Back Matter

Author(s):
Manmohan Singh
Published Date:
June 2014
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    Glossary of Selected Terms

    Central counterparty/clearinghouse: Central counterparties (CCPs), or clearinghouses, provide for central clearing of futures or derivatives trades and mutualisation of risk among clearing members. Regulatory initiatives that mandate that all standard over-the-counter (OTC) derivatives will have to clear will make CCPs the new too-big-to-fail organisations and focal points in financial plumbing.

    Central securities depositories: In Europe, each country’s securities must be moved from the national CSD into an account at an ICSD (international central security depository, q.v.) for cross-border use. The fragmented nature of the securities settlement landscape in Europe has historically made such movements relatively costly and time-consuming.

    Collateral velocity (or reuse rate): This is not an exact metric but gives an idea of the length of the collateral chains that stem from the reuse of financial collateral. The reuse rate of collateral – analogous to the concept of the “velocity of money” – captures the liquidity impact of collateral in the overall financial plumbing. Prerequisites for a high reuse rate include relative attractive returns and trusted counterparties. Unattractive returns or less-than-stellar counterparties lead to stranded liquidity pools, incomplete markets and shorter collateral chains.

    Default fund: In the context of CCPs, a default fund is an integral part of the “waterfall” (ie, mutualisation of large losses) that may vary among CCPs. Any residual losses that remain after using the variation and initial margin is recouped by another buffer called the default fund. This could arise from large changes in the positions due to default by one or more counterparties.

    Excess reserves: In the aftermath of quantitative easing (q.v.), some central banks have significant deposits from banks that far exceed the “reserve requirement” stipulated by the central bank. These excess deposits of the banks over the required reserves are called excess reserves.

    Initial margin and variation margin: At the inception of a derivative contract (when neither party is “in” or “out” of the money), initial margin (IM) is collected against potential future exposure that may result from a default of a counterparty. Typically, in a bilateral over-the-counter (OTC) derivative transaction, a hedge fund would pay IM to a bank; in a cleared transaction, the hedge fund would pay IM to clearing bank, which will then pass it on to a CCP. Variation margin settles current exposure (ie, daily mark-to-market positions).

    International central security depository: In Europe, ICSDs include, Euroclear and Clearstream and the European affiliates of the two US clearing banks, JP Morgan Chase (JPMC, London) and Bank of New York Mellon (BoNYM, Brussels). Euroclear and Clearstream do most of the triparty repos (q.v.) against relatively liquid fixed-income collateral. BoNYM and JPMC primarily facilitate triparty repos backed by equity collateral and less liquid fixed-income assets.

    Interoperability: Linking of CCPs, in its most practical version, would make a derivative user indifferent to the choice of a CCP, since all CCPs will be connected operationally for margin netting, default risk, etc. In theory, interoperability of CCPs would mimic one global CCP. If multiple CCPs do not interoperate (due to cross-border legal and bankruptcy issues), the benefits of netting are significantly reduced. At present across-product netting does not take place since most CCPs offer netting only in the same asset class and not across products; and they do not want to lose their niche market(s).

    IS/LM model with collateral: The IS curve stands for investment and saving; the LM curve stands for liquidity preference and money supply. However, textbooks that use the IS/LM framework do not incorporate financial (pledged) collateral in either IS or LM curves, which this book does (see Chapter 4).

    Netting: Typically, when a bank summarises its overall derivative positions, it can do so across all products – credit default swaps, interest-rate swaps, foreign exchange and so on. So if a bank’s overall portfolio is such that there is a positive or in-the-money position from a CDS contract (eg, with a reference entity such as the Republic of Italy), and a negative or out-of-money position from an IRS contract (with the same reference entity), then the two contracts “net” on the bank’s derivative book.

    New collateral space: Since Lehman’s crisis, several simultaneous changes on the collateral front stemming from quantitative easing (QE), proposed regulations, the role of custodians, the US Fed’s reverse repo programme and so forth have redrawn the old collateral space that largely spanned the bank–nonbank collateral flows (see Triparty repo).

    Qualified financial contracts: QFCs take the form of derivatives and repos. Under prevailing legal rules, such as the “safe harbour” provision, QFCs are allowed to be exempt from “automatic stay” during bankruptcy. In other words, QFCs are prioritised in reorganisation because they are deemed to be too interconnected with financial markets and thus too disruptive to tinker with.

    Quantitative easing: Central banks have taken good collateral (eg, the Fed and Bank of England) and also the not so good collateral (eg, the ECB) out of the market for macroeconomic reasons under the rubric of QE. This has resulted in large balance sheets of central banks.

    Recovery/resolution of a CCP: Recovery is associated with tools available to the CCP (and its members and end-users) to survive as a going concern. Resolution entails statutory tools outside and beyond the control of the CCP. Resolution may result in the unwinding of a CCP.

    Rehypothecation: The use of financial collateral by a collateral taker as security for their own obligations to some third party (ie, onward pledging).

    Reuse rate: See Collateral velocity.

    Securities lending agent: Custodians such as Euroclear, Clearstream and the Bank of New York typically act as securities lending agents on behalf of their custody clients. Non-custody banks and asset managers can also act as securities lending agents.

    Securities lending: Securities lending (typically pension funds, sovereign wealth funds, insurance companies and some asset managers) provides collateral to augment the overall returns from their securities, just like repo. Securities lending transactions generally have no set end date (unlike a repo) and the securities can be recalled any time. With respect to legal rights, securities lending is effectively identical to repo and both include title transfer (q.v.).

    Shadow banking: The nonbank–bank nexus embodies the rapid growth in financial intermediation whereby nonbanks interact with banks. The “puts” or potential taxpayer liabilities that occur for non-economic reasons have given a negative connotation to these activities, and, unfortunately, shadow banking is used in a pejorative sense.

    Sovereign–bank nexus via derivatives: New regulations require all users of OTC derivatives to post collateral to CCPs when using clear-able derivatives. However, the regulations exempt sovereigns, supranational (such as the ECB, World Bank) and agencies (Fannie Mae etc) from posting collateral; these are grouped as SSAs. This keeps the sovereign–bank umbilical cord intact.

    TARGET2-Securities: T2S is one of the largest infrastructure projects launched by the Eurosystem, and aims to standardise cross-border settlement for the pan-European market, and improve the post-trading infrastructure in Europe by providing a single platform for securities settlement in a central bank.

    Title transfer: Commonly used in financial collateral arrangements (such as repo, securities lending and OTC derivatives), title transfer changes ownership of the property. Most financial contracts include title transfer.

    Triparty repo: Triparty repo agents act as an intermediary in managing the flow of cash and collateral between two parties to a repo transaction. For example, in the US, the triparty repo market is intermediated by two agents: the Bank of New York and JP Morgan.

    Variation margin gains haircut: Central-bank backstop is usually an argument for providing liquidity support for a systemic important entity (such as a CCP). However, it is not clear, ex ante, if indeed the backstop is for liquidity or solvency of the entity. In this context, a

    VMGH is a proposed tool that may get around the ambiguity that straddles liquidity and solvency issues.

    Variation margin: See Initial margin.

    Index

    (page numbers in italic type refer to figures and tables)

    A

    • American International Group (AIG), bailout of xi, 90

    • analytics of collateral, before and after global financial crisis 73–7

    • analytics of tax on derivative liabilities 101–2

    • asset-backed commercial paper (ABCP) 9, 46

    B

    • Bank of America, as key SIFI active in OTC derivatives market 100

    • bank–dealer collateral 20

      • see also collateral

    • Bank of New York 44

      • as global custodian 133

    • Bank of New York Mellon (BoNYM Brussels) 112, 127

    • bank–non-bank nexus 37, 51, 57, 148, 162

    • banks at core for global financial plumbing 25

    • Barclays, as dominant SIFI in OTC derivatives market 100

    • Basel III ix, xii, 89, 111, 113, 116, 140

    • Berkshire Hathaway firms 92, 138, 142

    • bilateral repo market wedges 62–4

    • BNP Paribas, as dominant SIFI in OTC derivatives market 100

    C

    • Caisse de Liquidation 149

    • central-bank backstops 95–7

      • with and without interoperability 96–7

    • central banks:

      • and collateral markets 57–64

      • as factor driving collateral dynamics in near term 114–16

    • liquidity of, when there is no uncapped VMGH 154–5

    • central counterparties (CCPs) 40, 89, 147–56

    • alternative to route of 99–101

    • defined 159

    • here to stay 148

    • history and future of 149–51

    • movement of over-the-counter (OTC) derivatives to 43–4, 90, 91–9

    • and central-bank backstop 95–6

    • and interoperability 94

    • and sizable collateral requirements 94–5

    • revolution and recovery: variation margin “gain” haircuts 97–8

    • taxing derivative liabilities as alternative to 99–101

    • as useful lens on regulators and financial plumbing 148

    • and utilities 97

    • whether every country should have:

      • Australia’s case 103

      • Canada’s case 102–3

    • central securities depositories 127, 134

      • defined 159

    • Chicago Mercantile Exchange 149

    • Citi, as key SIFI active in OTC derivatives market 100

    • Clearstream 44, 116, 117, 127, 128, 136

    • collateral: analytics of, pre-and post-crisis 73–7

    • changing paradigm of 124

    • changing space of 111–21, 113, 115, 120

      • old and new 112–14, 113

      • and policy issues 118–19

    • custody versus collateral rehypothecation 119–20

    • dynamics, factors driving, in near term 114–18

      • central banks 114–16

      • new (net) debt issuance 118

      • new regulations 116–18

    • in financial plumbing 1–11, 6, 7, 58

      • and dealer–dealer collateral 7–9

      • and hypothecation, rules on 10–11

      • and money and pledged collateral 1–3

      • and securitisation vehicles 9–10

    • as finite good ix good and bad, difference between 5

    • markets, and central banks 57–6

    • and monetary policy 51–65, 52, 55, 56, 57, 58

      • and pledged-collateral market contraction in 56

      • and price of money and collateral 53–4

      • via IS/LM framework 54–7

    • and money and safe assets 67–86, 70, 71, 72, 75, 76, 79, 81

      • and monetary policy and financial lubrication 77–80

      • and money multiplier 68–70

      • pre-and post-crisis analytics 73–7

    • and over-the-counter (OTC) derivatives market 89–108

      • and analytics of tax on derivative liabilities 101–2

      • and CCPs and utilities 97

      • and movement to CCPs 95–6

      • policy issues 104–5

      • and undercollateralisation 90–1, 91

    • pledged, and money 1–3

    • price of, and price of money 53–4

    • rates, in US and selected EU countries 55

    • sources of 13–21, 23

      • bank–dealer 20

      • end-2013 22–3

      • equity strategies 14–16

      • hedge funds 14, 18

      • non-borrowing, non-leverage strategies 18–19

      • repo strategies 16–17, 17

      • securities lending 19–20, 20

      • and uses 21

    • use and reuse 37–9

    • collateral chains, weakening 28–9

    • collateral highways x, 116

    • collateral hubs x, 116

    • collateral infrastructures 123–36, 124, 131

      • and global market infrastructure and custodians 126–8

      • and intra-day liquidity: T2S and US tri-party 132–6

      • and differences between US and European tri-party markets 134–6

      • and TARGET2-Securities 128–32, 131

      • and legal connectivity 132

    • collateral transformation x, 63, 104, 106, 118

    • CPSS-IOSCO ix, 149

    • Credit Suisse, as dominant SIFI in OTC derivatives market 100

    • credit-support annexes (CSAs): one-way 137

      • two-way 92, 137, 143

    • custodians: in global financial system 133

    • and global market infrastructure 126–8

    D

    • dealer bank’s non-depository affiliate, as “puts” that have remained at large 42

    • dealer-to-dealer collateral 7–9

    • default funds 92, 96–7, 97–8, 150, 154

      • defined 159

    • deleveraging: and collateral velocity 23–32, 24;

    • see also velocity and balance sheet and interconnectedness 30–2

    • Depository Trust & Clearing Corporation (DTCC) 60, 63, 127

    • derivative liabilities: analytics of tax on 101–2

    • taxing, as alternative to CCP route 99–101

    • Deutsche Bank, as dominant SIFI in OTC derivatives market 100

    • differences between us and European tri-party markets 134

    • Dodd–Frank Wall Street Reform and Consumer Protection Act xii, 81, 89, 96, 99, 111, 113, 116, 126, 140, 155

    E

    • equity strategies, as sources of collateral 14–16; see also collateral

    • Euroclear 44, 116, 117, 127, 128, 136

    • European Banking Association 26

    • European Central Bank (ECB) 25, 64, 65, 77, 114, 116, 118–19, 130

      • access to, through tri-party 132

      • flexibility of 26, 30

      • information variables considered by, when considering monetary policy 77

      • M3 measure published by 78

    • European Repo Council 128

    • excess reserves 45, 53, 57, 74, 79

      • defined 160

      • not simply “good collateral”, 60

    • explanatory panels: analytics of tax on derivative liabilities 101–2

    • central-bank backstops 96–7

    • central-bank liquidity 154

    • collateral chains, weakening 28–9

    • CPP resolution and recovery 97–8

    • custodians in global financial system 133

    • derivative liabilities, analytics of tax on 101–2

    • FED QE exit 61–2

    • FED, and reverse repos and repo market wedges 62–4

    • floating-rate note “puts” 82

    • global financial plumbing, banks at core of 25

    • global financial system, custodians in 133

    • pledged collateral in US and non-US jurisdictions 8

    • rate of return on security 22

    • risk-free sovereigns, Lisbon move points to end of 143–5

    • systemic failure and taxpayers 105–6

    • undercollateralisation in OTC derivatives 90–1

    • variation margin “gain” haircuts 97–8, 152–3

    • weakening collateral chains, effects of 28

    • Exxon 68–9

    F

    • Fannie Mae 53

    • Federal Deposit Insurance Corporation (FDIC) 64, 81, 155

    • Federal Exchange: banknotes of, as legal tender for all debt 68

      • information variables considered by, when considering monetary policy 77

      • QE exit of 61–2

      • reverse-repo programme of 25, 54, 59, 62, 64, 80, 104, 112, 120, 161

      • and reverse repos and tri-party/bilateral repo market wedges 62–4

    • Federal Reserve Bank of Chicago 70

    • Fedwire 127

    • financial lubrication and monetary policy 77–80, 79

      • and pledged collateral and money aggregates 78–80

    • financial plumbing 38, 148, 153

      • and bank–non-bank nexus 148

    • banks at core for 25

    • breakdown of 147–56, 148, 153

      • and central counterparties (CCPs): history and future 149–51

      • and initial margin versus variation margin 154

      • and some loss-allocation choices 151–5

      • and variation margin “gain” haircuts 152–3

    • collateral in 1–11, 6, 7, 58; see also

      • collateral and dealer–dealer collateral 7–9

      • and hypothecation, rules on 10–11

      • and money and pledged collateral 1–3

      • and securitisation vehicles 9–10

    • Financial Stability Board (FSB) 34, 103

    • Financial Times columns: Singh: and Fed’s QE exit 61–2

      • and systemic failure and taxpayers 105–6

      • and weakening collateral chains, effects of 28–30

      • Tet, and risk-free sovereigns 143–4

    • floating-rate note “puts” 82

    • flow-of-funds data 72, 111

      • and its limitations 46–7

    • Freddie Mac 53

    G

    • global financial crisis: analytics of collateral, before and after 73–7

      • and OTC derivatives, movement of, from bilateral clearing to CCPs 90

      • as watershed ix Global Financial Stability Report (IMF) 26, 111

    • global financial system, custodians in 133

    • global market infrastructure and custodians 126–8

    • Goldman Sachs, as key SIFI active in OTC derivatives market 100

    • Goldman Sachs Group Holding Company 120

    • Gresham’s Law 26, 74

    H

    • hedge funds: collateral of, large banks’ use of 120

      • as “puts” that have remained at large 40–2

        • money market funds 43

        • qualified financial contracts 43–4

      • as sources of collateral 14, 18; see also collateral

    • Hong Kong Futures Exchange 149

    • hypothecation, rules on 10–11

    I

    • initial margin 91, 96, 97–8, 124, 126, 143

    • defined 160

    • versus variation margin 154

    • interest on excess reserves (IOER) 53–4, 61–2, 64

    • international central securities depositories (ICSDs) 127

    • defined 160

    • International Monetary Fund (IMF), Global Financial Stability Report of 26, 111

    • International Swaps and Derivatives Association (ISDA) 91, 92, 95, 99

      • recent surveys of 152

    • interoperability 94, 96–7, 101, 125

      • central-bank backstop with and without 96–7

      • defined 160

    • investment, saving, liquidity preference and money supply (IS/LM) framework 51–2, 52

      • collateral and monetary policy via 54–7

      • defined 160

    • IS/LM, see investment, saving, liquidity preference and money supply (IS/LM) framework

    J

    • JP Morgan 44, 112

      • as global custodian 133

      • as key SIFI active in OTC derivatives market 100

    • JP Morgan Chase (JMPC London) 127

    K

    • Kuala Lumpur Commodities Clearing House 149

    L

    • large banks’ use of hedge funds’ collateral 120

    • LCH Clearnet 77, 98, 150, 154

    • Lehman Brothers: bankruptcy of xi, 3–11

      • collapse in financial collateral since 55

      • last annual report of 5

      • regulatory attention after bankruptcy of 3–11

    • Lehman Brothers International Europe (LBIE) 3–4

    • limitations of flow-of-funds data 46–7

    • Liquidity Coverage Ratio (LCR) 5–6, 59, 117, 124, 125

    M

    • methodology for calculating velocity of collateral 21–3

      • see also velocity

    • monetary policy: and collateral 51–65, 52, 55, 56, 57, 58

      • and pledged-collateral market, contraction in 56

      • and price of money and collateral 53–4

      • via IS/LM framework 54–7

      • shadow banking’s interactions with 45

    • monetary policy and financial lubrication 77–80, 79

      • and pledged collateral and money aggregates 78–80

    • money aggregates and pledged collateral 78–80

    • Morgan Stanley: as key SIFI active in OTC derivatives market 100

    • net counterparty exposure of 140

    N

    • netting 125, 127, 129

      • defined 160–1

      • of repos 123

    • netting fragmentation: cleared and non-cleared over-the-counter (OTC) derivatives 106–8

    • new and old collateral space 112–14

      • new, defined 161

      • see also collateral

    • non-borrowing, non-leverage strategies, as sources of collateral 18–19; see also collateral

    O

    • old and new collateral space 112–14

      • see also collateral open-market paper 111

    • over-the-counter (OTC) derivatives market xi cleared and non-cleared 106–8

    • and collateral 89–108

    • and analytics of tax on derivative liabilities 101–2

    • and OTC derivatives, movement of, to CCPs 95–6

    • policy issues 104–5

    • and undercollateralisation 90–1, 91

    • movement of, to CCPs 43–4, 90, 91–9

      • and central-bank backstop 95–6

      • and interoperability 94

      • and sizable collateral requirements 94–5

    • sovereign–bank nexus via 137–45, 140, 141, 142

      • and new regulations 138–9

      • policy issues concerning 143

      • proposal to reduce 141–2

    • typical position of, from a SIFI’s financial statement 108

    • undercollateralisation in 90–1

    P

    • panels: analytics of tax on derivative liabilities 101–2

    • central-bank backstops 96–7

    • central-bank liquidity 154

    • collateral chains, weakening 28–9

    • CPP resolution and recovery 97–8

    • custodians in global financial system 133

    • derivative liabilities, analytics of tax on 101–2

    • FED QE exit 61–2

    • FED, and reverse repos and repo market wedges 62–4

    • floating-rate note “puts” 82

    • global financial plumbing, banks at core of 25

    • global financial system, custodians in 133

    • pledged collateral in US and non-US jurisdictions 8

    • rate of return on security 22

    • risk-free sovereigns, Lisbon move points to end of 143–5

    • systemic failure and taxpayers 105–6

    • undercollateralisation in OTC derivatives 90–1

    • variation margin “gain” haircuts 97–8, 152–3

    • weakening collateral chains, effects of 28

    • pledged-collateral market: contraction in 56

      • size of 4, 7

      • and US banks 6

    • pledged collateral and money aggregates 78–80

    • “pledged for reuse”, explained and discussed 2

    • policy implications of shadow banking 44–6

    • see also shadow banking policy issues and new collateral space 118–19

    • see also collateral policy issues and sovereign–bank nexus 143

    • price of money and price of collateral 53–4

    • “puts” that have remained at large 40–4

    • dealer bank’s non-depository affiliate 42

    • hedge funds 40–2

      • money market funds 43

      • qualified financial contracts 43–4

    Q

    • qualified financial contracts 43–4

      • defined 161

    • quantitative easing (QE) 35, 37, 56–61 passim, 78–80 passim

      • Bank of England’s 116

      • defined 161

      • Fed’s third round of 114

      • increased resort to 78

      • official sector efforts via 111

      • printing money via 74

    R

    • rate of return on security 22

    • RBS, as dominant SIFI in OTC derivatives market 100

    • regulation: and collateral velocity calculation, difficulty of 28

      • and financial plumbing, CCPs as useful lens on 148

      • new, as factor driving dynamics of collateral 116–18

      • new, and sovereign–bank nexus 138–9

      • post-Lehman 3–11

      • and pledged-collateral market, size of 4

    • rehypothecation: believed systemically dangerous 3

      • collateral, collateral custody versus 119–20

      • defined 161

      • explained and discussed 2

      • inside and outside US 3

      • and tri-party repo collateral market 9

    • repledging chains 26

    • repo strategies, as sources of collateral 16–17, 17; see also collateral

    • Reserve Bank of Australia (RBA) 25

    • risk-free sovereigns, Lisbon move points to end of 143–5

    • rules on hypothecation 10–11

    S

    • safe assets: and monetary policy and financial lubrication 77–80

      • pledged collateral and money aggregates 78–80

      • and money and collateral 67–86

      • and money multiplier 68–70

      • and money and safe assets, pre-and post-crisis analytics 73–7

      • and Treasury bills, determination of supply of 80–3, 81

    • safe/liquid assets, shortage of 39–40

    • Securities Investor Protection Act (SIPA) 10

    • Securities Investor Protection Corporation (SIPC) 10

    • securities lending: defined 162

      • as sources of collateral 19–20, 20

    • securities lending agent 133, 135

    • defined 161

    • securitisation vehicles 9–10

    • shadow banking: and bank–non-bank nexus 33

      • defined 162

      • economics of 33–48, 35, 38, 41

      • and bank analytical framework 35–40

      • and collateral use and reuse 37–9

      • and flow-of-funds data and its limitations 46–7

      • and “puts” that have remained at large 40–4

      • and safe/liquid assets, shortage of 39–40

    • as pejorative term ix–x

    • policy implications of 44–6

    • transparency needed to increase understanding of x

    • Singh, Manmohan: Financial Times columns of: and Fed’s QE exit 61–2

      • and systemic failure and taxpayers 105–6

      • and weakening collateral chains, effects of 28–30

    • size of pledged-collateral market 4, 7

    • sources of collateral 13–21, 23

      • bank–dealer 20

      • end-2013 22–3

      • equity strategies 14–16

      • hedge funds 14, 18

      • non-borrowing, non-leverage strategies 18–19

      • repo strategies 16–17, 17

      • securities lending 19–20, 20

      • and uses 21

      • see also collateral

    • sovereign–bank nexus:

      • defined 162

      • proposal to reduce 141–2

      • and some sovereigns’ experience 139–41

      • via over-the-counter (OTC) derivatives 137–45, 140, 141, 142

      • and new regulations 138–9

      • policy issues concerning 143

      • and proposal to reduce nexus 141–2

    • special-investment vehicles 46

    • structured investment vehicles 9–10, 112

    • systemic failure, taxpayers should not be made accountable for 105–6

    • systemically important banks (SIBs) 147

      • see also systemically important financial institutions

    • systemically important financial institutions (SIFIs) 42, 90, 91–2, 93, 94–5, 97, 98–102

      • passim, 104–5

      • financial statement of, typical OTC derivative position from 108

      • ten largest, and OTC derivatives 94–5

    T

    • TARGET2-Securities (T2S) 128–32, 131

      • defined 162

      • and intra-day liquidity 132

      • and legal connectivity 132

    • Tarullo, Daniel 34

    • taxing derivative liabilities as alternative to CCP route 99–101

    • Taylor Rule 57, 78

    • Tet, Gillian, Financial Times column of 143–4

    • title transfer 2, 4, 10–11, 45

    • defined 162

    • Treasury bills and safe assets, determination of supply of 80–3, 81

    • tri-party collateral markets, US and European, difference between 134–6

    • tri-party repo 44

      • agent services, providers of 127–8

      • collateral market, and rehypothecation 9, 40

      • defined 162

      • and the Fed and reverse repos 62–4

      • US, and TS2 and intra-day liquidity 132–6

      • Triparty Settlement Interoperability Memorandum of Understanding 128

    U

    • UBS, as dominant SIFI in OTC derivatives market 100

    • undercollateralisation in over-the-counter (OTC) derivatives market 90–1, 91

    V

    • variation margin 90, 127, 143

      • defined 160

      • “gain” haircuts 97–8, 148, 152–3

      • versus CB liquidity 153

      • defined 162–3

      • no uncapped, and central-bank liquidity 154–5

      • versus initial margin 154

    • velocity 13–32, 15, 16, 17, 18, 20, 21, 23, 24, 27

      • decrease in 98

      • defined 134

      • and deleveraging 23–32, 24

      • and balance sheet and interconnectedness 30–2

      • methodology for calculating 21–3

      • and new regulation 28

      • and sources of collateral 13–21, 21

      • bank–dealer 20

      • end-2013 22–3

      • equity strategies 14–16

      • hedge funds 14, 18

      • non-borrowing, non-leverage

      • strategies 18–19

      • repo strategies 16–17, 17

      • securities lending 19–20, 20

    W

    • weakening collateral chains, effects of 28

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