[JackFr]

In the fixed income, currency and money markets a billion dollars is not a lot of money -- and yet a billion dollars IS ALWAYS a lot of money.

I used to work on the repo desk of a primary dealer. One role of the repo desk is that it finances the banks position. We might hold $50 billion of bonds, but $40 billion of that is borrowed with the bonds as collateral.

One day because someone had keyed in a start of day position wrong -- off by a billion dollars -- 20 minutes before the FedWire closed for the day, I got to watch 2 traders get on the phones and borrow a billion dollars in 20 minutes, without letting our counterparties know that we were kind of desperate.

Had they failed, the bank would have had to go the the Fed, discount window and borrow $1 billion overnight at the discount rate (which would have been substantially more than we were paying in the repo market.) Additionally, it likely would have triggered process audits and incident reports which would have been far worse than the interest.

[thaumasiotes]

> Had they failed, the bank would have had to go the the Fed, discount window and borrow $1 billion overnight at the discount rate (which would have been substantially more than we were paying in the repo market.) Additionally, it likely would have triggered process audits and incident reports which would have been far worse than the interest.

> because someone had keyed in a start of day position wrong

I know basically nothing about this area, but I'm curious why what appears to be a mistake in data entry needs to be fixed by actually borrowing additional money, as opposed to issuing a correction. If you have the amount of money you're supposed to have, why is it so dire that you published a typo?

[JackFr]

We had $X billion dollars in bonds we needed to finance, that day. The traders thought they had to finance $X-1 billion dollars.

We had good collateral to borrow the the money, but it was the money we needed.

The legal-books-and-records system gave us the right starting number. The transferring it to the trading-book-dashboard was a manual process. So they traded all day based on the wrong number. No one noticed until operations called the desk with about a half hour left in the trading day to say “Do you guys realize you’re short a billion?” Ten minutes to figure out what went wrong. The clerk who keyed in the wrong number didn’t get dinged that badly, cause 8-9 people saw both numbers and no one else noticed.