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''Everyone'' involved in the business of [[prime services]], and global markets broking generally, should read {{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|the Credit Suisse Report}}. | ''Everyone'' involved in the business of [[prime services]], and global markets broking generally, should read {{plainlink|https://www.credit-suisse.com/about-us/en/reports-research/archegos-info-kit.html|the Credit Suisse Report}}. | ||
And while the goings on | And while the goings on it recounts were class-leadingly chaotic — it is hard to believe that the same organisation could have made ''so'' many basic errors, in such scale, for so long, so consistently, missing so many opportunities to cotton on, without catching even ''one'' lucky break as the [[apocalypse]] unfolded around it — the ''makings'' of all these [[joint and several liability|joint and several]] blunders is imprinted in the structure of ''every'' multinational organisation. | ||
After all, this broker was | After all, this broker was not alone in taking a hammering. It just took the ''worst'' hammering, and has been the most candid about how. | ||
This was not an institution that was out of its depth in a market it did not understand. Most of its missteps have a curiously sociological, ''human'' cast to them. Some speak of bad management: poor organisation, unclear responsibilities, fiefdoms and [[silo]]s, under-communication of what mattered, over-communication of what did not; others speak just to ordinary mortal frailty: the thrall of [[Christian name|rank and status]], the fear of speaking up, making management reports and [[dashboard]]s accommodate the risk, rather than making the risk accommodated the models; [[buttocratic oath|backside-covering as a primary goal]], inexplicable insouciance in the face of steadily escalating risk and, when it comes to it, outright [[Mediocre you|mediocrity]] in senior personnel. | |||
The end game sums up how dire the whole sorry business was: In March, 2021, the broker gingerly ''asked'' Archegos to consider a new proposal under which it would recharacterise $1.35 billion of the $2.4 billion in [[excess margin|excess]] [[variation margin]] ''it currently held for Archegos'' as [[initial margin]]: ''asked'', that is, when it was contractually entitled to ''demand'' that, and more, on 3 days’ notice. And, while ''thinking about it'', Archegos systematically demanded CS ''disburse the entire $2.4 billion''. | |||
If that | We like to imagine the conversation went a little bit like this. (''[[Disclaimer]]: this dialogue is entirely made up, but based very loosely on a true story.) | ||
{{quote|''It is early March 2021. A ZOOM CALL, conducted between the home office of a RISK OFFICER at CS, who is wearing PPE, wiping his monitor and disinfecting his hands every ten minutes, and a TRADER at ARCHEGOS, who is perched at a bar in the Bahamas nursing a pina colada and multitasking with a game of online poker.'' | |||
CS: Hi, guys. Listen, we are a bit concerned that your risk has got out of hand. We’re badly under-margined. <br> | |||
ARCHEGOS: Oh, I see. <br> | |||
CS. Yeah. If it’s okay with you, we want to exercise our contractual right to lock up some of your free cash.<br> | |||
ARCHEGOS: Hmmm. How much? <br> | |||
CS: About half of it? Say $1.3 billion? If we treat that as initial margin, your risk comes down quite a bit. <br> | |||
ARCHEGOS: Let me think about it. | |||
''Later that morning'' <br> | |||
ARCHEGOS: Hey can I withdraw some of my free cash? <br> | |||
CS: I guess so. How much? <br> | |||
ARCHEGOS: All of it. <br> | |||
CS: Okay.<br> | |||
''Later that morning'' <br> | |||
ARCHEGOS: Hey good news. I’ve just come into some money. Can I put on another billion and a half in risk? <br> | |||
CS: Okay. <br> | |||
''Two weeks later''<br> | |||
CS: Hey what about that increased margin we were talking about?<br> | |||
ARCHEGOS: Yeah, about that.<br> | |||
''[[Armageddon]] ensues''. <br> | |||
CURTAIN}} | |||
===Concerns about Archegos=== | ===Concerns about Archegos=== | ||
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===The broker that didn’t bark in the night-time=== | ===The broker that didn’t bark in the night-time=== | ||
Time for some more theatre. | |||
{{Quote| | {{Quote| | ||
KING LEAR: Now, our joy, | KING LEAR: Now, our joy, |