Margin requirements and futures activity: evidence from the soybean and corn markets

Hartzmark's model for future demand is used in assessing the impact of margin requirements on the activity and volatility of futures markets using data from the soybean and corn markets. Results indicate that as contracts mature, trading becomes more sensitive to margin changes. This finding negates the observation that margins present significant opportunity costs for futures traders. Moreover, it has been noted that margins have a negative effect on the trading activities for all types of traders.