Fed survey finds dealer credit terms largely unchanged, with hedge fund leverage above 10-year midpoint
The Federal Reserve's quarterly survey of dealers shows steady financing terms but elevated capital commitments and client leverage relative to the past decade.
What we know
- The Federal Reserve said its September 2026 Senior Credit Officer Opinion Survey found price and nonprice terms on securities financing and OTC derivatives were basically unchanged, on net, across all counterparty types between June and August 2026. [1] [2]
- Seventeen dealers responded; two-thirds of the 15 that have served hedge fund clients for at least 10 years said current hedge fund leverage is above the midpoint of the past decade. [2]
- More than one-third of dealers said their capital committed to equity financing is near the high end of its 10-year range. [2]
- More than one-fifth of dealers reported wider collateral spreads for equity financing, and more than one-third reported increased demand for equity funding. [2]
- Not yet confirmed: The survey reports dealers' opinions and percentages, not exact figures for leverage or capital. The excerpt of the survey page does not include the full text of the survey exhibits or footnotes.
The Federal Reserve said in a post on X that its Senior Credit Officer Opinion Survey on Dealer Financing Terms is now available. [1]
The September 2026 survey collected qualitative information on changes in credit terms in securities financing and over-the-counter (OTC) derivatives markets between June 2026 and August 2026, according to the Fed's summary. [2]
On the core questions, dealers reported that price and nonprice terms were basically unchanged, on net, across all counterparty types. Nearly one-fourth of dealers said hedge funds' efforts to negotiate more favorable terms had increased somewhat. Nearly one-half said changes in central counterparty practices, including margin requirements and haircuts, affected to at least a small degree the terms they offer clients on bilateral transactions that are not cleared. [2]
In securities financing, terms were basically unchanged for nearly all collateral types. More than one-fifth of dealers reported wider collateral spreads for equity financing. More than one-third reported increased demand for funding of equities, and nearly one-third reported higher demand for funding of commercial mortgage-backed securities. [2]
The survey also included special questions that asked dealers to compare current conditions with the past decade. Seventeen dealers responded. More than one-third of dealers said their capital committed to equity financing is near the high end of its range over the past 10 years, and more than three-fourths said it is above the midpoint. Nearly three-fourths of established dealers said collateral spreads on equities are above the 10-year midpoint. [2]
On client leverage, two-thirds of the 15 dealers that have facilitated hedge fund transactions for at least 10 years said current hedge fund leverage is above the midpoint of the past decade. More than three-fourths said this about equity-oriented hedge funds. Three-fourths of the 12 dealers with exchange-traded fund clients over that period said leverage among those clients is above the midpoint. [2]
The Fed said Xin Huang of the Division of Research and Statistics at the Board of Governors prepared the document, with help from staff at the Federal Reserve Bank of New York. [2]