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The Market Ticker - Where Is THAT ($1.7 - $10.2 Trillion) Going to Come From?

 November 29, 2012 11:29 AM


Gee, who's been talking about uncollateralized lending and the inherent fraud that is created by such transactions in that they are effectively a naked short on the currency involved?

Swaps that will be allowed to remain outside clearinghouses when new rules take effect in 2013 will require traders to post $1.7 trillion to $10.2 trillion in margin, according to a report by an industry group.

The analysis from the International Swaps and Derivatives Association, using data sent in anonymously by banks, says the trillions of dollars in cash or securities will be needed in the form of so-called "initial margin." Margin is the collateral that traders need to put up to back their positions, and initial margin is money backing trades on day one, as opposed to variation margin posted over the life of a trade as it fluctuates in value.

[Related -Integrated Device Technology Inc. (IDTI) Q1 Earnings Preview: Another Beat and Pop?]

This, my friends, is the amount of margin in the amount of actual hard funds that is supposed to be tied up in the form of collateral to back these bets but currently is not.

Oh, and if you're wondering how that compares against the actual amount of "un-cleared" swaps?  That's "estimated" at $127 trillion, which means that the ISDA thinks it's perfectly reasonable for people to have somewhere between 12 and 75 times leverage in these things.

[Related -Herbalife Ltd. (NYSE:HLF) Q2 Earnings Preview: The Potential To Shock?]

That's utter and complete crap but it is what passes for an alleged "cleanup" of this "market."

Bernie!  Oh Bernie!  Is that you Made-Off?

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