Risk management mistakes associated with Bill Hwang's blow-up

[murray t turtle]

I don't have special insights. What I'm going to say is obvious.

Main cause of Bill Hwang's blow-up is too much leverage. What surprised me about the leverage is why did multiple prime brokers extend him so much leverage that all of them died together? Shouldn't there be some established risk management process to prevent such things from happening in financial institutions?

I would like to hear from other elite-traders on what are some other risk management mistakes that were made in this blow-up.

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Bankers, brokers, mortgage brokers would much rather make big loans than small loans\assume they will be paid back. That may or may not be a correct assumption/LOL
The edgemarkets.com reported ''billions of derivatives''
But that article also noted banks favor them because of reserve requirements + tax favored in some areas .
MS + GS forced the sale, but must have been a bad loss/they would have preferred to keep collecting interest/i'm sure/LOL

 

[SoCal1Trader]

Five times just like portfolio margin available to retail.

Which U.S. broker provides 5x margin? I hope you're not talking about crypto trading like at BitMex.

 

[SoCal1Trader]

Bill did it with several prime brokers and all had no clue he was leveraging with others as well. This explains his overuse of leverage to the tune of 5x.

 

[SoCal1Trader]

You need 100k for portfolio margin at a retail broker.

No you don't. It's USD$25,000 to start.

 

[SoCal1Trader]

Don't you get 4:1 even without portfolio margin? I never used portfolio margin yet also never had to look up margin rates as I don't lever up to need to check. Anyway its irrelevant as this here is a completely different ballgame. We are talking figures where a single desk can bring down an entire brokerage that existed for almost hundred years. Who knows what other cowboy loans those retards at its US desk extended. It's US traders who tarnished DB's reputation and saddled it with massive losses, same with Lehman, many units in Asia were highly profitable all the way until the end. Same story with Barclay's Capital. Something tells me that US trading desks should be staffed with more French MDs

4:1 is for "day" trading. You better close out your positions at 4:1 leverage at the close, otherwise you'll get a margin call.

 

[SoCal1Trader]

looks like an engineered scam from the beginning to me.

He even may have hedged his positions with otm puts at other accounts not tied to his main fund.

 

[ZBZB]

No you don't. It's USD$25,000 to start.

$25,000 is the pattern daytrader rule. $2,000 for Reg T margin, $100,000 for portfolio margin.

 

[ZBZB]

Which U.S. broker provides 5x margin? I hope you're not talking about crypto trading like at BitMex.

Portfolio margin is 6 times or 15%. Need a $100,000 and approval at retail brokerages.

 

[Peter8519]

Whenever something blew up, Goldman is in the neighborhood. Well, this is just another coincidence. The market is not really free but of movers and shakers.

 

[DiceAreCast]

Of course, and the chaos from GS are infamous for fucking even their colleagues at other houses they just shook hands with and agreed to settle this in unison. Nice stab in the back as usual. Self preservation is the name of the game. Except what surprises me is that inter dealer brokers and everyone else continues to do business with then despite uncountable past betrayals. Like a spouse in domestic violence cases who can't get him/herself to leave. It's not that they pay their staff better than everyone else because they don't.

Whenever something blew up, Goldman is in the neighborhood. Well, this is just another coincidence. The market is not really free but of movers and shakers.