Short post today.
The sudden plunge in UK bonds, FX and stocks is certain to have created some massive margin calls, particularly for positions involving the first two which trade with huge leverage, easily exceeding 30-50x. Margins are dynamic these days, calculated using complex algorithms that take into account the credit quality of the counterparty, the underlying asset, and most relevant right now, historical price volatility.
UK gilts and pound sterling are not exactly volatile instruments, therefore margin would be lower, all other things equal. Yet, volatility just exploded as prices plunged, for sure creating massive losses somewhere - and SUDDENLY.
I'm waiting for the shoe to drop HARD somewhere, be it banks, hedge funds, family offices... somewhere. I think we will be hearing about it pretty soon.
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