Forget hiding FTD's in ETF's. They are being hidden right under our noses using the Continuous Net Settlement System.
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| Author      | Source | 
|  :----:     |    :----:   |        
| [u/Metro_Jocks](https://www.reddit.com/user/Metro_Jocks/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mwx5nk/forget_hiding_ftds_in_etfs_they_are_being_hidden/) |

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[DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)

So I just finished watching The Wall Street Conspiracy and I decided I wanted to dig a bit deeper to understand how naked short selling works. I highly suggest you watch the documentary as I found it really helpful to understand how hedge funds attack companies to achieve the Bankruptcy Jackpot. Link <https://www.youtube.com/watch?v=Kpyhnmd-ZbU&ab_channel=Alven1111>

While digging around I found this article from 2008 (I know it's a bit out of date) and it blew me away. I have highlighted a few segments which I found helpful but I suggest you go and read the whole thing as it does a great job of explaining how Citadel can get away with naked short selling using the NSCC and the CNS system and how they can hide FTD data.

First things first. I don't write DD so smart apes please correct any mistakes I make as i'm learning as I go. I've pasted snippets that i highlighted as I read to keep the post a bit shorter but check the PDF document link if you want the whole article. I'm just going to make comments on what I found and hopefully smarter apes can run with it...

TLDR: READ THE ARTICLE. It's a quick read I promise. The FTD data is hidden deep in the CNS system and what is getting reported to the DTC is only the tip of the iceberg. I suspect FTD's are being cycled using Dark Pools due to the high amount of float being traded in them. The NSCC is allowing FTD's to remain open with no consequence to the short seller. Shorts are also using DTC brokerage share pools to cover.

<https://preview.redd.it/264c5jl8bxu61.png?width=426&format=png&auto=webp&s=1d7a13aa7229d5fd4369d81f5280b056fd519e4f>

So we have known this for a while that Market Makers don't have to actually locate a share to borrow and there doesn't seem to be any real way to know what Bona-Fide activities are.

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<https://preview.redd.it/q5wwe9fecxu61.png?width=385&format=png&auto=webp&s=3f6e7b9b06fe8260a5eecb8b6eeb4875616a0801>

So 52% FTD in 2003 and they were only forced to buy in 0.12% of the time (remember this number). Wtf is happening here. Also god knows how much worse this has gotten 17 years later. I don't know much about options but I remember Melvin had a huge Put position on GME.

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[I believe the T+3 is out of date and it's now T+2](https://preview.redd.it/fjhow3lkcxu61.png?width=733&format=png&auto=webp&s=8db102a7ad5b736e054ac0bb8ae626357b02eabc)

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<https://preview.redd.it/8qqb1stncxu61.png?width=372&format=png&auto=webp&s=f2b549715172fc8f41d0d9c46f5a463a15cd5eb9>

Ok so here's where it gets a bit funky. The DTC just has a number of shares that your brokerage is entitled to on record. They don't know who owns the shares, that's the broker's job to keep track of.

So Citadel spends all day fucking about with shorts and what not and at the end of the day, as long as the net position is 0, the NSCC is happy! But if you can't net 0 then you will be hit with a FTD. Which is really bad...except it doesn't matter unless the long side of the trade requests a buy in. If they don't, GREAT! Just put it over there with the rest of the FTD's. But when your trading amongst your buddies, are you really going to rat on them to the NSCC?

But fear not because the DTC has a cool little feature where you can borrow stock from the SBP to cover your FTD! It's easy really. The DTC says fuck me there's a huge pile of shares her allocated to this brokerage who are part of the SBP. Just take a few of those, we don't even know who really owns them to be honest. Congratulations! You just used 1 credit card to pay for another credit card and cleared your FTD. (These are the ones we actually get data on BTW)

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<https://preview.redd.it/p4f2a5ckhxu61.png?width=723&format=png&auto=webp&s=a6e7e1aaccc58ea8e3ecee74733b2d7a9a603361>

Ok ok I was getting worried but the DTC is all over this shit and will DEMAND you buy in to fix your FTD's. And this will happen 0.12% of the time, every time!

The latter 2 examples are Exhibits 3C & 3D. So basically your broker has a pool of shares sitting at the DTC which are available to lend and can't tell you if your specific share has been lent. And if it is lent out, there is no limit to how many times it can be lent over and over again. Going back to [u/atobitt](https://www.reddit.com/u/atobitt/) Everything Short DD, re-hypothecation can be done again and again. The worst part....Citadel doesn't even need to locate a borrow to start this whole chain reaction.

And if they do this ex clearing or intra broker, they end up net 0 at the end of the day and no FTD's are recorded. What was the dark pool trade data for GME again? 400% of the float or something?

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<https://preview.redd.it/6h8hncncrxu61.png?width=702&format=png&auto=webp&s=afd75eb6663121aa86b70488ca930d6cc026a6ab>

<https://preview.redd.it/w7889qxbjxu61.png?width=723&format=png&auto=webp&s=56e5b26a737121adb05753c0858df40cbb4823f8>

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<https://preview.redd.it/fyk4rjhelxu61.png?width=732&format=png&auto=webp&s=8d54aff4d121c4d45ef8c47cdbcee4e6389185dc>

The left part is relevant to the upcoming shareholder meeting. it speaks for itself but luckily it's a simple system...just throw away the extras you don't need.

The right side....Holy shit! The CNS settles 96% of all trades! And if your net 0 for the day, The DTC couldn't give 2 fucks what your doing. They don't even seem to care about the FTD's in the CNS system because unless the member requests a buy in, they don't even want to know about it. How the hell does a company with 1M shares have 27M FTD's??????

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<https://preview.redd.it/hkb0qpubnxu61.png?width=738&format=png&auto=webp&s=eed9340db0b79a4f2c42b0fd1f441a697a2fb532>

Ok last bit. The DTC doesn't know what the fuck is going on as it only gets the daily net report from the NSCC. The brokers and market makers trading in the dark pools are the ONLY ones who know how fucked they are at the end of the day and why would they tell anyone. I see a couple of familiar names in there as well who got in trouble for failing to mark orders correctly as long or short.

The worst part about this whole thing is that the big boys are fucking around in their bedroom while the Daddy SEC just wants to read the morning Rensole news and drink their coffee in peace. We are like the neighbours banging on the door complaining about the noise and no one is answering. I think we just kick in the door at this point.

Link to full article

<https://csbweb01.uncw.edu/people/moffettc/about/Research%20Papers/IIJ-JOT-BROOKS.pdf>

As usual, the real DD will be in the comments so please discuss, correct and criticise!

*Edit: Thanks for the awards guys. No sure what they do but i'll show my wife and hope she's impressed. I have to go to bed now (2am here) but please post any questions and i'll try and respond tomorrow. 🚀*

Edit 2: I've had a few questions about Rule 204 so I'll address it here. I don't want to write the response here as it's too long. <https://imgur.com/gallery/MmmIkaK>
