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Derivative Margin Calls: A New Driver of MMF Flows

Author

Listed:
  • Maddalena Ghio
  • Linda Rousova
  • Dilyara Salakhova
  • Mr. Germán Villegas-Bauer

Abstract

During the March 2020 market turmoil, euro area money-market funds (MMFs) experienced significant outflows, reaching almost 8% of assets under management. This paper investigates whether the volatility in MMF flows was driven by investors’ liquidity needs related to derivative margin payments. We combine three highly granular unique data sources (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lipper data for daily MMF flows) to construct a daily fund-level panel dataset spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EURdenominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an important driver of the flows of EUR-denominated MMFs domiciled in euro area.

Suggested Citation

  • Maddalena Ghio & Linda Rousova & Dilyara Salakhova & Mr. Germán Villegas-Bauer, 2023. "Derivative Margin Calls: A New Driver of MMF Flows," IMF Working Papers 2023/061, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2023/061
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    Cited by:

    1. Michele Leonardo Bianchi & Dario Ruzzi & Anatoli Segura, 2024. "Shifting the yield curve for fixed-income and derivatives portfolios," Papers 2412.15986, arXiv.org.
    2. Kristy Jansen & Sven Klingler & Angelo Ranaldo & Patty Duijm, 2024. "Pension Liquidity Risk," Swiss Finance Institute Research Paper Series 24-16, Swiss Finance Institute.
    3. Giuzio, Margherita & Kapadia, Sujit & Kaufmann, Christoph & Storz, Manuela & Weistroffer, Christian, 2025. "Macroprudential policy, monetary policy and non-bank financial intermediation," Working Paper Series 3130, European Central Bank.
    4. Kaufmann, Christoph & Leyva, Jaime & Storz, Manuela, 2024. "Insurance corporations’ balance sheets, financial stability and monetary policy," Working Paper Series 2892, European Central Bank.
    5. Zuzana Gric & Jan Janku & Simona Malovana, 2023. "What Drives Sectoral Differences in Currency Derivate Usage in a Small Open Economy? Evidence from Supervisory Data," Working Papers 2023/12, Czech National Bank, Research and Statistics Department.
    6. Macchiati, Valentina & Cappiello, Lorenzo & Giuzio, Margherita & Ianiro, Annalaura & Lillo, Fabrizio, 2025. "When margins call: liquidity preparedness of non-bank financial institutions," Working Paper Series 3074, European Central Bank.

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    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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