Regulators Review Derivatives Margin Rules After Archegos Meltdown

The meltdown at Archegos Capital Management that triggered big losses at several banks highlighted the need to review rules on posting margin or cash against derivatives trades, the head of a global markets regulator said yesterday. Archegos was highly exposed to ViacomCBS Inc., whose shares plunged in March, leaving the hedge fund facing a massive margin call from its prime broker banks. Archegos was unable to meet the call to secure equity swap trades the banks had partly financed. "It's early days, but in my view incidents like these are valuable opportunities to test the effectiveness of these post-crisis reforms," Ashley Alder, chairman of the International Organization of Securities Commissions (IOSCO), told a conference held by derivatives industry body the International Swaps and Derivatives Association (ISDA). "I am asking the IOSCO secretariat initially to do some work in this area," Alder said. IOSCO, which groups market regulators from the United States, Europe and Asia, introduced tougher margin requirements on trades following the global financial crisis of 2008 in which derivatives played a role. Alder said that in addition to these margin rules, prime brokers may and should choose to collect additional margin as part of their internal risk management. "That is an area for further examination," Alder added. Read more.