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Energy Traders Ask For Central Bank Bailouts To Save Them From "Margin Call Doom Loop"
Europe’s largest energy traders have become insolvent and are calling on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
Yesterday, we reported that the Bloomberg news that one of the world's largest independent energy merchants - the secretive Trafigura which trades hundreds of billion in commodities every year - was facing "margin calls in the billions of dollars" which meant that the commodity "margin call doom loop" idea floated by repo guru Zoltan Pozsar was finally coming true, and despite Barclays' earnest attempts to minimize its impact, could threaten broader financial stability and was manifesting itself in broad liquidity squeezes which could be observed in the surge in such unsecured funding markets as the FRA-OIS.
Well, Zoltan was spot on again, because one day later, on Wednesday morning, the FT reported that Europe’s largest energy traders have joined insolvent bank in calling on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
Yes, that's what happens when the "margin call doom loop" goes global.
The FT writes that in a letter it had seen, the European Federation of Energy Traders, a trade body that counts BP, Shell and commodity traders Vitol and the margin-call stricken Trafigura as members, said the industry needed “time-limited emergency liquidity support to ensure that wholesale gas and power markets continued to function”.
Energy Traders Ask For Central Bank Bailouts To Save Them From "Margin Call Doom Loop"
Europe’s largest energy traders have become insolvent and are calling on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
Yesterday, we reported that the Bloomberg news that one of the world's largest independent energy merchants - the secretive Trafigura which trades hundreds of billion in commodities every year - was facing "margin calls in the billions of dollars" which meant that the commodity "margin call doom loop" idea floated by repo guru Zoltan Pozsar was finally coming true, and despite Barclays' earnest attempts to minimize its impact, could threaten broader financial stability and was manifesting itself in broad liquidity squeezes which could be observed in the surge in such unsecured funding markets as the FRA-OIS.
Well, Zoltan was spot on again, because one day later, on Wednesday morning, the FT reported that Europe’s largest energy traders have joined insolvent bank in calling on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
Yes, that's what happens when the "margin call doom loop" goes global.
The FT writes that in a letter it had seen, the European Federation of Energy Traders, a trade body that counts BP, Shell and commodity traders Vitol and the margin-call stricken Trafigura as members, said the industry needed “time-limited emergency liquidity support to ensure that wholesale gas and power markets continued to function”.
