The largest counterparties of Bill Hwang’s Archegos Capital final week discussed methods to restrict the market fallout from his collapsing bets on shares together with ViacomCBS, in accordance to 4 folks briefed on the talks, however the effort foundered and paved the way in which for days of chaotic trading.

Before the troubles on the household workplace burst into public view on the finish of the week, representatives from its buying and selling companions Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Nomura held a gathering with Archegos to talk about an orderly wind-down of troubled trades.

The banks had every allowed Archegos to tackle billions of {dollars} of publicity to risky equities by way of swaps contracts, and Hwang was struggling to cope with margin calls triggered by a plunge in ViacomCBS shares. An orderly wind-down would minimise the market affect and the hit to their very own steadiness sheets as they labored to promote down stakes in corporations that Archegos had amassed by way of the derivatives devices.

It is unclear whether or not an understanding was reached however a number of sources stated it was shortly clear that some banks had begun selling to stem their very own losses. People accustomed to the buying and selling stated Credit Suisse and Morgan Stanley each appeared to have unloaded small batches of shares available in the market after the assembly.

“It was like a game of chicken,” one particular person stated.

By Friday morning, any hopes of co-ordination had been snuffed out and the floodgates opened when Goldman started pitching international buyers on billions of {dollars} of Archegos-linked shares. Morgan Stanley joined hours later, and the 2 bought roughly $19bn in huge block trades that day alone, in accordance to the folks.

For the prime brokers that had not moved shortly sufficient, together with Credit Suisse and Nomura, the outcome has been painful. The Japanese lender has warned its losses might attain $2bn. The Swiss financial institution might face a loss between $3bn and $4bn, the FT has reported.

“The reality is in a fire sale, if you’re not first out the door you’re going to get burned,” stated one banker concerned. “There’s no honour among banks, [it’s a] question of who blinks first.”

One supply accustomed to the method stated there have been makes an attempt to convene once more on the weekend, after Friday’s share gross sales despatched the worth of Archegos-linked shares sharply decrease, however the thought of halting the gross sales was not pursued.

Goldman and Morgan Stanley “were not up for playing ball”, stated a supply briefed on the interactions. “The idea was to act in concert over the weekend so that we didn’t get to where we are now on Monday but some of the standstill terms put forward weren’t acceptable.”

The buying and selling by Archegos Capital and its prime brokers has reverberated throughout Wall Street, elevating thorny questions over how a lot leverage banks supplied to the household workplace and the way a secretive investor got here to amass such giant positions below the radar.

Money managers have additionally been left questioning how far more there’s to unwind and whether or not their very own buying and selling books could possibly be affected.

“Goldman will have looked at the situation and . . . made the decision that the first cut is the cheapest. You go first, in these situations, you may not come out best but you definitely do better than the guys who go second and third,” stated one Tokyo-based banker.

An individual accustomed to the matter stated the monetary affect on Goldman from the buying and selling fracas can be “immaterial”.

Morgan Stanley has discovered itself on the centre of the storm, since in addition to being a major dealer to Archegos it has additionally offered funding banking providers to ViacomCBS. Last week, it helped the media group elevate nearly $3bn in new fairness and convertible debt to fund its nascent streaming enterprise — a major dilution of current shareholders that sparked the preliminary decline in ViacomCBS inventory.

Over the weekend, Morgan Stanley disposed of an extra $2bn of ViacomCBS inventory that it held because of derivatives trades akin to these with Archegos, merchants stated.

Other prime brokers are searching for to clear their books as nicely. Wells Fargo on Monday morning bought inventory value $2.1bn in huge block trades, together with 18m ViacomCBS shares value greater than $800m, an individual with information of the gross sales stated.

Additional reporting by Owen Walker in London

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