Silver futures market has recently experienced some interesting changes. According to the latest segmented data on COMEX open interest, the net short positions of swap dealers (mainly banks) have been steadily declining and are now roughly balanced with the short positions of producers, both around 25,000 contracts. In contrast, long positions are mainly held by speculators and other institutional investors.

This situation is actually a bit different from the previous narratives of "shorts running rampant." When short positions no longer expand aggressively, another risk comes into focus—short squeeze. Simply put: producers need to find a rhythm between selling spot and paying futures margins. Once the funding chain tightens, they might get stuck.

Yesterday, the Chicago Mercantile Exchange (CME) took action. They changed the margin calculation method from a fixed dollar amount to a percentage of the notional value, set at 9% for silver. It seems like a significant reform, but looking back at historical data, this ratio isn't unreasonable; it’s roughly in line with the long-term average level.

CME's adjustment, in essence, aims to improve risk control on both sides—longs and shorts. Recently, price volatility has been frequent, with large swings demanding higher margin coverage. The exchange's responsibility is to ensure that all participants can replenish margins in extreme market conditions, preventing chain reactions of risk. This isn't favoritism toward one side but a fundamental aspect of market management.