Consequences of the sell-off: falling shares of large banks and SEC investigation | R Blog RU

From our previous material, you learned that last Friday Morgan Stanley and Goldman Sachs staged a $ 19 billion share sale. In addition, we have listed the companies whose quotes fell to a greater extent due to massive block deals that day.

Important questions were formulated. For example, what will be the consequences for the large financial institutions involved in the incident, and where did the US Securities and Exchange Commission look? Today we will try to find the answers.

Who crashed the market on March 26?

Bill Hwang’s family foundation Archegos Capital Management announced that it was unable to meet its loan obligations to brokers. Those, in turn, trying to recover their funds, started an urgent and large-scale liquidation of the assets of this organization.

According to the Wall Street Journal, the list of brokers at Archegos Capital Management is replete with the names of financial giants such as Morgan Stanley, Goldman Sachs, Deutsche Bank, UBS Group AG, Wells Fargo, Credit Suisse and Nomura.

According to Bloomberg, the above-listed authoritative organizations in the shortest possible time sold the assets of the Bill Hwan family fund in the amount of $ 20 billion.WSJ writes about a more impressive scale – $ 30 billion.

SEC launched an investigation

The actions of large banks and financial companies, as well as the consequences to which they led, attracted the attention of the US Securities and Exchange Commission (SEC). The regulator wanted to understand the reasons for the default of Archegos Capital Management and check the legality of the measures taken by all the heroes of the situation.

For this, representatives of Morgan Stanley, Goldman Sachs, Nomura and Credit Suisse were invited to the SEC office. In addition, the Commission requested relevant data from the Financial Industry Regulatory Authority (FINRA).

As a reminder, this private authority is responsible for compliance with the rules for trading on the OTC securities market.

Investigation in itself can provoke a further drop in quotations. If SEC finds violations in the actions of traders who staged a collapse, then most likely the penalties will be cosmic. And here it cannot be ruled out that the fall of the hedge fund was provoked by prior conspiracy.

Maxim Artyomov, RoboForex analyst and author of R Blog

What major financial companies have fallen in price?

Analysts note that brokers, who found themselves in a general difficult situation after the default of Archegos Capital Management, preferred to solve the problem on their own and reduced coordination of actions to zero. Those banks and firms that managed to throw off the assets of the Hwang family fund were practically not affected.

The quotes of those organizations, which on Friday failed to show efficiency, rushed down. Shares of Nomura Holdings (NYSE: NMR) for three trading sessions, and this is from March 26 to 30, inclusive, fell 16%, from $ 6.61 to $ 5.55.

Credit Suisse (NYSE: CS) securities on the same days decreased by 16.8%, from $ 13.21 to $ 10.99, and UBS Group AG (NYSE: UBS) – by 2.9%, from $ 16.06 up to $ 15.6. According to Reuters, the size of possible losses of world banks could exceed $ 6 billion.

Summing up the result

The consequences to one degree or another overtook only a third of the total list of large banks that acted as brokers for Archegos Capital Management. Shares of Morgan Stanley and Goldman Sachs hardly lost in value and are already trading in positive territory.

The US Securities and Exchange Commission launched an investigation, drawing attention to not the most transparent financial instruments used by the Bill Hwang family fund to create large stakes in various companies.

Most likely, they will not cancel completed transactions, but licenses can be taken away. It is difficult to predict how this will affect the share price in the future, but it is quite possible to draw a preliminary conclusion. After a rapid fall, if the fund remains afloat, the securities can win back their positions. This applies not only to Archegos Capital Management, but also to media conglomerates ViacomCBS, Discovery, Baidu and Tencent Music.

Maxim Artyomov, RoboForex analyst and author of R Blog

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