions to declare the daily limit, once the exchange using measures two positions will serve as a basis for agreement. Positions held by the same customer-way, the first level their positions, then the method open.
City in the event of three consecutive cases of unilateral, which measures the specific use, the exchange will be based on market conditions, in the Sept 28 12 -point first through the exchange website, please access the Member in a timely manner, and to prepare preparations.
Such as Sept 27 closed, the Bai Yinyan swap transactions did not appear for three consecutive unilateral City, Sept 28 normally open for trading, and maintenance margin ratio 18% , Change stop range limit of 15% unchanged.
Exchange Special Note: As the silver market price volatility and uncertainty of exchange to take measures, in order to safeguard the interests of investors in their own, reminding investors carefully about the risks of exchange control measures, prudent market.
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