This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)
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| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/c-digs](https://www.reddit.com/user/c-digs/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nfagu1/this_week_might_be_it_the_brakes_are_possibly/) | 

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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)

EDIT: May 20 - [So good, Tim Fries at the Tokenist shamelessly lifted this DD](https://tokenist.com/recent-occ-regulatory-moves-indicate-gme-amc-short-sellers-may-go-bust/) 🤣

I emphasize "*might*". See below and judge for yourself.

TL;DR:

1.  On Monday, May 17th, [OCC posted an increase to their Clearing Fund of $588,378,155](https://infomemo.theocc.com/infomemos?number=48718). This information was found by [u/aSphericalCow](https://www.reddit.com/u/aSphericalCow/). In case it isn't clear, OCC is saying that all members must contribute proportionally to add $588m to the common Clearing Fund by Wednesday, May 19 (tomorrow).

2.  Some [Options Clearing Corp (OCC) members](https://www.theocc.com/Company-Information/Member-Directory) (Citadel, Virtu, *and* Robinhood If you are not out yet, you better get out ASAP are members...) are likely at risk of default based on recent stress testing that resulted in the sudden increase to the Clearing Fund

3.  When they fail, OCC seizes the failing members' holdings as collateral to get a loan to keep everything from collapsing

4.  Then OCC needs to sell those holdings at auction to pay that loan back

5.  To get the best return at auction and minimize their own exposure (paying out of their own funds), OCC needs more bidders

6.  To get more bidders, they relaxed the qualification requirements for existing members and non-members in SR-OCC-2021-004 filed on March 31, 2021 and [entered into the Federal Register on April 6](https://www.federalregister.gov/documents/2021/04/06/2021-06989/self-regulatory-organizations-the-options-clearing-corporation-notice-of-filing-of-proposed-rule) (thanks [u/StatisticianActive48](https://www.reddit.com/u/StatisticianActive48/)) with a 45 day review period that ends on Friday, May 21.

7.  This rule change is set to go into effect this week and sets a path for a more controlled wind-down of a defaulting member and decreases volatility in the wake of a collapse and therefore, SR-OCC-2021-004 could be seen as a prerequisite by many parties such as the OCC and SEC and even Berkshire and BlackRock.

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[*This was originally posted last week*](https://www.reddit.com/r/GME/comments/napco9/srocc2021004_finalizes_this_week_is_this_the/) *as I believed we were on the verge of moving out of stasis. I want to thank* *all* *of the folks that reached out regarding my ban and the mods for reversing the ban. I mostly lurk so I took the ban in stride. I also want to thank and credit all of the folks who reached out with corrections and additional information that made this DD better!*

----

[SR-OCC-2021-004](https://www.sec.gov/rules/sro/occ/2021/34-91445.pdf) ("OCC-004") was filed on March 31, 2021 and entered into the Federal Register on April 6, 2021:

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/msfmn9jcmvz61.png?width=982&format=png&auto=webp&s=bf334ee67fd8f4501ad2085a072bfbbd1b667147)](https://preview.redd.it/msfmn9jcmvz61.png?width=982&format=png&auto=webp&s=bf334ee67fd8f4501ad2085a072bfbbd1b667147)

Filing date for SR-OCC-2021-004 in the Federal Register

With a date of effectiveness 45 calendar days after the entry into the Federal Register.

That would put the date at May 21, 2021 as pointed out by [u/StatisticianActive48](https://www.reddit.com/u/StatisticianActive48/).

One of two things will happen this week:

1.  It will go into effectiveness sometime between now and Friday, May 21.

2.  It will be postponed with an objection as we have seen with both SR-OCC-2021-003 and SR-NSCC-2021-002 in which case it will be pushed out to the June/August time frame (thanks [u/rockitman12](https://www.reddit.com/u/rockitman12/)).

If it does not get delayed, I expect a full collapse of the shorts in the near future. (Remember: it may take days for the margin calls to go into full force). Some of the activity we've seen this week is definitely pointing to a change in the stasis we've been in since March 16th.

-   [The additional FUD with respect to Glacier Capital](https://www.reddit.com/r/Superstonk/comments/nf2q78/glacier_capital_exists_and_its_much_spicer_than/) (courtesy [u/MrMadium](https://www.reddit.com/u/MrMadium/) and [u/timmmmmmmyy](https://www.reddit.com/u/timmmmmmmyy/))

-   [The options data aligning on Friday, May 21](https://www.reddit.com/r/Superstonk/comments/nexfv4/its_just_a_pyramid_scheme_part_1_the_missing/) (courtesy [u/hell-mitc](https://www.reddit.com/u/hell-mitc/))

-   [The FTD loop that may end T+35 on Monday, May 24](https://www.reddit.com/r/Superstonk/comments/nf22qz/theory_on_the_ftd_loop_missing_link_a_t35_surge/) (courtesy [u/Criand](https://www.reddit.com/u/Criand/))

-   [The recent DD with regards to SR-BOX-2021-11](https://www.reddit.com/r/Superstonk/comments/nd8nqt/need_a_wrinkle_brain_immediately_robinhood_and/) (courtesy [u/Inevitable-Elk-4162](https://www.reddit.com/u/Inevitable-Elk-4162/))

I don't want to plaster dates, but this week seems to be a convergence of many interesting events.

[On April 5, 2021, I wrote the following](https://www.reddit.com/r/Superstonk/comments/mkvgew/why_are_we_trading_sideways_why_is_the_borrow/):

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/6q6dc6wgmvz61.png?width=696&format=png&auto=webp&s=2b650e8e98e5b6f276e786c8eb09be73f329fd34)](https://preview.redd.it/6q6dc6wgmvz61.png?width=696&format=png&auto=webp&s=2b650e8e98e5b6f276e786c8eb09be73f329fd34)

My conclusion on April 5 after pondering why we had been in a "sideways" trading pattern for two weeks at that time.

For those that have not followed my posts in the past, the OCC is the Options Clearing Corporation which functions similarly to the DTCC except its for options. My thought is that OCC-004 is a critical piece of the puzzle to prepare for the first major margin calls that will initiate the squeeze as it opens up the asset auction qualifications and procedures once an OCC member defaults as a result.

As a reminder, here are the membership lists for DTCC and OCC:

-   DTC: <https://www.dtcc.com/-/media/Files/Downloads/client-center/DTC/alpha.pdf>

-   OCC: <https://www.theocc.com/Company-Information/Member-Directory>

Just a cross section:

| *Member* | *DTC* | *OCC* |
| --- | --- | --- |
| Apex Clearing | ✔ | ✔ |
| Barclays | ✔ | ✔ |
| Bank of America | ✔ | ✔ |
| Charles Schwab | ✔ | ✔ |
| Citadel Clearing | ✔ | ✔ |
| Citadel Securities | ✔ | ✔ |
| Credit Suisse Securities | ✔ | ✔ |
| Deutsche Bank | ✔ | ✔ |
| Goldman Sachs | ✔ | ✔ |
| Interactive Brokers | ✔ | ✔ |
| JP Morgan | ✔ | ✔ |
| Merrill Lynch | ✔ | ✔ |
| Robinhood Securities | ✔ | ✔ |
| TD Ameritrade | ✔ | ✔ |
| UBS Securities | ✔ | ✔ |
| Vanguard | ✔ | ✔ |

The reason why OCC-004 this is important is market stability. Having major market participants fail without a plan would create excess market turmoil (it is already going to be a shitshow). My sense has been that all vested parties have been working on how to structure this squeeze and contain the fallout. [u/k2fa91](https://www.reddit.com/u/k2fa91/)'s post yesterday [on a document entered into the Federal Register on April 13](https://www.reddit.com/r/Superstonk/comments/ne39fe/need_more_eyes_on_this_154_page_federal_register/) further hammers this home:

> *The Commission is adopting § 190.00(c)(3)(ii) to address the division of customer property and member property in proceedings in which the debtor is a clearing organization*. In such a proceeding, customer property consists of member property, which is distributed to pay member claims based on members' house accounts, an customer property other than member property, which is reserved for payment of claims for the benefit of members' public customers.

In other words, what to do with customer accounts when a clearing organization -- like Citadel or Robinhood -- goes into bankruptcy.

I believe that this is one of the reasons why we have been trading sideways with virtually no volume since March 16th:

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/sab93cu0nvz61.png?width=1634&format=png&auto=webp&s=16e2e1925cdd7785c35d4a60a5c370abfdb12988)](https://preview.redd.it/sab93cu0nvz61.png?width=1634&format=png&auto=webp&s=16e2e1925cdd7785c35d4a60a5c370abfdb12988)

The two distinct bands we've been trading in since March 16th. The 3.5m share offering is plainly visible in hindsight.

It is also likely one of the reasons why many big players like [Berkshire](https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-sells-stocks-reduces-buybacks-q1-earnings-2021-5-1030373389) and BlackRock are moving into cash heavy positions.

When an OCC member -- *like Citadel* -- fails, the member's assets are used as collateral to obtain immediate liquidity to keep the markets and OCC functioning. These assets are then auctioned off to recover the funds used to inject that liquidity. The thinking is that the more bidders at auction, the more likely it is that the assets will be sold closer to market value and prevent a market-wide collapse of asset prices (this is kind of already happening these past two weeks...).

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/43a8pyp8nvz61.png?width=584&format=png&auto=webp&s=a44179d9026335c599e142dae37b8ac10186f038)](https://preview.redd.it/43a8pyp8nvz61.png?width=584&format=png&auto=webp&s=a44179d9026335c599e142dae37b8ac10186f038)

Key lines on page 7

It also minimizes OCC members' exposure to that default if they can recover more cash through the auction process. Remember, OCC members include: Bank of America, Charles Schwab, Citadel, Credit Suisse, Deutsche Bank, Goldman Sachs, Interactive Brokers, JP Morgan, Robinhood, TD Ameritrade, UBS, Vanguard, and many others who don't want to pay for the mistakes of a few of their members.

Additionally, the changes in OCC-004 result in *non-OCC members* having an easier path to bidding at auction (remember: firms like Fidelity, Berkshire, and BlackRock are NOT OCC members) as part of this process to qualify more bidders.

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/yse9eoodnvz61.png?width=604&format=png&auto=webp&s=7f324f98c83d2862a0a6bc2de155b0a1fc242c35)](https://preview.redd.it/yse9eoodnvz61.png?width=604&format=png&auto=webp&s=7f324f98c83d2862a0a6bc2de155b0a1fc242c35)

Pages 4 and 5

My conjecture is that all of DTCC, OCC, and SEC those "postponed" closed-door meetings? have been buying time to prepare for the fallout of the squeeze so what we see with the price manipulation around GME is not solely due to the action of the shorts, but all of the key market players as a whole to contain this fallout from potentially multiple members of DTCC and OCC failing. [The next closed door meeting? It's scheduled for this Thursday, May 20](https://www.sec.gov/news/closedmeetings/2021/ssamtg052021.htm).

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/v1crl6k4nvz61.png?width=998&format=png&auto=webp&s=c4ce557a1fd4d1262f525fea1bce626403a191d0)](https://preview.redd.it/v1crl6k4nvz61.png?width=998&format=png&auto=webp&s=c4ce557a1fd4d1262f525fea1bce626403a191d0)

The next closed door meeting at the SEC is this Thursday, May 20

Furthermore, user [u/aSphericalCow](https://www.reddit.com/u/aSphericalCow/) sent me [something really interesting this morning](https://infomemo.theocc.com/infomemos?number=48718):

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/08ghduu0ovz61.png?width=643&format=png&auto=webp&s=8211ee85254d22fde62d9bdc27be32e0d6dbdf84)](https://preview.redd.it/08ghduu0ovz61.png?width=643&format=png&auto=webp&s=8211ee85254d22fde62d9bdc27be32e0d6dbdf84)

"The temporary increase would result in an increase OF $588,378,155 TO the Clearing Fund"

[![r/Superstonk - This week might be it; the brakes are possibly ready to come off (SR-OCC-2021-004 and MORE)](https://preview.redd.it/cw9isiijrvz61.png?width=876&format=png&auto=webp&s=415caf9fc54e2ce010d00b5898f037541e46556a)](https://preview.redd.it/cw9isiijrvz61.png?width=876&format=png&auto=webp&s=415caf9fc54e2ce010d00b5898f037541e46556a)

An ominous note at the end of that document that the Clearing Fund will increase nearly $600m by tomorrow, 9 AM US Central Time.

[u/aSphericalCow](https://www.reddit.com/u/aSphericalCow/)'s finding is a big piece of this puzzle that I was missing last week because I think this shows a sense of urgency on behalf of OCC to get this additional $588m into their Clearing Fund. *If members do not post their share, OCC will take it by force*. The memo also gives us a hint at the outcome of the stress test and I think we can conclude that it wasn't pretty if they are seeking over half a billion dollars.

That's a sudden increase of more than half a billion dollars *on top of* the existing Clearing Fund and mitigates the delay of SR-OCC-2021-003 which aimed to increase the size of the Clearing Fund contributions and was objected to and delayed by Susquehanna International Group.

To watch for this regulatory activity, check here:

-   SEC What's New page which is updated daily usually after noon: <https://www.sec.gov/news/whatsnew/wn-today.shtml>

-   SEC OCC Rulemaking page: <https://www.sec.gov/rules/sro/occ.htm>

Are we guaranteed to launch immediately after OCC-004? No. But I think that the likeliness of launch *feels* imminent with the multiple incidents we are observing this week, the market pullback, and the sudden rise in overall volatility. I think it will also depend on how far along they are with their pool of bidders.

FAQ

Q: Should I get out of Charles Schwab, TD Ameritrade, or E*Trade?

While they are all members of OCC, unless they are exposed to GME/AMC shorts, they are likely going to be fine. The problem with Citadel and Virtu is that their sister trading firms are highly exposed in GME and AMC short positions. Robinhood as well.

Citadel is additionally exposed through their market maker status and creating naked shorts as part of market making.

This is also likely one of the reasons why the margin requirements for AMC and GME are now going through the roof on all trading platforms.

Q: Will we get paid?

The whole point of preparing that liquidity is in anticipation of having to continue to fulfill buy/sell transactions. Without that liquidity, the market seizes up. You will get paid; DTCC and OCC will use those loans to pay obligations and then dip into their own funds.

I also submit the following quote from SEC chairman Gary Gensler [from one of his lectures at MIT](https://youtu.be/l0vD_FBWk0g?t=4580) (timestamped YouTube link):

> As we're not sharing the economic well-being broadly in the economy. Middle income America, middle income Europe in particular is not sharing as much. I think that hurts us in two ways. One is that is if we have the downturn, there's not as much uh...all economies these days are led by consumption. There's not as much ability to respond with consumption. And two I think it also tears at our social fabric.

Q: How is $588m going to make a difference?

The $588m is going into the OCC member Clearing Fund and isn't meant to shore up the defaulting member; it's meant to add to the pool of funds to shore up *the non-defaulting members*. You also have to keep in mind that much like a lease agreement prevents a landlord from arbitrarily increasing your rent, OCC cannot arbitrarily raise capital requirements from its members; it can only do so within the constraints of existing agreements and formulas for calculating capital contributions. This is part of the reason why they are amending their member agreement with respect to capital requirements via SR-OCC-2021-003 "Minimum skin in the game".
