The Federal Reserve released its quarterly Senior Credit Officer Opinion Survey on Dealer Financing Terms (SCOOS) survey, which provides information about the availability and terms of credit in securities financing and over-the counter (OTC) derivatives markets. This survey spanned mid-May 2023 and mid-August 2023.
With respect to securities financing transactions, respondents indicated the following:
- Approximately one-fourth of dealers, on net, indicated increased funding demand for equities (including through stock loans) over the past three months. Approximately one-seventh of dealers, on net, indicated increased funding and term funding demand for nonagency residential mortgage-backed securities.
- The vast majority of dealers indicated that securities financing terms remained unchanged over the past three months for all types of securities collateral.
- Nearly all dealers indicated that liquidity and market functioning for all types of securities remained unchanged over the past three months.
- The volume, duration, and persistence of mark and collateral disputes for all other securities remained basically unchanged over the past three months.
This quarter’s SCOOS also included questions on risk management practices and client activity in the trading of Zero-Days-to-Expiry Options (0DTE), aimed only at dealers with clients who regularly trade equity options and also actively trade 0DTE options (about one-half of survey participants – 10 out of 21).
Among the responses with respect to the activity of institutional clients who actively trade 0DTE options, dealers indicated that clients who actively trade 0DTE options constitute a small fraction of clients trading equity options.
One-half of dealers indicated that for clients who actively trade 0DTE options, such trades account for less than 5% of option trades by option premiums paid or received. One-fifth of the dealers indicated that 0DTE trades account for between 10 and 20% of option trades, and one-fifth indicated that they account for over 50% of such trades.