Crossing boundaries
Prime brokers are expanding cross-margining facilities to include ever-more exotic products as a means of reducing margin for hedge fund clients. Dealers say the reductions are justified from a risk management perspective, but regulators continue to have misgivings. By John Ferry
Regulators in the US have issued a string of warnings over the past year about the dangers of prime brokers over-aggressively slicing margin requirements for their hedge fund clients. In March, Annette Nazareth, a commissioner at the US Securities and Exchange Commission (SEC), said there was a need for adequate margin requirements to withstand periods of systematic stress. Then, in May, Timothy
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