(Reuters) – Top U.S. regulators are zeroing in on dangers posed by highly leveraged hedge fund trades, and considering options to rein in risks to the broader financial system, Bloomberg News reported on Thursday.
Regulators are weighing options ranging from pushing banks to gather more data on exposures to pressing them to ramp up haircuts on some secured borrowing, the report said, citing people familiar with the matter
In March, the U.S. Securities and Exchange Commission (SEC)proposed new rules for better oversight of private equity and hedge funds that would require reporting of events indicating “significant stress” to the agency within one business day, but the vote on that currently stands postponed.
Regulators are especially concerned about the growth of one strategy known as the basis trade, which involves the use of leverage to profit from the price gap between Treasury futures and the underlying cash market, the report added.
The Federal Deposit Insurance Corporation (FDIC) declined to comment, while the U.S. Treasury and the Federal Reserve did not immediately respond to Reuters requests for comment.
(Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Devika Syamnath)
