The CME Group, the U.S. exchange operator, has raised its margin requirements for trading copper futures effective after the close of business on Thursday. This move comes as copper prices have hit record highs this week.
The CME Group has increased the outright margins on copper futures by $500 to $5,000 per contract, according to a notice from the exchange’s clearing house.
The decision to raise margins follows reports that commodity traders Trafigura and IXM were seeking physical copper to cover large bearish positions on the CME exchange. This demand contributed to the surge in U.S. copper futures, with May Comex copper futures hitting a record high of $5.18 per pound on Wednesday.
As of Thursday at 0905 GMT, May Comex copper futures were trading at $5.02 per pound, up 1% and having surged by 30% so far in 2023.
By increasing the margin requirements, the CME Group aims to make it more costly for traders to take on large positions in the copper futures market, potentially helping to curb the recent price rally.
Margin requirements are the amount of collateral that traders must put up to hold a futures contract. Raising these requirements can help to reduce speculative activity and improve market stability, especially in times of high volatility.
The move by the CME Group underscores the ongoing strength in the copper market, driven by factors such as tight supply and strong demand, particularly from the energy transition and infrastructure sectors.