With little fanfare or notice, the CME Group has notified the CFTC that they plan to institute trading collars for Comex precious metals trading. At present, these collars are planned to go into effect on Monday, December 22.

Trading collars or "limits" are certainly not out of the ordinary. In the commodity markets, they have long been in place to limit the daily fluctuations of the grains. In S&P futures, collars have existed for years, brought about in large part by The Crash of 1987.

However, introducing these bands for the precious metals is completely new, as far as I can tell. And you'll note that these collars are only being implemented now, with prices at their bottoms. Wouldn't it have been nice to have trading collars in place back on May 1, 2011 or April 15, 2013?

I guess, ultimately, that leads us to the main question:

WHY NOW?

David Fuller's view

Be very careful with leveraged positions in these international commodity markets, because the game has changed.

The biggest risk is being either long during short-term overbought conditions, or short during short-term oversold conditions because you are being watched by the predatory HFT machines.  It is more dangerous to trend run in commodities which are internationally traded, in my opinion, than at any time during the last century.  Yes, we can still see the price action, but otherwise we are blind relative to the HFT machines.  With the ability to place and withdraw thousands of orders within microseconds, they will know far more about the persistence of supply versus demand.  Most crucially, they will see more quickly when demand or supply has been temporarily reduced to a point where it can be quickly exhausted.  HFT machines will also be able to see where limit buy and sell orders are.  These are tempting targets for the fast moving machines. 

The real trading battle is no longer between individuals and the HFT machines.  It is now largely between the machines themselves.  Unleveraged investors are least affected by this environment, especially if they use a medium to longer-term buy-low-sell-high strategy, expecting volatility to be the norm rather than the exception.   

Investors in ETFs and most individual shares are generally less susceptible to the percentage swings evident in gold and silver, even though HFT is evident in most markets.  However, these firms know that they are increasingly under the scrutiny of better informed regulators.  Additionally, speed of access has often been reduced to level the playing field.