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That said, it is an act of self-harm for which the watching world should feel tremendously grateful. Not only a sizzling read, arriving just in time for Bank executives as they head for a fortnight to the sun loungers of Mykonos and Ibiza, but a beautifully clear explanation of the [[equity prime brokerage]] business in particular and global markets broking in general, and a coruscating indictment of the way large organisations of all kinds operate.  
That said, it is an act of self-harm for which the watching world should feel tremendously grateful. Not only a sizzling read, arriving just in time for Bank executives as they head for a fortnight to the sun loungers of Mykonos and Ibiza, but a beautifully clear explanation of the [[equity prime brokerage]] business in particular and global markets broking in general, and a coruscating indictment of the way large organisations of all kinds operate.  
:—JC, July 2019}}
:—JC, July 2019}}
===Contents===
__TOC__
__TOC__
===Intro===
This is a proper horror story, make no mistake: Stephen King has not a patch on this.
''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 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 not alone in taking a hammering. It just took the ''worst'' hammering, and has been the most candid about how.
This is 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''.
===Prologue===
===Prologue===
We like to imagine the conversation went a little bit like this.<ref>''[[Disclaimer]]: this dialogue is entirely made up, but based very loosely on a true story.</ref>
We like to imagine the conversation went a little bit like this.<ref>''[[Disclaimer]]: this dialogue is entirely made up, but based very loosely on a true story.</ref>
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''[[Armageddon]] ensues''. <br>
''[[Armageddon]] ensues''. <br>
CURTAIN}}
CURTAIN}}
===Intro===
This is a proper horror story, make no mistake: Stephen King has not a patch on this.


''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 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 not alone in taking a hammering. It just took the ''worst'' hammering, and has been the most candid about how.
This is 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''.
===Archegos’ reputation and competence===
===Archegos’ reputation and competence===
[[File:Archegos NAV to 2020.png|alt=Archegos NAV 2012-2020|350px|right|thumb|Archegos’ performance between 2012 and 2020 was ''all over the shop''...]][[File:Archegos NAV to armageddon.png|350px|right|thumb|... and then it got ''worse''.<ref>Figures taken from the {{CS report}}</ref>]]What emphasis should you place on a record of misfeasance and bad management?  
[[File:Archegos NAV to 2020.png|alt=Archegos NAV 2012-2020|350px|right|thumb|Archegos’ performance between 2012 and 2020 was ''all over the shop''...]][[File:Archegos NAV to armageddon.png|350px|right|thumb|... and then it got ''worse''.<ref>Figures taken from the {{CS report}}</ref>]]What emphasis should you place on a record of misfeasance and bad management?  
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