I commence with my gratitude to The CreatorIn the past, I have published my concern that why US is loosing her status of World superpower and I believe that it has already lost it. It has been challenged in any serious way yet, economically and otherwise.Why $200bn in US trades are failing each day. According to a report published in Financial Times, yesterday. Please read the quotes from the Financial Times report."$200 billions" is a big number. Yet it is also the number of trades failing to settle on average per day in the US market. The equivalent figure for Europe is unknown – highlighting what some say is a worrying hole in the back office of the world’s financial system.
Such so-called settlement fails – where one market party fails to deliver the security or cash it had promised to send to another entity within a specific time frame – rarely garner much attention outside of the back offices of banks and investment firms.
But a gradual spike in failures over recent months in crucial liquidity markets such as “repo” is raising concerns among some market participants.
This persistence of settlement fails, despite US government actions to deter them, has led some commentators to conclude that banks might be purposefully failing the trades as a way of dealing with financial stress. The concern is that continued high failures could cause instability in the plumbing of the world’s financial system, and sow confusion over who really owns which assets.
“Trade settlement is what converts market liquidity into actual cash liquidity for firms and capital markets,” says Fred Sommers, a back office specialist at consulting firm Basis Point Group. “You wouldn’t buy a house and show up on closing day, take title, rent out the house and collect the rent, all before paying. Yet that’s what’s happening every day in the financial system.”
Settlement fails are a particular issue for the world’s repo markets, where banks borrow trillions of dollars each day through pledges to sell securities such as US Treasuries or mortgage debt in return for cash, and then “repurchase” these assets back at a later date. A typical “repo agreement” could see a large bank sell a portfolio of US government bonds worth millions of dollars, with a promise to buy the portfolio back in a week’s time. The initial buyer of the securities effectively acts as a lender to the seller.
A “fail to deliver” can happen if the seller does not hand over the assets to the purchaser in the agreed time frame, or vice versa.
The occurrence may sound rare, and likely to annoy those doing business with the bank in question, but it is a relatively regular market convention.
I commence with my gratitude to The Creator
When stock markets were rising on 09/07, I had sent out n alert that the rise of the market is done now and it WILL a reason to trend down from then. Turned down, did occur, as a matter of fact, that day was the high of the recent swing. Market next day closed lower and today all markets around the world are sharply down. Markets are down 2-4.5% all across the world's major exchanges.
