The Managed Funds Association (MFA) has urged US financial regulators to maintain flexible margining practices in the Treasury repo market, warning that overly rigid guidelines could disrupt liquidity and increase systemic risk.
In a comment letter to the Treasury Market Practices Group (TMPG) – a Federal Reserve Bank of New York-sponsored industry group – the hedge fund trade body cautioned against proposed revisions to best practices for non-centrally cleared bilateral repos (NCCBRs), saying the changes could “undermine prudent risk management.”
“Imposing rigid margin standards could disrupt well-functioning repo markets, reduce liquidity, and increase systemic risk,” said Jennifer Han, Chief Legal Officer at MFA. “TMPG’s best practices should support flexible, proportionate risk management so firms can effectively manage exposure across portfolios.”
The TMPG is currently reviewing updates to its best practices for NCCBRs, a critical but often opaque segment of the Treasury financing ecosystem. Hedge funds and other market participants rely on repos to manage leverage and liquidity, often using risk-based margining methods such as haircuts, portfolio margining, and counterparty credit assessments.
MFA argues that enforcing uniform margin requirements across the board could weaken market resilience, especially at a time when Treasury market structure is already facing substantial reform.
The letter also calls for regulatory sequencing, urging TMPG to delay any changes to best practices until after the SEC’s Treasury clearing mandate is implemented and the US Treasury Department completes its data collection on NCCBR activity.
“Changing the best practices prematurely could jeopardise the resilience of the Treasury markets,” the letter states.
Balyasny hires former Citadel data strategies chief as senior quant researcher
Balyasny Asset Management has hired the former head of Citadel's data strategies group, adding senior alternative-data expertise as hedge…
More
Kite Lake to launch diversified credit fund led by former Tyrus partner
Kite Lake Capital Management is preparing to launch a new hedge fund focused on global credit and convertible arbitrage, adding to a…
More
Segantii insider trading trial heads towards conclusion in Hong Kong
The insider trading trial involving Segantii Capital Management founder Simon Sadler is approaching its conclusion in Hong Kong, with…
More