As of April 29, 2011, those that had borrowed to go long silver futures were in the money and reaping profits. Why would the CME Group have any concerns whatsoever that these investors could pay back the margin loans related to long silver positions? The only way the CME group could jeopardize the collectibility of this margin was to do something dramatic, forcing a portion of their customers to sell their long positions under the confusion and uncertainty of 5 margin increases in 8 days. My opinion is that the CME group sent a clear message....the message being that they would raise margin requirements until the price of silver corrected. The CME Group or whoever they answer to was simply not going to allow the silver price to go up anymore, at least in the short term! This was the case despite the fact the CME Group's long customers were benefitting greatly from the price appreciation. This should have been a win/win situation as silver's rising price was enhancing the customer's ability to repay the margin borrowed from the CME Group.

Let's contrast this to the real estate industry. Mortgage Lenders allow home buyers to buy homes on "margin". Imagine for a moment that home values appreciate nicely causing the Mortgage Loan to Value ratio to improve, benefitting both the home buyer and the Mortgage Lender. Now, imagine what would happen if the Mortgage Lenders informed their borrowers that they needed to increase their down payment! Imagine the Mortgage Lenders did this 5 times in 8 days. Such action by the Mortgage Lenders would force real estate sales, cause the Mortgage Loan to Value ratio to worsen and cause foreclosures to increase. A major financial mess would ensue. The public outcry would be deafening as such conduct would be viewed as anti-American.

Next, let’s contrast this to the stock market. Wall Street and Brokers allow customers to buy stocks on "margin". Imagine for a moment that stock values appreciate nicely, benefitting both the investor and the Broker. Now, imagine what would happen if the Broker informed their investors that they needed to increase the margin requirements related to the appreciated stock positions. Imagine the Brokers did this 5 times in 8 days. Such action by the Brokers would force stock sales, cause the stock market to sell off. A major financial mess would ensue. The public outcry would be deafening as such conduct would be viewed as anti-American.

There is something very wrong in the world when those who have made major investment errors are assisted by a change in the rules. As of April 29, 2011, those that had borrowed to go short silver futures were in losing trades, jeopardizing their ability to pay back the margin loans related to their short silver positions. One of many questions that the CME group needs to answer is why did the CME Group’s 5 margin increases in 8 days not impact those short silver futures the way it impacted those long silver futures? How is it possible that the CME Group’s margin increases caused huge volatility when they should have reduced volatility?

The CME Group must address the increased volatility caused by their conduct. There is much going on here and hopefully this event will bring attention to the CME Group and their practices.