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US English

SEC considering derivatives and short selling transparency

By Neil Dennis

06:56, 22 April 2021

SEC emblem on side of building

US financial regulators are considering new rules aimed at increasing transparency into the trading of the types of derivatives that bankrupted fund manager Archegos last month, according to a report by Bloomberg.

Citing “people familiar with the matter”, the Bloomberg report said Securities and Exchange Commission (SEC) officials were in early stages of a review that may lead to greater scrutiny of certain types of trading practices, such as high-risk derivative strategies and short selling.

The regulator will review whether such information can be included in existing filings, such as 13D forms (which institutional investors must file if they amass more than 5% of a company's shares) or the 13F form (which firms with more than $100m under management must file quarterly to disclose their equity holdings).

It will also examine if such filings can be made more frequently so that officials can spot potential risk areas building up.

Archegos Capital Management

Last month Archegos went bust without ever filing such documents, as it had accumulated huge positions through the derivatives market, using total return swaps. It amassed large, concentraded positions in several companies, including Baidu, Vipshop and VaicomCBS.

EUR/USD

1.08 Price
-0.320% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0002%
Overnight fee time 21:00 (UTC)
Spread 0.00006

GBP/USD

1.26 Price
-0.240% 1D Chg, %
Long position overnight fee -0.0046%
Short position overnight fee -0.0036%
Overnight fee time 21:00 (UTC)
Spread 0.00013

AUD/USD_zero

0.65 Price
-0.540% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0009%
Overnight fee time 21:00 (UTC)
Spread 0.00006

USD/JPY

151.38 Price
+0.040% 1D Chg, %
Long position overnight fee 0.0113%
Short position overnight fee -0.0195%
Overnight fee time 21:00 (UTC)
Spread 0.010

When the bets went bad, the firm defaulted on margin calls with a number of investment banks, including Credit Suisse, which took a $4.8bn hit, while Nomura lost $2bn.

Archegos owner Bill Hwang reportedly lost his $20bn fortune in just two days following the collapse of the family office.

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Short selling

The Bloomberg report also suggested the SEC is under pressure from Capitol Hill to make the practice of short selling less murky by forcing investment firms to reveal large short positions that could lead to highly volatile trading conditions.

This follows a period in January and February when shares in GameStop lurched lower as hedge funds began to short sell the stock, and then reclaimed losses as retail investors banded together through a subreddit forum to buy the stock.

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Sell
Spread
Chg%
Trade
go to page
-0.04%
go to page
+0.01%
go to page
+2.14%
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+1.49%
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+1.72%
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+0.01%
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-0.34%
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-0.08%
go to page
+0.87%
go to page
-0.14%

Read more: Nomura internal team to investigate bn Archegos-linked loss

Markets in this article

BIDU
Baidu Inc (Extended Hours)
105.35 USD
0.35 +0.330%
BIDU
Baidu Inc (Extended Hours)
105.35 USD
0.35 +0.330%
PARA
Paramount Global
11.75 USD
0.33 +2.910%
PARA
Paramount Global
11.75 USD
0.33 +2.910%
VIPS
Vipshop
16.51 USD
0.35 +2.180%

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