[HN Gopher] Archegos was too busy for margin calls
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Archegos was too busy for margin calls
Author : mlla
Score : 54 points
Date : 2021-08-03 19:59 UTC (3 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| TrainedMonkey wrote:
| Matt Levine did a pretty good writeup on this:
| https://www.bloomberg.com/opinion/articles/2021-07-29/archeg...
| glasss wrote:
| I did enjoy reading through his updates about the situation as
| it was developing, pretty interesting stuff.
|
| I don't remember the exact line Matt Levine wrote, but he made
| a point of stating normally you couldn't get away with being
| this over leveraged, but since Archegos was a family firm it
| avoided some scrutiny. Interesting to think there will probably
| always be a way to avoid scrutiny when you're moving that much
| money around.
| dang wrote:
| 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 now. If anyone knows a better URL, we can
| change it again.
| arthurcolle wrote:
| How is a browser downloading an html file any different than
| requesting a PDF other than size? If anything it's useful to be
| able to pop it over into the Documents app and read later.
|
| I guess it's not responsive but to be honest that's a feature
| not a bug lol. I guess the editorial concern is the bigger
| issue.
| gjvc wrote:
| Some of the formatting of this document is remarkably poor.
| mdlm wrote:
| Who wrote this?
| jeffbee wrote:
| The authors are listed on page 1.
| vmception wrote:
| 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
| other way! They're at-will employees too.
| [deleted]
| blunte wrote:
| I cannot believe that Archegos was "too busy" to read a request
| for additional collateral. They knew exactly what was going on,
| and they were hoping to buy more time and pray that the market
| would change in the direction they needed.
|
| This sounds like a desperation play that didn't succeed, and
| Credit Suisse was left with the loss.
|
| Now, I'm not much educated in finance... but risk is risk, and
| whether you have models or you have tarot cards, sometimes things
| just do not go the way you thought they would. If you're betting
| 1x, you can lose what you have. If you're betting with leverage,
| you can win bigger, or lose 1x (and potentially the creditor can
| lose the remaining Xx). Unless the creditor can automatically
| liquidate and close out a client's position if they can't make a
| margin call, it seems you would have to be crazy to be a creditor
| for leveraged clients. Eventually you will lose big because of a
| client.
| baq wrote:
| > Notably, this is not a situation where the business and risk
| personnel engaged in fraudulent or illegal conduct or acted with
| ill intent. Nor is it one where the architecture of risk controls
| and processes was lacking or the existing risk systems failed to
| operate sufficiently to identify critical risks and related
| concerns. The Archegos risks were identified and were
| conspicuous. The persistent failure of he business and risk to
| manage and remediate the risks, and pervasive issues of business
| competence and resourcing adequacy, described in detail in this
| Report, require CS's urgent attention.
|
| wow. this reads like 'culprits have been found and let go with
| their bonus packages'.
| satellite2 wrote:
| This is common practice in post mortem analysis to try to
| determine the root cause in a blameless manner.
|
| On the next iteration of this issue the eventual culprits of
| the first probably won't be there to remember what went wrong.
|
| What might survive until then though is the set of procedures
| and guidelines put in place following the investigation
| recommendations.
|
| So it's more effective to determine what process were
| insufficient than which person had the capacity to avoid
| something.
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(page generated 2021-08-03 23:00 UTC)