Volatility prompts doubling of futures margin deposits

Initial margins on the NYSE Liffe market, where UK feed wheat futures contracts are traded, were more than doubled last week, reflecting market volatility and risk.

The initial margin deposit must be paid on each 100t lot bought or sold, and was increased from £720 to £1500 from 9 August. This is normal practice when volatility changes in futures contracts in order to cover large price movements, says the exchange.

In addition, users of the London grain futures market must pay daily margin calls of £100 per lot for every £1 movement in the market against their position. With high volumes and recent volatility, some of these daily margin calls are costing tens of thousands of pounds.