Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Archegos was too busy for margin calls

bloomberg.com

Post reply on HN
Print view View original

31–40 of 78 posts

Re: Archegos was too busy for margin calls

#31

Post by bdonlan »

dang wrote: post #11

We changed the URL from https://www.credit-suisse.com/media/assets/corporate/docs/ab... , which is one of those annoying links that downloads a file, and the title from "Postmortem in finance: How Credit Suisse lost $6B [pdf]", which was editorialized. (Please read the site guidelines! https://news.ycombinator.com/newsguidelines.html ) A user suggested the Levine article as a better alternative, so we'll use that for…

The new URL (at bloomberg) seems to be paywalled. Is there an alternative link?

Re: Archegos was too busy for margin calls

#32

Post by robbiep »

bdonlan wrote: post #31
dang wrote: post #11

We changed the URL from https://www.credit-suisse.com/media/assets/corporate/docs/ab... , which is one of those annoying links that downloads a file, and the title from "Postmortem in finance: How Credit Suisse lost $6B [pdf]", which was editorialized. (Please read the site guidelines! https://news.ycombinator.com/newsguidelines.html ) A user suggested the Levine article as a better alternative, so we'll use that for…

The new URL (at bloomberg) seems to be paywalled. Is there an alternative link?

you can usually get one read out of it through incognito/private

Re: Archegos was too busy for margin calls

#33

Post by ajaimk »

dang wrote: post #11

We changed the URL from https://www.credit-suisse.com/media/assets/corporate/docs/ab... , which is one of those annoying links that downloads a file, and the title from "Postmortem in finance: How Credit Suisse lost $6B [pdf]", which was editorialized. (Please read the site guidelines! https://news.ycombinator.com/newsguidelines.html ) A user suggested the Levine article as a better alternative, so we'll use that for…

HTML version of the original PDF: https://www.sec.gov/Archives/edgar/data/0001159510/000137036...

Re: Archegos was too busy for margin calls

#34

Post by vmception »

Dlanv wrote: post #25
vmception wrote: post #5

If you’ve ever traded with anything better than Reg-T margin, you know this whole system is ripe for implosion. The leverage is insane! Reg-T (like the kind Robinhood has) doesn’t allow long options to be bought on margin. Other margining systems allow as low as 6% down even on options. And when you’re talking real money, your personal risk/compliance team understands their employment is contingent on looking the oth…

Can individuals access that sort of margin? The best I've seen is portfolio margin at some brokers. What's the name of the "margining systems" you are referring to?

portfolio margining does what I describe and has a regulatory minimum of $125,000 or so net liquidation value (portfolio size), SPAN margining can as well which is what the futures and futures options market uses at any portfolio size

so yes individuals can access both

the primary benefits are cross margining, using other assets to fulfill or calculate margin requirements for a new position

and portfolio margin requirements are easy to calculate, just take the loss at a 15% move and whatever that loss is becomes your current margin requirement, it is a 6% move for indexes (like S&P)

the way to get in trouble is by confusing the margining system and hiding exposure behind synthetic positions (example, a combination of derivatives to make it look like you are long stock)

Re: Archegos was too busy for margin calls

#35

Post by rtkwe »

SkyMarshal wrote: post #14
dang wrote: post #11

We changed the URL from https://www.credit-suisse.com/media/assets/corporate/docs/ab... , which is one of those annoying links that downloads a file, and the title from "Postmortem in finance: How Credit Suisse lost $6B [pdf]", which was editorialized. (Please read the site guidelines! https://news.ycombinator.com/newsguidelines.html ) A user suggested the Levine article as a better alternative, so we'll use that for…

A little hopefully constructive feedback: 1. The original link was to the source, which I would think would take precedence over a second-party review of it, even a skilled one like Levine's. 2. The source's actual title is "Credit Suisse Group Special Committee Of The Board of Directors Report On Archegos Capital Management" . The editorizialized title ""Postmortem in finance: How Credit Suisse lost $6B [pdf]" isn't…

> 1. The original link was to the source, which I would think would take precedence over a second-party review of it, even a skilled one like Levine's.

A 170 page report isn't a really useful thing to drop on anyone especially if they don't already know what's happening. This article has a good summary of what happened and includes a link to the report if you want to see it.

Re: Archegos was too busy for margin calls

#37

Post by rtkwe »

fny wrote: post #26

Can someone provide color as to why this was such a discretionary process? If I get a call from my broker, and I don’t post collateral, I’m liquidated immediately. I’d at least expect a fixed date which triggers liquidation if you catch someone picking their nose. Also, I find it hilarious that this whole thing was bound to blow up after the recent Chinese regulatory crackdown anyway.

There's the saying of "if you owe the bank $100k you have a problem but if you owe the bank $100 million they have a problem." You're small enough fish you don't have a nearly dedicated person who's bonus and compensation is tied to keeping you from taking your pile of cash and going somewhere else. Individually your business and risk mean basically nothing to your broker most likely.

Re: Archegos was too busy for margin calls

#38

Post by fny »

huitzitziltzin wrote: post #30
fny wrote: post #26

Can someone provide color as to why this was such a discretionary process? If I get a call from my broker, and I don’t post collateral, I’m liquidated immediately. I’d at least expect a fixed date which triggers liquidation if you catch someone picking their nose. Also, I find it hilarious that this whole thing was bound to blow up after the recent Chinese regulatory crackdown anyway.

Do you have multiple billions of dollars at stake with the broker? If yes: he might annoy you enough with his impertinent margin demands that you go elsewhere, which makes his boss Very Unhappy. If no: his boss has never heard of you. Also it sounds like liquidating many of these positions would be no easy feat, when they represented 3-5 days mean trading volume in the underlying asset.

If I have multiple billions at stake, I would assume my broker would be even more demanding of responding within a time frame. Note, I'm not calling for automatic liquidation, but rather some timeframe wherein discussions must be held or else the posted collateral is seized.

Re: Archegos was too busy for margin calls

#39

Post by rtkwe »

huitzitziltzin wrote: post #30
fny wrote: post #26

Can someone provide color as to why this was such a discretionary process? If I get a call from my broker, and I don’t post collateral, I’m liquidated immediately. I’d at least expect a fixed date which triggers liquidation if you catch someone picking their nose. Also, I find it hilarious that this whole thing was bound to blow up after the recent Chinese regulatory crackdown anyway.

Do you have multiple billions of dollars at stake with the broker? If yes: he might annoy you enough with his impertinent margin demands that you go elsewhere, which makes his boss Very Unhappy. If no: his boss has never heard of you. Also it sounds like liquidating many of these positions would be no easy feat, when they represented 3-5 days mean trading volume in the underlying asset.

In a quote from the report it says it would have taken two weeks to a month to liquidate their positions just at Credit Suisse.

Re: Archegos was too busy for margin calls

#40

Post by vasco »

dang wrote: post #11

We changed the URL from https://www.credit-suisse.com/media/assets/corporate/docs/ab... , which is one of those annoying links that downloads a file, and the title from "Postmortem in finance: How Credit Suisse lost $6B [pdf]", which was editorialized. (Please read the site guidelines! https://news.ycombinator.com/newsguidelines.html ) A user suggested the Levine article as a better alternative, so we'll use that for…

Why do you change URLs instead of submitting the one you like instead as a regular user and let upvotes decide? I appreciate and am thankful to the effort you put into moderating HN, but the user did not submit this URL and changing it from under them is super weird, even with a comment explaining it. Not only that you changed it to a paywalled link which is simply bad form.
Post reply on HN