Hedge Funds

Top Fed official focuses on margin requirements

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Regulators need to consider whether banks and broker/dealers are imposing adequate margin requirements on hedge funds, according to a top Federal Reserve official.

In a speech delivered in Hong Kong earlier today, Timothy Geithner, president and chief executive of the New York Federal Reserve, expressed concern that margin requirements that seem adequate under normal conditions may not provide enough cushion when markets make big moves. Geitner believes they could, in fact, contribute to the volatility.

Investors are typically required to put up collateral when purchasing securities on margin, but the amount of collateral required varies dramatically from firm to firm