Banks split over sending traders to default auctions

After Nasdaq auction failed, some see need for traders in process; others can’t afford to lose them

Nasdaq-exchange
Nasdaq’s default management group does not include any bank traders

The busted auction at Nasdaq Clearing has laid bare divisions over the role of banks in clearing house default management groups (DMGs).

In one camp are those who want to send in their traders to help close out a defaulter’s portfolio, and in the other are those who say the absence of their traders would leave them dangerously understaffed in a market meltdown.

“DMGs are critical,” says a risk manager at a large bank. “Nasdaq’s DMG does not have any member representatives. That’s a bit of a

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