An imperfect deal on margin at NSCC’s proposed equity finance CCP is much better than no deal (Premium)
A main sticking point in NSCC’s plan to create an equity finance CCP is how margin will be collected from lenders of securities. This is already a known factor in the FICC’s sponsored repo market, with some hedge funds preferring bilateral transactions over CCP-cleared in order to avoid a 2% margin rather than 25 bps or even 0 bps for a bilateral trade. But in equity finance, we make the argument that agent lenders and beneficial owners should work to clear this hurdle for their own self-interest.
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