JP Morgan warns hedge funds to expect intraday margin calls
Nell Mackenzie, 13 July 2021
JP Morgan is warning hedge fund clients that it will demand they post more cash at any time during the day if their trades lose value.
The biggest US bank by assets called clients of its prime brokerage division in the aftermath of the collapse of Archegos Capital Management, according to three people familiar with the matter. JP Morgan told the hedge funds and family offices that they would have to post more collateral on their single-name equity swap positions if they lost value intraday.
[The following was written by a San Francisco friend from the hedge fund world, Shawn Brown. It buttresses the suspicion that while there seems to be plenty of credit money available for speculation, the collateral behind it is getting thinner and shakier by the week. The Fed, with $8 trillion of Treasury paper and other top-shelf collateral on its balance sheet, has monopolized the supply, leaving lending banks to scramble for collateral for their own that hasn’t already been hocked twentyfold. As a result, central bank interventions are becoming more frequent, more complex and bigger, to the point where even the experts are having trouble determining whether the banking system is headed for a crack-up far larger than the one that took down Archegos a few months ago. RA] 
The Federal Reserve has privately told Deutsche Bank AG that its compliance programs aren’t up to snuff, signaling that the scandal-plagued bank is failing to adhere to a number of past accords with U.S. regulators, according to people familiar with the matter.
Today is the deadline for 13F filings and while we already know what most of the marquee hedge funds have done during the quarter thanks to previously leaked investor letters (with the notable exception of the Soros Family Office which we learned over the weekend bought some $375MM of the Archegos shares liquidated by its prime brokers in late March), one filing was of particular interest, that of Scion Asset Management’s Michael “Big Short” Burry. And boy were there surprises.
Just about three months ago, I wrote a blog post which featured this quote, from Charles P. Kindleberger’s Manias, Panics and Crashes: “Swindles are a response to the appetite for wealth (or plain greed) stimulated by the boom.” Since then, the number of frauds, or swindles, that has been revealed has soared, a clear testament to both the breadth and degree of greed inspired by the current boom.
Deutsche Bank AG reported its strongest quarter in seven years thanks to activity at its investment bank, while the lender escaped the implosion of Archegos Capital Management that badly hit some rivals.
Although appellate court judges threw out some claims against the bank, they said that market manipulation allegations were “plausible.”
The battering to Wall Street banks from Archegos Capital Management topped $10 billion after UBS Group AG and Nomura Holdings, Inc. reported fresh hits caused by the fund’s collapse.
Apparently, firing half a dozen executives including its head of risk management (Lara Warner, also one of the most high-ranking women in the global financial services industry) hasn’t done enough to quiet shareholders’ demands for change atop Credit Suisse, the Swiss banking giant that reported a $4.7 billion loss from the collapse of Archegos Capital Management, with billions of losses likely to follow from the collapse for Greensill.
(Bloomberg) — Morgan Stanley became the latest bank to get swept up in the implosion of Archegos Capital Management, reporting $911 million in total losses related to the debacle.
The elite investor David Einhorn blasted market regulators, accused Elon Musk and Chamath Palihapitiya of juicing assets, and praised the GameStop champion Keith Gill in a letter to Greenlight Capital investors this week.