Securities dealer financing terms tightened among respondents to Fed survey, report says

A “substantial fraction” of respondents to the Federal Reserve’s June survey of senior credit officers on dealer financing terms indicated having tightened price and nonprice terms on securities financing transactions and over-the-counter (OTC) derivatives across all classes of counterparties, according to a Fed report released Thursday.

The June survey, the Fed notes, included 23 institutions and focused on activity from February to May. The institutions surveyed, it notes, account for almost all dealer financing of dollar-denominated securities to non-dealers and are the most active intermediaries in OTC derivatives markets.

Across all counterparty types, the report shows:

  • the net fractions of respondents reporting tightened price and nonprice terms were at the highest levels since the survey began in 2011; and
  • more than half of respondents indicated dedicating increased resources and attention to managing concentrated credit exposure to dealers and central counterparties.

“A substantial fraction of respondents indicated increased volume and duration of mark and collateral disputes for most counterparty types, and more respondents indicated so for dealers, hedge funds, and trading REITs [real estate investment trusts] than for other client types,” it states.

The report also covers clients’ use of financial leverage, OTC derivatives markets, securities financing transactions, and some special-topic questions.

Senior Credit Officer Opinion Survey on Dealer Financing Terms