Margin-raising is ineffective, as regards the big specs. Why? They'll simply move to SIMEX, DUBEX, Rotterdam, or London. Capital knows no borders.
What WILL cool out the big specs is the following:
1) Suspend Section 1056 of the IRS code specifically regarding big specs in energy mkts. (Explanation on request, it's somewhat technical.)
2) ERISA enforcement. This will remove, in very short order, ALL the pension-fund money that's currently in spec mkts.
3) Felony sanctions for position-limit violations. Right now, all the big specs get when they violate position limits (which some of them do routinely, btw) is a slap-on-the-wrist fine. Make it hard jail time.
4) A revision in daily trading limits, and a change of procedure when a daily limit is touched. (Again, technical, will explain at your request).
Given only the will, these four provisions could be executed in 30 days' time or less. Having been a futures trader since 1972, I guarantee you on my life that the mkts in which these are enforced will be cleared out of ''hot money'' and the overparticipation of the big specs in 2 weeks or less.
Could you give pointers or background on the IRC Sec 1056? I’m all ears, to quote H. Ross...
I completely and vehemently agree on enforcing the ERISA statutes. You and I both know that futures are risky, that huge losses can be had (as well as huge gains) and when funds like CalPERS get in there and lose huge amounts of money, they’re going to be hitting up the taxpayers (again!) to make them whole as a result of getting into markets where pension money has no business being.
Can you also explain the daily trading limits too? Or give me a pointer where I can learn on my own? Thanks
My god, some one that actually knows something.
Watch out, man. Your going to get a lot of abuse from the people that get their economics lessons from ayn rand novels and newsletters from da misses (van misses that is). I have to laugh on most of these economics and markets threads. Laughing keeps from screaming in terror.
I don't know how much of the trading is taking place in ERISA accounts, but retirement plans have no business in such volatile markets.
I'm so wrapped up in corporate tax returns, that I have no desire for new "technical" discussions. However, I do appreciate the offer.