4 ms·

IB's CEO was interviewed on CNBC, and he actually said that his motivation was to "protect the market" ... specifically large players important to the market, w

by bhk 6y ago

IB's CEO was interviewed on CNBC, and he actually said that his motivation was to "protect the market" ... specifically large players important to the market, whose solvency was threatened by the short squeeze. "... we are concerned about the financial viability of intermediaries and the clearing house." https://streamable.com/tfg1ow https://streamable.com/tfg1ow

adrr 6y ago
That is really scary. If few of them go under, what happens to the market in terms of liquidity?
- bhk 6y ago
  A year old, but on point... https://www.russellclarkim.com/marketviews/russell-clark/2019/11/clearing-houses-and-initial-margin https://www.russellclarkim.com/marketviews/russell-clark/201... > There is no doubt that a default by a clearinghouse member is more likely when initial margins are low and may be caused by a sharp unexpected move in the underlying markets. In the event of a default by one member this could trigger a chain reaction. Firstly, initial margins will rise in an event of a default, which will restrict other trader’s ability to participate in the market possibly acerbating the move in the underlying markets. Secondly, if the defaulting member was a particularly large player in one asset (likely, as this would be the cause of the default), the members with opposite positions may not receive variation margin and hence will become unhedged at the very moment they need hedging. Thirdly, the clearinghouse may well have to recapitalise itself from the surviving members. Major clearinghouse members (including JP Morgan) appear to be seriously worried about a clearinghouse problem after the default by a member of Nasdaq Clearing AB ..." Be careful out there. :-)
nayuki 6y ago
Much better quality but shorter length: https://www.youtube.com/watch?v=7RH4XKP55fM https://www.youtube.com/watch?v=7RH4XKP55fM (uploaded by CNBC, so might get deleted someday)

by bhk 6y ago

adrr 6y ago

That is really scary. If few of them go under, what happens to the market in terms of liquidity?

bhk 6y ago
A year old, but on point... https://www.russellclarkim.com/marketviews/russell-clark/2019/11/clearing-houses-and-initial-margin https://www.russellclarkim.com/marketviews/russell-clark/201... > There is no doubt that a default by a clearinghouse member is more likely when initial margins are low and may be caused by a sharp unexpected move in the underlying markets. In the event of a default by one member this could trigger a chain reaction. Firstly, initial margins will rise in an event of a default, which will restrict other trader’s ability to participate in the market possibly acerbating the move in the underlying markets. Secondly, if the defaulting member was a particularly large player in one asset (likely, as this would be the cause of the default), the members with opposite positions may not receive variation margin and hence will become unhedged at the very moment they need hedging. Thirdly, the clearinghouse may well have to recapitalise itself from the surviving members. Major clearinghouse members (including JP Morgan) appear to be seriously worried about a clearinghouse problem after the default by a member of Nasdaq Clearing AB ..." Be careful out there. :-)

nayuki 6y ago

Much better quality but shorter length: https://www.youtube.com/watch?v=7RH4XKP55fM https://www.youtube.com/watch?v=7RH4XKP55fM (uploaded by CNBC, so might get deleted someday)