Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A6782509459475443712
Billions in Secret Derivatives at Center of Archegos Blowup
https://lnkd.in/guYfDwG
#Risk #Derivatives #SWAPs #CFD #HedgeFunds
Archegos used equity swaps or CFDs…Instruments are popular with hedge funds, allow non-disclosure… The forced liquidation of more than $20 billion in holdings is drawing attention to the covert financial instruments used to build large stakes in companies. Much of the leverage was provided by banks including Nomura Holdings Inc. [which was down 15% at first impact] and Credit Suisse Group AG through swaps or so-called contracts-for-difference. It means Archegos may never actually have owned most of the underlying securities — if any at all. The products, which are transacted off exchanges, allow managers to amass [risk] exposure to publicly-traded companies without having to declare it. The swift unwinding reverberated across the globe, after banks such as Goldman Sachs and Morgan Stanley forced the firm to sell billions of dollars in investments accumulated through highly leveraged bets. The selloff roiled stocks from Baidu, Inc. to ViacomCBS Inc., and prompted Nomura and Credit Suisse to disclose that they face potentially significant losses on their exposure.
