“Billions in Secret Derivatives at Center of Archegos Blowup”

“The forced liquidation of more than $20 billion in holdings linked to Bill Hwang’s investment firm is drawing attention to the covert financial instruments he used to build large stakes in companies.

Much of the leverage used by Hwang’s Archegos Capital Management was provided by banks including Nomura Holdings Inc. and Credit Suisse Group AG through swaps or so-called contracts-for-difference, according to people with direct knowledge of the deals… While the margin calls on Friday triggered losses of as much as 40% in some shares, there was no sign of contagion in markets broadly on Monday…

Regulators have begun clamping down on CFDs in recent years because they’re concerned the derivatives are too complex and too risky for retail investors, with the European Securities and Markets Authority in 2018 restricting the distribution to individuals and capping leverage. In the U.S., CFDs are largely banned for amateur traders. Banks still favor them because they can make a large profit without needing to set aside as much capital versus trading actual securities..”

https://finance.yahoo.com/news/billions-secretive-derivatives-center-archegos-102415242.html