28 posts on "Dealers"
January 16, 2019
Customer and Employee Losses in Lehman’s Bankruptcy
In our second post on the Lehman bankruptcy [link to recovery blog], we discussed the cost to Lehman’s creditors from having their funds tied up in bankruptcy proceedings. In this post, we focus on losses to Lehman’s customers and employees from the destruction of firm-specific assets that could not be deployed as productively with another firm. Our conclusions are based in part on what happened after bankruptcy—whether, for example, customer accounts moved to other firms or employees found jobs elsewhere. While these indirect costs are difficult to pin down, the analysis suggests that the most notable losses were borne by mutual funds that relied on Lehman’s specialized brokerage advice and firms that used Lehman for its equity underwriting services.
January 15, 2019
Lehman’s Bankruptcy Expenses
In bankruptcy, firms incur expenses for services provided by lawyers, accountants, and other professionals. Such expenses can be quite high, especially for complex resolutions. The direct costs of bankruptcy proceedings reduce a firm’s value below its fundamental level, thus constituting a “deadweight loss.” Bankruptcy also carries indirect costs, such as the loss in value of assets trapped in bankruptcy—a subject discussed in our previous post (link). In this post, we provide the first comprehensive estimates of the direct costs of resolving Lehman Brothers’ holding company (LBHI) and its affiliates under Chapter 11 bankruptcy, and of Lehman’s broker-dealer (LBI) under the Securities Investor Protection Act (SIPA).
January 14, 2019
How Much Value Was Destroyed by the Lehman Bankruptcy?
Lehman Brothers Holdings Inc. (LBHI) filed for Chapter 11 bankruptcy protection on September 15, 2008, initiating one of the largest and most complex bankruptcy proceedings in history. Recovery prospects for creditors, who submitted about $1.2 trillion of claims against the Lehman estate, were quite bleak. This week, we will publish a series of four posts that provide an assessment of the value lost to Lehman, its creditors, and other stakeholders now that the bankruptcy proceedings are winding down. Where appropriate, we also consider the liquidation of Lehman’s investment banking affiliate (which occurred on a separate track in the Securities Investor Protection Act (SIPA) proceedings).
September 12, 2018
Do You Know How Your Treasury Trades Are Cleared and Settled?
The Treasury Market Practices Group (TMPG) recently released a consultative white paper on clearing and settlement processes for secondary market trades of U.S. Treasury securities. The paper describes in detail the many ways Treasury trades are cleared and settledinformation that may not be readily available to all market participantsand identifies potential risk and resiliency issues. The work is designed to facilitate discussion as to whether current practices have room for improvement. In this post, we summarize the current state of clearing and settlement for secondary market Treasury trades and highlight some of the risks described in the white paper.
October 4, 2017
The Cost and Duration of Excess Funding Capacity in Tri-Party Repo
In a previous post, we showed that dealers sometimes enter into tri-party repo contracts to acquire excess funding capacity, and that this strategy is most prevalent for the agency mortgage-backed securities (MBS) and equity asset classes. In this post, we examine the maturity of the repos used to pursue this strategy and estimate the associated costs.
October 2, 2017
Excess Funding Capacity in Tri-Party Repo
Security dealers sometimes enter into tri-party repo contracts to fund one class of securities with the expectation they will wind up settling the contract with higher quality securities.
May 24, 2017
Dealer Balance Sheets and Corporate Bond Liquidity Provision
Regulatory reforms since the financial crisis have sought to make the financial system safer and severe financial crises less likely.
May 10, 2017
Which Dealers Borrowed from the Fed’s Lender-of-Last-Resort Facilities?
During the 2007-08 financial crisis, the Fed established lending facilities designed to improve market functioning by providing liquidity to nondepository financial institutions—the first lending targeted to this group since the 1930s.
Posted at 7:00 am in Dealers, Federal Reserve, Lender of Last Resort, Liquidity, Recession, Repo | Permalink
December 19, 2016
Investigating the Proposed Overnight Treasury GC Repo Benchmark Rates
In its recent “Statement Regarding the Publication of Overnight Treasury GC Repo Rates,” the Federal Reserve Bank of New York, in cooperation with the U.S. Treasury Department’s Office of Financial Research, announced the potential publication of three overnight Treasury general collateral (GC) repurchase (repo) benchmark rates.
May 4, 2016
Why Dealers Trade in GCF Repo®
Analysis using confidential market data shows that the majority of individual dealers follow consistent strategies in GCF Repo, where dealers are net borrowers or lenders on almost every day that they are active.
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