IMF Working Papers

Derivative Margin Calls: A New Driver of MMF Flows

By Maddalena Ghio, Linda Rousova, Dilyara Salakhova, German Villegas Bauer

March 17, 2023

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Format: Chicago

Maddalena Ghio, Linda Rousova, Dilyara Salakhova, and German Villegas Bauer. "Derivative Margin Calls: A New Driver of MMF Flows", IMF Working Papers 2023, 061 (2023), accessed December 21, 2024, https://doi.org/10.5089/9798400233937.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

During the March 2020 market turmoil, euro area money-market funds (MMFs) experienced significant outflows, reaching almost 8% of assets under management. This paper investigates whether the volatility in MMF flows was driven by investors’ liquidity needs related to derivative margin payments. We combine three highly granular unique data sources (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lipper data for daily MMF flows) to construct a daily fund-level panel dataset spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EURdenominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an important driver of the flows of EUR-denominated MMFs domiciled in euro area.

Subject: Asset and liability management, Derivative markets, Expenditure, Financial institutions, Financial markets, Liquidity, Mutual funds, Nonbank financial institutions, Pension spending, Stocks

Keywords: Big data, Derivative margin calls, Derivative markets, Derivatives reform, EUR-denominated MMFs, Global, IMF working paper research Department, Interconnectedness, Liquidity, Liquidity risk, Margin payment, MMF flow, Money market funds, Mutual funds, Nonbank financial institutions, Non-bank financial intermediaries., Pension spending, Stocks, Variation margin payment, VM flow

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