Systemic Leverage: BlackRock Calls For Pulling The Plug On Stocks To Prevent Big Drops

It doesn’t surprise me that BlackRock would propose pulling the plug on the NYSE and related derivatives markets in the event of a big drop in prices.   BlackRock is the firm who’s co-chairman has running around DC with sacks of cash lobbying to make sure that derivatives will bailed out by the taxpayer.

Why?  Because BlackRock is the biggest participant in this:

The IMF calculates that there is around $1.5 trillion in embedded leverage in U.S. bond funds through derivatives, which could unwind dramatically if the Fed’s normalization process provokes liquidity shocks.   IMF Derivatives Warning

I find it hysterically ironic that the fund management firm whose CEO Larry Fink argued with Carl Icahn that there’s plenty of liquidity in the system to absorb a hit to the credit markets is now proposing to “unplug” the exchanges if stocks drop – make no mistake, this proposal was in BlackRocks mind at all when the S&P 500 was moving parabolically higher:

The fund company is proposing a three-part cure: the whole $23 trillion market should NYSE circuit breakerautomatically come to a halt if a significant number of shares stop trading; venues should use the same triggers to suspend trading throughout the day; and rules on when to pause securities should apply equally to shares, listed options, futures and exchange-traded products.  – BlackRock Calls For Halting Stocks    Perhaps this should be BlackRocks new marketing campaign:   “WHEN IN DOUBT, PULL IT OUT”

5 thoughts on “Systemic Leverage: BlackRock Calls For Pulling The Plug On Stocks To Prevent Big Drops

  1. Dave I just watched CNBC for 20 seconds before having to get a bucket to puke in.
    We have been wrong all along did you know that?
    On “power lunch” they are going to tell us that “there are lots of bullish signes for stocks and there might be a rally”
    And here comes the best(this one you must like)
    “Especially homebuilders looks good”
    I think they got it wrong.
    I think Glencore looks good with “only” 100 billion dollar in debt that is unsecured!

  2. I would be curious to hear why a similar circuit breaker should not also be placed on stocks going up?

    This whole down = bad; up = good concept strikes me as terribly un-capitalistic, starting off with the premise itself that value judgments even have a place in markets.

    Perhaps we can just set up automatic triggers, that instantly increase the pipeline of free cash to banks whenever the Dow drops below a certain level.

  3. Tilton, Patriarch Sued By Two Investors For CLO-related Losses

    Some of Lynn Tilton’s investors have seemingly lost patience with a long-running U.S. regulatory investigation into two CLO funds offered through Tilton’s private equity company, Patriarch Partners.

    The Patriarch CLO funds in question raised more than $2.5 billion by selling securities and using the proceeds to acquire commercial debt, essentially making them large pools of corporate loans made or purchased with investor funds. According to the Norddeutsche lawsuit, such baskets require careful management and attention, but in the case of the Patriarch CLOs, they were “in fact, poorly run and incredibly risky private equity ventures.”

    Moreover, both the SEC action and the Norddeutsche lawsuit contend Patriarch concealed defaults within the CLO pools in order to continue collecting fees, carrying the obligations at full value despite some of the loans not performing.

    The new case is Norddeutsche Landesbank Girozentrale et al v. Tilton et al, New York State Supreme Court, No. 651695/2015. The SEC case remains stayed by the U.S. Court of Appeals for the Second Circuit in Manhattan pending a ruling in federal court on Tilton’s challenge of the in-house venue.

    Tilton founded Patriarch Partners in 2000 after more than a decade on Wall Street. The company and its affiliates have become one of the best-known turnaround specialists, restructuring more than 240 companies. According to its website, Patriarch currently manages investments in more than 75 firms across 14 sectors.

    it’s either mismark portfolio assets or halt sales….everyone’s playing same game…inflated fee income….and then there’s the whole pledged asset black hole.

  4. Gawd I want to see these pathological liars and accessories to international fraud HANG AND BURN. But that probably won’t happen, so all us peons can do is scurry nimbly around the floor picking up crumbs before they lay a wet blanket on top of it.

    So that is why I will sell my shorts and puts early in the collapse, transfer the cash back to the linked bank account and then TRY to get it out and into my safe or ex-usa accounts and buy more PM’s (held outside the terminal system) – BEFORE DinkFink gets his way, in order to “protect us”……Probably won’t be successful, they already place 3 business day holds to pull cash out of the brokerage, of course for an electronic transaction that takes milliseconds.

    M’Fer’s……Be quick and nimble when playing within the wounded lion’s den guys……

    Trump for President! Icahn for VP!

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