Derivative margin calls: a new driver of MMF flows?

Time: 22 July (Friday) 14.00 Moscow time
Speaker: Dilyara Salakhova (European Central Bank)
Title: Derivative margin calls: a new driver of MMF flows?

Field of study
"Finance, macroprudential policy, derivatives"

What was the research question?
"What are the interconnections in the financial system? How the need to pay margins to make derivative transactions more secure affects liquidity in the market?"

What did your research find?
"We document relationships between margin calls in the derivative market and flows into money market funds which have not been known previosly. This finding is important for financial stability of the system."

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.

More information, a link to the research and the upcoming seminar here.
Seminar will not be streamed on our YouTube channel or recorded. 


We are looking forward to seeing you!