Margin requirements, price fluctuations, and market participation in metal futures.

Journal of Money, Credit & Banking | August 1, 1995| | Copyright

THE OCTOBER 1987 STOCK MARKET CRASH renewed interest among regulators and economists in using margin requirements as a tool of controlling excessive speculation in cash and futures markets. For example, the 1988 Brady Report's recommendations of consistent margin requirements across related markets led to a heated debate on the desirability of permanently higher margins in futures contracts. Permanently higher margins would be desirable only if they enhance the efficiency of the price mechanism by reducing mispricing and excess volatility. However, economic theory does not make ...

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