Contracts for Difference Margin Calls 17 August

Apologies if this has been discussed before.

Has anyone knowledge of what happened with Irish CFD margins last week. My knowledge is hearsay but I understand that Cantor Fitzgerald doubled the margin call % for Irish investors last Thursday night (10% to 20%). This was only imposed on Irish investors and that obviously says something about the credit rating of our nation.

A CFD is an equity derivative that allows you to take a leveraged long or short position in a stock. By posting €10k you can buy €100k of a stock. If prices increase by 10% you get a 100% return. However as the equity markets have been falling, it onlyt takes a 10% fall to wipe you out.

As a result of the margin increase the CFD holders got a call on Friday morning telling them to post further cash to their accounts or their positions would be closed out. Two things happened here, it being August many people were on holidays and did not get the call and therefore were closed out, others faced demand for amounts that they could not raise and hence were closed out. I heard stories of individuals being asked to post €20k to €100k, obviously that is a lot of money for anyone to have in cash and cars and paintings could not be sold quick enough. No bank manager is going to give you a loan to close out a loss.

If you remember last Friday was when the Fed cut its bank rate. European stocks opened low and the CFD investors got closed out at a loss in the morning. Then the Fed cut the bank rate in the afternoon giving the equity markets a bounce - too late for the savvy Irish investors.

I think a few people learned what it was like to play by big boys rules and are now nursing some hefty loses.
Tried googleing this and could not find anything but I did learn about some one who defaulted on a €1m loss incurred on CFDs on Elan a few years back.

London based friend advised me that usage of CFDs in Ireland is proportionately 10 times that in the UK. In my experience its my mates who give much of their money to Paddy Power who play with these rather than those who invest professionally.

Apologies for the simplistic explanation above, these are not instruments that I am particularly familiar with and I welcome any corrections.

yup, margin was doubled in size, ppl given 24 hours to post cash or collateral on which to borrow from c.fitz.

markets are hot like a shit storm…there is an unbelieveable amount of money being loss if you look at the MTM…the IRS markets are nuts, hedgeing spreads are crossing and recrossing, in other words, no body is certain of whats going on, and alot of banks have very large unrealised losses, very very large ones, bear stearns in particular and lehmans, but most investment banks and pension funds have xposure to this mess…

but the loss is only an actual loss if the position is closed out and most traders are keeping their positions open, albeit that their mtm are dropping slowly but surely,

so, do you cut and run or hope that things return to normal, well that volatiltiy reduces…