Market doesn’t share FSB concerns over basis trade
Industry warns tougher haircut regulation could restrict market capacity as debt issuance rises
The Financial Stability Board’s call for authorities to tighten regulation of leveraged basis trading in order to contain financial stability challenges in repo markets has drawn a degree of scepticism from the industry.
The FSB warned in a report last week about leverage in the cash-futures basis trade contributing to market volatility, as seen in the $200 billion fire sale of US Treasuries during
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