UPDATE: CME Cuts Margin Requirements On Crude-Oil Futures

CME Group Inc. (CME) cut the collateral that traders must put up to trade its main crude-oil futures contract Thursday, a move the exchange operator attributed to a drop in volatility.

Speculators must now put up an initial margin of $8,100 to trade a contract for light, sweet crude oil on the New York Mercantile Exchange, down from $8,438. To keep the contract open overnight, traders must maintain $6,000 of that initial margin, down from $6,250.

CME, which owns the Nymex, also cut both the initial and maintenance margin requirements for hedgers and exchange members to $6,000 from $6,250.

Exchange operators often change margin requirements in response to volatility levels. A drop in volatility can reduce the risk of big losses due to price swings, so exchanges sometimes reduce margin requirements in response.

Despite the reduction, margin requirements are high by historical standards. A year ago, speculators had to put up $5,062.50 to trade a contract of benchmark crude.

Oil futures on the Nymex have moved little from a range between $80 and $90 a barrel over the last three weeks. Many traders have remained on the sidelines awaiting more clarity on the future of Libya's crude-oil exports and possible additional stimulus measures from the Federal Reserve.

The front-month October contract settled up 14 cents, or 0.2%, to $85.30 a barrel Thursday.

-By Dan Strumpf, Dow Jones Newswires; 212-416-2818; dan.strumpf@dowjones.com.

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