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Derivative Margin Calls: A New Driver of MMF Flows
Author:
Maddalena Ghio
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,
Linda Rousova
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,
Dilyara Salakhova
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German Villegas Bauer
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Series:
IMF Working Papers
Volume/Issue:
Volume 2023: Issue 061
Language:
English
Publication Date:
17 Mar 2023
DOI:
https://doi.org/10.5089/9798400233937.001
ISBN:
9798400233937
ISSN:
1018-5941
Pages:
35
Keywords:
liquidity risk; money market funds; big data; interconnectedness; non-bank financial intermediaries.; EUR-denominated MMFs; derivative margin calls; MMF flow; variation margin payment; VM flow; Stocks; Liquidity; Mutual funds; Nonbank financial institutions; Pension spending; Global; IMF working paper research Department; derivatives reform; margin payment; Derivative markets
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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During the March 2020 market turmoil, euro area money-market funds (MMFs) experienced significant outflows, reaching almost 8% of assets under management. This paper investigates whether the volatility in MMF flows was driven by investors’ liquidity needs related to derivative margin payments. We combine three highly granular unique data sources (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lipper data for daily MMF flows) to construct a daily fund-level panel dataset spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EURdenominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an important driver of the flows of EUR-denominated MMFs domiciled in euro area.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund