The Commodity Futures Trading Commission (CFTC) exempted non-financial end users from its margin requirements
, but the Federal Reserve and other banking regulators have taken the opposite position and plan to impose margin requirements
on end users by mandating that banks collect margin from end users with significant exposures.
The 50% margin requirement
(Regulation T) can be met with either stock or cash.
The KSE Chairman impressed upon the SBP Governor that since there has been a drastic drop in the value of share during the last two years, the margin requirements
of 50 per cent announced by the SBP be reduced to 30 per cent to enable investors to invest at current attractive levels.
Figure 1 plots stock market volatility and Regulation T margin requirements
For example, the current margin requirement
since the market crash is 20 percent in France, 40 percent in Sweden, and 50 percent in Japan (see Roll, 1989).
On March 26, the House of Representatives approved with strong bipartisan support (370-24) a measure that would explicitly exempt nonfinancial end users from the margin requirement
The risk management side however needs to be tracked which could prompt SECP to gradually phase out the cash margin requirement
The Hong Kong Mercantile Exchange also raised the margin requirement
on its gold futures contract on Aug.
In particular, the Fed has the power to order increases in the margin requirement
on broker loans, dampening stock market speculation.
With a view to encouraging capital formation and reviving the economy it has been decided to withdraw effective from 1st November 1999, the minimum margin requirement
for opening letter of credit for machinery and their spare parts.
He says imposition of an initial margin requirement
"will severely curtail the use of uncleared swaps for hedging, which would disrupt key financial services, such as those that facilitate wider availability of home loans and corporate finance.