On March 10, 2023, volatility resulting from concerns regarding runs on certain banks triggered trading halts in those banks’ stocks on the New York Stock Exchange (NYSE) and Nasdaq. March 13, 2023, saw additional trading halts on bank stocks. This post provides a brief explanation of the Limit Up Limit Down (LULD) rules that
Our last post provided a big picture summary of the steps required to calculate a Fund’s “derivatives exposure” for purposes of new Rule 18f-4. The post may have left an impression that this process should not be that difficult. To provide additional perspective, we offer the following equation for calculating derivatives exposure.
If interest rate and currency hedges satisfy the following condition:
Then a Fund will be a limited derivatives user when:
Having completed our review of derivatives transactions, we now consider the risks such transactions may pose. Rule 18f-4(a) defines “derivatives risks” to include “leverage, market, counterparty, liquidity, operational, and legal risks and any other [material] risks.” The adopting release (the “Release”) provides helpful descriptions of these risks and some examples.
This post completes our exploration of the definition of “derivatives transactions” in Rule 18f-4, which is relevant to business development companies, closed-end funds and open-end funds other than a money market fund (“Funds”). Our object is to generate a fairly comprehensive list of what is, is not, and may be a “derivatives transaction” by using our touchstone of a “future payment obligation” in combination with the literal definition in the rule and points made in earlier posts.
In this post, we continue our exploration of the definition of “derivatives transaction” in new Rule 18f-4, which is relevant to business development companies, closed-end funds and open-end funds other than a money market fund (“Funds”). Our last post discussed examples of derivatives that fall outside of the definition. This post considers transactions that may not pose the risks addressed by Rule 18f-4 but which are nevertheless subject to the rule. Subsequent posts will explain why this overbreadth is not as bad as it might seem.
In the midst of the COVID-19 pandemic, the financial markets have experienced significant volatility. During the course of this volatility, exchanges have halted trading multiple times after declines in trading trigged circuit breakers. In addition, trading floors are transitioning to electronic trading in efforts to prevent the transmission of COVID-19 on physical trading floors. With the recent turmoil, this post provides a high-level summary of the various types of circuit breakers and what can be expected.