By Nicole Friedman
NEW YORK--Exchange operator CME Group Inc. (CME) lowered the
amount of collateral required to trade the benchmark natural-gas
futures contract on Thursday, as daily moves in the market quieted
down from wild price swings seen earlier in the year.
CME, which owns the New York Mercantile Exchange, said
natural-gas margins for the front-month contract will be reduced by
25%, effective at the close of trading on March 14, in a notice
emailed Thursday.
Speculative investors in one benchmark natural-gas contract must
now put up a deposit of $3,300 to open a position and maintain
$3,000 of that to keep that position overnight. That is down from
the previous initial margin of $4,400 and maintenance margin of
$4,000.
Exchanges often boost so-called margin requirements after
periods of volatile trading. Margins are intended to cover 99% of
the possible price moves within a trading day or multiple trading
days, according to CME.
The CME raised the amount of collateral required to trade
natural gas several times this winter as the market grew
increasingly volatile in response to unusually cold weather, which
boosted demand for the heating fuel. Front-month natural-gas prices
moved 5% or more on 16 days in January and February. This month,
prices have yet to move 4% or more in a single day.
Natural gas for April delivery settled down 10.7 cents at $4.383
a million British thermal units on the New York Mercantile
Exchange. One contract consists of 10,000 mmBtu.
Write to Nicole Friedman at nicole.friedman@wsj.com
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