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Senior Credit Officer Opinion Survey on Dealer Financing Terms
December 2015

Summary

In this Section:

The December 2015 Senior Credit Officer Opinion Survey on Dealer Financing Terms collected qualitative information on changes over the previous three months in credit terms and conditions in securities financing and over-the-counter (OTC) derivatives markets. In addition to the core set of questions, the survey included a set of special questions on high-frequency trading (HFT) firms and their interactions with dealers.1 The 21 institutions participating in the survey account for almost all dealer financing of dollar-denominated securities to nondealers and are the most active intermediaries in OTC derivatives markets. The survey was conducted during the period between November 17, 2015, and November 30, 2015. The core questions asked about changes between September 2015 and November 2015.2

Responses to the questions in the December survey offered a few insights regarding recent developments in dealer-intermediated markets:

  • Similar to the September survey, one-third of respondents reported an increase in resources and attention devoted to the management of concentrated credit exposure to central counterparties and other financial utilities over the past three months.
  • Dealers indicated that the use of financial leverage by all classes of counterparties was little changed over the past three months.
  • A net fraction of one-fourth of the respondents indicated that the price terms offered to hedge funds for securities financing and OTC derivatives transactions have tightened somewhat over the past three months. One-fifth of dealers also noted a tightening of price terms offered to nonfinancial corporations.
  • For securities financing transactions in high-yield corporate bonds, one-fifth of dealers indicated that effective financing rates (collateral spreads over the relevant benchmark) have increased, and one-fourth of respondents noted that haircuts have increased over the past three months.
  • Continuing a trend seen in recent surveys, one-fourth of dealers noted an increase in demand for funding non-agency residential mortgage-backed securities (RMBS).
  • In responses to the special questions on HFT firms, about two-thirds of dealers indicated that they have HFT clients in various financial markets.
  • Of those respondents that have HFT clients, four-fifths reported that they extend intraday credit to such clients in U.S. cash equity markets, and nearly two-thirds responded that they do so in the U.S. cash Treasury market, spot and futures foreign exchange markets, and U.S. equity futures markets.3 Between two-fifths and three-fifths of respondents reported that they also provide overnight credit to HFT customers in cash and futures markets (Treasury, equity, and foreign exchange markets).
  • Three-fourths of dealers with HFT clients in U.S. cash equity markets reported that the use of intraday credit by these clients had remained basically unchanged over the past three years, while one-fourth reported an increase. About four-fifths of respondents extending intraday credit to HFT clients in the U.S. cash equity markets indicated that they had increased the amount of resources and attention devoted to monitoring intraday exposures to such clients over the past three years.
  • Among the dealers that participate in the dealer-to-customer market for Treasury securities, more than two-fifths, on net, pointed to a tightening in price terms (such as widening bid-asked spreads) and nonprice terms (such as smaller quote sizes) over the past five years as a result of the increased presence of HFTs in the interdealer market for Treasury securities.4 In addition, a net fraction of more than two-fifths of dealers indicated that their ability to manage positions in the dealer-to-customer market has diminished as a result of the increased presence of HFTs in the interdealer market.

Counterparty Types

(Questions 1-40)

Dealers and Other Financial Intermediaries. Similar to the past several surveys, most respondents to the December survey reported that the amount of resources and attention devoted to the management of concentrated credit exposure to dealers and other financial intermediaries remained basically unchanged over the past three months, while the remainder pointed to an increase (see the exhibit Management of Concentrated Credit Exposures and Indicators of Supply of Credit).

Central Counterparties and Other Financial Utilities. As in the September survey, one-third of respondents indicated that they had increased the amount of resources and attention devoted to the management of concentrated credit exposures to central counterparties and other financial utilities over the past three months. One-fourth of dealers noted that changes in the practices of central counterparties, including changes in margin requirements and haircuts, had influenced to some extent the credit terms applied to clients on bilateral transactions that are not cleared.

Hedge Funds. In the December survey, one-fourth of dealers, on net, indicated that the price terms (such as financing rates) offered to hedge funds for securities financing and OTC derivatives transactions have tightened somewhat over the past three months. The most-cited reason was the diminished availability of balance sheet or capital, followed by higher internal treasury charges for funding. Most respondents reported no change in nonprice terms such as haircuts, maximum maturity, covenants, cure periods, cross-default provisions, and other documentation features. One-fourth of dealers responded that negotiation intensity by hedge fund clients has increased. Smaller net fractions reported increases in the use of leverage by hedge fund clients and in the provision of differential terms to most-favored hedge fund clients (see the exhibit Use of Financial Leverage). Most respondents reported that the availability of additional (and not utilized) financial leverage under agreements currently in place with hedge funds was little changed over the past three months.

Trading Real Estate Investment Trusts. Most respondents to the December survey indicated that the price and nonprice terms offered to trading real estate investment trusts have remained basically unchanged. The provision of differential terms to most-favored clients and the intensity of efforts by clients to negotiate more-favorable terms were also reported to be little changed by most respondents, as was the use of financial leverage.

Mutual Funds, Exchange-Traded Funds, Pension Plans, and Endowments. About one-seventh of respondents indicated that price terms offered to mutual funds, exchange-traded funds, pension plans, and endowments had tightened over the past three months, citing diminished balance sheets and higher internal treasury charges for funding as reasons behind this tightening. For these types of clients, nonprice terms, provision of differential terms to most-favored clients, intensity of efforts by clients to negotiate more-favorable terms, and use of financial leverage were all reported by most respondents to be little changed over the past three months.

Insurance Companies. Respondents to the December survey indicated that both price and nonprice terms offered to insurance companies had changed little over the past three months, as had the use of financial leverage. Provision of differential terms to most-favored clients was also reported to be little changed, as was the intensity of efforts by clients to negotiate more-favorable terms.

Separately Managed Accounts Established with Investment Advisers. Dealers indicated that price and nonprice terms negotiated by investment advisers on behalf of separately managed accounts were basically unchanged over the past three months. Provision of differential terms to most-favored clients and the use of financial leverage by investment advisers were also reported to be unchanged, as was the intensity of efforts by investment advisers to negotiate more-favorable terms.

Nonfinancial Corporations. One-fifth of respondents indicated that price terms offered to nonfinancial corporations had tightened over the past three months, with reduced willingness of dealers to take risk as the most frequently cited reason. Nonprice terms offered to such clients and the intensity of efforts by these clients to negotiate more-favorable terms were reported by most respondents to be little changed.

Mark and Collateral Disputes. As in previous surveys, most respondents in December indicated that the volume, persistence, and duration of mark and collateral disputes with all counterparty types included in the survey were little changed over the past three months.

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Over-the-Counter Derivatives

(Questions 41-51)

In the December survey, most respondents reported that nonprice terms (such as acceptable collateral, covenants, and the recognition of portfolio or diversification benefits) incorporated in new or renegotiated OTC derivatives master agreements were basically unchanged over the past three months.5 For all contract types surveyed, initial margins for average and most-favored clients were also reportedly little changed.6

Dealers reported little change in the use of nonstandard collateral--that is, collateral other than cash and U.S. Treasury securities--to fulfill margin requirements. On net, respondents generally reported that the volume, persistence, and duration of mark and collateral disputes had remained unchanged for all contract types.

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Securities Financing

(Questions 52-79)7

One-fifth of the respondents in the December survey indicated that effective financing rates (collateral spreads over the relevant benchmark) for high-yield corporate bonds have increased somewhat for both average and preferred clients over the past three months. One-fourth of dealers responded that haircuts for financing high-yield corporate bonds have increased for average clients, and smaller fractions of respondents reported a tightening in the maximum amount of funding and maximum maturity for both average and preferred clients. In addition, one-fifth of respondents indicated a tightening in the maximum amount of funding for high-grade corporate bonds and non-agency RMBS for average clients. For other collateral types, most respondents reported that the credit terms were little changed, on balance, over the past three months.

More than one-fourth of dealers pointed to an increase in demand for funding of non-agency RMBS over the past three months (see the exhibit Measures of Demand for Funding and Market Functioning), and one-fifth of respondents reported an increase in demand for term funding--that is, funding with a maturity greater than 30 days. In addition, one-fifth of respondents indicated an increase in funding demand for high-yield corporate bonds, and smaller fractions indicated that demand for funding agency RMBS, commercial mortgage-backed securities (CMBS), and consumer asset-backed securities (ABS) has increased. For other collateral types covered by the survey, respondents indicated that demand for funding has remained basically unchanged on net.

One-fifth of respondents indicated that the liquidity and functioning of markets have improved for high-grade corporate bonds over the past three months.8 About one-fifth of dealers indicated a deterioration in the liquidity and functioning of CMBS markets, while smaller net fractions of respondents reported deteriorations for high-yield corporate bond, agency RMBS, and consumer ABS markets.

Similar to previous surveys, all respondents indicated that the volume, duration, and persistence of mark and collateral disputes were basically unchanged for all of the collateral types.

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Special Questions on High-Frequency Trading Firms

(Questions 81-95)

Market commentaries have pointed to the increased participation of high-frequency trading (HFT) firms in a number of financial markets. A set of special questions in the December survey asked about markets in which dealers extend intraday and overnight credit to their HFT clients. In addition, dealers were queried about changes over the past three years in the use of intraday credit by HFT clients in U.S. cash equity markets as well as changes in terms extended to such clients over the same period. Dealers were also queried about practices employed to monitor and manage intraday exposure to such clients. Finally, survey respondents were asked how increased HFT participation in the interdealer market for cash Treasury securities has affected dealer behavior in the dealer-to-customer market over the past five years.

Credit extended to high-frequency trading clients in a number of financial markets

About two-thirds of respondents indicated that they have HFT clients. However, dealers did not apply a consistent definition of HFT clients when answering the survey. The exact definition applied seems to differ according to the dealer's business model and the visibility they have into the activity of such clients. More specifically, some respondents narrowly defined HFT firms to be proprietary accounts that use low-latency technology and generate high trading volumes during the day but generally tend to close the trading day with little or no exposure. Other dealers defined HFT firms to be clients who utilize low-latency technology, including those that may employ a significant amount of leverage in intraday trading and that may carry sizable positions overnight. Yet others defined HFT firms much more broadly to include all algorithmic traders, even if such traders do not necessarily use low-latency technology. The range of definitions suggests that there are significant differences in dealers' interactions with what are described as HFT clients, including in the terms of services they provide to such clients and the resulting risk exposures.

Of those respondents that have HFT clients, four-fifths reported that they extend intraday credit to such clients in U.S. cash equity markets, and nearly two-thirds responded that they do so in the U.S. cash Treasury market, spot and futures foreign exchange markets, and U.S. equity futures markets. About two-fifths of firms indicated that they extend intraday credit to HFT clients in the U.S. Treasury futures market.

Between two-fifths and three-fifths of respondents reported that they also provide overnight credit to HFT customers in cash and futures markets (Treasury, equity, and foreign exchange markets). Responses to this question were importantly driven by the definition of HFT firms adopted. Broadly speaking, dealers that had a narrower definition of HFT firms were more likely to report that they did not provide overnight credit, consistent with the notion that these firms tend to end the day flat in terms of exposures. Any overnight positions reported were said to be de minimis when compared with intraday positions. Some respondents also included settlement-related exposures in their definition of overnight credit, especially with respect to futures contracts. By contrast, respondents that adopted a broader definition of HFT clients indicated that such clients may carry sizable positions overnight (especially in cash markets). In these cases, respondents reported that they may provide overnight credit in the form of securities financing (often through prime brokerage relationships).

Intraday credit extended to high-frequency trading clients in U.S. cash equity markets

Three-fifths of respondents indicated that they have HFT clients in U.S. cash equity markets. Among these respondents, three-fourths noted that the use of intraday credit by HFT clients had remained basically unchanged over the past three years, while one-fourth reported an increase. Regarding changes in credit terms on intraday credit provided to HFT clients over the past three years, respondents generally noted that neither price terms (such as financing rates) nor nonprice terms (such as margin or exposure limits) had changed.

About four-fifths of respondents extending intraday credit to HFT clients in the U.S. cash equity markets indicated that they had increased the amount of resources and attention devoted to monitoring intraday exposures to such clients over the past three years. With respect to practices typically employed to monitor and manage intraday exposure to HFT clients, all but one dealer reported that they impose a maximum exposure limit or other types of limits for each such client. Two-thirds indicated that they calculate their exposure to HFT clients throughout the day, and one-third noted that they collect intraday margins.

Changing landscape of U.S. cash Treasury market

Finally, dealers were asked whether they participate in the dealer-to-customer market for cash Treasury securities and how their behavior in that market has changed during the past five years as a result of increased HFT participation in the interdealer Treasury market.

More than two-thirds of dealers reported that they participate in the dealer-to-customer market for Treasury securities. Of these respondents, a net fraction of about two-fifths indicated that their ability to manage positions that arise from trades established in the dealer-to-customer market has deteriorated as a result of the increased presence of HFT firms in the interdealer Treasury market. The most-cited reasons for the deterioration were more frequent spikes in volatility and decreased limit order book depth in the interdealer market.9 Some dealers also pointed to "phantom" liquidity in the interdealer market--that is, observed liquidity that tends to vanish very quickly when an investor tries to trade against it--as a reason for the deterioration in their ability to manage positions.10

The increased presence of HFT firms in the interdealer Treasury market has resulted in a tightening in terms quoted by dealers to their clients in the dealer-to-customer markets. In particular, more than two-fifths of respondents, on net, pointed to a tightening in price terms (such as widening bid-asked spreads) and nonprice terms (such as smaller quote sizes) over the past five years.

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This document was prepared by Yesol Huh, Division of Research and Statistics, Board of Governors of the Federal Reserve System. Assistance in developing and administering the survey was provided by staff members in the Statistics Function and the Markets Group at the Federal Reserve Bank of New York.

 

Exhibit 1: Management of Concentrated Credit Exposures and Indicators of Supply of Credit

Exhibit 1: Management of Concentrated Credit Exposures and Indicators of Supply of Credit. See accessible link for data.

Accessible version

 

Exhibit 2: Use of Financial Leverage

Exhibit 2: Use of Financial Leverage. See accessible link for data.

Accessible version

 

Exhibit 3: Measures of Demand of Funding and Market Functioning

Exhibit 3: Measures of Demand for Funding and Market Functioning. See accessible link for data.

Accessible version

 

Results of the December 2015 Senior Credit Officer Opinion Survey on Dealer Financing Terms

The following results include the original instructions provided to the survey respondents. Please note that percentages are based on the number of financial institutions that gave responses other than "Not applicable." Components may not add to totals due to rounding.

 


Counterparty Types

In this Section:

Questions 1 through 40 ask about credit terms applicable to, and mark and collateral disputes with, different counterparty types, considering the entire range of securities financing and over-the-counter (OTC) derivatives transactions. Question 1 focuses on dealers and other financial intermediaries as counterparties; questions 2 and 3 on central counterparties and other financial utilities; questions 4 through 10 focus on hedge funds; questions 11 through 16 on trading real estate investment trusts (REITs); questions 17 through 22 on mutual funds, exchange-traded funds (ETFs), pension plans, and endowments; questions 23 through 28 on insurance companies; questions 29 through 34 on separately managed accounts established with investment advisers; and questions 35 through 38 on nonfinancial corporations. Questions 39 and 40 ask about mark and collateral disputes for each of the aforementioned counterparty types.

In some questions, the survey differentiates between the compensation demanded for bearing credit risk (price terms) and the contractual provisions used to mitigate exposures (nonprice terms). If your institution’s terms have tightened or eased over the past three months, please so report them regardless of how they stand relative to longer-term norms. Please focus your response on dollar-denominated instruments; if material differences exist with respect to instruments denominated in other currencies, please explain in the appropriate comment space. Where material differences exist across different business areas--for example, between traditional prime brokerage and OTC derivatives--please answer with regard to the business area generating the most exposure and explain in the appropriate comment space.


Dealers and Other Financial Intermediaries

1. Over the past three months, how has the amount of resources and attention your firm devotes to management of concentrated credit exposure to dealers and other financial intermediaries (such as large banking institutions) changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 9.5
Remained basically unchanged 19 90.5
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100


Central Counterparties and Other Financial Utilities

2. Over the past three months, how has the amount of resources and attention your firm devotes to management of concentrated credit exposure to central counterparties and other financial utilities changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 7 33.3
Remained basically unchanged 14 66.7
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

3. To what extent have changes in the practices of central counterparties, including margin requirements and haircuts, influenced the credit terms your institution applies to clients on bilateral transactions which are not cleared?

Number of Respondents Percent
To a considerable extent 0 0.0
To some extent 5 23.8
To a minimal extent 6 28.6
Not at all 10 47.6
Total 21 100


Hedge Funds

4. Over the past three months, how have the price terms (for example, financing rates) offered to hedge funds as reflected across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of nonprice terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 6 28.6
Remained basically unchanged 14 66.7
Eased somewhat 1 4.8
Eased considerably 0 0.0
Total 21 100

5. Over the past three months, how has your use of nonprice terms (for example, haircuts, maximum maturity, covenants, cure periods, cross-default provisions or other documentation features) with respect to hedge funds across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of price terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 2 9.5
Remained basically unchanged 18 85.7
Eased somewhat 1 4.8
Eased considerably 0 0.0
Total 21 100

6. To the extent that the price or nonprice terms applied to hedge funds have tightened or eased over the past three months (as reflected in your responses to questions 4 and 5), what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Deterioration in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Reduced willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 1 100.0
      Total 1 100

    3. Adoption of more-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 2 100.0
      Not important 0 0.0
      Total 2 100

    4. Higher internal treasury charges for funding
      Number of Respondents Percent
      Very important 2 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 2 100

    5. Diminished availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 2 66.7
      Somewhat important 1 33.3
      Not important 0 0.0
      Total 3 100

    6. Worsening in general market liquidity and functioning
      Number of Respondents Percent
      Very important 1 50.0
      Somewhat important 0 0.0
      Not important 1 50.0
      Total 2 100

    7. Less-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 1 100.0
      Total 1 100

  2. Possible reasons for easing
    1. Improvement in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 1 100.0
      Total 1 100

    2. Increased willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Not important 0 0.0
      Total 1 100

    3. Adoption of less-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Lower internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Increased availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    6. Improvement in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. More-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

7. How has the intensity of efforts by hedge funds to negotiate more-favorable price and nonprice terms changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 5 23.8
Remained basically unchanged 16 76.2
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

8. Considering the entire range of transactions facilitated by your institution for such clients, how has the use of financial leverage by hedge funds changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 9.5
Remained basically unchanged 19 90.5
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

9. Considering the entire range of transactions facilitated by your institution for such clients, how has the availability of additional (and currently unutilized) financial leverage under agreements currently in place with hedge funds (for example, under prime broker, warehouse agreements, and other committed but undrawn or partly drawn facilities) changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 9.5
Remained basically unchanged 19 90.5
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

10. How has the provision of differential terms by your institution to most-favored (as a function of breadth, duration, and extent of relationship) hedge funds changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 9.5
Remained basically unchanged 19 90.5
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100


Trading Real Estate Investment Trusts

11. Over the past three months, how have the price terms (for example, financing rates) offered to trading REITs as reflected across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of nonprice terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 2 11.8
Remained basically unchanged 15 88.2
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 17 100

12. Over the past three months, how has your use of nonprice terms (for example, haircuts, maximum maturity, covenants, cure periods, cross-default provisions or other documentation features) with respect to trading REITs across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of price terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 1 5.9
Remained basically unchanged 15 88.2
Eased somewhat 1 5.9
Eased considerably 0 0.0
Total 17 100

13. To the extent that the price or nonprice terms applied to trading REITs have tightened or eased over the past three months (as reflected in your responses to questions 11 and 12), what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Deterioration in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Reduced willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    3. Adoption of more-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Higher internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Diminished availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    6. Worsening in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. Less-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

  2. Possible reasons for easing
    1. Improvement in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 1 100.0
      Total 1 100

    2. Increased willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of less-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Lower internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Increased availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    6. Improvement in general market liquidity and functioning
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    7. More-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Not important 0 0.0
      Total 1 100

14. How has the intensity of efforts by trading REITs to negotiate more-favorable price and nonprice terms changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 11.8
Remained basically unchanged 15 88.2
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 17 100

15. Considering the entire range of transactions facilitated by your institution for such clients, how has the use of financial leverage by trading REITs changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 5.9
Remained basically unchanged 16 94.1
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 17 100

16. How has the provision of differential terms by your institution to most-favored (as a function of breadth, duration, and extent of relationship) trading REITs changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 0 0.0
Remained basically unchanged 16 94.1
Decreased somewhat 1 5.9
Decreased considerably 0 0.0
Total 17 100


Mutual Funds, Exchange-Traded Funds, Pension Plans, and Endowments

17. Over the past three months, how have the price terms (for example, financing rates) offered to mutual funds, ETFs, pension plans, and endowments as reflected across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of nonprice terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 3 14.3
Remained basically unchanged 18 85.7
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 21 100

18. Over the past three months, how has your use of nonprice terms (for example, haircuts, maximum maturity, covenants, cure periods, cross-default provisions or other documentation features) with respect to mutual funds, ETFs, pension plans, and endowments across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of price terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 0 0.0
Remained basically unchanged 21 100.0
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 21 100

19. To the extent that the price or nonprice terms applied to mutual funds, ETFs, pension plans, and endowments have tightened or eased over the past three months (as reflected in your responses to questions 17 and 18) what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Deterioration in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Reduced willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of more-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Higher internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Not important 0 0.0
      Total 1 100

    5. Diminished availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 2 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 2 100

    6. Worsening in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. Less-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

  2. Possible reasons for easing
    1. Improvement in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Increased willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of less-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Lower internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Increased availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    6. Improvement in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. More-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

20. How has the intensity of efforts by mutual funds, ETFs, pension plans, and endowments to negotiate more-favorable price and nonprice terms changed over the past three months?

Number of Respondents Percent
Increased considerably 1 4.8
Increased somewhat 2 9.5
Remained basically unchanged 18 85.7
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

21. Considering the entire range of transactions facilitated by your institution, how has the use of financial leverage by each of the following types of clients changed over the past three months?

  1. Mutual funds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 20 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 20 100

  2. ETFs
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 19 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 19 100

  3. Pension plans
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  4. Endowments
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 17 100

22. How has the provision of differential terms by your institution to most-favored (as a function of breadth, duration, and extent of relationship) mutual funds, ETFs, pension plans, and endowments changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 0 0.0
Remained basically unchanged 20 100.0
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 20 100


Insurance Companies

23. Over the past three months, how have the price terms (for example, financing rates) offered to insurance companies as reflected across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of nonprice terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 1 5.0
Remained basically unchanged 19 95.0
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 20 100

24. Over the past three months, how has your use of nonprice terms (for example, haircuts, maximum maturity, covenants, cure periods, cross-default provisions or other documentation features) with respect to insurance companies across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of price terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 0 0.0
Remained basically unchanged 20 95.2
Eased somewhat 1 4.8
Eased considerably 0 0.0
Total 21 100

25. To the extent that the price or nonprice terms applied to insurance companies have tightened or eased over the past three months (as reflected in your responses to questions 23 and 24) what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Deterioration in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Reduced willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of more-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Higher internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Diminished availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    6. Worsening in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. Less-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

  2. Possible reasons for easing
    1. Improvement in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Increased willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    3. Adoption of less-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Lower internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Increased availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    6. Improvement in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. More-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Not important 0 0.0
      Total 1 100

26. How has the intensity of efforts by insurance companies to negotiate more-favorable price and nonprice terms changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 4.8
Remained basically unchanged 20 95.2
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

27. Considering the entire range of transactions facilitated by your institution for such clients, how has the use of financial leverage by insurance companies changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 4.8
Remained basically unchanged 20 95.2
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100

28. How has the provision of differential terms by your institution to most-favored (as a function of breadth, duration, and extent of relationship) insurance companies changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 4.8
Remained basically unchanged 20 95.2
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100


Separately Managed Accounts Established with Investment Advisers

29. Over the past three months, how have the price terms (for example, financing rates) offered to separately managed accounts established with investment advisers as reflected across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of nonprice terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 2 10.0
Remained basically unchanged 18 90.0
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 20 100

30. Over the past three months, how has your use of nonprice terms (for example, haircuts, maximum maturity, covenants, cure periods, cross-default provisions or other documentation features) with respect to separately managed accounts established with investment advisers across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of price terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 0 0.0
Remained basically unchanged 20 100.0
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 20 100

31. To the extent that the price or nonprice terms applied to separately managed accounts established with investment advisers have tightened or eased over the past three months (as reflected in your responses to questions 29 and 30), what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Deterioration in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Reduced willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of more-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Higher internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Diminished availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    6. Worsening in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. Less-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

  2. Possible reasons for easing
    1. Improvement in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Increased willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of less-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Lower internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Increased availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    6. Improvement in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. More-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

32. How has the intensity of efforts by investment advisers to negotiate more-favorable price and nonprice terms on behalf of separately managed accounts changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 5.0
Remained basically unchanged 19 95.0
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 20 100

33. Considering the entire range of transactions facilitated by your institution for such clients, how has the use of financial leverage by separately managed accounts established with investment advisers changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 0 0.0
Remained basically unchanged 20 100.0
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 20 100

34. How has the provision of differential terms by your institution to separately managed accounts established with most-favored (as a function of breadth, duration, and extent of relationship) investment advisers changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 0 0.0
Remained basically unchanged 20 100.0
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 20 100


Nonfinancial Corporations

35. Over the past three months, how have the price terms (for example, financing rates) offered to nonfinancial corporations as reflected across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of nonprice terms?

Number of Respondents Percent
Tightened considerably 2 9.5
Tightened somewhat 2 9.5
Remained basically unchanged 17 81.0
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 21 100

36. Over the past three months, how has your use of nonprice terms (for example, haircuts, maximum maturity, covenants, cure periods, cross-default provisions or other documentation features) with respect to nonfinancial corporations across the entire spectrum of securities financing and OTC derivatives transaction types changed, regardless of price terms?

Number of Respondents Percent
Tightened considerably 1 4.8
Tightened somewhat 1 4.8
Remained basically unchanged 19 90.5
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 21 100

37. To the extent that the price or nonprice terms applied to nonfinancial corporations have tightened or eased over the past three months (as reflected in your responses to questions 35 and 36) what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Deterioration in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Reduced willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 2 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 2 100

    3. Adoption of more-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 2 66.7
      Not important 1 33.3
      Total 3 100

    4. Higher internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 1 100.0
      Total 1 100

    5. Diminished availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 50.0
      Not important 1 50.0
      Total 2 100

    6. Worsening in general market liquidity and functioning
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 1 100

    7. Less-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

  2. Possible reasons for easing
    1. Improvement in current or expected financial strength of counterparties
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    2. Increased willingness of your institution to take on risk
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    3. Adoption of less-stringent market conventions (that is, collateral terms and agreements, ISDA protocols)
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    4. Lower internal treasury charges for funding
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    5. Increased availability of balance sheet or capital at your institution
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    6. Improvement in general market liquidity and functioning
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

    7. More-aggressive competition from other institutions
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Not important 0 0.0
      Total 0 100

38. How has the intensity of efforts by nonfinancial corporations to negotiate more-favorable price and nonprice terms changed over the past three months?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 9.5
Remained basically unchanged 19 90.5
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 21 100


Mark and Collateral Disputes

39. Over the past three months, how has the volume of mark and collateral disputes with clients of each of the following types changed?

  1. Dealers and other financial intermediaries
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 20 95.2
    Decreased somewhat 1 4.8
    Decreased considerably 0 0.0
    Total 21 100

  2. Hedge funds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 21 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 21 100

  3. Trading REITs
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 17 100

  4. Mutual funds, ETFs, pension plans, and endowments
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 89.5
    Decreased somewhat 2 10.5
    Decreased considerably 0 0.0
    Total 19 100

  5. Insurance companies
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 94.7
    Decreased somewhat 0 0.0
    Decreased considerably 1 5.3
    Total 19 100

  6. Separately managed accounts established with investment advisers
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  7. Nonfinancial corporations
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 94.1
    Decreased somewhat 1 5.9
    Decreased considerably 0 0.0
    Total 17 100

40. Over the past three months, how has the duration and persistence of mark and collateral disputes with clients of each of the following types changed?

  1. Dealers and other financial intermediaries
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 20 95.2
    Decreased somewhat 1 4.8
    Decreased considerably 0 0.0
    Total 21 100

  2. Hedge funds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 21 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 21 100

  3. Trading REITs
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 17 100

  4. Mutual funds, ETFs, pension plans, and endowments
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 88.9
    Decreased somewhat 2 11.1
    Decreased considerably 0 0.0
    Total 18 100

  5. Insurance companies
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 89.5
    Decreased somewhat 0 0.0
    Decreased considerably 2 10.5
    Total 19 100

  6. Separately managed accounts established with investment advisers
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 94.4
    Decreased somewhat 0 0.0
    Decreased considerably 1 5.6
    Total 18 100

  7. Nonfinancial corporations
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 94.1
    Decreased somewhat 1 5.9
    Decreased considerably 0 0.0
    Total 17 100

Back to section top


Over-the-Counter Derivatives

In this Section:

Questions 41 through 51 ask about OTC derivatives trades. Question 41 focuses on nonprice terms applicable to new and renegotiated master agreements. Questions 42 through 48 ask about the initial margin requirements for most-favored and average clients applicable to different types of contracts: Question 42 focuses on foreign exchange (FX); question 43 on interest rates; question 44 on equity; question 45 on contracts referencing corporate credits (single-name and indexes); question 46 on credit derivatives referencing structured products such as mortgage-backed securities (MBS) and asset-backed securities (ABS) (specific tranches and indexes); question 47 on commodities; and question 48 on total return swaps (TRS) referencing nonsecurities (such as bank loans, including, for example, commercial and industrial loans and mortgage whole loans). Question 49 asks about posting of nonstandard collateral pursuant to OTC derivatives contracts. Questions 50 and 51 focus on mark and collateral disputes involving contracts of each of the aforementioned types.

If your institution’s terms have tightened or eased over the past three months, please so report them regardless of how they stand relative to longer-term norms. Please focus your response on dollar-denominated instruments; if material differences exist with respect to instruments denominated in other currencies, please explain in the appropriate comment space.


New and Renegotiated Master Agreements

41. Over the past three months, how have nonprice terms incorporated in new or renegotiated OTC derivatives master agreements put in place with your institution's client changed?

  1. Requirements, timelines, and thresholds for posting additional margin
    Number of Respondents Percent
    Tightened considerably 0 0.0
    Tightened somewhat 0 0.0
    Remained basically unchanged 19 100.0
    Eased somewhat 0 0.0
    Eased considerably 0 0.0
    Total 19 100

  2. Acceptable collateral
    Number of Respondents Percent
    Tightened considerably 1 5.3
    Tightened somewhat 1 5.3
    Remained basically unchanged 16 84.2
    Eased somewhat 1 5.3
    Eased considerably 0 0.0
    Total 19 100

  3. Recognition of portfolio or diversification benefits (including from securities financing trades where appropriate agreements are in place)
    Number of Respondents Percent
    Tightened considerably 0 0.0
    Tightened somewhat 0 0.0
    Remained basically unchanged 19 100.0
    Eased somewhat 0 0.0
    Eased considerably 0 0.0
    Total 19 100

  4. Triggers and covenants
    Number of Respondents Percent
    Tightened considerably 0 0.0
    Tightened somewhat 1 5.3
    Remained basically unchanged 18 94.7
    Eased somewhat 0 0.0
    Eased considerably 0 0.0
    Total 19 100

  5. Other documentation features (including cure periods and cross-default provisions)
    Number of Respondents Percent
    Tightened considerably 0 0.0
    Tightened somewhat 0 0.0
    Remained basically unchanged 18 94.7
    Eased somewhat 1 5.3
    Eased considerably 0 0.0
    Total 19 100


Initial Margin

42. Over the past three months, how have initial margin requirements set by your institution with respect to OTC FX derivatives changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 2 10.5
    Remained basically unchanged 17 89.5
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 19 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 2 10.5
    Remained basically unchanged 16 84.2
    Decreased somewhat 1 5.3
    Decreased considerably 0 0.0
    Total 19 100

43. Over the past three months, how have initial margin requirements set by your institution with respect to OTC interest rate derivatives changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 20 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 20 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 90.0
    Decreased somewhat 2 10.0
    Decreased considerably 0 0.0
    Total 20 100

44. Over the past three months, how have initial margin requirements set by your institution with respect to OTC equity derivatives changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 1 5.6
    Remained basically unchanged 17 94.4
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 1 5.6
    Remained basically unchanged 17 94.4
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

45. Over the past three months, how have initial margin requirements set by your institution with respect to OTC credit derivatives referencing corporates (single-name corporates or corporate indexes) changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 1 5.9
    Remained basically unchanged 16 94.1
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 17 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 1 5.9
    Remained basically unchanged 16 94.1
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 17 100

46. Over the past three months, how have initial margin requirements set by your institution with respect to OTC credit derivatives referencing securitized products (such as specific ABS or MBS tranches and associated indexes) changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 14 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 14 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 13 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 13 100

47. Over the past three months, how have initial margin requirements set by your institution with respect to OTC commodity derivatives changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

48. Over the past three months, how have initial margin requirements set by your institution with respect to TRS referencing nonsecurities (such as bank loans, including, for example, commercial and industrial loans and mortgage whole loans) changed?

  1. Initial margin requirements for average clients
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 12 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 12 100

  2. Initial margin requirements for most-favored clients, as a consequence of breadth, duration, and/or extent of relationship
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 12 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 12 100


Nonstandard Collateral

49. Over the past three months, how has the posting of nonstandard collateral (that is, other than cash and U.S. Treasury securities) as permitted under relevant agreements changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 4.8
Remained basically unchanged 19 90.5
Decreased somewhat 1 4.8
Decreased considerably 0 0.0
Total 21 100


Mark and Collateral Disputes

50. Over the past three months, how has the volume of mark and collateral disputes relating to contracts of each of the following types changed?

  1. FX
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 94.1
    Decreased somewhat 1 5.9
    Decreased considerably 0 0.0
    Total 17 100

  2. Interest rate
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 94.4
    Decreased somewhat 1 5.6
    Decreased considerably 0 0.0
    Total 18 100

  3. Equity
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  4. Credit referencing corporates
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 15 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 15 100

  5. Credit referencing securitized products including MBS and ABS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 12 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 12 100

  6. Commodity
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 14 93.3
    Decreased somewhat 0 0.0
    Decreased considerably 1 6.7
    Total 15 100

  7. TRS referencing nonsecurities (such as bank loans, including, for example, commercial and industrial loans and mortgage whole loans)
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 8 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 8 100

51. Over the past three months, how has the duration and persistence of mark and collateral disputes relating to contracts of each of the following types changed?

  1. FX
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 94.1
    Decreased somewhat 1 5.9
    Decreased considerably 0 0.0
    Total 17 100

  2. Interest rate
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 17 94.4
    Decreased somewhat 1 5.6
    Decreased considerably 0 0.0
    Total 18 100

  3. Equity
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  4. Credit referencing corporates
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 15 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 15 100

  5. Credit referencing securitized products including MBS and ABS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 11 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 11 100

  6. Commodity
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 14 93.3
    Decreased somewhat 0 0.0
    Decreased considerably 1 6.7
    Total 15 100

  7. TRS referencing nonsecurities (such as bank loans, including, for example, commercial and industrial loans and mortgage whole loans)
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 8 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 8 100

Back to section top


Securities Financing

In this Section:

Questions 52 through 79 ask about securities funding at your institution--that is, lending to clients collateralized by securities. Such activities may be conducted on a "repo" desk, on a trading desk engaged in facilitation for institutional clients and/or proprietary transactions, on a funding desk, or on a prime brokerage platform. Questions 52 through 55 focus on lending against high-grade corporate bonds; questions 56 through 59 on lending against high-yield corporate bonds; questions 60 and 61 on lending against equities (including through stock loan); questions 62 through 65 on lending against agency residential mortgage-backed securities (agency RMBS); questions 66 through 69 on lending against non-agency residential mortgage-backed securities (non-agency RMBS); questions 70 through 73 on lending against commercial mortgage-backed securities (CMBS); and questions 74 through 77 on consumer ABS (for example, backed by credit card receivables or auto loans). Questions 78 and 79 ask about mark and collateral disputes for lending backed by each of the aforementioned contract types.

If your institution’s terms have tightened or eased over the past three months, please so report them regardless of how they stand relative to longer-term norms. Please focus your response on dollar-denominated instruments; if material differences exist with respect to instruments denominated in other currencies, please explain in the appropriate comment space.


High-Grade Corporate Bonds

52. Over the past three months, how have the terms under which high-grade corporate bonds are funded changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 18.8
      Remained basically unchanged 13 81.2
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 6.2
      Remained basically unchanged 15 93.8
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 6.2
      Remained basically unchanged 15 93.8
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 20.0
      Remained basically unchanged 11 73.3
      Eased somewhat 1 6.7
      Eased considerably 0 0.0
      Total 15 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 12.5
      Remained basically unchanged 14 87.5
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 6.2
      Remained basically unchanged 15 93.8
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 6.2
      Remained basically unchanged 14 87.5
      Eased somewhat 1 6.2
      Eased considerably 0 0.0
      Total 16 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 6.7
      Remained basically unchanged 13 86.7
      Eased somewhat 1 6.7
      Eased considerably 0 0.0
      Total 15 100

53. Over the past three months, how has demand for funding of high-grade corporate bonds by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 5.9
Remained basically unchanged 14 82.4
Decreased somewhat 2 11.8
Decreased considerably 0 0.0
Total 17 100

54. Over the past three months, how has demand for term funding with a maturity greater than 30 days of high-grade corporate bonds by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 0 0.0
Remained basically unchanged 16 94.1
Decreased somewhat 1 5.9
Decreased considerably 0 0.0
Total 17 100

55. Over the past three months, how have liquidity and functioning in the high-grade corporate bond market changed?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 3 17.6
Remained basically unchanged 14 82.4
Deteriorated somewhat 0 0.0
Deteriorated considerably 0 0.0
Total 17 100


High-Yield Corporate Bonds

56. Over the past three months, how have the terms under which high-yield corporate bonds are funded changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 18.8
      Remained basically unchanged 12 75.0
      Eased somewhat 1 6.2
      Eased considerably 0 0.0
      Total 16 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 12.5
      Remained basically unchanged 13 81.2
      Eased somewhat 1 6.2
      Eased considerably 0 0.0
      Total 16 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 4 25.0
      Remained basically unchanged 12 75.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 20.0
      Remained basically unchanged 12 80.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 15 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 12.5
      Remained basically unchanged 14 87.5
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 12.5
      Remained basically unchanged 14 87.5
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 16 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 18.8
      Remained basically unchanged 12 75.0
      Eased somewhat 1 6.2
      Eased considerably 0 0.0
      Total 16 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 20.0
      Remained basically unchanged 12 80.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 15 100

57. Over the past three months, how has demand for funding of high-yield corporate bonds by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 3 17.6
Remained basically unchanged 14 82.4
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 17 100

58. Over the past three months, how has demand for term funding with a maturity greater than 30 days of high-yield corporate bonds by your institution's clients changed?

Number of Respondents Percent
Increased considerably 1 5.9
Increased somewhat 0 0.0
Remained basically unchanged 15 88.2
Decreased somewhat 1 5.9
Decreased considerably 0 0.0
Total 17 100

59. Over the past three months, how have liquidity and functioning in the high-yield corporate bond market changed?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 0 0.0
Remained basically unchanged 15 88.2
Deteriorated somewhat 2 11.8
Deteriorated considerably 0 0.0
Total 17 100


Equities (Including through Stock Loan)

60. Over the past three months, how have the terms under which equities are funded (including through stock loan) changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 20 95.2
      Eased somewhat 1 4.8
      Eased considerably 0 0.0
      Total 21 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 21 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 21 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 21 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 21 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 20 95.2
      Eased somewhat 1 4.8
      Eased considerably 0 0.0
      Total 21 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 20 95.2
      Eased somewhat 1 4.8
      Eased considerably 0 0.0
      Total 21 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 21 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 21 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 21 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 21 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 19 95.0
      Eased somewhat 1 5.0
      Eased considerably 0 0.0
      Total 20 100

61. Over the past three months, how has demand for funding of equities (including through stock loan) by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 4.8
Remained basically unchanged 19 90.5
Decreased somewhat 1 4.8
Decreased considerably 0 0.0
Total 21 100


Agency Residential Mortgage-Backed Securities

62. Over the past three months, how have the terms under which agency RMBS are funded changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 10.5
      Remained basically unchanged 17 89.5
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 19 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 19 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 19 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 19 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 19 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 11.1
      Remained basically unchanged 16 88.9
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 18 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 5.3
      Remained basically unchanged 18 94.7
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 19 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 18 94.7
      Eased somewhat 1 5.3
      Eased considerably 0 0.0
      Total 19 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 18 94.7
      Eased somewhat 1 5.3
      Eased considerably 0 0.0
      Total 19 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 5.6
      Remained basically unchanged 17 94.4
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 18 100

63. Over the past three months, how has demand for funding of agency RMBS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 10.5
Remained basically unchanged 17 89.5
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 19 100

64. Over the past three months, how has demand for term funding with a maturity greater than 30 days of agency RMBS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 5.3
Remained basically unchanged 18 94.7
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 19 100

65. Over the past three months, how have liquidity and functioning in the agency RMBS market changed?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 0 0.0
Remained basically unchanged 16 84.2
Deteriorated somewhat 3 15.8
Deteriorated considerably 0 0.0
Total 19 100


Non-Agency Residential Mortgage-Backed Securities

66. Over the past three months, how have the terms under which non-agency RMBS are funded changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 3 21.4
      Remained basically unchanged 11 78.6
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 14 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 7.1
      Remained basically unchanged 12 85.7
      Eased somewhat 1 7.1
      Eased considerably 0 0.0
      Total 14 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 14.3
      Remained basically unchanged 11 78.6
      Eased somewhat 1 7.1
      Eased considerably 0 0.0
      Total 14 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 2 15.4
      Remained basically unchanged 11 84.6
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 13 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 7.1
      Remained basically unchanged 11 78.6
      Eased somewhat 2 14.3
      Eased considerably 0 0.0
      Total 14 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 85.7
      Eased somewhat 2 14.3
      Eased considerably 0 0.0
      Total 14 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 7.1
      Remained basically unchanged 11 78.6
      Eased somewhat 2 14.3
      Eased considerably 0 0.0
      Total 14 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 7.7
      Remained basically unchanged 12 92.3
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 13 100

67. Over the past three months, how has demand for funding of non-agency RMBS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 4 26.7
Remained basically unchanged 11 73.3
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 15 100

68. Over the past three months, how has demand for term funding with a maturity greater than 30 days of non-agency RMBS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 3 20.0
Remained basically unchanged 12 80.0
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 15 100

69. Over the past three months, how have liquidity and functioning in the non-agency RMBS market changed?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 1 6.7
Remained basically unchanged 12 80.0
Deteriorated somewhat 1 6.7
Deteriorated considerably 1 6.7
Total 15 100


Commercial Mortgage-Backed Securities

70. Over the past three months, how have the terms under which CMBS are funded changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 92.3
      Eased somewhat 1 7.7
      Eased considerably 0 0.0
      Total 13 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 13 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 13 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 92.3
      Eased somewhat 1 7.7
      Eased considerably 0 0.0
      Total 13 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 7.7
      Remained basically unchanged 12 92.3
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 13 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 92.3
      Eased somewhat 1 7.7
      Eased considerably 0 0.0
      Total 13 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 13 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 13 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 92.3
      Eased somewhat 1 7.7
      Eased considerably 0 0.0
      Total 13 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 13 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 13 100

71. Over the past three months, how has demand for funding of CMBS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 14.3
Remained basically unchanged 12 85.7
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 14 100

72. Over the past three months, how has demand for term funding with a maturity greater than 30 days of CMBS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 7.1
Remained basically unchanged 13 92.9
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 14 100

73. Over the past three months, how have liquidity and functioning in the CMBS market changed?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 0 0.0
Remained basically unchanged 11 78.6
Deteriorated somewhat 2 14.3
Deteriorated considerably 1 7.1
Total 14 100


Consumer Asset-Backed Securities

74. Over the past three months, how have the terms under which consumer ABS (for example, backed by credit card receivables or auto loans) are funded changed?

  1. Terms for average clients
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 12 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 12 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 11 91.7
      Eased somewhat 1 8.3
      Eased considerably 0 0.0
      Total 12 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 1 8.3
      Remained basically unchanged 11 91.7
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 12 100

  2. Terms for most-favored clients, as a consequence of breadth, duration and/or extent of relationship
    1. Maximum amount of funding
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 12 100

    2. Maximum maturity
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 12 100

    3. Haircuts
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 11 91.7
      Eased somewhat 1 8.3
      Eased considerably 0 0.0
      Total 12 100

    4. Collateral spreads over relevant benchmark (effective financing rates)
      Number of Respondents Percent
      Tightened considerably 0 0.0
      Tightened somewhat 0 0.0
      Remained basically unchanged 12 100.0
      Eased somewhat 0 0.0
      Eased considerably 0 0.0
      Total 12 100

75. Over the past three months, how has demand for funding of consumer ABS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 2 15.4
Remained basically unchanged 11 84.6
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 13 100

76. Over the past three months, how has demand for term funding with a maturity greater than 30 days of consumer ABS by your institution's clients changed?

Number of Respondents Percent
Increased considerably 0 0.0
Increased somewhat 1 7.7
Remained basically unchanged 12 92.3
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 13 100

77. Over the past three months, how have liquidity and functioning in the consumer ABS market changed?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 0 0.0
Remained basically unchanged 11 84.6
Deteriorated somewhat 1 7.7
Deteriorated considerably 1 7.7
Total 13 100


Mark and Collateral Disputes

78. Over the past three months, how has the volume of mark and collateral disputes relating to lending against each of the following collateral types changed?

  1. High-grade corporate bonds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  2. High-yield corporate bonds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  3. Equities
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  4. Agency RMBS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  5. Non-agency RMBS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 13 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 13 100

  6. CMBS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 13 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 13 100

  7. Consumer ABS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 13 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 13 100

79. Over the past three months, how has the duration and persistence of mark and collateral disputes relating to lending against each of the following collateral types changed?

  1. High-grade corporate bonds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  2. High-yield corporate bonds
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 16 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 16 100

  3. Equities
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  4. Agency RMBS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 18 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 18 100

  5. Non-agency RMBS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 14 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 14 100

  6. CMBS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 14 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 14 100

  7. Consumer ABS
    Number of Respondents Percent
    Increased considerably 0 0.0
    Increased somewhat 0 0.0
    Remained basically unchanged 13 100.0
    Decreased somewhat 0 0.0
    Decreased considerably 0 0.0
    Total 13 100

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Optional Question

Question 80 requests feedback on any other issues you judge to be important relating to credit terms applicable to securities financing transactions and OTC derivatives contracts.

Special Questions

In this Section:

The following special questions are intended to provide better context for interpreting the core set of questions in the previous section, which focus on changes in credit terms over the preceding three months. Unlike the core questions, these special questions will not be included in the survey on an ongoing basis.

Special Questions on High-Frequency Trading Firms

A number of market commentaries have pointed to the increased participation of high-frequency trading (HFT) firms in a number of financial markets. Questions 81 to 83 ask whether your firm extends credit to HFT clients in specific financial markets. Questions 84 to 90 ask about provision of credit, credit terms, and credit risk management with respect to HFT clients active in U.S. equity markets. Questions 91 to 95 ask the extent to which your firm's behavior in the dealer-to-customer cash market for U.S. Treasury securities has changed as a result of increased presence of HFTs in the interdealer market in recent years.


Credit extended to HFT clients in a number of financial markets

This set of questions focuses on credit extended by your firm to HFT clients that transact in a number of financial markets. Please note that, if during the day, HFT clients are allowed to accumulate long or short positions that are larger than the amount of cash or collateral in their accounts, and if your firm is liable for settling the trades, this will be considered intraday credit for the purpose of this survey even if the clients tend to end the day with little or no position.

81. Do you have HFT clients?

Number of Respondents Percent
Yes 14 70.0
No 6 30.0
Total 20 100

82. In which markets does your firm extend intraday credit to HFT clients? Please select all that apply.

Number of Respondents Percent
U.S. cash equity markets 11 78.6
U.S. cash Treasury markets 8 57.1
Spot foreign exchange markets 8 57.1
U.S. equity futures markets 9 64.3
U.S. Treasury futures markets 6 42.9
Foreign exchange futures markets 9 64.3

83. In which markets does your firm extend overnight credit to HFT clients? Please select all that apply.

Number of Respondents Percent
U.S. cash equity markets 7 50.0
U.S. cash Treasury markets 6 42.9
Spot foreign exchange markets 7 50.0
U.S. equity futures markets 8 57.1
U.S. Treasury futures markets 6 42.9
Foreign exchange futures markets 8 57.1


Intraday credit extended to HFT clients in the U.S. cash equity markets

This set of questions focuses on intraday credit extended by your firm to HFT clients that transact in the U.S. cash equity markets. Please note that, if during the day, HFT clients are allowed to accumulate long or short positions that are larger than the amount of cash or collateral in their accounts, and if your firm is liable for settling the trades, this will be considered intraday credit for the purpose of this survey even if the clients tend to end the day with little or no position.

84. Do you have any HFT firms as clients in the U.S. cash equity markets?

Number of Respondents Percent
Yes 12 60.0
No 8 40.0
Total 20 100

85. How has the use of intraday credit by HFT clients changed over the past three years?

Number of Respondents Percent
Increased considerably 1 8.3
Increased somewhat 2 16.7
Remained basically unchanged 9 75.0
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 12 100

86. How have price terms (for example, financing rates) on intraday credit extended to your firm's HFT clients changed over the past three years, regardless of nonprice terms? (Please indicate tightening if price terms have become more stringent.)

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 3 25.0
Remained basically unchanged 5 41.7
Eased somewhat 1 8.3
Eased considerably 0 0.0
Not applicable (that is, there are no price terms) 3 25.0
Total 12 100

87. How have nonprice terms (for example, margin or exposure limits) on intraday credit extended to your firm's HFT clients changed over the past three years, regardless of price terms?

Number of Respondents Percent
Tightened considerably 0 0.0
Tightened somewhat 2 16.7
Remained basically unchanged 8 66.7
Eased somewhat 2 16.7
Eased considerably 0 0.0
Total 12 100

88. To the extent that the price or nonprice terms applied to your firm's HFT clients have tightened or eased over the past three years (as reflected in your responses to question 86 and 87), what are the most important reasons for the change?

  1. Possible reasons for tightening
    1. Re-evaluation of HFT clients' operational risks
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Total 1 100

    2. Relatively lower return compared with other business lines at your firm
      Number of Respondents Percent
      Very important 1 50.0
      Somewhat important 1 50.0
      Total 2 100

    3. Decreased willingness on the part of your institution to take on credit risk against this type of counterparty
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Total 1 100

  2. Possible reasons for easing
    1. Re-evaluation of HFT clients' operational risks
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Total 1 100

    2. Relatively higher return compared with other business lines at your firm
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Total 0 100

    3. Increased willingness on the part of your institution to take on credit risk against this type of counterparty
      Number of Respondents Percent
      Very important 1 50.0
      Somewhat important 1 50.0
      Total 2 100

89. Over the past three years, how has the amount of resources and attention your firm devotes to monitoring intraday exposure to your HFT clients changed?

Number of Respondents Percent
Increased considerably 4 33.3
Increased somewhat 6 50.0
Remained basically unchanged 2 16.7
Decreased somewhat 0 0.0
Decreased considerably 0 0.0
Total 12 100

90. How does your firm typically monitor and manage your intraday exposure to HFT clients? Please select all that apply, and/or provide additional answers in text as appropriate.

Number of Respondents Percent
No formal framework 0 0.0
Calculate firm's exposure to the client throughout the day 8 66.7
Collect intraday margin 4 33.3
Impose a maximum exposure limit or other types of limit for each client 11 91.7

Changing landscape in the U.S. cash Treasury market

91. Does your firm participate in the dealer-to-customer market for cash U.S. Treasury securities?

Number of Respondents Percent
Yes 14 70.0
No 6 30.0
Total 20 100

92. Over the past five years, to what extent has your firm's ability to manage positions that arise from trades established in the dealer-to-customer market changed as a result of the increased presence of HFT firms in the interdealer U.S. cash Treasury market?

Number of Respondents Percent
Improved considerably 0 0.0
Improved somewhat 2 14.3
Remained basically unchanged 4 28.6
Deteriorated somewhat 7 50.0
Deteriorated considerably 1 7.1
Total 14 100

93. To the extent that the increased presence of HFT firms in the interdealer U.S. cash Treasury market has changed your firm's ability to manage positions that arise from trades established in the dealer-to-customer cash market (as reflected in your response to question 92), what are the most important reasons for the change?

  1. Reasons for improvement
    1. Lower transaction costs in the interdealer market
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Total 1 100

    2. Increased limit order book depth in the interdealer market
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Total 0 100

    3. Lower operational risk in the interdealer market
      Number of Respondents Percent
      Very important 1 100.0
      Somewhat important 0 0.0
      Total 1 100

    4. Lower average levels of volatility in the interdealer market
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Total 0 100

    5. Reduced frequency of sudden increases in volatility in the interdealer cash market
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Total 1 100

  2. Reasons for deterioration
    1. Higher transaction costs in the interdealer market
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 0 0.0
      Total 0 100

    2. Decreased limit order book depth in the interdealer market
      Number of Respondents Percent
      Very important 2 50.0
      Somewhat important 2 50.0
      Total 4 100

    3. Higher operational risk in the interdealer market
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Total 1 100

    4. Higher average levels of volatility in the interdealer market
      Number of Respondents Percent
      Very important 0 0.0
      Somewhat important 1 100.0
      Total 1 100

    5. Increased frequency of sudden increases in volatility in the interdealer cash market
      Number of Respondents Percent
      Very important 5 83.3
      Somewhat important 1 16.7
      Total 6 100

94. Over the past five years, how has the increased presence of HFTs in the interdealer U.S. cash Treasury market affected price terms (such as bid-asked spreads) that your firm quotes to clients in the dealer-to-customer market?

Number of Respondents Percent
Tightened considerably 1 7.1
Tightened somewhat 5 35.7
Remained basically unchanged 8 57.1
Eased somewhat 0 0.0
Eased considerably 0 0.0
Total 14 100

95. Over the past five years, how has the increased presence of HFTs in the interdealer U.S. cash Treasury market affected nonprice terms (such as quote size) that your firm quotes to clients in the dealer-to-customer market?

Number of Respondents Percent
Tightened considerably 2 14.3
Tightened somewhat 5 35.7
Remained basically unchanged 6 42.9
Eased somewhat 0 0.0
Eased considerably 1 7.1
Total 14 100


Footnotes

1. For the purposes of this survey, the term "HFT firms" refers to trading firms that deploy strategies predicated on low latency. Return to text

2. For questions that ask about credit terms, reported net percentages equal the percentage of institutions that reported tightening terms ("tightened considerably" or "tightened somewhat") minus the percentage of institutions that reported easing terms ("eased considerably" or "eased somewhat"). For questions that ask about demand, reported net fractions equal the percentage of institutions that reported increased demand ("increased considerably" or "increased somewhat") minus the percentage of institutions that reported decreased demand ("decreased considerably" or "decreased somewhat"). Return to text

3. Survey respondents were instructed that, if during the day HFT clients are allowed to accumulate long or short positions that are larger than the amount of collateral in their accounts, and if the respondent is liable for settling the trades, this should be considered as extending intraday credit even if clients tend to end the day with little or no position. Return to text

4. For the purposes of this survey, "dealer-to-customer cash Treasury market" refers to the over-the-counter cash Treasury market, where clients are generally not dealers nor HFTs. "Interdealer cash Treasury market" refers to interdealer platforms such as BrokerTec or eSpeed. Return to text

5. The survey asks specifically about requirements, timelines, and thresholds for posting additional margin; acceptable collateral; recognition of portfolio or diversification benefits; triggers and covenants; and other documentation features, including cure periods and cross-default provisions. Return to text

6. Contract types included in the survey are OTC foreign exchange derivatives, interest rate derivatives, equity derivatives, credit derivatives, securitized product derivatives, commodity derivatives, and total return swap referencing nonsecurities (such as bank loans). Return to text

7. Question 80, not discussed here, was optional and allowed respondents to provide additional comments. Return to text

8. Note that survey respondents were instructed to report changes in liquidity and functioning in the market for the underlying collateral to be funded through repurchase agreements and similar secured financing transactions, not changes in the funding market itself. This question was not asked with respect to equity markets in the core questions. Return to text

9. Other options provided to the respondents were higher transaction costs in the interdealer market, higher operational risk in the interdealer market, and higher average levels of volatility in the interdealer market. Return to text

10. Respondents were given the option to respond in text. Three respondents mentioned phantom liquidity in the text response. Return to text

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Last update: January 5, 2016