Tag: Margin Calls (Page 1 of 2)

Phase 6 Margin Call Requirements on The Way

Phase 6 Margin Call Requirements
Market News: Phase 6 Margin Call Requirements on the way | ISDA

Market News: Phase 6 margin call requirements are on the way.

Institutions under UMR who had not previously been affected by these specific margin requirements will be as of September 1st, 2022.

Uncleared Margin Rules (or UMR) were created to address the OTC derivatives market–and its participants– in the wake of the global financial crisis (GFC) of 2008-2009.

It implemented new margin requirements for non-centrally cleared derivatives to avoid further systemic risk.

For this reason, they were ‘phased in’, or broken down by phases.

Institutions affected by phase 6 margin call requirements could find themselves in a sticky situation and I’m going to discuss why down below.

Let’s get started!


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Preparing for margin calls

The requirement to exchange initial margin for over-the-counter (OTC) derivatives is one of the last remaining pillars of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that remains to be fully implemented.

The five-year implementation period began in 2016.

UMR Phases - Phase 6 Margin Requirements
UMR Phases – Phase 6 margin requirements

The chart above depicts the number of counterparties affected throughout each phase.

Phase 5 occurred in September of 2021 where 319 counterparties were affected.

We will be entering Phase 6 in September of 2022, where 775/990 counterparties with more than the $8 billion scope detailed on the graph, or gross amount across all uncleared OTC trades, will be affected.

Phase 5 of UMR touched a mix of sellside and buyside firms, especially medium-sized banks and larger buyside firms.

However, Phase 6 is almost exclusively buyside-focused meaning we could potentially see a massive market rebound, per Bloomberg.

Institutions affected by Phase 6 margin call requirements may include asset managers, banks, hedge funds, and private family offices.

The entire process is extremely challenging according to Bloomberg.

But while it may seem complex in nature, it’s the results that truly matter.

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How long will it take for margin calls to happen?

Although Phase 6 margin call requirements are going into effect on September 1st, 2022, it’s important to note that this is going to take some time.

The derivatives market is massive, now boasting approximately 1 quadrillion derivatives as of May 2022, per Investopedia.

The Senior Principal at BNY Mellon has said in the past that even after Phase 6 there will be margin calls that will still have to be processed.

That’s how massive this event will be.

Phase 6 margin call requirements will begin to margin a variety of sized banks, hedge funds, market makers, and family offices.

The bottom line, the markets need this reset, and its coming.

For a much greater and in-depth walkthrough of what this event means, check out AMCBIGGUM’s video below.

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Phase 6 Margin Call Requirements meaning

AMC Short Sellers Suffer More Than $750 Million

AMC Short Sellers lose more than $750 million
Short sellers lose more than $750 million shorting AMC stock

AMC short sellers are facing massive losses.

Short sellers have lost more than $750 million in the past two weeks alone.

AMC is up more than 84% in the past five trading days closing up more than 44% today.

Should we expect more price surges this week?

Let’s break it down together.


Welcome to Franknez.com – Today AMC is experiencing a gamma squeeze. This is going to be an exciting week for shareholders.

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AMC’s volume skyrockets past 200 million

AMC Stock

Last week AMC’s trading volume reached 130 million, a milestone we have not seen since last year prior to its runup to $72 per share.

Today AMC’s volume skyrocketed past 200 million.

A clear sign the stock is getting ready for higher price action.

In the midst of these runups, short sellers have lost more than $750 million dollars in the past two weeks alone.

And this is only so far as momentum will keep driving AMC forward.

AMC short sellers are about to experience greater losses if they continue to hold their positions.

History is about to repeat itself as AMC aims at reaching a new all-time high for 2022.

The question is how high will AMC go?

Has AMC’s short squeeze started?

AMC short squeeze
Is AMC squeezing?

AMC’s current reported short interest is 20.90%.

We will notice short covering in the market when this number figure begins to decline.

When AMC surged to $72 per share last year, we saw the short interest drop from 20% to 14%.

AMC short sellers jumped in again and the short interest has risen to almost 21% since.

As of today, AMC’s short interest has not changed.

We should have a better understanding whether AMC’s runup has been mere momentum from retail, or short covering in the next day or two.

I update AMC’s short interest data here daily so be sure to bookmark it.

You can subscribe to the blog or follow me on social media for regular updates.

What’s currently moving AMC’s price action may also be options that expired in the money last week.

I’d love to hear your thoughts in the comment section below on what you think.

How soon will AMC squeeze?

AMC Short Sellers

AMC had two main runup points.

One towards the end of January and another in May of 2021.

While both events managed to squeeze a few shorts from their positions, hedge funds continued to overleverage their positions.

Shareholders have held their stock to inevitably send AMC’s share price to unprecedented numbers by squeezing hedge funds out.

Financial institutions around the globe are facing liquidity issues.

These liquidity issues are forcing institutions to keep up with their margin requirements as margin calls are triggered.

While the market takes a dump due to hedge fund selloffs, heavily shorted stocks such as AMC and GameStop will trigger short sellers to close their positions.

AMC’s trading volume surpassed 200 million on Monday and the probability of it increasing in the coming days is very high.

At some point, shorting the stock won’t be worth if for short sellers, especially as the cost to borrow the stock soars.

AMC has increased its retail shareholder base from 3 million to 4 million in the past year.

More investors have uncovered the short interest data that shows AMC has the perfect short squeeze setup.

Whether MOASS is just around the corner, or this is merely another massive price runup, there’s no denying significant gains are on their way.

What do you think?

Leave your thoughts in the comment section below.

AMC short sellers are going to be in a lot of pain.

Will it be from gamma, or from MOASS?

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Clearing Houses Could Face a Liquidity Crisis of Historic Proportions

Clearing houses could face a liquidity crisis
The stock market will mirror the commodity sector’s liquidity issue

The CFO of Trafigura just said clearing houses will collapse as “margin call doom loop” goes global.

Last week the commodities sector (oil, petroleum, metals and minerals) saw margin calls worth billions of dollars.

Trafigura Group is one of the world’s top oil and metal traders.

Trafigura has in recent weeks stepped up efforts to seek new funding from beyond its traditional group of bank lenders, according to people familiar with the matter. 

And no one is able to meet equity demands.

Let’s break it down together.


Welcome to Franknez.com – we’re seeing something very interesting unfold here as margin calls are triggered and short sellers brace for short squeezes.

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“Margin call doom loop” goes global, Trafigura CFO warns

Trafigura CEO Margin Call Doom Loop
Clearing houses face liquidity issues – Trafigura CFO warns of ‘margin call doom loop’

Trafigura Group, one of the world’s top oil and metals traders, has been holding talks with private equity groups to secure additional financing as soaring prices trigger giant margin calls across the commodities industry.

The trader held talks with Blackstone Inc. for an investment of around $2 billion to $3 billion but those talks ended without a deal.

Trafigura has also approached Apollo Global Management Inc.BlackRock Inc. and KKR & Co.,.

The discussions have been based on raising funding due to several margin calls the commodity industry has been facing recently.

There’s no certainty any of the discussions will progress to a deal, they said. (Bloomberg)

These large companies facing margin calls are having a very big problem meeting demand.

Now, the increase in IM (initial margin) created demands on hedge funds and other investors.

Prepare for short squeezes

Studies have looked at the connection between margin calls and market stress, and most have focused on a margin call doom loop” in which higher margin requirements force fire sales into an already illiquid market.

This process then triggers more margin calls.

Financial institutions are going to be forced to sell assets, triggering short squeezes in heavily shorted stock.

The Dow Jones and NASDAQ are down today as ‘meme stocks’ are soaring.

AMC is up more than 24%, GME stock 11%, and HYMC more than 45%.

The price runups on AMC and GameStop shows us the stocks are merely getting warmed up.

We know this because of the short interest data (updated daily here).

As more market stress begins to settle, hedge funds will be required to keep up with their margin requirements or be forced to liquidate their positions.

clearing houses cash in margin

Globally, cash IM (in margin) is typically held by banks.

A bigger short squeeze than Nickel?

Nickel short squeeze

Analysts are expecting a bigger short squeeze than nickel to occur which soared more than 250%.

Although nickel is in the commodities sector, the financial system goes full circle.

The banks distribute cash and even bailout companies despite the industry.

“Expect much more commodity volatility, and many more multi-billion margin calls, until eventually the big one is triggered, one which leads to a near default not of the LME but of a far bigger clearinghouse.” ZeroHedge.

The liquidity issue in the commodity sector could threaten broader financial stability and create broad liquidity squeezes.

Trafigura’s chief financial officer warned that the spike in capital needed to keep commodities flowing around the world since Russia invaded Ukraine would squeeze smaller trading houses out of the market.

Bloomberg reported that trading houses have been seeking funds to maintain their physical and derivative positions as prices of everything from natural gas to metals soar.

Since commodities represent the basic building blocks of all products in an economy, the prices of commodities affect the operational costs of corporations.

This in turn affects prices in the stock market, further sparking margin calls in this sector.

What will happen as clearing houses require more liquidity?

Leave a comment below.

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Credit Suisse News: Margin Call Tension Rises in Global Markets

Credit Suisse Margin Call
Tensions rises – Credit Suisse News – Credit Suisse margin calls investors

Credit Suisse is triggering margin calls on clients that use Russian resources as collateral.

With Russian assets falling in value, it’s causing a domino effect that’s going to affect all global ties to Russia.

Margin calls are going to affect banks and financial institutions to close and liquidate their positions.


Welcome to Franknez.com – margin calls are on the horizon. And it’s going to tank the stock market even lower.

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Wealthy individuals face frozen accounts

wealthy individuals face frozen accounts

The invasion of Ukraine has left wealthy individuals invested in Russian assets with frozen accounts and demands for more collateral.

In a margin call, banks ask investors to add cash or securities to a portfolio that typically includes borrowed funds when the market value drops below margin requirement.

The bank can forcibly liquidate clients’ holdings if they are unable to deposit the funds.

Credit Suisse told PBI that its position in the matter remains unchanged.

“Credit Suisse serves its clients while complying with all applicable laws and regulations, including any sanctions from relevant authorities,” the firm said.

This isn’t affecting just Europeans; Credit Suisse is imposing margin calls in the U.S. too.

How is this affecting investors in the U.S.?

Getting rid of Russian assets is a big problem for hedge fund managers in the U.S.

Russia’s central bank retaliated by banning Russian brokers from selling securities held by foreigners.

Furthermore, Russian Prime Minister Mikhail Mishustin said the country will temporarily stop foreign investors from selling Russian assets.

Hedge funds in the U.S. holding Russian assets are in a big mess right now.

Margin call tension is causing liquidation in many areas of the market.

U.S. hedge funds will be forced to liquidate positions or hedge their plays, further overleveraging short positions.

Financial institutions in the U.S. exposed to Russia

Morgan Stanley - Credit Suisse AMC Margin Calls
Morgan Stanley – Credit Suisse AMC Margin Calls – Credit Suisse News Bloomberg

Citigroup disclosed in its annual report that it has nearly $10 billion in exposures to Russian counterparties, including loans, reverse repo agreements and cash deposits. 

Citigroup stock is down more than 11% year-to-date.

Morgan Stanley’s next gen emerging markets fund (MFMIX) has also been exposed to Russia.

Nearly $16.6 million is frozen due to Russian sanctions.

That’s 13.6% of the total net assets of $122 million in the fund.

Schwab’s fundamental emerging markets large company index ETF (FNDE) has also been affected.

Out of the $4.8 billion in assets, 12.7% have been exposed to the Russian stock market.

Related: Regulators are taking Morgan Stanley and hedge funds to court

Credit Suisse aids U.S. probe of rivals Morgan Stanley and Goldman Sachs

Hedge fund FBI raids
Morgan Stanly and others under investigation – Credit Suisse AMC relations? Credit Suisse News Bloomberg

Credit Suisse is trying to help the U.S. Department of Justice build a case to block trading against rivals Morgan Stanley and Goldman Sachs, REUTERS.

The bank delivered a presentation to the U.S attorney’s Office in New York flagging issues leading to the collapse of Archegos Capital.

Archegos Capital was a private family office, also known as unregulated hedge funds, that caused banks to lose billions of dollars.

Banks and hedge funds are currently under investigation by the Justice Department for illegal trading activities.

Two of these banks under investigation are Morgan Stanley and Goldman Sachs.

One hedge fund has been raided by the FBI for flooding the market with fake orders to drive the price of stocks down.

It comes as no surprise Credit Suisse is imposing margin calls on investors but also attacking its rivals.

Credit Suisse news Bloomberg

What does this mean for shareholders?

Leave your thoughts in the comment section below.

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