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> It is 100% correct, based on the evidence they provide.

This is very wrong. The "evidence" they provide is nonexistent. The ZH link is typical ZH garbage. A bunch of assertions without basis with a few misconstrued quotes thrown in.

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It isn't. Read the quoted section from Russel Clark, the BIS has been talking about this (they specifically mention levered hedge fund positions), and they specifically mention an arb between cash bond and derivatives (do you know the history of this trade? It blew up twice in the 90s)/point out that some funds are running with a lot of leverage (is this repo? I don't know, but it is likely given that this has always been a financing source and the BIS are saying that it is).

So not nonexistent. The quotes look completely fine (I have looked at clearinghouses quite a bit, Russel Clark understands them...obv, the guy is not an idiot).

The FED would love for hedge funds to INCREASE their cash bond and derivative Arb activity. This would arb away the differential and hedge funds would make a tidy profit in performing this service for the market. The problem is that hedge funds, prop desks, banks, and pretty much everyone DIDN'T step in and arb away the differential. This led to a massive 10%! rate for O/N repo, which is supposed to be a risk free instrument.

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