SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?
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| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/c-digs](https://www.reddit.com/user/c-digs/) | [Reddit](https://www.reddit.com/r/GME/comments/napco9/srocc2021004_finalizes_this_week_is_this_the/) | 

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[🔬 DD 📊](https://www.reddit.com/r/GME/search?q=flair_name%3A%22%F0%9F%94%AC%20DD%20%F0%9F%93%8A%22&restrict_sr=1)

TL;DR:

1.  Some [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 about to fail

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

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

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

5.  To get more bidders, they relaxed the qualification requirements for existing members and non-members in SR-OCC-2021-004 on March 31, 2021

6.  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 (to the margin calls that will start the squeeze) by many parties such as the OCC and SEC and even Berkshire and BlackRock.

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[SR-OCC-2021-004](https://www.sec.gov/rules/sro/occ/2021/34-91445.pdf) ("OCC-004") was filed on March 31, 2021:

[![r/GME - SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?](https://preview.redd.it/uv0h05ka8py61.png?width=660&format=png&auto=webp&s=15413aa698d043a6aa336887e2c204bebdfff2a3)](https://preview.redd.it/uv0h05ka8py61.png?width=660&format=png&auto=webp&s=15413aa698d043a6aa336887e2c204bebdfff2a3)

SR-OCC-2021-004 filing date

With a date of effectiveness 45 calendar days after the date of filing.

[![r/GME - SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?](https://preview.redd.it/yg4uj8yyzoy61.png?width=672&format=png&auto=webp&s=d7c681f570c9c4a60344f2e5a564c73da0c2db8b)](https://preview.redd.it/yg4uj8yyzoy61.png?width=672&format=png&auto=webp&s=d7c681f570c9c4a60344f2e5a564c73da0c2db8b)

See page 12 of SR-OCC-2021-004

That would put the date at May 15, 2021 or this Saturday. ( [u/StatisticianActive48](https://www.reddit.com/u/StatisticianActive48/) points out that this could alternatively be May 21, 2021 instead since the actual publication to the Federal Register was on April 6, 2021 ).

One of two things will happen in the next ~~two~~ few days:

1.  It will go into effectiveness sometime between now and Friday (May 13, anyone?) May 14 or 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 90 calendar days to potentially either June 29, 2021 or August 13, 2021 depending on whether that's an *additional* 90 days or a cumulative 90 days (thanks [u/rockitman12](https://www.reddit.com/u/rockitman12/))

[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/GME - SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?](https://preview.redd.it/8idzdd3ybpy61.png?width=696&format=png&auto=webp&s=feac234cffaef648a76c6e177a16ae63f166aae2)](https://preview.redd.it/8idzdd3ybpy61.png?width=696&format=png&auto=webp&s=feac234cffaef648a76c6e177a16ae63f166aae2)

My closing thoughts from that earlier post; my only regret is not selling covered calls! I had a very strong sense that NOTHING would be allowed to substantially move the price of GME until OCC-004 was in place.

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.

The reason why this is important is market stability and I believe that this is one of the reasons why we have been trading sideways since March 16th:

[![r/GME - SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?](https://preview.redd.it/upypeusd3py61.png?width=1634&format=png&auto=webp&s=dab31a39e45d157143ac2518369567af478f827a)](https://preview.redd.it/upypeusd3py61.png?width=1634&format=png&auto=webp&s=dab31a39e45d157143ac2518369567af478f827a)

Two notable bands where we've been trading for two months now.

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 days...).

[![r/GME - SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?](https://preview.redd.it/tcx9fgcz1py61.png?width=584&format=png&auto=webp&s=ef6a6c8d165494565cfb6b25d6d328b795a56b47)](https://preview.redd.it/tcx9fgcz1py61.png?width=584&format=png&auto=webp&s=ef6a6c8d165494565cfb6b25d6d328b795a56b47)

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](https://www.theocc.com/Company-Information/Member-Directory) 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/GME - SR-OCC-2021-004 Finalizes This Week; Is This the Convergence?](https://preview.redd.it/qn9xn8sj2py61.png?width=604&format=png&auto=webp&s=1fc96eb1d50dba621f3dcf215353cc491fae0f65)](https://preview.redd.it/qn9xn8sj2py61.png?width=604&format=png&auto=webp&s=1fc96eb1d50dba621f3dcf215353cc491fae0f65)

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 recent actions by Bezos and Gates may also be related as they seek to protect their own equity and prepare to feast on discount assets at auction.

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 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.
