Aug. 20, 2023
In a world of High Frequency Trading and swap positions being able to get moved back and forth between brokers at the speed of electrons, it seems reasonable to me that the daily reserve requirement calculations and margin-related calculations should be operating as fast as reasonable possible. Otherwise, every trade in the market of any kind becomes a sort of large-scale time-based arbitrage, whereby the people owing the money can just shift things in quickly to meet the weekly check, then move it out again back into risky positions. A bit like a restaurant proving their Pies are "fresh" by moving Fresh Pies into the pie case in the morning, and then serving sloppy expired ones out the back when no one is looking, only moving a Fresh Pie into the pie case when eating a new customer. The entire market seems rife with such efforts by large investors, which serves to further move the market away from "lit and reasonable" into "dark and obscure". If reserve requirements aren't calculated in real time, in line with the trades that depend on those reserve requirements as collateral, then the entire market for such trades can present substantially more risk than is made obvious in the weekly "checks" of such numbers. Maybe in the 70's weekly checks were reasonable, when T+X settlement type rules applied to everyone. But today, when trillions of dollars flow between counter-party in time frames measured in milliseconds or faster, it stands to reason that such reporting requirements should also be made faster.