CEBA talks 2020-2022
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Derivative margin calls: a new driver of MMF flows?

Authors: Linda Fache Rousova, Maddalena Ghio, Dilyara Salakhova, Germán Villegas Bauer

Abstract: This paper investigates whether the significant volatility in MMF flows in the March 2020 market turmoil was driven by investors' liquidity needs related to derivative margin payments. We combine three highly granular unique data sets (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lipper data for daily MMF flows) to construct a daily fund-level panel data spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EUR-denominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an important driver of the flows of EUR-denominated MMFs domiciled in euro area. Margins posted have a stronger effect on MMF outflows that margins received on MMFs inflows.

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