Liquidating illiquid collateral

14 Dec

Debt isn't the only kind of liability, but that's a pretty reasonable simplification for now. In general, liability means you owe something to somebody in the future. And we'll assume right now that your debt is your main liability. You might have some type of legal liability, where someone is suing you or you had sprayed asbestos on a bunch of playgrounds, thinking that it was actually good for the playground equipment and now there's all of this liability because, well, you get the idea. It'll pay you coupons or interest and so forth. That would be a certificate that's an IOU from a company.At the same time, collateral became a key feature of the post-crisis regulatory reforms: it will be mandatory for many bilateral OTC derivatives and is already required for centrally cleared transactions.This ubiquity has led to concern as to whether there is enough collateral to meet all the roles it must play.

You're never going to make any money, so you might as well just sell everything you have. And I'll show you how that's done in a reasonably fair way.Based on the NSCC Illiquid Requirement, Apex has implemented a policy on trades involving illiquid stocks, in order to reduce the very large deposit fees required by NSCC.For trading activity that triggers an NSCC illiquidity deposit requirement, Apex will charge interest on the illiquid requirement generated by the customer.In this article we review the key features of secured transactions, setting out the principal risks that collateralisation brings both to the parties involved and to the system.This discussion is illustrated by two of the key failures during the crisis, AIG and Lehman Brothers.