The amount of derivative exposure continues to dazzle and amaze

(You can see the full report here: OCC’s Quarterly Report):


Click to enlarge:

Hat tip: Damien, an RIA in sunny San Diego.

Category: Derivatives

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

14 Responses to “Bank Trading and Derivatives Activities”

  1. Frilton Miedman says:

    Interesting to look at assets vs derivatives, JPM leading the pack with roughly 36X leverage, leading to question the need for such massive buying power and whether Bruno Iksil was only another face in the crowd, the one caught in a league of manipulators @ JPM.

  2. Chief Tomahawk says:

    That data is in millions…… Kind of increases the importance of having which can’t be treated so poorly: Gold.

  3. Conan says:

    If these we pure risk capital Hedge Funds it wouldn’t make a difference. Invest at your own risk. However these “BANKS” are backed by the US Government (John Q Taxpayer) therefore this is inexcusable. Real Banks should be run like a Utility, tightly regulated and rule of law enforced, that’s the price of the guarantee.

    The way it is now is just another disaster waiting to happen, we have learned nothing! Wash, Rinse & Repeat!!!!!

  4. b_thunder says:

    I’d love to figure out (but not smart/knowledgeable enough) if an “unexpected” rise in inflation/ interest rates would cause the “big 5″ banks to become AIG 2.0 and force TARP 2.0

    But let’s not be delusional – Bernanke would never let that happen by fixing rates low, and letting inflation run wild.
    I’m not saying it’s going to happen tomorrow…

  5. Frilton Miedman says:

    Thunder, it wouldn’t surprise me if the big 5 have already concluded TBTF will inevitably fail – knowing it’s a matter of time before a mass break-up or nationalization happens, they could be positioning themselves for the next 2008, make as much as possible and leave it to the taxpayer.

    I don’t think it’s a coincidence that the Pentagon investigated oil futures manipulation as an intentional tool for the 2008 crash, depleting Sub-prime lenders of disposable income & collecting MBS short positions after lying about ratings to the public they sold them to.

    Bernie Sanders’ “accidental” release of CFTC records showed GS and MS were leveraged to the hilt in oil futures in the Summer of 2008, the same Summer that gas prices skyrocketed – the height of the Sub-prime bubble, soaring RBOB prices gave it just enough of a push to an already stretched consumer.

  6. eliz says:

    Tangentially — Barry, I’d like to read your insights into the Fed’s move back into repo (vs reverse repo) land. This has been a topic on ZH. Is the Fed pouring more fuel on the banks’ burning embers, or is it something else? Then again, maybe you’ve shared this and I just missed it.

  7. glodime says:

    Frilton Miedman,

    JPM has roughly 39.7X leverage in derivatives. You seem to have forgotten to add in the Total Credit Derivatives, which, as noted in the bottom of the table, is excluded from Total Derivatives

  8. callistenes says:

    Umm is it just a typo because according to the chart Goldman is running > 415X leverage

  9. Moss says:

    What would be interesting to know is what was the notional value of the JPM position(s) that resulted in their recent loss. It is quite possible they don’t even know the answer.

  10. Frilton Miedman says:

    goldie, good catch, I missed that – further illustrates the point – Why does JPM need that kind of buying power?

  11. capitalistic says:

    Remember, those derivative figures are notional, not net. The net figure is usually a fraction of the notional amount.

  12. Frilton Miedman says:

    Capital, a $100 billion notional value in oil futures options, though only requir a fraction that in cash, still represents $100 billion in oil futures., no?

    To me, such large positions present risk to the bank, but more so the potential for commodity/index manipulation.

    I.E. a well placed series of laddered oil futures over the Summer of 2008, cornering oil futures – restricting supply, was found by the Pentagon to have contributed to the drop in consumer buying power, triggering the sub-prime defaults, leading to the collapse of CDO’s,

    The report originally cited a probable act of financial terrorism, but then, last year Bernie Sanders leaked CFTC records from 2008 showing GS & MS had massive positions in oil futures.

    What also caught my eye, CFTC position limits stop at 10%, and the banks are fighting tooth and nail over it – why does any single entity need to own more than 10% of a given commodity?

    Even a 5% stake in a given staple, soft or commodity avails near omnipotence over pricing action, a well placed order and a crash or rally is easily triggered, leaves an endless list of potential long/short money-makers via artificial price manipulation.

  13. howardoark says:

    JPM made 17.5 billion in 2011. Even if they made all of that in their derivatives, that’s a return of 0.00026 – there isn’t much room for error there.

  14. justaluckyfool says:

    If I read this correctly, $228 TRILLION of the possible $700-$800 TRILLION derivative markets is “insured”. But not to worry for the net loss need only to be covered. Example; if loss is only 10% (I’m sure most of us have taken that small of a market loss recently) that would be $22.8 TRILLION.
    But then not to worry-””There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises