How Does the Margin Requirement on Futures Contracts Affect Manipulation Risk?

Margin requirements directly affect manipulation risk by determining the amount of leverage available. Lower margin requirements (higher leverage) increase the potential profit from a successful manipulation, making the market more attractive to bad actors.

High leverage allows a manipulator to cause a larger price impact with less capital, increasing the risk of price volatility and liquidation cascades. Conversely, higher margin requirements reduce the leverage, making it more expensive and capital-intensive to manipulate the market, thus reducing the manipulation risk.