But I am told that the main auction being looked at by the SFO was the 2008 Special Liquidity Scheme, in which the Bank lent 32 banks and building societies £185bn, in return for collateral of £287bn, in the form of assets that the banks could not shift to anyone else (such as mortgage backed bonds).
For example, the European Central Bank holds credit offerings in US dollars for periods of seven days and three months, offering as much in dollars as European banks may want in return for collateral such as bonds or other securities.
Providers of synthetic ETFs argue that there is plenty of counterparty risk in physical funds, too, because the funds' securities are routinely being lent out to other investors in return for collateral.
Now, McKinney said, ICE has "returned to collateral damage," meaning the agency will pick up anyone in the process of seizing their target just as they did prior to November 2014.
The trustee and the CME Group, the exchange where MF Global conducted most of its business, have already returned the majority of collateral that customers had posted to support trading positions.
It may be able to increase the incentive for reform by offering more aid in return for some form of collateral from privatized state assets.
On Saturday, Sept. 13, for instance, the Federal Reserve allowed the big banks to pledge new types of collateral in return for overnight capital.
He gave no details, but a euro zone source said one idea under consideration was for the European Financial Stability Facility rescue fund to buy Greek bonds in the primary market upon issuance next year, in return for a new form of collateral.
Instead of using investors' cash to buy the underlying securities, the money is put into a basket of collateral whose returns are swapped with a counterparty for the returns of the index being targeted.That spooks plenty of people because it exposes investors to counterparty risk.
Questions remain about the scale of debt buybacks and exchanges that will be employed, the duration of the bond maturities that would be covered, the assessment of the rate of return on debt rollovers, the amount of collateral that would be required for Greek banks to participate, and the risk-free interest rate that investors would seek as part of a plan.
Non-banks like Goldman and Morgan Stanley were tossed a lifeline in March, given access to the Fed's emergency lending window in return for putting up an array of collateral.
