Maintenance margin Deutsche

A recent survey of asset managers globally, managing USD 27.4 trillion between them, found that 78% of defined-benefit plans would need annual returns of at least 5% per year to meet their commitments, while 19% required more than 8%, "a target of 5% per year can be reached but only by using leverage, shorting, and derivavtives." And sure enough, as Deutsche Bank (DB) reports, in short, investors have rarely been more levered than today! According to DB, a MoM change in NYSE margin debt >10% has to be taken as a critical warning signal as there are astonishing similarities in the sequence of events among all crises. As the S&P 500 just hit a new all-time high, investors might want to ask themselves when it is a good time to become more cautious – yesterday, in our view. Simply put, the higher margin debt levels rise, the more fragile the underlying basis on which prices trade; with even a less severe sell-off in equities capable of triggering a collapse.

Deutsche Bank Special Topic: Red flag! – The curious case of (NYSE) Margin Debt

A recent survey by the Create consultancy of >700 asset managers globally, managing USD 27.4 trillion between them, found that 78% of defined-benefit plans would need annual returns of at least 5% per year to meet their commitments, while 19% required more than 8% - far higher than reasonable projections. Institutions are also taking on more risk. According to a fund manager, “a target of 5% per year can be reached but only by using […] LEVERAGE, SHORTING AND DERIVATIVES.”

This special topic focuses on the critical development of margin debt, a term commonly understood as a tool used by stock speculators to increase their winnings. Investors borrow money from brokerages to buy more stock than they could otherwise afford on their own. If the stock rises, they end up making far more money than they would without borrowing. If the stock crashes, the opposite materializes. This kind of speculation is highly alarming as a large amount of margin debt makes the market vulnerable and, potentially, highly volatile. If a drop in stocks causes nervousness for regular investors, it can cause panic among those who rely on stock gains to pay off high-interest loans on margin debt. These loans are collateralized by stock holdings, so when the market goes south, investors are either required to inject more cash/assets or become forced to sell immediately to pay off their loans – sometimes leading to mass pullouts or crashes. None of the statistics shown in this report are cause for panic considering that corporate fundamentals, like earnings, are still relatively strong. But they are worrisome. Comparing press articles around 1999/00 (NM), 2007/08 (GFC) and 2013 YTD reveals an astonishing degree of congruence between the two major equity sell-offs and today, where the discussion on margin debt embedding the peaks in equity markets takes centre stage, again.

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Self-Regulatory Organizations; ICE Clear Europe Limited; Order Granting ..  — Insurance News Net
ICE Clear Europe states that the changes to the Risk Policy amend the calculation of CDS initial margin requirements to comply with margin requirements under EMIR Article 41 and Article 24 of the implementing Regulatory Technical Standards. /5/ ICE ..

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Popular Q&A

avatar
What are the margin requirements for commodity trading?

A person at Scottrade told me that you must have 1 million dollars in a margin account to trade commodities. Was he blowing smoke somewhere, or is this correct?

He's blowing smoke big time.
Most traders start with $10,000.
Margin is determined by the contract you want to trade.
Oil margin currently is around $10,000 per contract.
Corn is around 3,000.
If you really want to learn how to trade commodities from a 35 year veteran I suggest you go to
The guy know what he's talking about and trades commodities the way they should be traded. (so you can sleep at night)

avatar
What is a margin in commodities trading?

A margin in commodities trading, is the amount of money you have to deposit in your brokerage account before trading a futures contract. The margin amount varies on each commodity and fluctuates with the volatility of the markets.
There is an initial margin amount required when entering a contract and "maintenance" margin amount that must be kept in the account at all times during the contract holding period, which is typically lower than the initial margin.
The balance of your account will fluctuate with gains and losses on the contract and if the balance falls below the "maintenance m…

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