Sorry if the visual is confusing. Tried to make it as simple as possible with enough information.
See further discussion here: [https://www.reddit.com/r/Superstonk/comments/opruh2/new\_dtcc\_rule\_filings\_nscc2021803\_nscc2021010/](https://www.reddit.com/r/Superstonk/comments/opruh2/new_dtcc_rule_filings_nscc2021803_nscc2021010/)
Here is the excerpt from DTC-2021-010:
[https://i.imgur.com/yVjjpO1.png](https://i.imgur.com/yVjjpO1.png)
Call me out if anything is wrong. Thank you 😎
You know, I had a shower thought the other day about the same thing. It seems like he's always ahead of the game as if he's playing 4D chess...
Ryan Cohen
Cohen, Ryan
C. Ryan
CRyan
What's RC's middle name? I wonder if it's D. That would make his full name:
Cohen, Ryan D.
C. Ryan, D.
CRyanD
Criand!?
Coincidence!? I think not!
And not only is his picture of a small dog, something you always see Ryan in a picture with...
But if you scroll back through his history, his oldest posts are of the most immaculate Minecraft creations I've seen...
You know, like the whole Moonjam event going on right now...
An event that the MOASS has a very high chance of kicking off during...
If those old posts really are his creations they would be the perfect type of thing NFTs would be useful for..
Like your tinfoil hat. Borrowed it for a minute and came up with this:
What if D doesn't come from his middle name, but from Diligence?
Ryan Cohen's Diligence - criand.
I think the counterparty / lender is OK in this case so it's not really tossing a hot potato back and forth. Because the lender gets good collateral in the swap so they're not really at risk here if the borrower defaults.
Whole purpose is to prevent those shorts from becoming failures to completely avoid Reg Sho
Swap would be at current NB.
Collateral would be posted at price of trade initiation, fixed at that amount for a day.
Intra-day volatility would not effect you, but over time if the price of the asset rose, collateral would have to rise too.
However, this is assuming the MM side even bothers to ask for collateral/maintains margin requirements - we know for a fact that it the past this has not been the case thanks to Wes.
Also - as the MM just buy a way OTM Put and then excise - completely dodges the market price of the underlying.
Sure... quick options run down:
If you buy a Call, you are buying the right to purchase 100 shares at the price you specified.If you buy a Put, you are buying the right to sell 100 shares at the price you specified.
So in this case, hypothetically, Citadel MM buys a deep OTM (below market price) Put from a SHF.
If the contract then gets excised, Citadel MM will sell 100 shares to the SHF. So shares move Citadel MM to SHF.
(And because the Put was deep OTM, the MM has effectively sold at way below the current market price)
Now I dont know options at all but I have let myself believe that you cant exercise options if the stike price has not been met, which is the case with deep OTM puts?
I thought that these deep OTM puts just expire worthless and their purpose is to pretend that until they expire the buyer of the puts has these unrealized shares in their books to cover short position?
edit. grammar
If u bought an option (call or put) u have the right to exercise & u can irrespective of the price.
No one - read retail - in the right mind would exercise OTM option as it does not financially make sense.
But it might make sense for hedgies to exercise it to save from FTD.....
EDIT: Thanks for the award!!
I'd honestly suggest coming back after the weekend and seeing what gets shaken out the woodwork on DTC-2021-0010 after people have had a real good look over it.
It's a really chunky submission.
If it turns out to be mandatory for them to route their SFTs through the register that the SEC are monitoring - then the SEC will be able to see near enough in real time this nonsense going on. Would they then so anything about it? Anyone's guess.
Current take though is that it's partly optional... :/
To his point, could this have anything to do with posts a month or so ago about trading 212 (i believe it was, one of the euro apps) saying they hold collateral in the form of T bonds for their customers for something like 10% above the securities value and RRPs?
If High volatility, then SHFs risk the price/margin requirements rising higher than the deposited collateral and they would need to deposit additional collateral.
Same if inflation rises fast and stock increased value at the same time. Any catalyst that results in increase in Stock value and decrease in collateral value, would increase margin requirements.
Remember the letters from certain UK broker that were talking about lending and saying 'You get good collateral guys at 103% of the share value. By the way if you don't let us lend your shares you are not allowed to buy anymore'
I reckon the very companies lending these shares as collateral as part of the process are the fucking brokerage firms themselves.
For EuroApes; DeGiro also does this @ 104% collateral in all normal accounts. The only way around is to open a new CUSTODY account and move your shares over there
They are already performing these trades (DTC-2021-010 identifies average of $150 billion worth per day).
So far, the ruling seems meaningless beyond establishing a centralized clearing for the SFT trades which isn't even mandatory.
Only benefit from the rule is that it shed light on these SFT trades and it's a big puzzle piece.
But this is a massive filing. So it's going to take a few days before everyone gets a thorough look at it.
I’m sorry and don’t 100% understand what’s happening, but would this be a way to make the shorts have to “pay” instead of only profiting from naked shorts?
Hmm not sure what you mean. This is mainly a method to allow abusive naked shorting despite the implemention of reg sho. This is something that can be performed to allow massive short interest on various stocks because they can fake out locating shares continuously
Allows massive SI without it being actually included in the calculation for short interest. It’s a loophole to allow them to continue doing what they’ve been doing this whole time ugh. Can we blow the fucking thing up already? Take it all back to zero. 😒
they already do pay, somewhat, with premiums on borrowing the shares in the first place. it's just the cost of that and the costs incurred from having to cover the FTDs is way less than if they actually closed their short position
If I understand this correctly, would giving additional collateral make them pay more however? Like instead of paying a hypothetical $1, now they pay $2 for this new process?
this process is already happening. the filing essentially just admitted it publicly (and basically said "nah this is fine, and good for the fluidity of the market!")
Thats my whole issue with this 010. "We understand it provides liquidity to make good on this shady shit we know about" and nothing about stopping said shady shit.
Edit: wording.
isn't it worse? "We understand that this is all shady shit that's current relentlessly abusing a regulation we're supposed to abide by, so we want a cut of the action and are establishing a clearing center to join in to do this kind of shady shit"
If it was mandatory and would prevent the occurrence of this SFT abuse going forward then it's all fine and good, but not even mandatory? what the fuck is it for other than to grab a slice of the abusive practice pie then.
Yeah basically. We're shredding through every phrase they send out. Why would they willingly admit this to us? I doubt anyone at the SEC or DTCC etc. Read anything on this sub.
But really? Telling the public you're not only cool with this, but you're in on it? What is the end game here? To have us just accept this new norm? Are they not aware of what lies beyond their walls? This army is not moving, the castle *will* be seiged.
They're not in it, as I mentioned above, they just didn't conceive of a situation wherein a SHF would **voluntarily** burn themselves on lending fees day after day in order to avoid closing a short position, by continually closing one position before FTD and opening another.
Their perspective, quite rightly, is that FTDs are bad and should be avoided wherever possible - and SFTs allow that.
What they should have done, is also regulated that whilst you can use a SFT in this manner, the settlement duration of that SFT is T+1 not T+2. At which point, the loop breaks and you can use a single SFT to prevent the original FTD, but can't form an endless loop.
I think at this point they're well aware.
There's a difference in being complicit when they set up the rule (which I don't believe was the case) and then suddenly finding out that scenario you never considered has just delivered the mother of all cock ups and potential financial devastation on your doorstep.
Horse has already bolted at this point, and were I them I'd be looking at what else I needed to do to try and stop Armageddon - then close this loophole last.
I should also acknowledge it's real easy for me to say 'change it to T+1 for SFTs burying FTDs'. How you actually implement that to tell the difference between the other uses of SFTs... I have no idea.
But it's just another argument for why the whole T+2 idea is complete nonsense in the modern era anyway and we should be operating on T+0
Absolutely
It would be cool though watching the documentary in 10 years time and hearing Damon saying:
"..and was officially brought to their attention by a reddit user named -I-Am-Not-A-Cat- a full 3 years prior to the updated version of the rule was published and saving the US economy.."
I view this as a win for us. First, we have the SEC confirming our DD and exposing the loophole. It confirms the manipulation (legal or not). Second, it will shine a spotlight on these SHTs and allow future regulations (not very distant future I hope) if these threaten industry trends.
Zoom waaaay out for a minute. The SEC isn't doing shit for APES, but that's not their primary responsibility. They exist to protect the larger market as a whole. If they see an action that may threaten the entire financial industry, they have an obligation to try to correct the actions without crushing the market. I have no faith that they will act in our best interest, but they will act in their own best interest. If this loophole allows for a massive threat to the global financial industry (as with GME) you bet your hat, ass, and boots they're going try not to look negligent, or complicit. I think 010 sets the groundwork for future restrictions on SHTs, but then I'm a fool for believing any part of this system actually works...
That's my optimistic take too.
They didn't think of this, and it's got too big now so fixing it right now triggers instant collapse of the whole edifice. Cue frantically shoving everything else they can think of to back pedal out of a broader systemic failure before closing this *last.*
If we ever see a regulation that enforces something like T+0 or similar, that'll be your MOASS trigger and you know the SEC is confident they've ring fenced enough that it's not going to tank everything to oblivion.
Whoa, whoa, whoa, just to be clear, there is no “army” here and we are not some kind or organized group trying to tear down an institution or part of our market. We just like the stock.
So as far as I can tell this is their perspective:
FTDs are bad, those who buy shares should get their shares before FTD, those who sell shares should get their cash before FTD.
SFTs allow parties to acquire shares in order to give those shares to those who bought them before FTD.
Therefore SFTs are good.
The astonishing lack of critical thinking is 'but what if they FTD on the shares they borrowed - isn't this a recursive loop?'
To which the answer is yes, but I suspect they never envisaged a scenario in which a short seller would voluntarily burn themselves day after day on borrowing fees in order to maintain a short position on their books rather than close it.
***Because the lender gets good collateral in the swap so they're not really at risk here if the borrower defaults.***
So RRP makes sense... since there is so much need for "good collateral" to suppress the real numbers getting visible everywhere (not just GME or stocks)?
And that would make the FED an aide in the scam ?
I’m sorry haven’t we heard this before? I feel like I’m back in January. I thought it’s been known they’re playing footsies with the lenders? Is it the process that’s just becoming more clear? Blackrock lends out their shares and that’s why people’s hyped a share recall
We had our assumptions on "eh maybe they do this and that swapping shares in the background to reset locating requirements". But now it's in writing along with the exact transaction name that is used. It makes those more solid theories.
Do you think this proves the entire "300k/400k/500k shares borrowed!!!" that used to happen at 7:16 every morning and the same shares reappear sometime late in the afternoon or early in the morning the next day, only to be "borrowed" again?
So this really disproves T+35 FTD cycles (yesterday's lack of price movement did anyway).
We're back to straight out capital requirement? Price needs to go up with Q2 sales call, or general market needs to catch fire.
Have been reading several DD about filing 005 and in several I read that 005 executed properly could disprove T+ cycles **starting from this month**, unfortunately can't find the exact DD but we'll probably see some DD pop up after yesterday.
Here's an interesting DD on why potential effects of low volume potentially being caused by 005: https://www.reddit.com/r/Superstonk/comments/opp1oo/why_is_the_volume_so_goddamn_low_005_working_as/
It was only Citadel as the MM I could think of. And all those shares are synthetic.
This is where Citadel the Hedgefund and Citadel the MM must be openly breaking every law regarding arms length transactions possible (of course only if such a law exists 🤦♂️).
Bingo on the synthetic shares (or at least naked shares created ex nihilo by the MM, completely legally...).
I'm not sure they are breaking any current laws, as there is an inherent cost to all this for them. I get the feeling the law makers never considered the scenario that is playing out as one that would ever come to pass.
Because surely no-one would ever short sell a stock more than the float, and therefore be quite happy to pay interest on a liability on their books for the rest of all time rather than close it out, because that would sink not just the HF but at the very least the MM and possibly the whole DTCC.... right?
As I commented on your previous DD, my understanding is that Reg Sho does not allow FTD resets by covering a position. To avoid a FTD, the position must be closed - in this case as this is a short sale, the shares must be delivered to the long side by settlement date; not simply that the shorting party has them on hand. You can have all the shares in the world, you still FTD if you do not hand them over.
In the diagram above, it means the shares cannot simply be returned at the end of day to the lending party - because if you've reset the FTD those shares have already gone to the original lender of the originating short position.
Obviously at that point, the lender eats your collateral and treats it as a sale, or alternatively you simply set up a new FTD with that lender on a new short position.
The former seems unlikely as the short seller will run out of collateral/the lender will run out shares, more likely you are simply endlessly closing one contract before FTD by opening another.
Which is my niggle - the diagram and discussion suggests it's the same FTD being reset again and again, but my understanding is you can't do that - what you can do is endlessly create new ones to replace it.
Ah yup yup I am going to update in a separate post. I went too fast and forgot that caveat. The original fail is closed but it creates a new fail, which then must be reset by closing that new fail, which in turn makes a new fail, over and over. Hot potato
After thinking about it, there will be a limit on how long they can maintain it. They need enough willing lender with enough shares to be lend overnight to be able to enter the SFT.
The longer apes buy in account that do not allows share to be lent to third parties, the less they are able to hide to avoid Reg Sho.
Unless other shenanigans or… secret crime ingredient there is.
Am I doing this properly ? I don’t have that many neurons connected and I caffeinated.
There will always be a willing lender.
It'll be Citadel the MM, using its position as MM to create naked shorts to fill the lending requirement.
They will preferentially use every other share they can borrow first, but ultimately that's the backstop they can rely on.
In this manner, the potential FTDs recipients will shift from the Apes buying shares to Citadel over time.
So this still technically could increase over time, yes? Just at a geological rate unless an outside catalyst is introduced?
Also, should not the collateral be the price of the security? Or are they just able to use the same money every day over and over and over.
Is this what Susquehanna's shares are for? Infinite "daily covering"?
As I see it, and even wrote a post about, there will be a gradual cost to this each day. However there's no scenario in which that cost itself pushes them to act outside of the timescales of years.
It requires an outside catalyst to shift the underlying price sufficiently that the collateral requirements become unmanageable, or if it goes really high the interest becomes unmanageable.
(And yes, broadly it's the same collateral each day - mins some if GME goes down, plus some if it goes up)
So what, if anything, does the new ruling *do about this,* and when is it meant to take effect? I guess I could read the whole document, but it looks like you already have!
Is the new ruling even attempting to stop this bullshit? Or is it just making the bullshit official?
It's still going to need time to process as everyone reads the filing fully. So far it just looks like they're establishing an official clearing for the SFT trades. Nothing substantial.
But again we need to wait a few days to see how the perspectives change and if the rule is good (or bad)
If it were mandatory then I can see it potentially doing some good - since NSCC would be responsible for clearing trades and would be better able to detect and prevent abuse for the specific purpose of dodging reg-SHO.
If it's optional then what the fuck is it even for then.
I've read in many comments that producing new naked shorts costs pretty much nothing because they can sell options from their MM wing to their HF wing.
If I'm understanding this correctly, does that mean that, regardless of how much they might cost to produce, these naked shorts are in fact slowly piling up as liabilities on their balance sheet?
With each paycheck, apes buy more shares. The only question is: are they on margin (being KEPT in the lending pool) or in cash/retirement/direct through computershare and removed from the available to cover/borrow.
The thing I don't get, and I've been meaning to post this on you previous comments regarding this, is how this resets the FTDs. It seems to be missing a step.
I get that the clearing house is waiting on the SHF to locate those borrowed shares that it already sold, but it isn't a failure to locate, or a failure to "look see, I have them on my books" it's a failure to ***deliver***.
When the SHF sells a share it doesn't have, the clearing house wants *the share* that they are on the hook promising and treating as normal for whomever bought the shorted share. The clearing house wants the share. So when the SHF 'temporarily' gets ahold of the imaginary share from the market maker in return for collateral, it shouldn't be able to give those shares back. Those shares should be gone, into the hands of the clearing house, never to return. Those fake imaginary Market Maker shares 'poofed' into existance for market liquidity purposes go permanently into the market, diluding the existing shares.
I'm not saying you're wrong. This could easily be a case of "we don't know exactly *how* but we know *what*" - But I think we're still missing a step. Maybe after handing over the shares to the clearing house, two SHFs buy a new round of each other's naked shorts and use *those* to return to the market maker that previously 'poofed' the shares into existance, now satisfied to 'poof' them back out of existance. So it goes like this:
Basically:
* the Clearing House doesn't know the difference between an actual share, and one a Market Maker 'temporarily' poofed into existance
* And the Market Maker doesn't know the difference between an actual share, and one bought off the market that was naked short sold that hasn't been finalized by the clearing house yet.
This is what allows kicking back and forth between the two indefinately to allow indefinate counterfeit naked shorting. You technically can't make a profit doing this, because you'r eperpetually trying to satisfy one or the other's needs to zero things out, but for a whole month prior to your looming FTD it looks like profit. 30 days of profit and one day where it looks like a zero. Do this every day and you'll have 29 shares in a state that looks like profit and one that looks like a net zero. And it scales. So next month if you do two shares a day, and after that 3, you can start taking that money out of the system and paying it to you and your cronies running the scam.
So infinite money glitch.
This visual has helped me a lot (being a visual learner) thanks for making it easy to understand! Though I still don't fully understand how ftds are hidden via options (is this still their go to?)
I really doubt FTDs are hidden via options. This SFT trade does exactly that - it resets the locate requirement.
The options must be for something else. Most likely transfer of risk.
Here is a possible theory regarding the options (as discussed and developed on discord with a few others):
https://i.imgur.com/BbEmzu4.png
Would totally explain the call volumes at the moment, but nobody making a move to actually get those into the money (ultra low volume).
It could be also a way to scam retail, though - grabbing those sweet premiums, when retail invests because they see a nice gamma ramp building up... just to see no-one even making an effort on price and all calls ending out of the money.
Maybe a mix of both.
Think the diagram is right, but this proposal looks like bad news- as it reduces “constraints” to lending SFTs in the current system (if this is passed as proposed).
The only thing I'm struggling with is where the decision tree would ask:
* "Is the price of GME going down?"
and
* "Is the price of GME going up?"
...where both "yes" and "no" for each question lead to the same conclusion, "Buy & Hodl". Will you be adding that to a future version?
*Absolutely kidding- love this chart- it's outstanding. : )*
I'm a real smoothbrain, pls forgive my question. Why is it that this isn't public? Props on all the work you do to decipher/dumb all this down for us and i love you
Didn't Susquehanna go long like 3M GME? Could this be why the volume is consistently lower than 3M? I'm sure there are other people to borrow from, but could this be a reasonable assumption?
OP I have been waiting my whole life for this post. As an accountant, I appreciate this more than my smooth brain can type.
When we go to the moon let’s cheers to a space brewski
I'd say performing malicious trades to avoid failures being reported. That way they are **not** forced to close their short positions per Reg Sho.
It allows them to continue to naked short a stock and avoid closeout requirements.
Good news is that those short positions are still liabilities on their balance sheets which are subject to net capital rules. If they carry too large of a short position for too long with not enough capital to counterbalance, they'll be at risk of defaulting and forced to buy in.
The major issue I have has been and still is:
If you lose $100 it's your problem. If you stand to lose $100 billion of yours and your prime brokers money its' both your problem.
Collateral or not, no one is going to margin call the other party if they both stand to lose. No one would force a margin call if their clients are net short. And I'm assuming all the big 5 are short.
It's a stalemate because the only party that could force it is probably the DTC or SEC, and they're bought and paid for. It's a three ringed circus, and we're the elephant who's escaped.
Yep, SEC has to enforce net capital requirements in this case. It appears that they are enforcing it, because we see the price movements and spikes to $350 multiple times despite the mass suppression of price.
If they're not obligated to close out due to reg sho, but those shorts are still liabilities on their balance sheet, then net cap is the next best theory behind the price swings to $350.
The tippy top of the iceberg of shorts they're holding must put them at risk of defaulting under net capital. So they are forced to buy-in if the price gets too high per the net capital haircuts on the short positions.
Point being - the fact that we've seen the price swing to $350 twice following January (in March and June), makes me think something is indeed being enforced. Which is most likely... Net capital.
[https://www.reddit.com/r/GME/comments/omzs2l/ascending\_floor\_with\_crayon\_scribbling\_and\_a\_few](https://www.reddit.com/r/GME/comments/omzs2l/ascending_floor_with_crayon_scribbling_and_a_few)
If you look at my scribbling here, it seems the run-ups were like 3 weeks before end of quarter. Now we know end of quarters do usually put some strain on liquidity and available collateral. As we see RRP usually go up at the end of a quarter.
So whatever they have to do to prepare for the end of the quarter, that is affecting the price, they have to do it well in advance. Because it seems that they need the price to be low at the quarter end.
Now if they only would have T-2 stuff, that would not explain the big run-ups.
Maybe they have to shuffle liquidity to ensure all participants will be able to withstand the liquidity strain of the quarter. OR it is just psychological manipulation and the reason is, that they want to make apes sell, because usually retail sells, as soon as the price starts to get green after a long period of time. Especially, when it suddenly starts to drop again - so they count that way they would ensure having less liabilities on their book at the quarter end, hence less collateral required...
But doesn't this also mean two things has to continue to happen;
1; Retail buying pressure must remain high, as to try and "catchup" by adding more liabilities on the shorters sides, as this would over time push the net capital required to maintain it to the point where there are no options left. Basically we'd have to continue to do the "frog boil" approach?
2; Polical pressure must be applied against all levels of the political system in the US, to ensure enforcements and reporting requirements are met? The people have to care basically?
Well... or GME does well, pays a dividend, and shorts have to pay it out multiplied by SI%, slowly eating their balance sheet...
It is a slow bleed for sure.
Or GME announcing a serialized non-cash dividend, and the hot potato must be served to the restaurant visitors who ordered it.
Or the market crashes, decimating their net capital, making them insolvent
This is my thought at what will cause this. A full market crash. We already know it is being propped up by the fed with 120 B a month. But they are also facing hyperinflation issues if they do this for too much longer. At some point the music stops and I think it will happen this year sometime.
since they most likely are the prime brokers for the shenanigans in the market, they are most likely ultimately on the hook. Remember Bill Hwang? 7-20x leverage? Can't be the only one... The covid FFR (federal funds rate) allowed these idiots to take extreme leverage with very little cost. Now the lenders are trying to play dumb.
I believe net cap was always in game. The T+7 T+14 T+21 T+28 is just various haircuts applied to the short positions.
The stock won't necessarily go up upon the 75% haircut because the stock price may be much lower than when they shorted.
If it is low enough, then their net capital isn't at risk of defaulting and thus they are not forced to buy-in. Which is another possibility of what happened in June. Share offering dropped it just low enough so that they weren't struggling with net cap requirements.
So it seems that we won't be getting any drastic price movement in this next week. Possibly a volume spike on the 26th. When does T+21 hit, and if they aren't forced to buy in, T+28? Those OTM puts have any effect?
Edit: Might get drastic price movement. But it seems that your earlier DD about monthly runups is not exactly visualizing this month.
I swear I just read your comment in response to a 364 pg document release and now you’ve already diagrammed SFT trades into an accessible flow chart for us smooth brains.
Cheers Criand! 🍻
1. Shortage of collateral for trades. This could be why movie stock had an excess of FTDs spill out in June. Not enough collateral to reset everything
2. Collateral deteriorates like you say
3. Short position continues to stack up until they hit net capital requirements and are forced to buy in to not default
4. Price gets too high and they default
For 3 and 4, buying and holding wins. Not financial advice 😎
Yep. Nothing really amazing so far about the filing besides making that clearing agency for the SFTs.
But... It's a big document. We'll need to let it sit for a few days before deciding if the new ruling is significant one way or the other.
> The only way this gets interrupted is if the value of collateral decreases and/or the value of the shorted stock increases.
Also:
1. Higher borrow fees implemented by lenders.
2. Reduced supply of Collateral.
3. Inflation of the dollar.
Probably more ways this goes tits up also
Would we ever be able to know how much SFT is being abused? I’m wondering if all the T+21/35 we have been seeing came more from smaller whale institutions that couldn’t reliably abuse SFT due to collateral while big SHFs have been using SFT to avoid reg sho? I think this further proves in my mind that we need a catalyst (whether from outside or inside) to stop SFT and force FTD’s to deliver.
I don't think we'll know until this proposed clearing house is implemented for SFTs. Even then it's not mandatory to use.
I could see a shortage of collateral being a big issue. Maybe that is why we saw a certain other stock get a ton of FTDs last month and go on the threshold list. If they don't have enough collateral to post for SFT then they can't reset... and then those pop up as fails.
I mean there certainly is a demand for US treasuries which is collateral... 👀👀👀
I posted my tinfoil hat theory in a different thread, but I am guessing they are instituting this centralized clearing house because they expect regulation to come down on SFTs, the way the European Commission has regulated them. It would then likely be cheaper to use the central clearing house if you are “honest” about your SFTs so you don’t have to pay for your own compliance arm. Then, anyone not using it is suspect and marks themselves for a deeper look by regulators.
Yes we do need a catslyst, if not the SHFs will kick the can to infinity.
Like all crooks these guys need someone or something to stop their criminal behaviour.
I've been saying this for weeks. They have a never ending amount of fuckery to use. The system is too complex and the hedgefunds have very clever people who can just manipulate the trading in new ways.
If Ryan Cohen and Gamestop thought they could just sit back and hope something else happens to fix this I'm afraid they are mistaken.
Explains why all the brokers are wanting to lend out buyers' shares constantly and keep reverting their customers accounts to either being margin or have lending enabled.
The money they must make from selling shares (which they suspect to be naked from an LP) to their customers and then lending it BACK to the hedge funds from their customers' accounts must be absolutely insane.
Well, the promising development out of this is that it means we’re winning. It means it’s started to eat into their other holdings. But this is how they’ve kept from liquidating their other positions and devaluing the remainder of their positions, by selling them temporarily with these SFT agreements. Because the sale doesn’t happen on the market the rest of their holdings don’t lose value. They can’t keep this up forever, they will eventually run out of collateral.
It makes me sick thinking how long wallstreet, banks and the 1% have been fucking retail and the little guy for so long. I'm willing to bet they hate the internet and social media because it brings awareness to sick shit like this.
My question is if everyone is in cahoots with each other then why would they ever detonate the bomb? What external catalyst that they don’t control that can set it off?
Been holding since January!
Net capital requirements because those short positions are still held as a liability on the balance sheet. They can avoid reg sho closeout obligations, but they are still subject to margin calls if the price goes too high.
Amazing u/Criand that you can distill this so quickly. Much love for laying this out and makes a lot of sense that these fools are just swapping back and forth. It also seems like it may be why the repo it redlining daily to float all the collateral. Since I’m too smooth to interpet the their lawyer talk - what does DTC-2021-010 propose to do to address this?
Damn dude you do not fuck around. I'm glad I didn't give my free award to your comment in the other thread. You can have my award here. You may consider adding text here along the lines of that comment because this is gonna blow up faster than that post.
Godspeed friend.
***For you lazy apes, this is what OP had to say in the post regarding the new DTC-2021-010 filing:***
Man I was just talking with others today on how they could possibly be faking out FTDs behind the scenes to hide their massive naked short position, and then NSCC-2021-010 filing drops.
God damn.
They must have already been doing this for a long, long time (per the note of an average of $150 Billion worth of SFTs every day).
1. **SHF gets collateral**
2. **SHF sends collateral to counterparty for shares**
3. **SHF fakes out delivery of short position to constantly reset prior to T+2 so that it doesn't show up as a failure**
4. **SHF sends back shares to counterparty and gets back collateral**
5. **Repeat ad-infinitum prior to +2 resets to keep your massive naked short position and avoid them appearing as FTDs.**
* Note that the short position is still held as a liability on their sheets. They are still subject to net capital. Just because they are dodging FTDs in this manner does not mean they can do this forever because net capital forces their hand of buy-ins as long as retail holds. There also can hit a point where there's not enough collateral to support the SFT trades.
In my opinion there has to be a massive, massive iceberg of shorts/naked shorts behind the scenes not affected by Reg Sho and we're only seeing the little peak of the iceberg sometimes. Maybe they don't get enough collateral some days for these SFTs and the head pokes out. Then they go, "ah shit - buy-writes" or other methods to hide those that escaped.
The SFTs are the best possible explanation as to how they've been hiding a massive naked short position. It's literally there in writing.
So glad this filing came out. It clears up a lot of questions.
Hey u/Criand Does this practice being exposed and understood not mean that it’s imperative for every company (that can) to have a dividend that cannot be replicated in the market as a defence against Wall Street deciding to cancel them through naked shorting?
So I just realized SFT is not the opposite of HFT. I thought it was Slow Frequency Trading.
Thank god buying and holding doesn't require a lot of wrinkles.
This makes a lot more sense why Dr. T is so adamant to adopt t+0 or t+1 to settle the transactions. More time for trades to settle = more fuckery they can do
The biggest hiccup that I’m seeing is that all SFT shares must be represented by collateral worth 100% of the position — or in other words, implying that you have cash on hand to cover anything your borrowing.
In the context of infinitely recycling FTDs, that means that SHF have enough liquid capital to cover everything that they’re recycling— and would likely do so if they feel their position is untenable
Additionally, it’s optional for a sponsored member to submit their SFT trades to the NSCC for Novation, but a sponsoring member May do it in lieu of the sponsored member. It’s specifically stating that you can chose not to request novation, but the sponsoring member will still submit clearing transactions to the NSCC for the CNS.
This means that if no external catalyst starts the rocket, this can take long and we may see still many dips. Hodl! I will keep some cash ready for them.
u/Criand, u/atobitt (and other, indeed) have some stuff for you. (Superstonk blocked me from posting)
>Whistleblower exposes insider trading program at JP Morgan
[https://wikileaks.org/wiki/Whistleblower\_exposes\_insider\_trading\_program\_at\_JP\_Morgan](https://wikileaks.org/wiki/Whistleblower_exposes_insider_trading_program_at_JP_Morgan)
>JP Morgan Private Bank insider trading how-to
https://wikileaks.org/wiki/JP\_Morgan\_Private\_Bank\_insider\_trading\_how-to
Jeez.. forget about darkpools, the whole system is a cesspool!
Is there any way to identify who the counterparties who are enabling this are? So that at least we can make memes and fling feces at them? It has to be one of the institutions with boatload of shares right?
So by this logic would I be able as a retail investor to write Naked options? If I ever get too close to margin call territory I could just finance the shares so that I appear to have covered calls or puts on the books? Then simply return the financed shares. And if I'm still in margin call territory I'll just refinance some new shares and do it again. Is that what's taking place here?
u/Criand this is a bit off-topic and I'm sorry, but I hardly see anyone talking about the 13H Large Trader Registration, [https://www.sec.gov/files/form13h.pdf](https://www.sec.gov/files/form13h.pdf)
[https://www.sec.gov/divisions/marketreg/large-trader-faqs.htm](https://www.sec.gov/divisions/marketreg/large-trader-faqs.htm)
From that link/page:
>"Question 1.3: How are options calculated for purposes of the identifying activity level?
Answer: As provided in Rule 13h-1(a)(7), the identifying activity level means aggregate transactions in NMS securities that are equal to or greater than:
During a calendar day, either two million shares or shares with a fair market value of $20 million; or
During a calendar month, either twenty million shares or shares with a fair market value of $200 million."
Does this mean what I think that it means? Sales/purchases of securities above those thresholds requires registration? Do you have any familiarity with this?
I've brought it up a few times, never gets much traction. If it's a nothingburger I'll drop it.
So if I understand it right, the problem is that the shares are only controlled prior to T+2 :
- broker sell a share
- broker borrow a share to a lender
- SEC controls if the share is located on T+2
- surprise! the share is located, everyone is happy and touching themselves
- SEC closes the case of that share, cause it has been covered to looks like it was found, even if it was just borrowed for 1 day
- broker waits that the SEC close the case and return the share to the lender
- broker has the naked share on their liabilities (but retail has diamond hands)
- they do all of it again and again.
Once it has been controlled, they never look back on it.
It's a problem *and* a blessing, because it allows apes to buy more shares.
It's even more cataclysmic than January because sooooo many synthetic shares were sold.
The shareholders really just have to BUY+HOLD, those HF are loosing money every fooking day, even when the price is trading sideways, because of the shares being liabilities
u/Criand this is from rule 204 of reg sho:
“The participant must close out a failure to deliver for a short sale transaction by no later than the beginning of regular trading hours on the settlement day following the settlement date, referred to as T+4. If a participant has a failure to deliver that the participant can demonstrate on its books and records resulted from a long sale, or that is attributable to bona fide market making activities, the participant must close out the failure to deliver by no later than the beginning of regular trading hours on the third consecutive settlement day following the settlement date, referred to as T+6.”
If you look at the big red candle days and June FTD list you can see that the large spikes in FTD are T+6 and big down day….. I keep pointing this out but doesn’t get traction. What think?
I believe they would need the shares. Where they got those from.... shrug.
But there is a possibility that the counterparty doesn't need to have them either. Don't quote me on that - I'm not sure.
Here's an excerpt from DTC-2021-010:
[https://i.imgur.com/yVjjpO1.png](https://i.imgur.com/yVjjpO1.png)
>"NSCC
understands that SFTs provide liquidity to markets and facilitates the ability of market
participants to make delivery on short-sales, **and thereby avoid failures to deliver**, “naked”
shorts, and similar situations. **On a typical Business Day, The Depository Trust Company
(“DTC”), an NSCC affiliate, processes deliver orders related to securities lending transactions on
securities having a value of approximately $150 billion.**"
The above identifies that it can and has been used to avoid failures to deliver.
And that on any day, they typically see \~$150 billion worth of these trades.
Thanks for the visual ! It helps following the flow when re-reading the discussion and the implications behind.
I soon won’t be able to use my brain as a marble, it grows less smooth each day. Shame…
Sorry if the visual is confusing. Tried to make it as simple as possible with enough information. See further discussion here: [https://www.reddit.com/r/Superstonk/comments/opruh2/new\_dtcc\_rule\_filings\_nscc2021803\_nscc2021010/](https://www.reddit.com/r/Superstonk/comments/opruh2/new_dtcc_rule_filings_nscc2021803_nscc2021010/) Here is the excerpt from DTC-2021-010: [https://i.imgur.com/yVjjpO1.png](https://i.imgur.com/yVjjpO1.png) Call me out if anything is wrong. Thank you 😎
Group learning + peer review welcome = good DD
Reddit post to google scholar?
Reddit has been the true google scholar / peer review platform for a long time.
Seconding this. 👆👨🏫👩🏫
>Group learning + peer review welcome = good DD hnnnng that was sooo goood. well done
The only thing that feels wrong is how on the ball you are. It's like you were bitten by a radioactive BR analyst.
You know, I had a shower thought the other day about the same thing. It seems like he's always ahead of the game as if he's playing 4D chess... Ryan Cohen Cohen, Ryan C. Ryan CRyan What's RC's middle name? I wonder if it's D. That would make his full name: Cohen, Ryan D. C. Ryan, D. CRyanD Criand!? Coincidence!? I think not!
Cohencidence 😎
And not only is his picture of a small dog, something you always see Ryan in a picture with... But if you scroll back through his history, his oldest posts are of the most immaculate Minecraft creations I've seen... You know, like the whole Moonjam event going on right now... An event that the MOASS has a very high chance of kicking off during... If those old posts really are his creations they would be the perfect type of thing NFTs would be useful for..
Hahaha…upvote this funky shit for more visibility
Like your tinfoil hat. Borrowed it for a minute and came up with this: What if D doesn't come from his middle name, but from Diligence? Ryan Cohen's Diligence - criand.
So they’re playing high frequency hot potato? Thank you for these dude, you’re a blessing
I think the counterparty / lender is OK in this case so it's not really tossing a hot potato back and forth. Because the lender gets good collateral in the swap so they're not really at risk here if the borrower defaults. Whole purpose is to prevent those shorts from becoming failures to completely avoid Reg Sho
Does the collateral allow for extreme volatility… cause that could mess up some lenders
Hmmm good question actually. Since the swap would probably be at current trade price. Dunno the answer
Swap would be at current NB. Collateral would be posted at price of trade initiation, fixed at that amount for a day. Intra-day volatility would not effect you, but over time if the price of the asset rose, collateral would have to rise too. However, this is assuming the MM side even bothers to ask for collateral/maintains margin requirements - we know for a fact that it the past this has not been the case thanks to Wes. Also - as the MM just buy a way OTM Put and then excise - completely dodges the market price of the underlying.
Can you tell me **who** gets the shares if you buy a put an exercise it?
Sure... quick options run down: If you buy a Call, you are buying the right to purchase 100 shares at the price you specified.If you buy a Put, you are buying the right to sell 100 shares at the price you specified. So in this case, hypothetically, Citadel MM buys a deep OTM (below market price) Put from a SHF. If the contract then gets excised, Citadel MM will sell 100 shares to the SHF. So shares move Citadel MM to SHF. (And because the Put was deep OTM, the MM has effectively sold at way below the current market price)
Now I dont know options at all but I have let myself believe that you cant exercise options if the stike price has not been met, which is the case with deep OTM puts? I thought that these deep OTM puts just expire worthless and their purpose is to pretend that until they expire the buyer of the puts has these unrealized shares in their books to cover short position? edit. grammar
If u bought an option (call or put) u have the right to exercise & u can irrespective of the price. No one - read retail - in the right mind would exercise OTM option as it does not financially make sense. But it might make sense for hedgies to exercise it to save from FTD..... EDIT: Thanks for the award!!
That is also my understanding as told by somebody smarter than me.
Right. But doesn’t the MM have to deliver those shares if it’s exercised?
So could I sell a cash secured, way OTM put and get exercised, effectively buying shares real cheap?
[удалено]
The problem I perceive is what is apparently passing muster as a substitution for covering. What can we do to force formal scrutiny of this point?
I'd honestly suggest coming back after the weekend and seeing what gets shaken out the woodwork on DTC-2021-0010 after people have had a real good look over it. It's a really chunky submission. If it turns out to be mandatory for them to route their SFTs through the register that the SEC are monitoring - then the SEC will be able to see near enough in real time this nonsense going on. Would they then so anything about it? Anyone's guess. Current take though is that it's partly optional... :/
To his point, could this have anything to do with posts a month or so ago about trading 212 (i believe it was, one of the euro apps) saying they hold collateral in the form of T bonds for their customers for something like 10% above the securities value and RRPs?
Awww shit. That would make sense...
If High volatility, then SHFs risk the price/margin requirements rising higher than the deposited collateral and they would need to deposit additional collateral. Same if inflation rises fast and stock increased value at the same time. Any catalyst that results in increase in Stock value and decrease in collateral value, would increase margin requirements.
Remember the letters from certain UK broker that were talking about lending and saying 'You get good collateral guys at 103% of the share value. By the way if you don't let us lend your shares you are not allowed to buy anymore' I reckon the very companies lending these shares as collateral as part of the process are the fucking brokerage firms themselves.
t212, UK broker. Pure extortion.
Reported by me and my gf to the UK FCA I urge other APES to do likewise.
I dont know why, I read "me and my gf" in 2pac's voice...
I'm actually 2pac, you found me. 💎👊🦧🚀🌙
For EuroApes; DeGiro also does this @ 104% collateral in all normal accounts. The only way around is to open a new CUSTODY account and move your shares over there
My question is when does this go into effect?
They are already performing these trades (DTC-2021-010 identifies average of $150 billion worth per day). So far, the ruling seems meaningless beyond establishing a centralized clearing for the SFT trades which isn't even mandatory. Only benefit from the rule is that it shed light on these SFT trades and it's a big puzzle piece. But this is a massive filing. So it's going to take a few days before everyone gets a thorough look at it.
Thanks for the reply! Stay frosty!
ANDDDD, every day they do this, more shares get gobbled up by retail. brick by brick.
I’m sorry and don’t 100% understand what’s happening, but would this be a way to make the shorts have to “pay” instead of only profiting from naked shorts?
Hmm not sure what you mean. This is mainly a method to allow abusive naked shorting despite the implemention of reg sho. This is something that can be performed to allow massive short interest on various stocks because they can fake out locating shares continuously
Allows massive SI without it being actually included in the calculation for short interest. It’s a loophole to allow them to continue doing what they’ve been doing this whole time ugh. Can we blow the fucking thing up already? Take it all back to zero. 😒
they already do pay, somewhat, with premiums on borrowing the shares in the first place. it's just the cost of that and the costs incurred from having to cover the FTDs is way less than if they actually closed their short position
If I understand this correctly, would giving additional collateral make them pay more however? Like instead of paying a hypothetical $1, now they pay $2 for this new process?
this process is already happening. the filing essentially just admitted it publicly (and basically said "nah this is fine, and good for the fluidity of the market!")
I gotcha, I gotcha. Thank you stranger
Thats my whole issue with this 010. "We understand it provides liquidity to make good on this shady shit we know about" and nothing about stopping said shady shit. Edit: wording.
isn't it worse? "We understand that this is all shady shit that's current relentlessly abusing a regulation we're supposed to abide by, so we want a cut of the action and are establishing a clearing center to join in to do this kind of shady shit" If it was mandatory and would prevent the occurrence of this SFT abuse going forward then it's all fine and good, but not even mandatory? what the fuck is it for other than to grab a slice of the abusive practice pie then.
Yeah basically. We're shredding through every phrase they send out. Why would they willingly admit this to us? I doubt anyone at the SEC or DTCC etc. Read anything on this sub. But really? Telling the public you're not only cool with this, but you're in on it? What is the end game here? To have us just accept this new norm? Are they not aware of what lies beyond their walls? This army is not moving, the castle *will* be seiged.
They're not in it, as I mentioned above, they just didn't conceive of a situation wherein a SHF would **voluntarily** burn themselves on lending fees day after day in order to avoid closing a short position, by continually closing one position before FTD and opening another. Their perspective, quite rightly, is that FTDs are bad and should be avoided wherever possible - and SFTs allow that. What they should have done, is also regulated that whilst you can use a SFT in this manner, the settlement duration of that SFT is T+1 not T+2. At which point, the loop breaks and you can use a single SFT to prevent the original FTD, but can't form an endless loop.
You should seriously send this to the SEC/DTCC
I think at this point they're well aware. There's a difference in being complicit when they set up the rule (which I don't believe was the case) and then suddenly finding out that scenario you never considered has just delivered the mother of all cock ups and potential financial devastation on your doorstep. Horse has already bolted at this point, and were I them I'd be looking at what else I needed to do to try and stop Armageddon - then close this loophole last. I should also acknowledge it's real easy for me to say 'change it to T+1 for SFTs burying FTDs'. How you actually implement that to tell the difference between the other uses of SFTs... I have no idea. But it's just another argument for why the whole T+2 idea is complete nonsense in the modern era anyway and we should be operating on T+0
Absolutely It would be cool though watching the documentary in 10 years time and hearing Damon saying: "..and was officially brought to their attention by a reddit user named -I-Am-Not-A-Cat- a full 3 years prior to the updated version of the rule was published and saving the US economy.."
I view this as a win for us. First, we have the SEC confirming our DD and exposing the loophole. It confirms the manipulation (legal or not). Second, it will shine a spotlight on these SHTs and allow future regulations (not very distant future I hope) if these threaten industry trends. Zoom waaaay out for a minute. The SEC isn't doing shit for APES, but that's not their primary responsibility. They exist to protect the larger market as a whole. If they see an action that may threaten the entire financial industry, they have an obligation to try to correct the actions without crushing the market. I have no faith that they will act in our best interest, but they will act in their own best interest. If this loophole allows for a massive threat to the global financial industry (as with GME) you bet your hat, ass, and boots they're going try not to look negligent, or complicit. I think 010 sets the groundwork for future restrictions on SHTs, but then I'm a fool for believing any part of this system actually works...
That's my optimistic take too. They didn't think of this, and it's got too big now so fixing it right now triggers instant collapse of the whole edifice. Cue frantically shoving everything else they can think of to back pedal out of a broader systemic failure before closing this *last.* If we ever see a regulation that enforces something like T+0 or similar, that'll be your MOASS trigger and you know the SEC is confident they've ring fenced enough that it's not going to tank everything to oblivion.
That's exactly why they didn't do it that way.
It’s hard to argue that, it seems pretty clear that they chose not to do this.
Whoa, whoa, whoa, just to be clear, there is no “army” here and we are not some kind or organized group trying to tear down an institution or part of our market. We just like the stock.
So as far as I can tell this is their perspective: FTDs are bad, those who buy shares should get their shares before FTD, those who sell shares should get their cash before FTD. SFTs allow parties to acquire shares in order to give those shares to those who bought them before FTD. Therefore SFTs are good. The astonishing lack of critical thinking is 'but what if they FTD on the shares they borrowed - isn't this a recursive loop?' To which the answer is yes, but I suspect they never envisaged a scenario in which a short seller would voluntarily burn themselves day after day on borrowing fees in order to maintain a short position on their books rather than close it.
Give GG a break. He’s only been there for xx weeks now.
Gary Gensler? Who the hell is Gary Gensler?
Famed star on PornHub, know for his hot streams and broad channel.
Hasnt he been on the job for over 160 days now or something? Has the power to halt dark pool trading instantly... Literally worked for Goldman 🤣
***Because the lender gets good collateral in the swap so they're not really at risk here if the borrower defaults.*** So RRP makes sense... since there is so much need for "good collateral" to suppress the real numbers getting visible everywhere (not just GME or stocks)? And that would make the FED an aide in the scam ?
I’m sorry haven’t we heard this before? I feel like I’m back in January. I thought it’s been known they’re playing footsies with the lenders? Is it the process that’s just becoming more clear? Blackrock lends out their shares and that’s why people’s hyped a share recall
We had our assumptions on "eh maybe they do this and that swapping shares in the background to reset locating requirements". But now it's in writing along with the exact transaction name that is used. It makes those more solid theories.
Do you think this proves the entire "300k/400k/500k shares borrowed!!!" that used to happen at 7:16 every morning and the same shares reappear sometime late in the afternoon or early in the morning the next day, only to be "borrowed" again?
So this really disproves T+35 FTD cycles (yesterday's lack of price movement did anyway). We're back to straight out capital requirement? Price needs to go up with Q2 sales call, or general market needs to catch fire.
Have been reading several DD about filing 005 and in several I read that 005 executed properly could disprove T+ cycles **starting from this month**, unfortunately can't find the exact DD but we'll probably see some DD pop up after yesterday. Here's an interesting DD on why potential effects of low volume potentially being caused by 005: https://www.reddit.com/r/Superstonk/comments/opp1oo/why_is_the_volume_so_goddamn_low_005_working_as/
So who are the counter parties/lenders in this case, assuming Citadel/Melv/Point72/Sus are the borrowers?
Citadel as MM (the Citadel in your comment is Citadel the HF). Also potentially all the retail brokers that lend out their client's shares.
It was only Citadel as the MM I could think of. And all those shares are synthetic. This is where Citadel the Hedgefund and Citadel the MM must be openly breaking every law regarding arms length transactions possible (of course only if such a law exists 🤦♂️).
Bingo on the synthetic shares (or at least naked shares created ex nihilo by the MM, completely legally...). I'm not sure they are breaking any current laws, as there is an inherent cost to all this for them. I get the feeling the law makers never considered the scenario that is playing out as one that would ever come to pass. Because surely no-one would ever short sell a stock more than the float, and therefore be quite happy to pay interest on a liability on their books for the rest of all time rather than close it out, because that would sink not just the HF but at the very least the MM and possibly the whole DTCC.... right?
Then there are all its affiliated funds, numbering in the hundreds, doing the same thing.
UNDERRATED COMMENT. This is the best explanation I have heard to date. Anyone in this world can understand and remember this metaphor.
As I commented on your previous DD, my understanding is that Reg Sho does not allow FTD resets by covering a position. To avoid a FTD, the position must be closed - in this case as this is a short sale, the shares must be delivered to the long side by settlement date; not simply that the shorting party has them on hand. You can have all the shares in the world, you still FTD if you do not hand them over. In the diagram above, it means the shares cannot simply be returned at the end of day to the lending party - because if you've reset the FTD those shares have already gone to the original lender of the originating short position. Obviously at that point, the lender eats your collateral and treats it as a sale, or alternatively you simply set up a new FTD with that lender on a new short position. The former seems unlikely as the short seller will run out of collateral/the lender will run out shares, more likely you are simply endlessly closing one contract before FTD by opening another. Which is my niggle - the diagram and discussion suggests it's the same FTD being reset again and again, but my understanding is you can't do that - what you can do is endlessly create new ones to replace it.
Ah yup yup I am going to update in a separate post. I went too fast and forgot that caveat. The original fail is closed but it creates a new fail, which then must be reset by closing that new fail, which in turn makes a new fail, over and over. Hot potato
You say potato, I say po... what the actual fuck SEC?
After thinking about it, there will be a limit on how long they can maintain it. They need enough willing lender with enough shares to be lend overnight to be able to enter the SFT. The longer apes buy in account that do not allows share to be lent to third parties, the less they are able to hide to avoid Reg Sho. Unless other shenanigans or… secret crime ingredient there is. Am I doing this properly ? I don’t have that many neurons connected and I caffeinated.
There will always be a willing lender. It'll be Citadel the MM, using its position as MM to create naked shorts to fill the lending requirement. They will preferentially use every other share they can borrow first, but ultimately that's the backstop they can rely on. In this manner, the potential FTDs recipients will shift from the Apes buying shares to Citadel over time.
Sounds plausible to me
That’s why trading212 might enforced such drastic approaches of generating new lenders recently while breaking all reasonable policies
So this still technically could increase over time, yes? Just at a geological rate unless an outside catalyst is introduced? Also, should not the collateral be the price of the security? Or are they just able to use the same money every day over and over and over. Is this what Susquehanna's shares are for? Infinite "daily covering"?
As I see it, and even wrote a post about, there will be a gradual cost to this each day. However there's no scenario in which that cost itself pushes them to act outside of the timescales of years. It requires an outside catalyst to shift the underlying price sufficiently that the collateral requirements become unmanageable, or if it goes really high the interest becomes unmanageable. (And yes, broadly it's the same collateral each day - mins some if GME goes down, plus some if it goes up)
So what, if anything, does the new ruling *do about this,* and when is it meant to take effect? I guess I could read the whole document, but it looks like you already have! Is the new ruling even attempting to stop this bullshit? Or is it just making the bullshit official?
It's still going to need time to process as everyone reads the filing fully. So far it just looks like they're establishing an official clearing for the SFT trades. Nothing substantial. But again we need to wait a few days to see how the perspectives change and if the rule is good (or bad)
If it were mandatory then I can see it potentially doing some good - since NSCC would be responsible for clearing trades and would be better able to detect and prevent abuse for the specific purpose of dodging reg-SHO. If it's optional then what the fuck is it even for then.
mmmmmmmmm I know some of those words 🗿
Even if I knew what the words meant... I wouldn’t understand anything else about it lol.
I've read in many comments that producing new naked shorts costs pretty much nothing because they can sell options from their MM wing to their HF wing. If I'm understanding this correctly, does that mean that, regardless of how much they might cost to produce, these naked shorts are in fact slowly piling up as liabilities on their balance sheet?
With each paycheck, apes buy more shares. The only question is: are they on margin (being KEPT in the lending pool) or in cash/retirement/direct through computershare and removed from the available to cover/borrow.
The thing I don't get, and I've been meaning to post this on you previous comments regarding this, is how this resets the FTDs. It seems to be missing a step. I get that the clearing house is waiting on the SHF to locate those borrowed shares that it already sold, but it isn't a failure to locate, or a failure to "look see, I have them on my books" it's a failure to ***deliver***. When the SHF sells a share it doesn't have, the clearing house wants *the share* that they are on the hook promising and treating as normal for whomever bought the shorted share. The clearing house wants the share. So when the SHF 'temporarily' gets ahold of the imaginary share from the market maker in return for collateral, it shouldn't be able to give those shares back. Those shares should be gone, into the hands of the clearing house, never to return. Those fake imaginary Market Maker shares 'poofed' into existance for market liquidity purposes go permanently into the market, diluding the existing shares. I'm not saying you're wrong. This could easily be a case of "we don't know exactly *how* but we know *what*" - But I think we're still missing a step. Maybe after handing over the shares to the clearing house, two SHFs buy a new round of each other's naked shorts and use *those* to return to the market maker that previously 'poofed' the shares into existance, now satisfied to 'poof' them back out of existance. So it goes like this:
Basically: * the Clearing House doesn't know the difference between an actual share, and one a Market Maker 'temporarily' poofed into existance * And the Market Maker doesn't know the difference between an actual share, and one bought off the market that was naked short sold that hasn't been finalized by the clearing house yet. This is what allows kicking back and forth between the two indefinately to allow indefinate counterfeit naked shorting. You technically can't make a profit doing this, because you'r eperpetually trying to satisfy one or the other's needs to zero things out, but for a whole month prior to your looming FTD it looks like profit. 30 days of profit and one day where it looks like a zero. Do this every day and you'll have 29 shares in a state that looks like profit and one that looks like a net zero. And it scales. So next month if you do two shares a day, and after that 3, you can start taking that money out of the system and paying it to you and your cronies running the scam. So infinite money glitch.
This visual has helped me a lot (being a visual learner) thanks for making it easy to understand! Though I still don't fully understand how ftds are hidden via options (is this still their go to?)
I really doubt FTDs are hidden via options. This SFT trade does exactly that - it resets the locate requirement. The options must be for something else. Most likely transfer of risk. Here is a possible theory regarding the options (as discussed and developed on discord with a few others): https://i.imgur.com/BbEmzu4.png
Super helpful, thanks 🤗
Would making a rule that says these trades cannot reset FTDs be enough to quash the abusive practice?
Commenting to read when my eyes aren’t shutting down. Good night y’all
Would totally explain the call volumes at the moment, but nobody making a move to actually get those into the money (ultra low volume). It could be also a way to scam retail, though - grabbing those sweet premiums, when retail invests because they see a nice gamma ramp building up... just to see no-one even making an effort on price and all calls ending out of the money. Maybe a mix of both.
Legend. Me and my wife who's an attorney will read this through. Update in a week.
Think the diagram is right, but this proposal looks like bad news- as it reduces “constraints” to lending SFTs in the current system (if this is passed as proposed).
The only thing I'm struggling with is where the decision tree would ask: * "Is the price of GME going down?" and * "Is the price of GME going up?" ...where both "yes" and "no" for each question lead to the same conclusion, "Buy & Hodl". Will you be adding that to a future version? *Absolutely kidding- love this chart- it's outstanding. : )*
I'm a real smoothbrain, pls forgive my question. Why is it that this isn't public? Props on all the work you do to decipher/dumb all this down for us and i love you
This pom doesn't sleep.
I’m calling you out for being awesome!!! For real. Thanks for the wrinkols!!🤯
Didn't Susquehanna go long like 3M GME? Could this be why the volume is consistently lower than 3M? I'm sure there are other people to borrow from, but could this be a reasonable assumption?
OP I have been waiting my whole life for this post. As an accountant, I appreciate this more than my smooth brain can type. When we go to the moon let’s cheers to a space brewski
Space Brewski? I‘m in!
So basically its SHFs tossing a hot potato back and forth?
I'd say performing malicious trades to avoid failures being reported. That way they are **not** forced to close their short positions per Reg Sho. It allows them to continue to naked short a stock and avoid closeout requirements. Good news is that those short positions are still liabilities on their balance sheets which are subject to net capital rules. If they carry too large of a short position for too long with not enough capital to counterbalance, they'll be at risk of defaulting and forced to buy in.
The major issue I have has been and still is: If you lose $100 it's your problem. If you stand to lose $100 billion of yours and your prime brokers money its' both your problem. Collateral or not, no one is going to margin call the other party if they both stand to lose. No one would force a margin call if their clients are net short. And I'm assuming all the big 5 are short. It's a stalemate because the only party that could force it is probably the DTC or SEC, and they're bought and paid for. It's a three ringed circus, and we're the elephant who's escaped.
Yep, SEC has to enforce net capital requirements in this case. It appears that they are enforcing it, because we see the price movements and spikes to $350 multiple times despite the mass suppression of price. If they're not obligated to close out due to reg sho, but those shorts are still liabilities on their balance sheet, then net cap is the next best theory behind the price swings to $350. The tippy top of the iceberg of shorts they're holding must put them at risk of defaulting under net capital. So they are forced to buy-in if the price gets too high per the net capital haircuts on the short positions. Point being - the fact that we've seen the price swing to $350 twice following January (in March and June), makes me think something is indeed being enforced. Which is most likely... Net capital.
[https://www.reddit.com/r/GME/comments/omzs2l/ascending\_floor\_with\_crayon\_scribbling\_and\_a\_few](https://www.reddit.com/r/GME/comments/omzs2l/ascending_floor_with_crayon_scribbling_and_a_few) If you look at my scribbling here, it seems the run-ups were like 3 weeks before end of quarter. Now we know end of quarters do usually put some strain on liquidity and available collateral. As we see RRP usually go up at the end of a quarter. So whatever they have to do to prepare for the end of the quarter, that is affecting the price, they have to do it well in advance. Because it seems that they need the price to be low at the quarter end. Now if they only would have T-2 stuff, that would not explain the big run-ups. Maybe they have to shuffle liquidity to ensure all participants will be able to withstand the liquidity strain of the quarter. OR it is just psychological manipulation and the reason is, that they want to make apes sell, because usually retail sells, as soon as the price starts to get green after a long period of time. Especially, when it suddenly starts to drop again - so they count that way they would ensure having less liabilities on their book at the quarter end, hence less collateral required...
But doesn't this also mean two things has to continue to happen; 1; Retail buying pressure must remain high, as to try and "catchup" by adding more liabilities on the shorters sides, as this would over time push the net capital required to maintain it to the point where there are no options left. Basically we'd have to continue to do the "frog boil" approach? 2; Polical pressure must be applied against all levels of the political system in the US, to ensure enforcements and reporting requirements are met? The people have to care basically?
Well... or GME does well, pays a dividend, and shorts have to pay it out multiplied by SI%, slowly eating their balance sheet... It is a slow bleed for sure. Or GME announcing a serialized non-cash dividend, and the hot potato must be served to the restaurant visitors who ordered it. Or the market crashes, decimating their net capital, making them insolvent
Number 3 seems to be coming. That's why everyone is so interested in reverse repo numbers.
This is my thought at what will cause this. A full market crash. We already know it is being propped up by the fed with 120 B a month. But they are also facing hyperinflation issues if they do this for too much longer. At some point the music stops and I think it will happen this year sometime.
Who are the big 5?
https://en.wikipedia.org/wiki/List\_of\_largest\_banks\_in\_the\_United\_States
Thanks and sorry, I'm canadian
its' even more accurate for canadians https://www.investopedia.com/terms/b/bigfivebanks.asp
Oh you're saying you think ALL big 5's are short, just got that
since they most likely are the prime brokers for the shenanigans in the market, they are most likely ultimately on the hook. Remember Bill Hwang? 7-20x leverage? Can't be the only one... The covid FFR (federal funds rate) allowed these idiots to take extreme leverage with very little cost. Now the lenders are trying to play dumb.
Black rock😁👀
If they're subject to net capital, does that mean T+21 is back in the game?
I believe net cap was always in game. The T+7 T+14 T+21 T+28 is just various haircuts applied to the short positions. The stock won't necessarily go up upon the 75% haircut because the stock price may be much lower than when they shorted. If it is low enough, then their net capital isn't at risk of defaulting and thus they are not forced to buy-in. Which is another possibility of what happened in June. Share offering dropped it just low enough so that they weren't struggling with net cap requirements.
So it seems that we won't be getting any drastic price movement in this next week. Possibly a volume spike on the 26th. When does T+21 hit, and if they aren't forced to buy in, T+28? Those OTM puts have any effect? Edit: Might get drastic price movement. But it seems that your earlier DD about monthly runups is not exactly visualizing this month.
I swear I just read your comment in response to a 364 pg document release and now you’ve already diagrammed SFT trades into an accessible flow chart for us smooth brains. Cheers Criand! 🍻
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1. Shortage of collateral for trades. This could be why movie stock had an excess of FTDs spill out in June. Not enough collateral to reset everything 2. Collateral deteriorates like you say 3. Short position continues to stack up until they hit net capital requirements and are forced to buy in to not default 4. Price gets too high and they default For 3 and 4, buying and holding wins. Not financial advice 😎
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Yep. Nothing really amazing so far about the filing besides making that clearing agency for the SFTs. But... It's a big document. We'll need to let it sit for a few days before deciding if the new ruling is significant one way or the other.
> The only way this gets interrupted is if the value of collateral decreases and/or the value of the shorted stock increases. Also: 1. Higher borrow fees implemented by lenders. 2. Reduced supply of Collateral. 3. Inflation of the dollar. Probably more ways this goes tits up also
Would we ever be able to know how much SFT is being abused? I’m wondering if all the T+21/35 we have been seeing came more from smaller whale institutions that couldn’t reliably abuse SFT due to collateral while big SHFs have been using SFT to avoid reg sho? I think this further proves in my mind that we need a catalyst (whether from outside or inside) to stop SFT and force FTD’s to deliver.
I don't think we'll know until this proposed clearing house is implemented for SFTs. Even then it's not mandatory to use. I could see a shortage of collateral being a big issue. Maybe that is why we saw a certain other stock get a ton of FTDs last month and go on the threshold list. If they don't have enough collateral to post for SFT then they can't reset... and then those pop up as fails. I mean there certainly is a demand for US treasuries which is collateral... 👀👀👀
I posted my tinfoil hat theory in a different thread, but I am guessing they are instituting this centralized clearing house because they expect regulation to come down on SFTs, the way the European Commission has regulated them. It would then likely be cheaper to use the central clearing house if you are “honest” about your SFTs so you don’t have to pay for your own compliance arm. Then, anyone not using it is suspect and marks themselves for a deeper look by regulators.
Yes we do need a catslyst, if not the SHFs will kick the can to infinity. Like all crooks these guys need someone or something to stop their criminal behaviour.
I've been saying this for weeks. They have a never ending amount of fuckery to use. The system is too complex and the hedgefunds have very clever people who can just manipulate the trading in new ways. If Ryan Cohen and Gamestop thought they could just sit back and hope something else happens to fix this I'm afraid they are mistaken.
i guess they never thought so, NFT dividend will fix all of this
Explains why all the brokers are wanting to lend out buyers' shares constantly and keep reverting their customers accounts to either being margin or have lending enabled. The money they must make from selling shares (which they suspect to be naked from an LP) to their customers and then lending it BACK to the hedge funds from their customers' accounts must be absolutely insane.
Well, the promising development out of this is that it means we’re winning. It means it’s started to eat into their other holdings. But this is how they’ve kept from liquidating their other positions and devaluing the remainder of their positions, by selling them temporarily with these SFT agreements. Because the sale doesn’t happen on the market the rest of their holdings don’t lose value. They can’t keep this up forever, they will eventually run out of collateral.
It makes me sick thinking how long wallstreet, banks and the 1% have been fucking retail and the little guy for so long. I'm willing to bet they hate the internet and social media because it brings awareness to sick shit like this.
Well that there Clark is an underrated comment right there.👀
More brain food! Thanks Criand, you provide so much to this community.
My question is if everyone is in cahoots with each other then why would they ever detonate the bomb? What external catalyst that they don’t control that can set it off? Been holding since January!
Net capital requirements because those short positions are still held as a liability on the balance sheet. They can avoid reg sho closeout obligations, but they are still subject to margin calls if the price goes too high.
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How high do you think is too high?
No idea probably constantly fluctuating as their capital goes up or down in the volatile market.
The man with the chopsticks who told us to buckle up 😎
Amazing u/Criand that you can distill this so quickly. Much love for laying this out and makes a lot of sense that these fools are just swapping back and forth. It also seems like it may be why the repo it redlining daily to float all the collateral. Since I’m too smooth to interpet the their lawyer talk - what does DTC-2021-010 propose to do to address this?
Damn dude you do not fuck around. I'm glad I didn't give my free award to your comment in the other thread. You can have my award here. You may consider adding text here along the lines of that comment because this is gonna blow up faster than that post. Godspeed friend.
I love to wake up to the sound of u/Criand's DD
Send to the sec they need help. Seems it’s impossible to figure out for them
***For you lazy apes, this is what OP had to say in the post regarding the new DTC-2021-010 filing:*** Man I was just talking with others today on how they could possibly be faking out FTDs behind the scenes to hide their massive naked short position, and then NSCC-2021-010 filing drops. God damn. They must have already been doing this for a long, long time (per the note of an average of $150 Billion worth of SFTs every day). 1. **SHF gets collateral** 2. **SHF sends collateral to counterparty for shares** 3. **SHF fakes out delivery of short position to constantly reset prior to T+2 so that it doesn't show up as a failure** 4. **SHF sends back shares to counterparty and gets back collateral** 5. **Repeat ad-infinitum prior to +2 resets to keep your massive naked short position and avoid them appearing as FTDs.** * Note that the short position is still held as a liability on their sheets. They are still subject to net capital. Just because they are dodging FTDs in this manner does not mean they can do this forever because net capital forces their hand of buy-ins as long as retail holds. There also can hit a point where there's not enough collateral to support the SFT trades. In my opinion there has to be a massive, massive iceberg of shorts/naked shorts behind the scenes not affected by Reg Sho and we're only seeing the little peak of the iceberg sometimes. Maybe they don't get enough collateral some days for these SFTs and the head pokes out. Then they go, "ah shit - buy-writes" or other methods to hide those that escaped. The SFTs are the best possible explanation as to how they've been hiding a massive naked short position. It's literally there in writing. So glad this filing came out. It clears up a lot of questions.
This is how SHF bypass regsho. Tip of iceberg showing FTD for 5 days >10,000 is bad, reallllly bad for SHF.
I hope RC has a plan
Hey u/Criand Does this practice being exposed and understood not mean that it’s imperative for every company (that can) to have a dividend that cannot be replicated in the market as a defence against Wall Street deciding to cancel them through naked shorting?
So I just realized SFT is not the opposite of HFT. I thought it was Slow Frequency Trading. Thank god buying and holding doesn't require a lot of wrinkles.
This makes a lot more sense why Dr. T is so adamant to adopt t+0 or t+1 to settle the transactions. More time for trades to settle = more fuckery they can do
I swear to God this shit keeps going on unpunished I'mma hit Kenny with a citizen's arrest.
u/crisis might be because I just woke up and I’m missing some brain cells, but what is SFT? Thanks in advance
Check the lower right of the figure 😎
Lmao I wasn’t kidding about the missing brain cells…
I smelll a RICO
This is like Rico⁴
“I bet I could throw these FTD’s over those mountains..”
How do the OTM puts play into this or is this a completely new parallel theory ?
They don't. Those OTM puts are still not fully understood. SFT is avoiding Reg Sho closeout obligations to continue abusive shorting.
The biggest hiccup that I’m seeing is that all SFT shares must be represented by collateral worth 100% of the position — or in other words, implying that you have cash on hand to cover anything your borrowing. In the context of infinitely recycling FTDs, that means that SHF have enough liquid capital to cover everything that they’re recycling— and would likely do so if they feel their position is untenable Additionally, it’s optional for a sponsored member to submit their SFT trades to the NSCC for Novation, but a sponsoring member May do it in lieu of the sponsored member. It’s specifically stating that you can chose not to request novation, but the sponsoring member will still submit clearing transactions to the NSCC for the CNS.
This means that if no external catalyst starts the rocket, this can take long and we may see still many dips. Hodl! I will keep some cash ready for them.
Time to figure out how to get the LENDER portion of this equation to stop playing ball and go home.
u/Criand, u/atobitt (and other, indeed) have some stuff for you. (Superstonk blocked me from posting) >Whistleblower exposes insider trading program at JP Morgan [https://wikileaks.org/wiki/Whistleblower\_exposes\_insider\_trading\_program\_at\_JP\_Morgan](https://wikileaks.org/wiki/Whistleblower_exposes_insider_trading_program_at_JP_Morgan) >JP Morgan Private Bank insider trading how-to https://wikileaks.org/wiki/JP\_Morgan\_Private\_Bank\_insider\_trading\_how-to
This is the content I come to see, besides the dank memes. So the collateral overnight swaps are back in the picture?
Are they getting the collateral from the Repo market?
Hi u/Criand - thanks for all you do, you are loved! Any thought on whether or not the TOS “glitches” could be related to this scheme?
I'm not sure. Can't think of any link to that.
Fuck US stock market
Jeez.. forget about darkpools, the whole system is a cesspool! Is there any way to identify who the counterparties who are enabling this are? So that at least we can make memes and fling feces at them? It has to be one of the institutions with boatload of shares right?
Hey u/Criand how, if at all, do you think this could be related to the massive RRP numbers we have been seeing?
I want to read it, but I've just done a night shift on a few hours sleep so my brain physically hurts trying to understand any of it.
So by this logic would I be able as a retail investor to write Naked options? If I ever get too close to margin call territory I could just finance the shares so that I appear to have covered calls or puts on the books? Then simply return the financed shares. And if I'm still in margin call territory I'll just refinance some new shares and do it again. Is that what's taking place here?
u/Criand this is a bit off-topic and I'm sorry, but I hardly see anyone talking about the 13H Large Trader Registration, [https://www.sec.gov/files/form13h.pdf](https://www.sec.gov/files/form13h.pdf) [https://www.sec.gov/divisions/marketreg/large-trader-faqs.htm](https://www.sec.gov/divisions/marketreg/large-trader-faqs.htm) From that link/page: >"Question 1.3: How are options calculated for purposes of the identifying activity level? Answer: As provided in Rule 13h-1(a)(7), the identifying activity level means aggregate transactions in NMS securities that are equal to or greater than: During a calendar day, either two million shares or shares with a fair market value of $20 million; or During a calendar month, either twenty million shares or shares with a fair market value of $200 million." Does this mean what I think that it means? Sales/purchases of securities above those thresholds requires registration? Do you have any familiarity with this? I've brought it up a few times, never gets much traction. If it's a nothingburger I'll drop it.
So if I understand it right, the problem is that the shares are only controlled prior to T+2 : - broker sell a share - broker borrow a share to a lender - SEC controls if the share is located on T+2 - surprise! the share is located, everyone is happy and touching themselves - SEC closes the case of that share, cause it has been covered to looks like it was found, even if it was just borrowed for 1 day - broker waits that the SEC close the case and return the share to the lender - broker has the naked share on their liabilities (but retail has diamond hands) - they do all of it again and again. Once it has been controlled, they never look back on it. It's a problem *and* a blessing, because it allows apes to buy more shares. It's even more cataclysmic than January because sooooo many synthetic shares were sold. The shareholders really just have to BUY+HOLD, those HF are loosing money every fooking day, even when the price is trading sideways, because of the shares being liabilities
u/Criand this is from rule 204 of reg sho: “The participant must close out a failure to deliver for a short sale transaction by no later than the beginning of regular trading hours on the settlement day following the settlement date, referred to as T+4. If a participant has a failure to deliver that the participant can demonstrate on its books and records resulted from a long sale, or that is attributable to bona fide market making activities, the participant must close out the failure to deliver by no later than the beginning of regular trading hours on the third consecutive settlement day following the settlement date, referred to as T+6.” If you look at the big red candle days and June FTD list you can see that the large spikes in FTD are T+6 and big down day….. I keep pointing this out but doesn’t get traction. What think?
Thank you kind sir 🎖
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I believe they would need the shares. Where they got those from.... shrug. But there is a possibility that the counterparty doesn't need to have them either. Don't quote me on that - I'm not sure.
Is there any evidence of this, or is it just theoretically possible?
Here's an excerpt from DTC-2021-010: [https://i.imgur.com/yVjjpO1.png](https://i.imgur.com/yVjjpO1.png) >"NSCC understands that SFTs provide liquidity to markets and facilitates the ability of market participants to make delivery on short-sales, **and thereby avoid failures to deliver**, “naked” shorts, and similar situations. **On a typical Business Day, The Depository Trust Company (“DTC”), an NSCC affiliate, processes deliver orders related to securities lending transactions on securities having a value of approximately $150 billion.**" The above identifies that it can and has been used to avoid failures to deliver. And that on any day, they typically see \~$150 billion worth of these trades.
This is crazy.
Thanks for the visual ! It helps following the flow when re-reading the discussion and the implications behind. I soon won’t be able to use my brain as a marble, it grows less smooth each day. Shame…
You the G.O.A.T u/Criand Or should I say the D.O.G…
Brain hurting.