mirror of
https://github.com/verymeticulous/wikAPEdia.git
synced 2025-06-10 11:47:56 -05:00
Renaming Must-Read Directory
This commit is contained in:
verymeticulous
182
01-Must-Read/2021-03-13-Citadel-Has-No-Clothes.md
Normal file
182
01-Must-Read/2021-03-13-Citadel-Has-No-Clothes.md
Normal file
@ -0,0 +1,182 @@
|
||||
Citadel Has No Clothes
|
||||
======================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/) | [Reddit](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/) |
|
||||
|
||||
---
|
||||
|
||||
[DD](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%22&restrict_sr=1)
|
||||
|
||||
EDIT: This is not financial advice. Everything disclosed in the post was done by myself, with public information. I came to my own conclusions, as should you.
|
||||
|
||||
TL;DR - Citadel Securities has been fined 58 times for violating FINRA, REGSHO & SEC regulations. Several instances are documented as 'willful' naked shorting. In Dec 2020 they reported an increase in their short position of 127.57% YOY, and I'm calling bullsh*t on their shenanigans.
|
||||
|
||||
I've been digging into the financial statements of Citadel Securities between 2018 and 2020. Primarily because Citadel Securities *actually* has a set of published financial statements as opposed to the 13Fs filed by Citadel Advisors.
|
||||
|
||||
First... Citadel is a conglomerate.. they have a hand in literally every pocket of the financial world. Citadel Advisors LLC is managing $384,926,232,238 in market securities as of December 2020...
|
||||
|
||||
Yes, seriously- $384,926,232,238
|
||||
|
||||
$295,347,948,000 of that is split into options (calls & puts), while $78,979,887,238 *(**20.52%**)* is allocated to actual, *physical*, shares (or so they say). The rest is convertible debt securities.
|
||||
|
||||
The value of those options can change dramatically in a short amount of time, so Citadel invests in several "trading practices" which allow them to stay ahead of the average 'Fidelity Active Trader Pro'. Robinhood actually sells this data (option price, expiration date, ticker symbol, everything) to Citadel from it's users. Those commission fees you're not paying for? yeah.... think again.. Check out [Robinhoods 606 Form](https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%20Rule%20606a%20and%20607%20Disclosure%20Report%20Q4%202020.pdf) to see how much Citadel paid them in Q4 2020.. F*CK Robhinhood.
|
||||
|
||||
Anyway, another example is Citadel's high-frequency trading. They actually profit *between* the national ask-bid prices and scrape pennies off millions of transactions... I'm going to show you several instances where Citadel received a 'slap on the wrist' from FINRA for doing this, but not just yet.
|
||||
|
||||
Now.... the *"totally, 100% legit, nothing-to-see-here,* *independent**"* branch of Citadel Advisors is Citadel Securities- the Market Maker Making Manipulated Markets. The whole purpose of the DTCC is to serve as an third party between brokers and customers (check out [this video](https://www.youtube.com/watch?v=qtkaMx12otQ) for more on DTCC corruption). I'll bring up the DTCC again, soon.
|
||||
|
||||
Anyway, Citadel Advisors uses their own subsidiary (Citadel Securities) to support their very "unique" style of trading. For some reason, the SEC and FINRA have allowed this, but not without citing them for 58 'REGULATORY EVENTS'.
|
||||
|
||||
So that got me thinking.... "WTF is Citadel actually putting out there for the public to see?" Truthfully, not much... a 12-page annual report called a 'statement of financial condition'.
|
||||
|
||||
Statement of Financial Condition in 2018.
|
||||
|
||||
[](https://preview.redd.it/hk66r3lxdqm61.png?width=830&format=png&auto=webp&s=90edee204e70c476d0b771c19d9b11d1001cd99a)
|
||||
|
||||
The highlighted section above represents *securities sold, but not yet purchased, at fair value* for $22,357,000,000. This is a liability because Citadel is responsible for paying back the securities they borrowed and sold. If you're thinking *"that sounds a lot like a short",* you're correct. Citadel Securities shorted $22 big ones (that's billion) in 2018.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Same story for 2019- but bigger: $25,270,000,000
|
||||
|
||||
[](https://preview.redd.it/0ec7aofldqm61.png?width=740&format=png&auto=webp&s=79b5754210abccdc6c30fc07f0ff5de9185047fd)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
2020 starts to get REALLY interesting...
|
||||
|
||||
Throughout the COVID pandemic, we all heard the stories of brick-and-mortars going bankrupt. It was becoming *VERY* profitable to bet against the continuity of these companies, so big f*cks like Citadel decided to up their portfolio... by 127.57%.
|
||||
|
||||
[](https://preview.redd.it/83uepbgudqm61.png?width=829&format=png&auto=webp&s=7c8b1f1475be0cf61d55f87e29fd282c45833b3c)
|
||||
|
||||
That's right. Citadel Securities upped their short position to $57,506,000,000 in 2020.
|
||||
|
||||
We've all heard Jimmy Cramer's bedtime stories: *"It's important to create a narrative in your favor so that your short position helps drive those businesses into bankruptcy."* Personally, I'm convinced that most of the media hype throughout COVID was an example of this, but I digress.
|
||||
|
||||
EDIT: Credit to u/[JohnnyGrey](https://www.reddit.com/user/JohnnyGrey) for the deeper-dive, here..
|
||||
|
||||
[](https://preview.redd.it/nwght79ayvm61.png?width=870&format=png&auto=webp&s=3bad63929dbaf3449cde0784fce8f98657cd9a32)
|
||||
|
||||
Out of the $32,236,000,000 increase in shorts during 2020, $22,740,000,000 (70.5%) were increases in financial derivatives (options)...
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Anyway, Citadel shorted another $32,236,000,000 in 2020 and rolled into 2021 with some PHAT $TACK$. Now it's time for a quick accounting lesson; this is where you're going to sh*ted the bed.
|
||||
|
||||
You see the highlighted section below? Citadel (and other companies reporting highly liquid securities) uses 'Fair Value' accounting to measure the amount that goes on their balance sheet (including liabilities like short positions). The cash that Citadel received (asset) was accounted for when the security was sold, but the liability (short) needs to be recorded at the CURRENT MARKET PRICE for those securities while they remain on the balance sheet..
|
||||
|
||||
[](https://preview.redd.it/sxznlzxw3tm61.png?width=726&format=png&auto=webp&s=3943060b3844675b5cc8b165a5371a37bb0f6809)
|
||||
|
||||
At the end of 2020, the 'Fair Value' of their short positions were $57 billion.
|
||||
|
||||
At the end of 2021, however, Citadel will need to adjust the value of those liabilities to their CURRENT market value... Since we don't know the domestic allocation of their short portfolio, you can only imagine the sh*tsunami that's coming for them..
|
||||
|
||||
Take $GME for example....
|
||||
|
||||
We [KNOW](https://wallstreetonparade.com/2021/02/citadel-didnt-just-bail-out-a-gamestop-short-seller-citadel-also-had-a-big-short-position-in-gamestop/) that Citadel "had" a short position in $GME along with Melvin Capital... Can you imagine the damage that [r/wallstreetbets](https://www.reddit.com/r/wallstreetbets/) has done to the other stonks in their portfolio? If Melvin lost 53% in January from this, there's no telling what the current 'Fair Value' of those shorts are..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
I trust a wet fart more than Citadel, Melvin, and Point 72. [Here's why](https://files.brokercheck.finra.org/firm/firm_116797.pdf).
|
||||
|
||||
This is a FINRA report published in early 2021. It cites 58 regulatory violations and 1 arbitration. After explaining how Ken Griffin basically controls the world through the tentacles of the Citadel octopus, it lists detailed cases and fines that were usually *'neither admitted or denied, but promptly paid'* by Citadel Securities.
|
||||
|
||||
Let me shed some light on a *FEW*:
|
||||
|
||||
1. INACCURATE REPORTING OF SHORT SALE INDICATOR. FIRM ALSO FAILED TO HAVE A SUPERVISORY SYSTEM IN PLACE TO COMPLY WITH FINRA RULES REQUIRING USE OF SHORT SALE INDICATORS. DATE INITIATED 11/13/2020 - $180,000 FINE
|
||||
|
||||
2. TRADING AHEAD OF ACTIVE CUSTOMER ORDERS... IMPLEMENTED CONTROLS THAT REMOVED HUNDREDS OF THOUSANDS OF MOSTLY-LARGER CUSTOMER ORDERS FROM TRADING SYSTEM LOGICS... INTENTIONALLY CREATING DELAYS BETWEEN MARKET MAKERS' TRANSACTIONS WHILE THE UNRESPONSIVE PARTY UPDATED PRICE QUOTES.... NO SUPERVISORY SYSTEM IN PLACE TO PREVENT THIS. DATE INITIATED 7/16/2020 - $700,000 FINE
|
||||
|
||||
3. FAILED TO CLOSE OUT A FAILURE TO DELIVER POSITION; EFFECTED SHORT SALES. DATE INITIATED 2/14/2020 - $10,000 FINE
|
||||
|
||||
4. BETWEEN JUNE 12, 2013 - OCTOBER 17 2017 (YEAH, OVER 4 YEARS) THE FIRM PRINCIPALLY EXECUTED BETWEEN 248 AND 7,698 BUY ORDERS DURING A CIRCUIT BREAKER EVENT; FAILED TO ESTABLISH AND MAINTAIN SUPERVISORY PROCEDURES TO ENSURE COMPLIANCE. INITIATED 1/22/2020 - $15,000 FINE
|
||||
|
||||
5. ON OR ABOUT 11/16/2017, CITADEL SECURITIES TENDERED 34,299 SHARES IN EXCESS OF IT'S NET LONG POSITION (naked short); DATE INITIATED 8/21/2019 - $30,000 FINE
|
||||
|
||||
6. CEASE AND DESIST ORDER ON 12/10/2018: FAILURE TO SUBMIT COMPLETE AND ACCURATE DATA TO COMMISSION BLUESHEET ("EBS") REQUESTS. (BASICALLY FAILED TO PROVIDE PROOF OF TRANSACTIONS TO THE SEC). BETWEEN NOV 2012 AND AUG 2016, CITADEL SECURITIES PROVIDED 2,774 EBS STATEMENTS, ALL OF WHICH CONTAINED DEFICIENT INFORMATION RESULTING IN INCORRECT TRADE EXECUTION TIME DATA ON 80 MILLION TRADES. DATE INITIATED 12/10/2018 - $3,500,000 FINE
|
||||
|
||||
7. TENDERED SHARES FOR THE PARTIAL TENDER OFFER IN EXCESS OF ITS NET LONG POSITION (more naked shorting); FAILED TO ESTABLISH SUPERVISORY PROCEDURES TO ASSURE COMPLIANCE WITH THE RULES. INITIATED 3/22/2018 - $35,000 FINE
|
||||
|
||||
8. IN MORE THAN 200,000 INSTANCES BETWEEN JULY 2014 AND SEPTEMBER 2016, FIRM FAILED TO EXECUTE AND MAINTAIN CONTINUOUS, TWO-SIDED TRADING INTEREST WITHIN THE DESIGNATED PERCENTAGE (scraping pennies between bid-ask) ABOVE AND BELOW THE NATIONAL BEST BID OFFER.... INITIATED 10/13/2017 - $80,000 FINE
|
||||
|
||||
9. ANOTHER CEASE AND DESIST FOR MAJOR MARKET MANIPULATION BETWEEN 2007 - 2010. INITIATED 1/13/2017 - $22,668,268 FINE
|
||||
|
||||
___________________________________________________________________________________________________________
|
||||
|
||||
Quite frankly, I'm tired of typing them. There are STILL 49 violations, and most are BIG fines.
|
||||
|
||||
Naked shorts, failure to provide documentation to SEC, short selling on trade halts..... is this starting to sound familiar? When [r/wallstreetbets](https://www.reddit.com/r/wallstreetbets/) started exposing the truth, they lost the advantage. Now that the DD is coming out about this sh*t, they're getting desperate.
|
||||
|
||||
Let's look at some recent events that occurred with trading halts in $GME. On March 10 2021 (Mar10 Day) we watched the stock rise until 12:30pm when an *unbelievable* drop triggered at least 4 circuit breaker events (probably more but I walked away for a bit).
|
||||
|
||||
[](https://preview.redd.it/00b5hrc96tm61.png?width=359&format=png&auto=webp&s=ac4247e1bf857c4e94d0479b5fe32a8b49c9799a)
|
||||
|
||||
Price drop of 40% in about 25 minutes
|
||||
|
||||
Now... I do not believe retail traders did this.. most importantly, the market was totally frozen for the majority of that 25 minutes. Even if people were putting in orders to sell, there were just as many people trying to buy the dip.
|
||||
|
||||
The volume of shares flooding the market- at the same exact time- was premeditated. I can say that with confidence because several media outlets (mainly MarketWatch) published articles WHILE this was happening, after nearly a week of radio-silence. MarketWatch even predicted the decline of 40% before the entire drop had occurred. When Redditors reached out to ask WTF was going on, the authors set their Twitter accounts to private... slimy. as. f*ck.
|
||||
|
||||
"But wait.... didn't example # 4 say that Citadel was fined $15,000 for selling shorts during circuit breaker events!?"
|
||||
|
||||
Yup! and here are TWO more instances:
|
||||
|
||||
1. CITADEL SECURITIES LLC EFFECTED TRANSACTIONS DURING NUMEROUS TRADING HALTS..
|
||||
|
||||
[](https://preview.redd.it/vt2kmm0t8tm61.png?width=1029&format=png&auto=webp&s=bf02f505ba883bb4b5293b882366407072a54ea8)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
2: And another...
|
||||
|
||||
[](https://preview.redd.it/egdc1j9z9tm61.png?width=1008&format=png&auto=webp&s=7c174bfc13800becec44bf44fc6aacf0babe4a6e)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Think Citadel is alone in all of this? Think again... It's actually been termed- "flash crash".
|
||||
|
||||
$12,500,000 fine for [Merrill Lynch](https://www.sec.gov/news/pressrelease/2016-192.html) in 2016..
|
||||
|
||||
$7,000,000 for [Goldman](https://www.sec.gov/news/pressrelease/2015-133.html)...
|
||||
|
||||
$12,000,000 for [Knight Capital](https://www.sec.gov/news/press-release/2013-222)...
|
||||
|
||||
$5,000,000 for [Latour Trading](https://www.sec.gov/news/pressrelease/2015-221.html)...
|
||||
|
||||
$2,440,000 for [Wedbush](https://www.sec.gov/news/press-release/2014-263)...
|
||||
|
||||
PEAK-A-BOO, I SEE YOU! $4,000,000 for [MORGAN STANLEY](https://www.sec.gov/news/press-release/2014-274)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
I can't tell who was responsible for the flash crash in $GME last Wednesday; I don't think anyone can. However, to suggest that it wasn't market manipulation is laughable. The media and hedge funds are tighter than your wife and her boyfriend, so spending time on this issue is a waste.
|
||||
|
||||
But what we can do is look at the steps they're taking to prepare for this sh*tsunami. So let's summarize everything up to this point, shall we?
|
||||
|
||||
1. Citadel has been cited for 58 separate incidents, several of which were for naked shorting and circuit breaker flash-crashes
|
||||
|
||||
2. The short shares reported on Citadel's balance sheet as of December 2020 were up 127% YOY
|
||||
|
||||
3. The price of several heavily-shorted stocks has skyrocketed since Jan 2021
|
||||
|
||||
4. Citadel uses 'Fair Value' accounting and needs to reconcile the value of their short positions to this new market price. The higher the price goes, the more expensive it becomes for them to HODL
|
||||
|
||||
We know that Citadel is on the hook for $57,000,000,000 in shorts, but at least they're HODLing onto some physical shares as assets, right?.... RIGHT??
|
||||
|
||||
This should soothe that smooth ape brain of yours...
|
||||
|
||||
[](https://preview.redd.it/mf7j96xmstm61.png?width=726&format=png&auto=webp&s=30a838dadb130c9a815a4866ef403d9c6aafafb7)
|
||||
|
||||
"UHHHHHH ACTUALLY, THE DTCC & FRIENDS OWN OUR PHYSICAL SHARES".....
|
||||
|
||||
Well that's just terrific, because the DTCC just implemented [SRCC 801](https://www.dtcc.com/Globals/PDFs/2021/March/05/SR-NSCC-2021-801) which means they DON'T have your f*cking shares... I've seriously never seen so much finger pointing and ass-covering in my LIFE....
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
I know this post was long, but the story can't go untold.
|
||||
|
||||
The pressure being placed on hedge funds to deliver has never been higher and the sh*t storm of corruption is coming to a head. Unfortunately, the dirty tricks & FUD will continue until this boil ruptures. There are several catalysts coming up, but no one truly knows when the MOAB will blow.
|
||||
|
||||
However, desperate times call for desperate measures and we have never seen so much happening at once. For all of these reasons and more: Diamond. F*cking. Hands.
|
||||
500
01-Must-Read/2021-03-30-The-EVERYTHING-Short.md
Normal file
500
01-Must-Read/2021-03-30-The-EVERYTHING-Short.md
Normal file
@ -0,0 +1,500 @@
|
||||
The EVERYTHING Short
|
||||
====================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/)| [Reddit](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/) |
|
||||
|
||||
---
|
||||
|
||||
[DD 📊](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%20%F0%9F%93%8A%22&restrict_sr=1)
|
||||
|
||||
4/4/2021 EDIT: Just got done watching [this review](https://www.youtube.com/watch?v=6pnK7W4b0Ro) (2:09:37) from George Gammon and Meet Kevin. As pointed out by George, the link I posted below talking about the submitted repo amount was ONLY showing the NY Fed's total for that day. According to his own research, he suspects that $4 TRILLION is pumped through this market, EACH DAY.
|
||||
|
||||
4/1/2021 EDIT: GREAT NEWS APES! [u/dontfightthevol](https://www.reddit.com/u/dontfightthevol/) has been reviewing my post and helping me address weaknesses! I take this as REALLY good news as we move another step closer to exposing the TRUTH. Furthermore, I am making updates that take speculative connections out of this post.
|
||||
|
||||
The first one being the WSJ article covering BlackRock, where the fed has tapped them to purchase bonds for the government. These bonds consist of mortgage backed securities and corporate bonds- NOT TREASURIES. While this does not destroy the concept within the post, it DOES remove a link between the speculative relationship of BlackRock and Citadel. Citadel is still shorting bonds, other hedge funds are shorting bonds, BlackRock just isn't buying treasuries from the government. There are plenty of other financial institutions lending out their treasury bonds.
|
||||
|
||||
We are still discussing the post and I will make updates as they are available.
|
||||
|
||||
STAY TUNED!
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
*TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short & trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE global financial economy is modeled after a fractional reserve system that is beginning to experience THE MOTHER OF ALL MARGIN CALLS.*
|
||||
|
||||
*THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has officially come full circle.*
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
My fellow apes,
|
||||
|
||||
After writing [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/?utm_source=share&utm_medium=web2x&context=3), I couldn't shake one MAJOR issue: *why do they have a balance sheet full of financial derivatives instead of physical shares? Even Melvin keeps their derivative exposure to roughly 20%...(*[*whalewisdom.com*](https://whalewisdom.com/)*, Melvin Capital 13F - 2020)*
|
||||
|
||||
The concept of a hedging instrument is to protect against price fluctuations. Hopefully you get it right and make a good prediction, but to have a portfolio with literally 80% derivatives.... absolute INSANITY.. it's is the complete OPPOSITE of what should happen.. so WHAT is going on?
|
||||
|
||||
Let's break this into 4 parts:
|
||||
|
||||
1. *Repurchase & Reverse Repurchase agreements*
|
||||
|
||||
2. *Treasury Bonds*
|
||||
|
||||
3. *Palafox Trading*
|
||||
|
||||
4. *Short-seller Endgame*
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Ok, 4 easy steps... as simple as possible.
|
||||
|
||||
*Step 1: Repurchase & Reverse Repurchase agreements.*
|
||||
|
||||
*WTF are they?*
|
||||
|
||||
A Repurchase Agreement is much like a loan. If you have a big juicy banana worth $1,000,000 and need some quick cash, a repo agreement might be right for you. Just take that banana to a pawn shop and pawn it for a few days, borrow some cash, and buy your banana back later (plus a few tendies in interest). This creates a liability for you because you have to buy it back, unless you want to default and lose your big, beautiful banana. Regardless, you either buy it back or lose it. A reverse repo is how the *pawn shop* would account for this transaction.
|
||||
|
||||
*Why do they matter?*
|
||||
|
||||
Repos and reverse repos are the *LIFEBLOOD* of global financial liquidity. They allow for SUPER FAST conversions from securities to cash. The repo agreement I just described is happening daily with hedge funds and commercial banks. *EDIT: Inserting the quote from George Gammon: according to his calculations, the estimated total amount of repos are $4 TRILLION, DAILY.* The NY Fed, alone, submitted [$40.354 BILLION](https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000) for repo agreements on (3/29). This amount represents the ONE DAY REPO due on 3/30. So yeah, SUPER short term loans- usually a few days. It's probably not a surprise that back in 2008 the go-to choice of collateral for repo agreements was mortgage backed securities..
|
||||
|
||||
[Lehman Brothers](https://www.cpajournal.com/2016/08/01/lehman-brothers-mf-globals-misuse-repurchase-agreements-reformed-accounting-standards/) went bankrupt because they fraudulently classified repo agreements as sales. You can do your own research on this, but I'll give you the quick n' dirty:
|
||||
|
||||
Lehman would go to a bank and ask for cash. The bank would ask for collateral in return and Lehman would offer mortgage backed securities (MBS). *It's great having so many mortgages on your balance sheet, but WTF good does it do if you have to wait 30 YEARS for the cash*.... So Lehman gave their collateral to the bank and recorded these loans as *sales* instead of payables, with no intention of buying them back. This *EXTREMELY* overstated their revenue. When the market started realizing how sh*tty these "AAA" securities actually were (thanks to Michael BRRRRRRRRy & friends), they were no longer accepted as collateral for repo loans. We all know what happened next.
|
||||
|
||||
The interest rate in 2008 on repos started climbing as the cost of borrowing money went through the roof. This happens because the collateral is no longer attractive compared to cash. My favorite bedtime story is how the Fed stepped in and bought all of the mean, toxic assets to save the US economy.. They literally paid Fannie & Freddie over [$190 billion in bailouts..](https://projects.propublica.org/bailout/initiatives/1-housing-and-economic-recovery-act-of-2008)
|
||||
|
||||
[](https://preview.redd.it/ry0gqkm7g9q61.png?width=1596&format=png&auto=webp&s=48892cf57a2765e0bdd62575a8ccc8c9e3f65a1a)
|
||||
|
||||
A few years later, [MF Global](https://fas.org/sgp/crs/misc/R42091.pdf) would suffer the same fate when their European repo exposure triggered a massive margin call. Their foreign exposure to repo agreements was nearly 4.5x their total equity.. Both Lehman and MF Global found themselves in a major liquidity conundrum and were forced into bankruptcy. Not to mention the other losses that were incurred by other financial institutions... check this list for [bailout totals](https://projects.propublica.org/bailout/programs).
|
||||
|
||||
But.... did you know this happened AGAIN in 2019?
|
||||
|
||||
[](https://preview.redd.it/9htr7vn8g9q61.jpg?width=912&format=pjpg&auto=webp&s=25995c33d0056f6108471baa373d1a371b5d0cd5)
|
||||
|
||||
Instead of the gradual increase in rates, the damn thing spiked to 10% OVERNIGHT. This little blip almost ruined the whole show. It's a HUGE red flag because it shows how the system MUST remain in tight control: one slip and it's game over.
|
||||
|
||||
The reason for the spike was once again due to a lack of liquidity. The [federal reserve](https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-in-money-markets-in-september-2019-20200227.htm#:~:text=In%20the%20repo%20market%2C%20there,supply%20mismatch%20in%20the%20market) stated there were two main catalysts (click the link): both of which removed the necessary funds that would have fueled the repo market the following day. Basically, their checking account was empty and their utility bill bounced.
|
||||
|
||||
It became apparent that ANOTHER infusion of cash was necessary to prevent the whole damn system from collapsing. *The reason being: institutions did NOT have enough excess liquidity on hand*. Financial institutions needed a fast replacement for the MBS, and J-POW had just the right thing.. $FED go BRRRRRRRRRRRRRRRRR
|
||||
|
||||
[](https://preview.redd.it/7mmmhqf9g9q61.png?width=1200&format=png&auto=webp&s=790466a2979a194facb57919d762cacca815a384)
|
||||
|
||||
"but don't say it's QE.."
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Step 2: Treasury Bonds*
|
||||
|
||||
Ever heard of the bond market? Well it's the redheaded step-brother of the STONK market.
|
||||
|
||||
The US government sells you a treasury bond for $1,000 and promises to pay you interest depending on how long you hold it. Might be 1%, might be 3%; might be 3 months, might be 10 years. Regardless, the point is that purchasing the US Treasury bond, in conjunction with mortgage backed securities, allowed the fed to keep pumping unlimited liquid tendies into the repo market. Surely, liquidity won't be an issue anymore, right?
|
||||
|
||||
Now... take the repo scenario from the Lehman Brothers story, but instead of using ONLY mortgage backed securities, add in the US Treasury bond: primarily the 10-year. Note that MBS are still prevalent at 19.1% of all repo transactions, but the US Treasury bond now represents a whopping 67%.
|
||||
|
||||
[](https://preview.redd.it/t5jkjj5bg9q61.png?width=808&format=png&auto=webp&s=8add42402770ffcb76f2cfcb56e4f28196a42e96)
|
||||
|
||||
For now, just know that the US Treasury has replaced the MBS as the dominant source of liquidity in the repo market.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Step 3: Palafox Trading*
|
||||
|
||||
Ever heard of Palafox Trading? Me either. It's pretty much meant to be that way.
|
||||
|
||||
Palafox Trading is a market maker for repurchase agreements. Initially, they appear to be an innocent trading company, but their financial statements revealed a little secret:
|
||||
|
||||
[](https://preview.redd.it/8w7uhymcg9q61.png?width=723&format=png&auto=webp&s=d2350bca6b44c8d470904525dc7dfca914cc7f7a)
|
||||
|
||||
Are you KIDDING ME?... I should have known...
|
||||
|
||||
OF COURSE Citadel has their own private repo market..
|
||||
|
||||
Who else is in this cesspool?!
|
||||
|
||||
[](https://preview.redd.it/ah5775qdg9q61.png?width=360&format=png&auto=webp&s=ad4ab23bdee3739d06f4443e97da4c6172199590)
|
||||
|
||||
[](https://preview.redd.it/hhkco0ueg9q61.png?width=900&format=png&auto=webp&s=7bdb80678d270dd17990312d5024542e61a6db4a)
|
||||
|
||||
I made this using the financial statement listed above, showing all beneficiaries of the GFIL
|
||||
|
||||
Everything rolls into the [Citadel Global Fixed Income Master Fund](https://aum13f.com/firm/citadel-advisors-llc?view_all=fund)... This controls $123,218,147,399 (THAT'S BILLION) in assets under management... I know offshore accounts are technically legal for hedge funds.... but when you look at the itemized holdings of these funds on Citadel's most recent [form ADV](https://reports.adviserinfo.sec.gov/reports/ADV/148826/PDF/148826.pdf), it gives me chills..
|
||||
|
||||
[Form ADV](https://reports.adviserinfo.sec.gov/reports/ADV/148826/PDF/148826.pdf) page 105-106....
|
||||
|
||||
[](https://preview.redd.it/ho4j0oghg9q61.png?width=664&format=png&auto=webp&s=147c10a38cfc2857b4b2691fe70f088a88e83091)
|
||||
|
||||
Ok... ok.... let me get this straight....
|
||||
|
||||
1. The repo market provides IMMEDIATE liquidity to hedge funds and other financial institutions
|
||||
|
||||
2. After the MBS collapse in 2008, the US Treasury replaced it as the liquid asset of choice
|
||||
|
||||
3. Citadel owns 100% of Palafox Trading which is a market maker for repo agreements
|
||||
|
||||
4. This market maker provides liquidity to the Global Fixed Income Master Fund LTD (GFIL) through Citadel Advisors
|
||||
|
||||
5. 80% of its $123,218,147,399 in assets under management belong to entities in the Cayman Islands
|
||||
|
||||
Ok.....I tore the [bermuda, paradise, and panama papers](https://offshoreleaks.icij.org/search?utf8=%E2%9C%93&q=citadel&e=&commit=Search) apart and found that all of these funds boil down to just a few managers, but can't pin anything on them for money laundering... However, if there EVER were a case for it, I'd be extremely suspicious of this one...
|
||||
|
||||
The level of shade on all this is INCREDIBLE... There should be NO ROOM for a investment pool as big as Citadel to hide this sh*t.... absolutely ridiculous..
|
||||
|
||||
The fact that there is so much foreign influence over our bond & repo market, which controls the liquidity of our country, is VERY concerning..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Step 4: Short-seller Endgame*
|
||||
|
||||
Alright, I know this is a lot to take in..
|
||||
|
||||
I've been writing this post for a week, so reading it all at one time is probably going to make your head explode.. But now we can finally start putting all of this together.
|
||||
|
||||
Ok, remember how I explained that the repo rate started to rise in '08 because the collateral was no longer attractive compared to cash? That means there wasn't enough liquidity in the system. Well this time the OPPOSITE effect is happening. Ever since March 2020, the short-term lending rate (repo rate) has nearly dropped to *0.0%....*
|
||||
|
||||
[](https://preview.redd.it/ui9welgkg9q61.png?width=330&format=png&auto=webp&s=fbd5b9501f7bbc386fa62e152ca2b090173692a2)
|
||||
|
||||
https://www.newyorkfed.org/markets/treasury-repo-reference-rates
|
||||
|
||||
So the fed is printing free money, the repo market is lending free money, and there's basically NO difference between the collateral that's being lent and the cash that's being received.. With all this free money going around, it's no wonder why the price of the 10 year treasury has been declining.
|
||||
|
||||
In fact, hedge funds are SO confident that the 10 year treasury will continue to decline, that they've SHORTED THE 10-YEAR BOND MARKET. I'm not talking about speculative shorting, I mean shorting it to oblivion like they've shorted stocks.
|
||||
|
||||
Don't believe me?
|
||||
|
||||
Hedge funds like Citadel Advisors must first locate the treasury bond in order to swap them for cash in the repo market. It's extremely difficult to do this with the fed because they're tied up in government BS, so they locate a lender in the market. These consist of other commercial banks and hedge funds.
|
||||
|
||||
NOTE: I MADE A COMMENT ABOUT BLACKROCK SUPPLYING TREASURY BONDS AND THIS IS NOT TRUE. UPON FURTHER REVIEW ( CREDIT [u/dontfightthevol](https://www.reddit.com/u/dontfightthevol/) ) THESE BONDS CONSIST OF MBS AND CORPORATE BONDS. WHILE THE US TREASURY DEPARTMENT IS INVOLVED, THEY ARE NOT SUPPLYING TREASURY BONDS.
|
||||
|
||||
So financial institutions keep treasuries on reserve for hedgies like Citadel to short. Citadel comes along and asks for the bond, they throw it into Palafox Trading and collect their cash. So what happens when they need to pay for their repo agreement? Surely to GOD there are enough bonds floating around, right? Not unless hedge funds like Citadel have shorted more bonds than there are available.
|
||||
|
||||
Here's the evidence.
|
||||
|
||||
There have been 3 instances over the past year where the repo rate dipped below the "failure" rate of -3.0%. On March 4th 2021, the repo rate hit [-4.25%](https://www.reuters.com/article/usa-bonds-repo/explainer-u-s-treasury-sell-off-spills-over-to-repo-market-idUSL2N2L32FR) which means that investors were willing to PAY someone 4.25% interest to lend THEIR OWN MONEY in exchange for a 10 year treasury bond.
|
||||
|
||||
This is a major signal of a squeeze in the treasury market. It's MAJOR desperation to find bonds. With the federal reserve purchasing them monthly from the open market, it leaves room for a shortage when the repo call hits. If commercial banks and hedge funds haven't purchased more treasuries since first lending them out, short sellers simply cannot cover unless they go into the market and PAY the bond holder for their bond. It's literally the same story as all of the heavily shorted stocks.
|
||||
|
||||
Still not convinced?
|
||||
|
||||
At the end of 2020, Palafox Trading listed $31,257,102,000 (BILLION) in GROSS repo agreements. $30,576,918,000 (BILLION) were directly related to repurchasing treasury bonds....
|
||||
|
||||
[](https://preview.redd.it/m3lg8nzog9q61.png?width=726&format=png&auto=webp&s=747e1f671323227be9c0220aec18f8ec245d3cf1)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
But what about their Reverse Repurchase agreements? Don't they have assets to BUY treasury bonds?SURE.. Take a look..
|
||||
|
||||
[](https://preview.redd.it/wt8fbrlrg9q61.png?width=371&format=png&auto=webp&s=72f939a98e0dc34a08b8a58e89ef68045a8e78a7)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
SeE tHeRe? I tOlD yOu ThEy HaD iT cOvErEd..
|
||||
|
||||
Yeaaaah... now read the fine print.
|
||||
|
||||
[](https://preview.redd.it/5enfigytg9q61.png?width=354&format=png&auto=webp&s=ab613f3bf46064c674bce68766a90e2b2613a2ec)
|
||||
|
||||
I know the totals are slightly different than the balance above, but they're both from 2020. It's just how they are presented. Check for yourself. (https://sec.report/CIK/0001284170)
|
||||
|
||||
So no, they don't have it covered. Why? Because our POS financial system allows for rehypothecation, that's why. It's a big fancy word for using amounts owed to you as collateral for another transaction. In the event that the party defaults, SO DO YOU.
|
||||
|
||||
This means that the securities which Palafox is waiting to receive, have ALREADY been pledged to pay off the bonds they currently OWE to someone else.
|
||||
|
||||
Does this sound familiar? Promising to repay something with something you don't already have? Basically you need to wait on Ted, to repay Steve, to repay Jan, to repay Mark, to repay you, so you can repay Fred, so Fred can.... Yeah, REAAAAL secure..
|
||||
|
||||
OH, and by the way, the problem is getting WORSE.
|
||||
|
||||
Here's Palafox's financial statements in 2018:
|
||||
|
||||
[](https://preview.redd.it/lrtryfivg9q61.png?width=720&format=png&auto=webp&s=d850854f0fbcf0a5d701374ed5634d6eaf036919)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
And 2019:
|
||||
|
||||
[](https://preview.redd.it/zjxda0swg9q61.png?width=721&format=png&auto=webp&s=4c124bfd8b4f4a9162b2a2b65ade4b690b4dfadd)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
The amount in 2020 is STILL +100% greater than 2019, AFTER netting (which is even more bullsh*t).
|
||||
|
||||
[](https://preview.redd.it/xjss7dzxg9q61.png?width=714&format=png&auto=webp&s=9ff71bf6631f9e665378a0f4a623a95e3aecb264)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
All of this made me wonder what the FICC's balance is for treasury deposits... For those of you that don't know, the FICC is a branch of the DTCC that deals with government securities.
|
||||
|
||||
Just like the updated DTC rule for supplemental liquidity deposits being calculated throughout the day, the FICC also calculates this amount as it relates to treasury securities multiple times throughout the day.
|
||||
|
||||
Would you be surprised that the FICC has $47,000,000,000 (BILLION) just in DEPOSITS for unsettled treasury bonds? $47,000,000,000!?!?!?
|
||||
|
||||
CAN YOU IMAGINE HOW ASTRONOMICAL THE ACTUAL MARGIN MUST BE?!
|
||||
|
||||
[](https://preview.redd.it/zrkpzdb1h9q61.png?width=710&format=png&auto=webp&s=64f6b10aca2566bcf9b5d560967af3715104b839)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
There is TOO much evidence, from TOO many separate events, pointing to the imminent default of something big. That's all this is going to take. When Ted can't repay Steve, it means the panic has already started. Just look at how easy it was for the repo rate to spike overnight in 2019..
|
||||
|
||||
We are already starting to see the consequences of the SLR update with Archegos, Nomura, and Credit Suisse. This is just a taste of what's to come.. and now we know the bond market represents an even BIGGER catalyst in triggering this event.. and it's happening already.
|
||||
|
||||
With that being said, things finally started to make sense... Citadel doesn't NEED shares if their investment strategy to go short on EVERYTHING instead of going long. Why bother owning shares? Financial institutions and other asset managers simply lend them to you when you need to pony up a margin call for stocks and bonds..
|
||||
|
||||
Their HFT systems allow them to manipulate the market in their favor so there's NO way they could fail.... unless.... a bunch of degenerates all decided to ignore taking profits...
|
||||
|
||||
But that would NEVER happen, right?
|
||||
|
||||
...wrong...
|
||||
|
||||
we just like the stonks
|
||||
|
||||
DIAMOND.F*CKING.HANDS
|
||||
|
||||
*This is not financial advice*
|
||||
|
||||
[DD 📊](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%20%F0%9F%93%8A%22&restrict_sr=1)
|
||||
|
||||
4/4/2021 EDIT: Just got done watching [this review](https://www.youtube.com/watch?v=6pnK7W4b0Ro) (2:09:37) from George Gammon and Meet Kevin. As pointed out by George, the link I posted below talking about the submitted repo amount was ONLY showing the NY Fed's total for that day. According to his own research, he suspects that $4 TRILLION is pumped through this market, EACH DAY.
|
||||
|
||||
4/1/2021 EDIT: GREAT NEWS APES! [u/dontfightthevol](https://www.reddit.com/u/dontfightthevol/) has been reviewing my post and helping me address weaknesses! I take this as REALLY good news as we move another step closer to exposing the TRUTH. Furthermore, I am making updates that take speculative connections out of this post.
|
||||
|
||||
The first one being the WSJ article covering BlackRock, where the fed has tapped them to purchase bonds for the government. These bonds consist of mortgage backed securities and corporate bonds- NOT TREASURIES. While this does not destroy the concept within the post, it DOES remove a link between the speculative relationship of BlackRock and Citadel. Citadel is still shorting bonds, other hedge funds are shorting bonds, BlackRock just isn't buying treasuries from the government. There are plenty of other financial institutions lending out their treasury bonds.
|
||||
|
||||
We are still discussing the post and I will make updates as they are available.
|
||||
|
||||
STAY TUNED!
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
*TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short & trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE global financial economy is modeled after a fractional reserve system that is beginning to experience THE MOTHER OF ALL MARGIN CALLS.*
|
||||
|
||||
*THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has officially come full circle.*
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
My fellow apes,
|
||||
|
||||
After writing [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/?utm_source=share&utm_medium=web2x&context=3), I couldn't shake one MAJOR issue: *why do they have a balance sheet full of financial derivatives instead of physical shares? Even Melvin keeps their derivative exposure to roughly 20%...(*[*whalewisdom.com*](https://whalewisdom.com/)*, Melvin Capital 13F - 2020)*
|
||||
|
||||
The concept of a hedging instrument is to protect against price fluctuations. Hopefully you get it right and make a good prediction, but to have a portfolio with literally 80% derivatives.... absolute INSANITY.. it's is the complete OPPOSITE of what should happen.. so WHAT is going on?
|
||||
|
||||
Let's break this into 4 parts:
|
||||
|
||||
1. *Repurchase & Reverse Repurchase agreements*
|
||||
|
||||
2. *Treasury Bonds*
|
||||
|
||||
3. *Palafox Trading*
|
||||
|
||||
4. *Short-seller Endgame*
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Ok, 4 easy steps... as simple as possible.
|
||||
|
||||
*Step 1: Repurchase & Reverse Repurchase agreements.*
|
||||
|
||||
*WTF are they?*
|
||||
|
||||
A Repurchase Agreement is much like a loan. If you have a big juicy banana worth $1,000,000 and need some quick cash, a repo agreement might be right for you. Just take that banana to a pawn shop and pawn it for a few days, borrow some cash, and buy your banana back later (plus a few tendies in interest). This creates a liability for you because you have to buy it back, unless you want to default and lose your big, beautiful banana. Regardless, you either buy it back or lose it. A reverse repo is how the *pawn shop* would account for this transaction.
|
||||
|
||||
*Why do they matter?*
|
||||
|
||||
Repos and reverse repos are the *LIFEBLOOD* of global financial liquidity. They allow for SUPER FAST conversions from securities to cash. The repo agreement I just described is happening daily with hedge funds and commercial banks. *EDIT: Inserting the quote from George Gammon: according to his calculations, the estimated total amount of repos are $4 TRILLION, DAILY.* The NY Fed, alone, submitted [$40.354 BILLION](https://apps.newyorkfed.org/markets/autorates/tomo-results-display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000) for repo agreements on (3/29). This amount represents the ONE DAY REPO due on 3/30. So yeah, SUPER short term loans- usually a few days. It's probably not a surprise that back in 2008 the go-to choice of collateral for repo agreements was mortgage backed securities..
|
||||
|
||||
[Lehman Brothers](https://www.cpajournal.com/2016/08/01/lehman-brothers-mf-globals-misuse-repurchase-agreements-reformed-accounting-standards/) went bankrupt because they fraudulently classified repo agreements as sales. You can do your own research on this, but I'll give you the quick n' dirty:
|
||||
|
||||
Lehman would go to a bank and ask for cash. The bank would ask for collateral in return and Lehman would offer mortgage backed securities (MBS). *It's great having so many mortgages on your balance sheet, but WTF good does it do if you have to wait 30 YEARS for the cash*.... So Lehman gave their collateral to the bank and recorded these loans as *sales* instead of payables, with no intention of buying them back. This *EXTREMELY* overstated their revenue. When the market started realizing how sh*tty these "AAA" securities actually were (thanks to Michael BRRRRRRRRy & friends), they were no longer accepted as collateral for repo loans. We all know what happened next.
|
||||
|
||||
The interest rate in 2008 on repos started climbing as the cost of borrowing money went through the roof. This happens because the collateral is no longer attractive compared to cash. My favorite bedtime story is how the Fed stepped in and bought all of the mean, toxic assets to save the US economy.. They literally paid Fannie & Freddie over [$190 billion in bailouts..](https://projects.propublica.org/bailout/initiatives/1-housing-and-economic-recovery-act-of-2008)
|
||||
|
||||
[](https://preview.redd.it/ry0gqkm7g9q61.png?width=1596&format=png&auto=webp&s=48892cf57a2765e0bdd62575a8ccc8c9e3f65a1a)
|
||||
|
||||
A few years later, [MF Global](https://fas.org/sgp/crs/misc/R42091.pdf) would suffer the same fate when their European repo exposure triggered a massive margin call. Their foreign exposure to repo agreements was nearly 4.5x their total equity.. Both Lehman and MF Global found themselves in a major liquidity conundrum and were forced into bankruptcy. Not to mention the other losses that were incurred by other financial institutions... check this list for [bailout totals](https://projects.propublica.org/bailout/programs).
|
||||
|
||||
But.... did you know this happened AGAIN in 2019?
|
||||
|
||||
[](https://preview.redd.it/9htr7vn8g9q61.jpg?width=912&format=pjpg&auto=webp&s=25995c33d0056f6108471baa373d1a371b5d0cd5)
|
||||
|
||||
Instead of the gradual increase in rates, the damn thing spiked to 10% OVERNIGHT. This little blip almost ruined the whole show. It's a HUGE red flag because it shows how the system MUST remain in tight control: one slip and it's game over.
|
||||
|
||||
The reason for the spike was once again due to a lack of liquidity. The [federal reserve](https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-in-money-markets-in-september-2019-20200227.htm#:~:text=In%20the%20repo%20market%2C%20there,supply%20mismatch%20in%20the%20market) stated there were two main catalysts (click the link): both of which removed the necessary funds that would have fueled the repo market the following day. Basically, their checking account was empty and their utility bill bounced.
|
||||
|
||||
It became apparent that ANOTHER infusion of cash was necessary to prevent the whole damn system from collapsing. *The reason being: institutions did NOT have enough excess liquidity on hand*. Financial institutions needed a fast replacement for the MBS, and J-POW had just the right thing.. $FED go BRRRRRRRRRRRRRRRRR
|
||||
|
||||
[](https://preview.redd.it/7mmmhqf9g9q61.png?width=1200&format=png&auto=webp&s=790466a2979a194facb57919d762cacca815a384)
|
||||
|
||||
"but don't say it's QE.."
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Step 2: Treasury Bonds*
|
||||
|
||||
Ever heard of the bond market? Well it's the redheaded step-brother of the STONK market.
|
||||
|
||||
The US government sells you a treasury bond for $1,000 and promises to pay you interest depending on how long you hold it. Might be 1%, might be 3%; might be 3 months, might be 10 years. Regardless, the point is that purchasing the US Treasury bond, in conjunction with mortgage backed securities, allowed the fed to keep pumping unlimited liquid tendies into the repo market. Surely, liquidity won't be an issue anymore, right?
|
||||
|
||||
Now... take the repo scenario from the Lehman Brothers story, but instead of using ONLY mortgage backed securities, add in the US Treasury bond: primarily the 10-year. Note that MBS are still prevalent at 19.1% of all repo transactions, but the US Treasury bond now represents a whopping 67%.
|
||||
|
||||
[](https://preview.redd.it/t5jkjj5bg9q61.png?width=808&format=png&auto=webp&s=8add42402770ffcb76f2cfcb56e4f28196a42e96)
|
||||
|
||||
For now, just know that the US Treasury has replaced the MBS as the dominant source of liquidity in the repo market.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Step 3: Palafox Trading*
|
||||
|
||||
Ever heard of Palafox Trading? Me either. It's pretty much meant to be that way.
|
||||
|
||||
Palafox Trading is a market maker for repurchase agreements. Initially, they appear to be an innocent trading company, but their financial statements revealed a little secret:
|
||||
|
||||
[](https://preview.redd.it/8w7uhymcg9q61.png?width=723&format=png&auto=webp&s=d2350bca6b44c8d470904525dc7dfca914cc7f7a)
|
||||
|
||||
Are you KIDDING ME?... I should have known...
|
||||
|
||||
OF COURSE Citadel has their own private repo market..
|
||||
|
||||
Who else is in this cesspool?!
|
||||
|
||||
[](https://preview.redd.it/ah5775qdg9q61.png?width=360&format=png&auto=webp&s=ad4ab23bdee3739d06f4443e97da4c6172199590)
|
||||
|
||||
[](https://preview.redd.it/hhkco0ueg9q61.png?width=900&format=png&auto=webp&s=7bdb80678d270dd17990312d5024542e61a6db4a)
|
||||
|
||||
I made this using the financial statement listed above, showing all beneficiaries of the GFIL
|
||||
|
||||
Everything rolls into the [Citadel Global Fixed Income Master Fund](https://aum13f.com/firm/citadel-advisors-llc?view_all=fund)... This controls $123,218,147,399 (THAT'S BILLION) in assets under management... I know offshore accounts are technically legal for hedge funds.... but when you look at the itemized holdings of these funds on Citadel's most recent [form ADV](https://reports.adviserinfo.sec.gov/reports/ADV/148826/PDF/148826.pdf), it gives me chills..
|
||||
|
||||
[Form ADV](https://reports.adviserinfo.sec.gov/reports/ADV/148826/PDF/148826.pdf) page 105-106....
|
||||
|
||||
[](https://preview.redd.it/ho4j0oghg9q61.png?width=664&format=png&auto=webp&s=147c10a38cfc2857b4b2691fe70f088a88e83091)
|
||||
|
||||
Ok... ok.... let me get this straight....
|
||||
|
||||
1. The repo market provides IMMEDIATE liquidity to hedge funds and other financial institutions
|
||||
|
||||
2. After the MBS collapse in 2008, the US Treasury replaced it as the liquid asset of choice
|
||||
|
||||
3. Citadel owns 100% of Palafox Trading which is a market maker for repo agreements
|
||||
|
||||
4. This market maker provides liquidity to the Global Fixed Income Master Fund LTD (GFIL) through Citadel Advisors
|
||||
|
||||
5. 80% of its $123,218,147,399 in assets under management belong to entities in the Cayman Islands
|
||||
|
||||
Ok.....I tore the [bermuda, paradise, and panama papers](https://offshoreleaks.icij.org/search?utf8=%E2%9C%93&q=citadel&e=&commit=Search) apart and found that all of these funds boil down to just a few managers, but can't pin anything on them for money laundering... However, if there EVER were a case for it, I'd be extremely suspicious of this one...
|
||||
|
||||
The level of shade on all this is INCREDIBLE... There should be NO ROOM for a investment pool as big as Citadel to hide this sh*t.... absolutely ridiculous..
|
||||
|
||||
The fact that there is so much foreign influence over our bond & repo market, which controls the liquidity of our country, is VERY concerning..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Step 4: Short-seller Endgame*
|
||||
|
||||
Alright, I know this is a lot to take in..
|
||||
|
||||
I've been writing this post for a week, so reading it all at one time is probably going to make your head explode.. But now we can finally start putting all of this together.
|
||||
|
||||
Ok, remember how I explained that the repo rate started to rise in '08 because the collateral was no longer attractive compared to cash? That means there wasn't enough liquidity in the system. Well this time the OPPOSITE effect is happening. Ever since March 2020, the short-term lending rate (repo rate) has nearly dropped to *0.0%....*
|
||||
|
||||
[](https://preview.redd.it/ui9welgkg9q61.png?width=330&format=png&auto=webp&s=fbd5b9501f7bbc386fa62e152ca2b090173692a2)
|
||||
|
||||
https://www.newyorkfed.org/markets/treasury-repo-reference-rates
|
||||
|
||||
So the fed is printing free money, the repo market is lending free money, and there's basically NO difference between the collateral that's being lent and the cash that's being received.. With all this free money going around, it's no wonder why the price of the 10 year treasury has been declining.
|
||||
|
||||
In fact, hedge funds are SO confident that the 10 year treasury will continue to decline, that they've SHORTED THE 10-YEAR BOND MARKET. I'm not talking about speculative shorting, I mean shorting it to oblivion like they've shorted stocks.
|
||||
|
||||
Don't believe me?
|
||||
|
||||
Hedge funds like Citadel Advisors must first locate the treasury bond in order to swap them for cash in the repo market. It's extremely difficult to do this with the fed because they're tied up in government BS, so they locate a lender in the market. These consist of other commercial banks and hedge funds.
|
||||
|
||||
NOTE: I MADE A COMMENT ABOUT BLACKROCK SUPPLYING TREASURY BONDS AND THIS IS NOT TRUE. UPON FURTHER REVIEW ( CREDIT [u/dontfightthevol](https://www.reddit.com/u/dontfightthevol/) ) THESE BONDS CONSIST OF MBS AND CORPORATE BONDS. WHILE THE US TREASURY DEPARTMENT IS INVOLVED, THEY ARE NOT SUPPLYING TREASURY BONDS.
|
||||
|
||||
So financial institutions keep treasuries on reserve for hedgies like Citadel to short. Citadel comes along and asks for the bond, they throw it into Palafox Trading and collect their cash. So what happens when they need to pay for their repo agreement? Surely to GOD there are enough bonds floating around, right? Not unless hedge funds like Citadel have shorted more bonds than there are available.
|
||||
|
||||
Here's the evidence.
|
||||
|
||||
There have been 3 instances over the past year where the repo rate dipped below the "failure" rate of -3.0%. On March 4th 2021, the repo rate hit [-4.25%](https://www.reuters.com/article/usa-bonds-repo/explainer-u-s-treasury-sell-off-spills-over-to-repo-market-idUSL2N2L32FR) which means that investors were willing to PAY someone 4.25% interest to lend THEIR OWN MONEY in exchange for a 10 year treasury bond.
|
||||
|
||||
This is a major signal of a squeeze in the treasury market. It's MAJOR desperation to find bonds. With the federal reserve purchasing them monthly from the open market, it leaves room for a shortage when the repo call hits. If commercial banks and hedge funds haven't purchased more treasuries since first lending them out, short sellers simply cannot cover unless they go into the market and PAY the bond holder for their bond. It's literally the same story as all of the heavily shorted stocks.
|
||||
|
||||
Still not convinced?
|
||||
|
||||
At the end of 2020, Palafox Trading listed $31,257,102,000 (BILLION) in GROSS repo agreements. $30,576,918,000 (BILLION) were directly related to repurchasing treasury bonds....
|
||||
|
||||
[](https://preview.redd.it/m3lg8nzog9q61.png?width=726&format=png&auto=webp&s=747e1f671323227be9c0220aec18f8ec245d3cf1)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
But what about their Reverse Repurchase agreements? Don't they have assets to BUY treasury bonds?SURE.. Take a look..
|
||||
|
||||
[](https://preview.redd.it/wt8fbrlrg9q61.png?width=371&format=png&auto=webp&s=72f939a98e0dc34a08b8a58e89ef68045a8e78a7)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
SeE tHeRe? I tOlD yOu ThEy HaD iT cOvErEd..
|
||||
|
||||
Yeaaaah... now read the fine print.
|
||||
|
||||
[](https://preview.redd.it/5enfigytg9q61.png?width=354&format=png&auto=webp&s=ab613f3bf46064c674bce68766a90e2b2613a2ec)
|
||||
|
||||
I know the totals are slightly different than the balance above, but they're both from 2020. It's just how they are presented. Check for yourself. (https://sec.report/CIK/0001284170)
|
||||
|
||||
So no, they don't have it covered. Why? Because our POS financial system allows for rehypothecation, that's why. It's a big fancy word for using amounts owed to you as collateral for another transaction. In the event that the party defaults, SO DO YOU.
|
||||
|
||||
This means that the securities which Palafox is waiting to receive, have ALREADY been pledged to pay off the bonds they currently OWE to someone else.
|
||||
|
||||
Does this sound familiar? Promising to repay something with something you don't already have? Basically you need to wait on Ted, to repay Steve, to repay Jan, to repay Mark, to repay you, so you can repay Fred, so Fred can.... Yeah, REAAAAL secure..
|
||||
|
||||
OH, and by the way, the problem is getting WORSE.
|
||||
|
||||
Here's Palafox's financial statements in 2018:
|
||||
|
||||
[](https://preview.redd.it/lrtryfivg9q61.png?width=720&format=png&auto=webp&s=d850854f0fbcf0a5d701374ed5634d6eaf036919)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
And 2019:
|
||||
|
||||
[](https://preview.redd.it/zjxda0swg9q61.png?width=721&format=png&auto=webp&s=4c124bfd8b4f4a9162b2a2b65ade4b690b4dfadd)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
The amount in 2020 is STILL +100% greater than 2019, AFTER netting (which is even more bullsh*t).
|
||||
|
||||
[](https://preview.redd.it/xjss7dzxg9q61.png?width=714&format=png&auto=webp&s=9ff71bf6631f9e665378a0f4a623a95e3aecb264)
|
||||
|
||||
https://sec.report/CIK/0001284170
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
All of this made me wonder what the FICC's balance is for treasury deposits... For those of you that don't know, the FICC is a branch of the DTCC that deals with government securities.
|
||||
|
||||
Just like the updated DTC rule for supplemental liquidity deposits being calculated throughout the day, the FICC also calculates this amount as it relates to treasury securities multiple times throughout the day.
|
||||
|
||||
Would you be surprised that the FICC has $47,000,000,000 (BILLION) just in DEPOSITS for unsettled treasury bonds? $47,000,000,000!?!?!?
|
||||
|
||||
CAN YOU IMAGINE HOW ASTRONOMICAL THE ACTUAL MARGIN MUST BE?!
|
||||
|
||||
[](https://preview.redd.it/zrkpzdb1h9q61.png?width=710&format=png&auto=webp&s=64f6b10aca2566bcf9b5d560967af3715104b839)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
There is TOO much evidence, from TOO many separate events, pointing to the imminent default of something big. That's all this is going to take. When Ted can't repay Steve, it means the panic has already started. Just look at how easy it was for the repo rate to spike overnight in 2019..
|
||||
|
||||
We are already starting to see the consequences of the SLR update with Archegos, Nomura, and Credit Suisse. This is just a taste of what's to come.. and now we know the bond market represents an even BIGGER catalyst in triggering this event.. and it's happening already.
|
||||
|
||||
With that being said, things finally started to make sense... Citadel doesn't NEED shares if their investment strategy to go short on EVERYTHING instead of going long. Why bother owning shares? Financial institutions and other asset managers simply lend them to you when you need to pony up a margin call for stocks and bonds..
|
||||
|
||||
Their HFT systems allow them to manipulate the market in their favor so there's NO way they could fail.... unless.... a bunch of degenerates all decided to ignore taking profits...
|
||||
|
||||
But that would NEVER happen, right?
|
||||
|
||||
...wrong...
|
||||
|
||||
we just like the stonks
|
||||
|
||||
DIAMOND.F*CKING.HANDS
|
||||
|
||||
*This is not financial advice*
|
||||
74
01-Must-Read/2021-04-07-MOASS-Preparation-Guide.md
Normal file
74
01-Must-Read/2021-04-07-MOASS-Preparation-Guide.md
Normal file
@ -0,0 +1,74 @@
|
||||
# The MOASS Preparation Guide
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/socrates6210](https://www.reddit.com/user/socrates6210/)| [Reddit](https://www.reddit.com/r/Superstonk/comments/mm5qle/the_moass_preparation_guide/) |
|
||||
|
||||
---
|
||||
|
||||
Please read though this and possibly sticky this because I think it is very important that we all have an understanding on the game plan 🚀
|
||||
|
||||
## Pre-liftoff Preparation
|
||||
|
||||
|
||||
- **Brokers preparation** - i think everyone should take the time to understand the nuances and rules that the broker applies on trading. Some brokers may have some sneaky fine prints. So you should make sure that nothing can get in the way of you and your tendies. Take note of the [brokers that previously blocked trading](https://www.reddit.com/r/stocks/comments/l8rhr3/weekend_gme_thread_homework_for_all_lets_stop/). If you have all your shares one of these brokers and can't transfer, don't sweat it too much. The message was clear as crystal in January: if they prevent free trade like Robinhood did then that means they will lose customers, so i hope they have prepared for this. **It also wouldn't hurt to email your brokers customer service and ask them "will you prevent me from selling if the price goes to XXX amount?". It's good to create a paper trail just incase you need to bring them to court.**
|
||||
|
||||
- **Back up broker** - If you can, open up an account as soon as possible on a reputable broker and buy at least 1 share. Don't aim to maximize gains but to minimize the regret of missing out just in case your broker decides to f*ck you. The rule of thumb is usually that commission based boomer brokers with horrible user interfaces are the most trustworthy. See the "good brokers" in the link above.
|
||||
|
||||
- **Online Security** - If you have learned anything from all this it's that you should not trust anyone. Take the time to enable two-factor authentication on your bank/broker accounts. Also you should have a different password for each account, preferably more than 20 characters with a mixture of alphanumeric characters and symbols.
|
||||
|
||||
- **Taxes** - It is crucial that you learn about your countries [capital gains taxes](https://www.investopedia.com/terms/c/capital_gains_tax.asp). Remember to calculate what you need to set aside to pay the tax man. **ELI5**: `profit / 100 x CGT = Amount you need to pay in taxes`.
|
||||
|
||||
- **Prepare a personal balance sheet** - It may be a good idea to prepate a balance sheet. A balance sheet is a snapshot of net worth and lists all your assets, liabilities, cash etc. This will make your life (and your accountants life) easier when you need an accountant. If you need a better understanding of balance sheets see this [video here](https://www.youtube.com/watch?v=hhKO6MRvk_c)
|
||||
|
||||
- **Mentally preparation** - This one isn't so obvious, but please prepare yourself for seeing life changing money in your posession. Have a long think what you are going to do with this money. And as a side note: **try to not tell too people your invested, the less people know the easier your life will be.**
|
||||
|
||||
## D-Day
|
||||
https://preview.redd.it/j9c2jtes4sr61.gif?format=mp4&s=3e8e32cda0f334a5c4c328121233e0e5ac8707b5
|
||||
|
||||
- **Take care of your health** - Firstly, on the day of lift off you will definitely feel overwhelmed with emotions and anxiety. Your probably going to feel a little dizzy seeing the price increase exponentially. Please sit down when you are checking the price. The last thing i want to hear is that a fellow ape fainted and cracked their head because of being overwhelmed with emotions. In my opinion, deep slow [diaphragmatic breathing](https://my.clevelandclinic.org/health/articles/9445-diaphragmatic-breathing) really helps to slow down your heart rate and reduce anxiety.
|
||||
|
||||
- **Expect Trading Halts** - The NYSE may stop trading if the price rises to quickly. This is usually done to prevent massive impulse waves and let people calm down for a few minutes. But this is futile in the setting of a short squeeze, because all shorts must cover regardless. You can also check when GME is halted [here](https://www.nyse.com/trade-halt-current). Do not freak out if the graph flatlines.
|
||||
|
||||
## During the MOASS
|
||||
https://preview.redd.it/0jl90zju4sr61.png?width=1890&format=png&auto=webp&s=afdd5fc492e5bb2c17046ea80999f2f925919690
|
||||
|
||||
- **Diamond hands** - This one i cannot stress enough, the mantra is clear: HOLD! If you sell early you creating downward pressure against the MOASS. If the short position is in the billions of shares (which has been speculated before) then this shouldn't be too much of a problem, but regardless - KEEP THOSE HANDS DIAMOND! The squeeze could last a few days, week or indefinitely. At this point no one knows. Don't feel pressure to sell as soon as it gets to 100K.
|
||||
|
||||
- **Whats an exit strategy?** - This one isn't so obvious because the we don't know what the peak will be, but you should have an exit strategy: All i can say on this matter is do not sell on the way up as it's a bad idea. [u/WardenElite](https://www.reddit.com/u/WardenElite/) [explains here that you should](https://www.reddit.com/r/GME/comments/m073v6/exit_strategy_dd_a_comprehensive_guide_to/):
|
||||
- **sell on the way down**
|
||||
- **don't sell everything at once**
|
||||
- **scale out slowly.**
|
||||
|
||||
- **Sit down when you decide to take gain**s - when the dust has settled and you decide to take gains, again, sit down and drink some water and breath.. because you may faint or possibly get sick from seeing that you have sold a single share for a 7 figure price.
|
||||
|
||||
- **Don't publish your realised gains publicly** - obvious one, don't be that person who flaunts the gains online. You are going to cause a lot of fairweather friends and family to crawl out of the woodwork trying to get their hands on you tendies. It may be tempting to rub it in the faces of the people who doubted you, but just don't. It's not worth it.
|
||||
|
||||
- **Inform your bank about large deposits incoming** - this one may not apply to everyone, but make sure you bank is aware that you will be depositing a large sum of money into your account (most likely in multiple withdrawals) and explain why. This will prevent them from contacting the authorities in fears that you're up to illegal activities.
|
||||
|
||||
## Immediate Aftermath
|
||||
https://preview.redd.it/p05865tv4sr61.gif?format=mp4&s=5244c22c62024e01615fd840a6fe37874dca7566
|
||||
|
||||
- **Assemble a team of legal and financial advisers:**
|
||||
- **Get an accountant** - Get certified public accountant who helps wealthy families organize their finances and guide you through your finances.
|
||||
- **Lawyer up** - Hire a tax attorney to deal with any problems that may arise from all of this. Hire a family law or estate planning attorney that can arrange a Will for your family immediately.
|
||||
|
||||
- **Financial advisor** - Make sure you hire a financial advisor that is sworn to act as a fiduciary (acting in your best financial interests, not theirs), preferably with experience managing significant wealth. Make sure you check their certifications and that they aren't trying to push you to buy some insurance policy. The requirements to be a FA aren't concrete so there are a lot of snake oil salesmen that really don't have your best interests at heart.
|
||||
|
||||
- **Expect to vilified some more** - you will most likely see news about a financial system crashing. And i can nearly garuantee that they will try to blame us rather than the hedgies and regulators who caused it. Pay no mind to mainstream media and stand your ground. If people try to paint you as the "bad guy" just ignore them.
|
||||
|
||||
- **Do nothing with the money** - this kind of piggy backs off the first point about assembling a team of advisors, but please don't just cash out and go crazy with the money. Sit and think about it for some time. Let reality settle in and decide how are you going to use this money to help yourself and the people around you. Lambos are great but they won't bring you happiness forever. Don't blow that money down the drain. Educate yourself on how wealthy people maintain their wealth.
|
||||
|
||||
## Longer Term Aftermath
|
||||
- **Expect turbulence in the economy** - this wont be just contained to the world of GME. This is going to have a ripple affect across the world economy as the powers-that-be, who have been taking advantage of the system loops holes, finally pay their debt. If you want to learn more about this i suggest that you read [The Everything Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/) by [u/atobitt](https://www.reddit.com/u/atobitt/).
|
||||
|
||||
- **Hedge against hyper-inflation** - if you haven't been paying attention, there are fears of hyperinflation of the US dollar. This is due to JPOW printing money like there is no tomorrow. Learn how to protect yourself from inflation so your tendies don't lose all their value.
|
||||
|
||||
https://preview.redd.it/697hza3x4sr61.jpg?width=1908&format=pjpg&auto=webp&s=8937e8a8ad43b15a84e6ff96fddac57612e3f806
|
||||
|
||||
If there is anything else you think should be in here let me know in the comments. This is just my opinion and not financial advice. I am just an ape who eats crayons for fun. Before I finish i will just leave you with this image (above ^). Remember what happened in 2008 and don't show any mercy. HOLD
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
|
||||
TLDR: no tldr you lazy ape, go read it. Its imporant
|
||||
273
01-Must-Read/2021-05-04-Major-Deep-ITM-Call-Option-Dates.md
Normal file
273
01-Must-Read/2021-05-04-Major-Deep-ITM-Call-Option-Dates.md
Normal file
@ -0,0 +1,273 @@
|
||||
Major Deep ITM CALL Option Dates. A Massive Net Capital BOMB Might Explode This Week.
|
||||
=====================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/n4h832/major_deep_itm_call_option_dates_a_massive_net/) |
|
||||
|
||||
---
|
||||
|
||||
|
||||
[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)
|
||||
|
||||
0\. Update
|
||||
|
||||
Edit: Ah here we are after cinco de buyo. No big price move was made. That's some good shit if you ask me. The prediction was that we'd see a price surge again if they delayed FTDs once more. The fact that it didn't happen today - no Deep ITM CALLs or PUTs occurred today - is reason to believe this is almost over. If Net Capital theory is correct, there's two possibilities here:
|
||||
|
||||
A) They raised enough capital to kick it to the next threshold on May 17. Remember, only 50% will be accounted for as of tomorrow. More time to try to hit the price down.
|
||||
|
||||
B) They went net negative and it's over. They were unable to reset FTDs. Only a matter of time before things start unwinding.
|
||||
|
||||
I also see some exciting stuff being posted today. Two caught my eye:
|
||||
|
||||
DD pointing to theoretical margin call price has been passed three days in a row.
|
||||
|
||||
We also possibly saw 1m+ in volume evaporate in after hours. Interesting shit.
|
||||
|
||||
So once more - see you soon moon.
|
||||
|
||||
1\. Preface
|
||||
|
||||
I am not a financial advisor.
|
||||
|
||||
Take it all in, and then question what you read. We want all perspectives here. Criticism of DD is what makes this subreddit so amazing - it helps us re-evaluate our theories.
|
||||
|
||||
I also love dates. I think they should be promoted more as long as there is data behind it. Picking arbitrary dates based on Tweets, yeah, I can see a problem with that. But it really feels like we can pinpoint this shit down. And if it's wrong - you know what - we come back and re-evaluate everything. It helps us grow, learn, and find new perspectives. You no longer look at data one way, you take a new approach.
|
||||
|
||||
I have never done a TLDR but let's put it this way:💎🤲 =💣=💀🐻
|
||||
|
||||
TLDR in picture form:
|
||||
|
||||
<https://preview.redd.it/vjttbykab1x61.png?width=316&format=png&auto=webp&s=ce91afc315f2e1872aa8043a9eb941fee53669c5>
|
||||
|
||||
Edit: a real TLDR:
|
||||
|
||||
Deep ITM CALL + OTM PUT options expiry causes MMs (Shitadel) to have a debt due to them pushing FTDs out. The debt must be resolved quickly or they could become net negative, violating a Net Capital rule. If they violate the rule they essentially lose their MM privileges because they don't have enough capital for their positions in the event of a default.
|
||||
|
||||
Day 0 = 0% of debt accounted for in calculations
|
||||
|
||||
Day 7 = 25% of debt accounted for in calculations
|
||||
|
||||
Day 14 = 50% of debt accounted for in calculations
|
||||
|
||||
Day 21 = 75% of debt accounted for in calculations
|
||||
|
||||
Day 28 = 100% of debt accounted for in calculations
|
||||
|
||||
They appear to not want more than 50% of the debt accounted for and try to push FTDs out between day 0 and day 13 because once day 14 hits the 50% could bring them net negative.
|
||||
|
||||
Day 13 coincides with the spikes I've been observing:
|
||||
|
||||
Feb 5 -> Feb 24
|
||||
|
||||
Feb 19 -> Mar 10
|
||||
|
||||
And what might be coming:
|
||||
|
||||
April 16 -> May 5
|
||||
|
||||
2\. Recap
|
||||
|
||||
[I posted the other day theorizing a link between certain option dates and a spike the second Wednesday following expiration.](https://www.reddit.com/r/Superstonk/comments/n2dkw2/scoobydoo_and_the_deep_itm_calls_of_april_16_is/) For example:
|
||||
|
||||
February 5 Options Expiration -> February 24
|
||||
|
||||
February 19 Options Expiration -> March 10
|
||||
|
||||
April 16 Options Expiration -> May 5
|
||||
|
||||
What happened on February 24? We spiked up. Significantly.
|
||||
|
||||
What happened on March 10? We climbed up. Significantly, until a flash crash brought us down. And there's pretty good evidence that points to the flash crash being caused by nearly 80,000 PUTs from July 16, 2021 being exercised on March 10th.
|
||||
|
||||
What happened on May 5? We'll find out. But I'm sure I'll get a bunch of shit spam comments if it all goes downhill lmao.
|
||||
|
||||
3\. Theory Hole
|
||||
|
||||
I was claiming that the link was due to T+13 forcing of FTDs by the broker, but that isn't necessarily true. [/u/keijikage](https://www.reddit.com/u/keijikage/) identified that:
|
||||
|
||||
> T+13 only counts if it is on the threshold securities list (10k shares FTD + > 0.5% of shares outstanding). HOWEVER...there may be some nonsense going on around net capital"
|
||||
|
||||
We haven't seen GME on the threshold list since February 3rd. So the T+13 FTD delivery theory seems to be out the window. However, the pattern still stands. And boy does this new information look spicy.
|
||||
|
||||
4\. The Link Between Options and Spikes Still Exists
|
||||
|
||||
There's no doubt in my mind that we're witnessing a pattern here, and that it will repeat. Each spike in price has to link to a date in the past - that's where I started going down this rabbit hole. I mean, shoving a few crayons up my nose like Homer Simpson might have also influenced me.
|
||||
|
||||
<https://preview.redd.it/kwr9wb8o30x61.png?width=507&format=png&auto=webp&s=57af9773746a233aeb9486f978437507e413034b>
|
||||
|
||||
In my last post, [/u/beyond-mythos](https://www.reddit.com/u/beyond-mythos/) pointed out a wonderful source of information - another DD with crazy amounts of data for Deep ITM CALL purchases: [The SI Is Fake I Found 44,000,000 Shorts](https://www.reddit.com/r/GME/comments/mhv22h/the_si_is_fake_i_found_44000000_million_shorts/)
|
||||
|
||||
The DD poured through data finding that FTDs were hidden in very specific options with Deep ITM CALLs. What dates enticed the shorters so much? *queue ominous music* dun dun DUN...
|
||||
|
||||
<https://preview.redd.it/11gjaljq70x61.png?width=559&format=png&auto=webp&s=1f1d295244e648846d7afd9cac6c1b1fe32ce193>
|
||||
|
||||
February 5, February 19, March 19, April 16, July 16, January 2022, and January 2023. I got absolutely JACKED when I saw that there was evidence pointing to the exact dates I wanted to link to the spikes:
|
||||
|
||||
February 5 and February 19.
|
||||
|
||||
Now you're probably asking, hey, I see March 19 on that list. Why didn't it spike on April 7?! Don't worry, because it's going to need a little bit more explaining in this post. I'll get there just bear with me.
|
||||
|
||||
You also might be wondering, "Ok what the hell are you looking at these Deep ITM CALL purchases for?". It is because we're theorizing that FTDs are being hidden through this malicious options practice. And on the other end of the spectrum, it's theorized that the SI% is being hidden through PUTs which also expire on these major dates. Both old and new shorts and being stuck in PUTs.
|
||||
|
||||
The DD also posted the following table, and I absolutely love [u/dejf2](https://www.reddit.com/user/dejf2/) for this glorious artwork. I'd pay at least 10 and a 1/2 Shmeckles for it. It shows the amount of deep ITM calls which were purchased not only for certain expiration dates, but when those purchases were made.
|
||||
|
||||
<https://preview.redd.it/i5xh3f2350x61.png?width=1933&format=png&auto=webp&s=8594466c3aa5675ebffdb39a8364e18c4f39d7f3>
|
||||
|
||||
You can see that they went absolutely nuts purchasing these Deep ITM CALLs on the January runup (dark red highlight) because liquidity was AWFUL. Robinhood pulled the plug on buyers, and let the buy pressure dry up while the HFs and MMs swapped FTDs to later dates because there were so many shares that had to be delivered. The retail buy pressure is the whale that is now splashing larger and larger FTD waves until the MOASS.
|
||||
|
||||
So thank you Robinhood, the floor was $1,000 back then but now there's going to be so much more money sucked out of the 1%.
|
||||
|
||||
<https://preview.redd.it/wmlo5r9yc1x61.png?width=594&format=png&auto=webp&s=8d786347ecdf326c3c940538547b93d76f7a72d0>
|
||||
|
||||
I did a rough calculation of the cumulative amount of Deep ITM CALL purchases for these dates ONLY with the red-highlighted area:
|
||||
|
||||
| Option Expiration Date | Cumulative Deep ITM Call Purchases (Red Area Only / January Runup) | Number of Shares Equivalent |
|
||||
| --- | --- | --- |
|
||||
| Combined | 287,000 | 28,700,000 |
|
||||
| February 19, 2021 | 51,000 | 5,100,000 |
|
||||
| March 19, 2021 | 4,000 | 400,000 |
|
||||
| April 16, 2021 | 143,000 | 14,300,000 |
|
||||
| July 16, 2021 | 31,000 | 3,100,000 |
|
||||
| January 2022 | 58,000 | 5,800,000 |
|
||||
|
||||
Fucking... WHAT? In the January runup alone they had to purchase at least 287,000 Deep ITM CALLs to handle FTDs? That's equivalent to 28,700,000 shares. Hello float - or should I say more than the float - since it's now estimated that the float is around 23,000,000. Remember that this table is ONLY for the red highlighted area, so the total number upon option expiry is greater than the rough calculation table.
|
||||
|
||||
Let's look at the dates and their significance:
|
||||
|
||||
- February 19 had 51,000 purchases. Two Wednesdays later, March 10, we see $GME climb to a price of $350 before being smacked down.
|
||||
|
||||
- March 19 had 4,000 purchases. Two Wednesdays later, April 7, nothing. Hmm. Well, it certainly isn't a lot of CALLs in comparison but it should have done something - right? Even a tiny bump instead of the red day on April 7? Don't worry. I'm almost there.
|
||||
|
||||
- April 16 had 143,000 purchases. Two Wednesdays later, May 5, we'll find out! Take a notice the magnitude of deep CALLs that were purchased for this day compared to February 19 - big fucking oof if the price spike happens again.
|
||||
|
||||
- July 16 had 31,000 purchases, and January 2022 had 58,000 purchases. So obviously they wanted to spread out the FTDs among all the dates but for some godawful reason poured into April 16. If this does indeed pop again on May 5 but doesn't trigger the MOASS, we can expect it to pop following the next major Deep ITM CALL option expiration date.
|
||||
|
||||
But this doesn't really explain why the spikes occur two Wednesdays following option expiry.
|
||||
|
||||
5\. Ok, If Not T+13 From FTDs Then What Is Causing The Movement?
|
||||
|
||||
[/u/keijikage](https://www.reddit.com/u/keijikage/) pointed out a tasty rule. [Net Capital Requirements For Brokers or Dealers - 240.15c3-1](https://www.law.cornell.edu/cfr/text/17/240.15c3-1).
|
||||
|
||||
In summary, 240.15c3-1 is a net capital rule which:
|
||||
|
||||
> ...is designed to ensure that a broker-dealer holds, at all times, more than one dollar of highly liquid assets for each dollar of liabilities (e.g., money owed to customers and counterparties), excluding liabilities that are subordinated to all other creditors by contractual agreement. The premise underlying the net capital rule is that if a broker-dealer fails, it should be in a position to meet all unsubordinated obligations to customers and counterparties and generate resources sufficient to wind down its operations in an orderly manner without the need of a formal proceeding...
|
||||
>
|
||||
> ...A broker-dealer must ensure that its actual net capital exceeds its required minimum net capital at all times. - [Source](https://www.mercatus.org/system/files/peirce_reframing_ch6.pdf)
|
||||
|
||||
More ape-speak, this rule makes it so that if a Market Maker (Shitadel) wants to continue operating and not get ass-fisted by the SEC, they cannot carry a debt that makes their capital net negative. Otherwise, if they default, they're an idiot and have insufficient capital for the positions to pay out. How do you carry a debt? Let's say you are all nice and happy, shorting GME without a care in the world because you're a moron, operating net-netural, when suddenly a shitload of FTDs pour on you all at once. Oh shiiiit. I owe those shares and am carrying a debt! What do I do? Hmm I can either:
|
||||
|
||||
1. Raise some capital or
|
||||
|
||||
2. Sweep those FTDs under the rug using some sneaky sneak tricks. I'll pay that shit later, hoping the price of the stock is much lower and thus my debt calculation doesn't bring me negative.
|
||||
|
||||
What did we see every time a spike-up occurred? More god damn Deep ITM CALLs being purchased. Because they're hitting the (2) button and kicking them further down the road.
|
||||
|
||||
You know how much time they have to solve this net capital issue? Not long. The following is from rule 240.15c3-1 I linked, towards the bottom.
|
||||
|
||||
<https://preview.redd.it/4dsve3w3d0x61.png?width=1166&format=png&auto=webp&s=b88384871b2de08e37b92826df32f5e5c1322707>
|
||||
|
||||
This is my interpretation, please correct me if I am wrong. Every 7 days that pass by, their debt is subtracted from their capital at an increase of 25% each tick. In other words, each 7 days your debt is 25% more accounted for:
|
||||
|
||||
Day 0 -> Net Capital = Capital - Debt*0.00 = 0% of the debt accounted for in calculations
|
||||
|
||||
Day 7 -> Net Capital = Capital - Debt*0.25 = 25% of the debt accounted for in calculations
|
||||
|
||||
Day 14 -> Net Capital = Capital - Debt*0.50 = 50% of the debt accounted for in calculations
|
||||
|
||||
Day 21 -> Net Capital = Capital - Debt*0.75 = 75% of the debt accounted for in calculations
|
||||
|
||||
Day 28 -> Net Capital = Capital - Debt*1.00 = All debt accounted for in calculations.
|
||||
|
||||
------
|
||||
|
||||
> Example A (Good Situation):
|
||||
>
|
||||
> Imagine you have $100. Then suddenly you get a piece of paper saying "your debt is $90".
|
||||
>
|
||||
> Day 0 -> Net Capital = $100 - $90*0.00 = $100
|
||||
>
|
||||
> Day 7 -> Net Capital = $100 - $90*0.25 = $100 - $22.5 = $77.5
|
||||
>
|
||||
> Day 14 -> Net Capital = $100 - $90*0.50 = $100 - $45 = $55.0
|
||||
>
|
||||
> Day 21 -> Net Capital = $100 - $90*0.75 = $100 - $67.5 = $32.5
|
||||
>
|
||||
> Day 28 -> Net Capital = $100 - $90*1.00 = $100 - $90 = $10.00
|
||||
>
|
||||
> All good! You're still net positive. This must have been what occurred for March 19 option expiry. The debt was insignificant! So much more time to spread out some Deep ITM CALL purchases. There was no way that they'd cross the net negative threshold from only 4,000 Deep ITM CALLs + PUTs.
|
||||
|
||||
------
|
||||
|
||||
> Example B (Bad Situation, Shitadel):
|
||||
>
|
||||
> Imagine you have $100. Then suddenly you get a piece of paper saying "your debt is $250".
|
||||
>
|
||||
> Day 0 -> Net Capital = $100 - $250*0.00 = $100
|
||||
>
|
||||
> Day 7 -> Net Capital = $100 - $250*0.25 = $100 - $62.5 = $37.5
|
||||
>
|
||||
> Day 14 -> Net Capital = $100 - $250*0.50 = $100 - $125 = -$25.00
|
||||
>
|
||||
> Whoops! You're now net negative and you violated the rule and only when 50% was accounted for. Bye bye.
|
||||
|
||||
------
|
||||
|
||||
It's important to note that the debt is based on current market price of the security. So if GME is trading $170 then the debt is based off of $170. If it drops to $150 the next day, then the debt is based off of $150. They want to kick this down the road until the price is really low. Probably in the $20s range. They're absolutely fucked.
|
||||
|
||||
So, Day 0 they'll see the debt but might not need to worry about it. If it's not a problem, such as Net Capital having no chance to go negative, then they're fine. Whatever. They won't violate the rule and they can go on being a happy Market Maker. But if it is a problem which would bring them negative and violate the threshold rule, then they'll start panicking. They want to resolve this before the threshold occurs which would make them net negative.
|
||||
|
||||
The fact that 50% of the debt is subtracted at T+14 is very curious. That implies they (Shitadel) can't risk the debt even being 50% accounted for. So it must be an absolutely massive position. Let's walk through February 19 expiration as an example:
|
||||
|
||||
1. February 19 options expire. Deep ITM CALLs and possibly married PUTs expire that were used to hide FTDs and shorts. Day 0. Their Capital does not account for the FTD and short position yet. Well... they can try to drive the price down and hope that the debt calculations don't carry them net negative.
|
||||
|
||||
2. Day 7 arrives on March 2. The FTDs and shorts are 25% accounted for. Maybe they'll start shifting some stuff out by purchasing new Deep ITM CALLs between March 2 and March 9 since the price doesn't seem to be going down as fast as they want.
|
||||
|
||||
3. Day 13 arrives on March 10. Oh SHIT. They can't let Day 14 arrive or else 50% of the debt will be accounted for and they'll be net negative and thus violate the rule. So they start to move out a ton of FTDs to later dates by purchasing more Deep ITM CALLs. (If you reference the purchase anomaly chart in my previous post, you'll see tons of Deep ITM CALLs are purchased on the spike dates and run-up dates)
|
||||
|
||||
4. Day 14 arrives on March 11. All is well in the world (for now) because their debt has been moved out.
|
||||
|
||||
Edit: But...why exactly does the price move up? On Discord, "Assets" has a great possible explanation. Assets - you are the best. ❤️
|
||||
|
||||
> 1. You are obligated 100 shares through FTDs.
|
||||
>
|
||||
>
|
||||
> 2. You buy an ITM Call and Sell an OTM put.
|
||||
>
|
||||
>
|
||||
> 3. You short 100 shares of the underlying saying that it's actually covered by your ITM Call.
|
||||
>
|
||||
>
|
||||
> 4. You exercise your call and you are credited 100 shares.
|
||||
>
|
||||
>
|
||||
> 5. You tell your broker that you wish to cover your shorts with 100 shares and you tell the clearing house that you wish to satisfy your FTD with the same 100 shares.
|
||||
>
|
||||
>
|
||||
> 6. Both parties take the same shares and both parties look to the market maker to satisfy those 100 shares because you said they were good for it when you exercised.
|
||||
|
||||
> You've succesfully shorted and reset the FTD.
|
||||
|
||||
Apply this to the other major option expiry dates and you get the same picture. They want to fix this issue by the second Wednesday following option expiry because the massive amount of Deep ITM CALLs caused their debt to be too significant to carry the full 28 days. It brings them net negative by day 14. At least... that's the theory now. ;)
|
||||
|
||||
Let's finally apply this logic to our wonderful, beautiful, April 16th date which is the option expiration date of when a dumpster load of Deep ITM CALLs have been purchased:
|
||||
|
||||
1. April 16 options expire. Day 0
|
||||
|
||||
2. Day 7 arrives on April 27.
|
||||
|
||||
3. Day 13 arrives on May 5. They (in theory) don't want it to hit day 14 when their net capital would be negative due to accounting for 50% of the debt. Whatcha gonna do this time, Shitadel?
|
||||
|
||||
------
|
||||
|
||||
- Perhaps this is what [/u/Suspicious-Singer243](https://www.reddit.com/u/Suspicious-Singer243/) was observing in [The March To Zero Liquidity](https://www.reddit.com/r/Superstonk/comments/n3ehw0/the_march_to_zero_liquidity_volume_or_bust/). The Market Makers are about to have a net capital bomb go off. They NEED to eliminate their debt by wiping out their FTDs that have appeared once again in order to become net neutral. They were able to swipe the FTDs under the rug on January 13, the January run-up, March run-up, and a few times here and there since then. But if 005 is enacted before the next pop then they have to deal with this massive 143,000 order from April 16 without delaying it any longer. RUH-ROH RAGGY.
|
||||
|
||||
- Of course while I'm writing this, I see that May the Fourth could indeed end up being the Golden Ticket day per [/u/Door_Public](https://www.reddit.com/u/Door_Public/). It's very likely that 002/801 go into effect tomorrow. I've been thinking we'll see 002/801 as well as 005 enacted and within 24 hours a price spike would occur. If I see these rules go into effect tomorrow, I will NOT be able to sleep. [May the 4th Be With You](https://www.reddit.com/r/Superstonk/comments/n49zl5/srnscc2021801_confirmation_may_the_4th_be_with_you/)
|
||||
|
||||
- [Bank netting accounts coming into effect by May 5](https://www.reddit.com/r/Superstonk/comments/mur8bz/srdtc2021004_the_dtcc_and_jp_morgan_theyre/)
|
||||
|
||||
- [US Treasury Issuing 0% Bonds on May 4 and Maturing June 1](https://www.reddit.com/r/Superstonk/comments/n1hus8/the_poster_discrediting_the_0_40_billion_dollar_4/)
|
||||
|
||||
------
|
||||
|
||||
See you on the moon. If not this week - sometime soon. ❤️
|
||||
@ -0,0 +1,236 @@
|
||||
Hank's Definitive GME Theory of Everything
|
||||
==========================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/HomeDepotHank69](https://www.reddit.com/user/HomeDepotHank69/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/n66tzh/hanks_definitive_gme_theory_of_everything/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
********** I am not a financial advisor, this is not financial advice **********
|
||||
|
||||
Introduction (DD starts below)
|
||||
|
||||
Apes, did you know that there are usually about 80 confirmed cases of deadly shark attacks per year. You know what nobody ever talks about though? The fact that sharks have TWO, count it TWO, FUCKING PENSIS. I am not making that up. Imagine what I could do with two penises. I'd have twice the total dick length. I might have to rename myself HomeDepotHank3InchesTotal.
|
||||
|
||||
On the topic of cocks, did you know that many reptiles have two penises as well? They call them hemipenes. SUCK MY HEMI PEEN SHILLS.
|
||||
|
||||
As many of you know, I am a music aficionado. I like to listen to my fair share of classical music like Megan Thee Stallion and Linkin Park, Jazz music like Fifth Harmony, and even heavy metal like Coldplay and Carly Rae Jepsen. However, I recently came across a beautiful artist who I was not previously aware of. He is a contemporary opera singer named Wheeler Walker Jr. Some of his most popular songs reminded me of this current situation:
|
||||
|
||||
"Fuck you bitch" - how I feel about shorts
|
||||
|
||||
"Pictures on my phone" - my DD
|
||||
|
||||
"Pussy King" and "Rich Sumbitch" - apes when the squeeze is over
|
||||
|
||||
"Finger up my butt" - me sitting on the toilet scrolling through this sub every morning
|
||||
|
||||
"Sleeping on the Blacktop" - shorts after they go bust
|
||||
|
||||
"Drop 'em out" - shorts getting squeezed out of their positions
|
||||
|
||||
"Sit on my face" - me every time I see my wife's boyfriend
|
||||
|
||||
"Still ain't sick of fuckin you" - apes when the shorts beg for mercy
|
||||
|
||||
"Dicked down in Dallas" - shorts who live in Texas during the squeeze
|
||||
|
||||
"I like smoking pot (a lot)" - my wife
|
||||
|
||||
(These are the actual titles and this guy is actually real, I love the internet).
|
||||
|
||||
Alright apes, enough joking around, it's time to get serious
|
||||
|
||||
Where the DD actually starts
|
||||
|
||||
There has been an absolute slew of data in the past month about FTDs, dark pools, and rule changes. As many of you know, I have been pumping out a bunch of DD about the FTD cycle. After reading tons of posts about dark pool DD and DTCC rule changes, I think I now understand how all of this fits together and have thus made this GME theory of everything. The DDs that I read on dark pools and OTC trading are the glue that connects everything together IMO.
|
||||
|
||||
In this post, I will be me connecting my own DD about FTDs to other users' DDs about dark pools, DTCC rule changes, and ETF shorting in order to give us a bigger picture of what all of this is and means. Thus, there will be absolutely no prediction in this post, however, it should help you understand how everything is tied together and the fact that because we don't know the exact extent of shorts' exposure, it is impossible to predict when the MOASS will occur. I am confident though that we are nearing the light at the end of the tunnel. With that, Apes, I present to you: HOMEDEPOTHANK69's DEFINITIVE GME THEORY OF EVERYTHING. Enjoy....
|
||||
|
||||
Roadmap
|
||||
|
||||
Alrighty apes, I am going to first briefly explain my own DD on the FTD cycle. Next, I am going to summarize some DD from a user about OTC trading and dark pools relating to GME. After that, I will summarize some DD from other users about how new DTCC and other agency rules affect GME in the future. Finally, I will summarize how ETF shorting plays into GME. After that, I will go into how all of these fit together in one big beautiful orgy that explains where the HFs are at with GME and why they are there. This will allow us to understand our current position.
|
||||
|
||||
Summarizing DD of FTD Cycle, new rules, OTC trading, and ETF shorting of GME
|
||||
|
||||
FTD Cycle
|
||||
|
||||
Below are the links to my posts on the FTD cycle:
|
||||
|
||||
[Post 1](https://www.reddit.com/r/Superstonk/comments/myxei0/hank_returns_with_some_ftd_cycle_dd/) [Post 2](https://www.reddit.com/r/Superstonk/comments/mzd0sf/dd_update_from_hank_ftd_cycle/) [Post 3](https://www.reddit.com/r/Superstonk/comments/mzzb65/quick_update_from_hank_ftd_cycle/) [Post 4](https://www.reddit.com/r/Superstonk/comments/n1dy1a/a_hankdate_gme_ftd_cycle/) [Post 5](https://www.reddit.com/r/Superstonk/comments/n1wqlg/huge_ftd_cycle_dd_update_from_hank/)
|
||||
|
||||
Essentially, the FTD cycle is the idea that because shorts have continuously shorted GME, covered it with borrowed shares, and used naked shorts, their short exposure is multiples higher than the actual shares of GME in existence. Because of this and SEC rules forcing them to cover every 35 days, there are predictable price and volume hikes on the chart that coincide with them covering. As every FTD cycle passes, the price to cover gets more and more expensive, and more and more shares are required (naked or not) to maintain their position, which makes it progressively more expensive and progressively increases their position. This increase in expense is going up exponentially, so each cycle is more expensive for them to keep their positions, and eventually, the pressure will be too much for them and they will be forced out. Because heavy naked shorting probably started in early 2020 for GME, with each passing month their exposure increases drastically because a naked short gives them double the obligation (they must cover the short and the nakedly created share). This is why I believe that their current short position is multiples higher than the amount of GME shares in existence. Therefore, they've dug themselves into a hole (hole is an understatement, it's more like an abyss) that they cannot get out of and are trying to slowly unravel the FTD cycle, which is only possible if apes sell. Because apes have not sold, the FTD cycle continues and gets progressively more expensive and they cannot get out of the abyss, they can only kick the can down the road. Similar to the January squeeze, eventually the pressure will be too much and they will be forced out. Here is a picture of the FTD cycle on the charts from one of my posts:
|
||||
|
||||
[](https://preview.redd.it/aptkte0kvhx61.png?width=1518&format=png&auto=webp&s=f95b969d4b3acd1ef5c318065d224cfb192271cd)
|
||||
|
||||
This doesn't give you the full picture of the FTD cycle but it gives you a generalization of its thesis. If you want to learn more about it, see my other posts.
|
||||
|
||||
OTC/Dark pool trading
|
||||
|
||||
*All credit for this goes to the absolute KING who is* [u/nayboyer2](https://www.reddit.com/u/nayboyer2/)*. Here is his* [*original post*](https://www.reddit.com/r/Superstonk/comments/myf505/probably_the_last_dd_youll_ever_need_to_read_the/)*.*
|
||||
|
||||
According to his post, Citadel, Virtu, and Two Sigma are and have been trading MILLIONS of GME shares in dark pools and OTC exchanges. He used publicly available data from FINRA and converted it into charts and spreadsheets (again FUCKING KING). He plotted the ownership of GME shares of these firms. He found that these firms are trading over 1000 shares of GME for every one that they own (let that sink in). He also found that an exorbitant amount of shares are trading in dark pools when compared to the float. This data is irrefutable because, again, it is publicly available FINRA data (i.e. he's not just making a theory, he's just saying what the data shows). Here are some important screenshots from his post:
|
||||
|
||||
[](https://preview.redd.it/owemuaknvhx61.png?width=1386&format=png&auto=webp&s=f7523a863e97c3f8ecdb9e277cedfc3f0c729b26)
|
||||
|
||||
[](https://preview.redd.it/uck7fejovhx61.png?width=1150&format=png&auto=webp&s=f213f69fb05c91d7fff17739fba96b4c0782457c)
|
||||
|
||||
[](https://preview.redd.it/gjinhpepvhx61.png?width=1206&format=png&auto=webp&s=94760b5e594291ca78e7bf6a66e7e97c7daeebf2)
|
||||
|
||||
The takeaway: there is a massive amount of dark pool and OTC trading of GME, it's multiples higher than the actual float. This is just publicly available data that they've reported, so I would guess there's even more to this than we can see from public data. Seriously, check out this post if you haven't, it is a masterpiece.
|
||||
|
||||
*I am just scratching the surface of this, it's only meant to be a summary, I encourage you to read his post. I'd let him have a night with my wife ANYTIME.*
|
||||
|
||||
New Rules
|
||||
|
||||
*All credit for this goes to the absolute KING who is* [u/c-digs](https://www.reddit.com/u/c-digs/)*. Here is his* [*original post*](https://www.reddit.com/r/Superstonk/comments/mu9xed/why_were_still_trading_sideways_and_why_we_havent/)*.*
|
||||
|
||||
In his post, he theorizes that all of Wallstreet knows what's going on with GME and that we have been trading sideways for so long because Wallstreet is waiting on several crucial rules from organizations like the DTC and OCC to be passed that will essentially ensure that Citadel can't completely break the market when they go bust. The user believes that once these measures are passed, a firm (he thinks BlackRock) will put tons of buying pressure on GME and cause the squeeze because the measures would make the blow to the financial system more containable. He also points out that in a single week multiple banks broke the record for bond offerings (i.e. they want to have cash on hand). This user believes that a few institutions are in GME too deep and everyone knows it and the influx of rules is meant to make the unraveling safe for Wallstreet, therefore, Wallstreet is waiting to pounce on GME until the middle of the summer when these rules would be passed (at the latest). He gives specific rules, how they will essentially take exposure off of clearing companies and put it on members and the defaulting institutions, and shows the latest possible dates that these proposed rules may go into effect.
|
||||
|
||||
*I am just scratching the surface of this, it's only meant to be a summary, I encourage you to read his post. I'd let him have a night with my wife ANYTIME.*
|
||||
|
||||
ETF Shorting
|
||||
|
||||
*All credit for this goes to the absolute KING who is* [u/leenixus](https://www.reddit.com/u/leenixus/)*. Here is his* [*original post*](https://www.reddit.com/r/Superstonk/comments/n4axra/95_gme_etfs_3_months_of_ftds_visualized/)*.*
|
||||
|
||||
There are tons of posts about how ETFs are being shorted in order to a. put indirect pressure on GME and b. hide FTDs. I particularly liked this post because of all the charts, which make my smooth brain tingle. I won't go too far into this because most of us already know that another tactic used by HFs is to use these ETFs to put more pressure on GME and to hide FTDs. Here are some important screenshots:
|
||||
|
||||
[](https://preview.redd.it/skufmdpvvhx61.png?width=1410&format=png&auto=webp&s=27cfc9c831e755a0e15705128e1fb12ef87c0d27)
|
||||
|
||||
[](https://preview.redd.it/ulxh5cmwvhx61.png?width=1284&format=png&auto=webp&s=9f189cc3a4023fadaf2e099dd57ec72b3eb5b443)
|
||||
|
||||
*I am just scratching the surface of this, it's only meant to be a summary, I encourage you to read his post. I'd let him have a night with my wife ANYTIME.*
|
||||
|
||||
**I am not taking credit for the above three DDs. I am using their DD to contribute to my overall theory. Please see their posts as they are spectacular. These are truly KING apes**
|
||||
|
||||
How all of this fits together
|
||||
|
||||
[](https://preview.redd.it/isdrqz6yvhx61.png?width=1396&format=png&auto=webp&s=2e36c37b3e968f156657bb9b7bdd47063b038b1c)
|
||||
|
||||
So, we have the FTD cycle, Dark pool/OTC activity, ETF shorting, and upcoming rules that could benefit us. But how do all of these fit together? (again, this is just my opinion and it could be wrong). I will guide you through the conclusions I make as I go by bolding them.
|
||||
|
||||
First, the dark pool/OTC data indicates what we all already know: HFs are in a giant fucking hole, an abyss. They borrowed shares, covered those borrowed shares with borrowed shares, shorted with borrowed shares, covered those with borrow shares, and so on. They have been repeating this forever, which is why the price of GME is still so high and volatile. They do most of this covering in dark pools to suppress buying pressure and do other shady things in these dark pools so it goes unnoticed (more on that below).
|
||||
|
||||
Moreover, GME's OBV has always perplexed me. How could OBV still be this high post squeeze? The DD on dark pools explains that (i.e. they are covering on dark pools to suppress buying pressure and OBV shows that). This means that apes did not sell post-squeeze and that the HFs did indeed use naked shorts to create artificial selling pressure (OBV is the yellow line):
|
||||
|
||||
[](https://preview.redd.it/m4175igzvhx61.png?width=902&format=png&auto=webp&s=17b67302299d87b4d33a5d5c088c7f43dbc0fbcb)
|
||||
|
||||
The OTC data also explains the low volume. The funds are covering in dark pools in an attempt to suppress buying pressure, which is why volume has been so low lately. This also explains the random 1pm jumps in buy volume that I noted in a previous post. Finally, this further explains why GME reacts so strangely to catalysts - there are outside forces (OTC trading) that are currently bogging down the price. If a catalyst happens to line up with when they have to cover (i.e. February 24), then we will see positive volume, if not, there is still massive selling pressure on even positive news.
|
||||
|
||||
Furthermore, the dark pool/OTC data provides almost irrefutable evidence that 1. there is still fuckery afoot with GME, 2. the shorts have indeed dug themselves into a hole that they cannot get out of 3. the exposure that the short funds have is astronomical, and 4. unless for some odd reason all apes sell, the MOASS will in fact happen and it will happen big. Essentially, I believe that we now know exactly what's going on, we just don't know the exact numbers of it (i.e. we don't know their precise exposure or how many shares they borrow or use to short during an attack). The fact that GME's price is still insanely volatile and is trading over 5x what most analysts think it should be and the fact that an INSANE amount of volume is coming from OTC markets demonstrates that shorts still indeed have large positions are still very much IN THIS BITCH.
|
||||
|
||||
Conclusion 1: HFs are indeed in a deep hole, have not covered, and are trading in high volumes in dark pools in an attempt to kick the can down the road. All of this explains the low volume.
|
||||
|
||||
In the OTC data post, the user shows that the institutions involved in these dark pools do in fact own shares of GME; however, they are trading over 1000x the shares that they own. A few days ago, I remember seeing a post from someone who contacted Interactive Brokers asking why the borrow fee was so low (I don't remember the post but if you do please link and give user credit). The person said that GME is one of the hardest stocks to short right now but the reason that the borrow rate is so low is because there is almost zero demand.
|
||||
|
||||
Conclusion 2: GME is insanely hard to borrow right now and there is very little demand to short it
|
||||
|
||||
Next, dark pool activity helps us to further explain the FTD cycle. Why do we see these spikes in price and volume every 35ish calendar days? SEC regulations force them to cover. Why does it keep happening? The OTC data shows us that they are STILL naked shorting. Why else would there be this much OTC activity. That shows us that HFs are continuing to naked short and cover with borrowed shares every day, thus digging themselves in a deeper hole (because naked shorting creates 2 obligations - covering the short and covering the naked share) and it's getting more expensive to do so as time goes on (FTD cycle) because their short position is increasing rapidly as shown by the OTC data.
|
||||
|
||||
[](https://preview.redd.it/luan1b21whx61.png?width=817&format=png&auto=webp&s=22488dac3696615829aa4853b16daa22e9b2abd8)
|
||||
|
||||
Conclusion 3: The OTC data adds credence to the idea that the FTD cycle is getting more and more expensive and that shorts are increasing their short positions rapidly as time passes
|
||||
|
||||
So if all of this is true, why isn't some whale coming in to take advantage of it and benefit from a squeeze as many of them did in January? That's where the new rules DD comes into play. Because Wallstreet has access to better, more accurate data than is publicly available, they probably already know what we are just starting to figure out. Why else would the DTC and OCC put in all these rules related to liquidation, bankruptcy, and oversight right after the GME squeeze? Therefore, potential whales are purposely sidelining themselves until these rules are passed, so that they don't completely destroy the financial system in unraveling these short positions. If some whale came in and tried to start the squeeze now, there's a good chance that it would cause a collapse in the financial system because clearinghouses would go bankrupt from having to cover for the shorts who default, which would tank the whales' other assets; however, because of the proposed rules, doing so would only make a few institutions collapse, which would save the whales' other positions in the market.
|
||||
|
||||
Conclusion 4: Whales have purposely sidelined themselves and are waiting for the proposed regulatory rules to take effect so the squeeze doesn't destroy the financial system.
|
||||
|
||||
Back to OTC data. Why would an institution want to trade on a dark market? The first reason is to suppress buying pressure. The second reason is so that the broader market cant see what they're doing (without taking a deep dive like our ape KING did). The third reason is because they may be employing trading strategies that are borderline illegal, would cause a lot of suspicions, and would make GME dangerously volatile. Because dark pools allow institutions to trade with each other absent an exchange, I believe that this is what they're doing on those pools: they are buying and selling back and forth between each other at a rapid rate in order to drop the price. These are the short attacks that we see. Ever notice that it seems to take about half the volume for the price of GME to go down $5 (arbitrary number) as it does for it to rise $5 (arbitrary number)? This could be why. Moreover, I also believe that they are limiting their covering ONLY to dark pools to suppress buying pressure in public exchanges. Why do I believe this? If there was nothing crazy going on with GME then why is there still an asininely high amount of dark pool activity similar to what we saw during the squeeze?
|
||||
|
||||
Conclusion 5: Shorts are using dark pools to suppress buying pressure and to drop the price by rapidly trading between each other.
|
||||
|
||||
Back to the fact that it is getting harder and harder to borrow GME and there is very little interest. What I believe is happening is, as said above, these funds are rapidly trading back and forth between each other to drop the price, are borrowing shares from each other, are covering with borrowed shares, and continue to use naked shorts. HOWEVER, because the availability of borrowed shares in the broader market is drying up and because the shorts only own so many shares that they can borrow and trade between each other, their supply is drying up, so they can't continue this forever. Because apes continue to buy, the amount of shares available is further drying up. The longer these funds continue to borrow shares, make naked shorts, cover with borrowed shares, and borrow each other's shares, the more the shares available to borrow dry up. As the FTD cycle rages on, this also becomes more expensive over time. Thus, they are playing a losing game but financially cannot stop playing this game because they're in so deep. Therefore, the squeeze will happen when the supply of shares completely dries up and their short positions slowly (or rapidly) start to unravel or when the FTD cycle makes continuing their game too expensive.
|
||||
|
||||
Conclusion 6: The squeeze will happen once the availability of shares to borrow is completely dried up, which seems to be rapidly approaching.
|
||||
|
||||
[](https://preview.redd.it/4bcl5rm2whx61.png?width=1018&format=png&auto=webp&s=5d5ba7fc4d299220b605b278ee50b76331747fa4)
|
||||
|
||||
Moreover, many people have also noted that GME and AMC trade disturbingly similar in price and volume. I'll also add that this seems to be true for other stocks that were squeezed in January. Why do you think stocks like AMC, GMC, KOSS, BB, NOK, EXPR move so similarly? It's because they are all victims of the FTD cycle as well. Why do you think all of these stocks squeezed at around the same time and why do you think brokers simultaneously halted trading on all of these stocks? Because naked shorting is a cancer infecting the market. Shorts got too risky during covid and thought that all of these companies would go bust, so they abusively shorted them hoping to get the bankruptcy jackpot. Bankrupting these companies would let these funds be off the hook for covering because the company would no longer exist, so there would be no share to cover. However, J Pow then turned on the money machine and we saw the greatest recovery of all time. Realizing how bad HFs fucked up, brokers had the choice of facing bad press for restricting buying or allowing the FTD cycle to unravel and let the financial system collapse. They did the rational thing. Then, realizing that the problem was still grossly persistent, financial regulatory companies started implementing more and more rules to prevent the unraveling of this from destroying the economy when it does happen.
|
||||
|
||||
No one says this but why do you think literally every brokerage did exactly what RH did? Do you really think they all had liquidity issues? No. It's because they all knew what was happening because they had the access to the data. They knew that if they let it squeeze, it would bankrupt Citadel and they'd be on the hook for it. However, now that there are all of these new rules in place, they can allow it to happen once all of the rules are passed.
|
||||
|
||||
Conclusion 7: The FTD cycle is persistent and exemplifies the naked shorting problem in Wallstreet that Dr. Trimbath discussed.
|
||||
|
||||
[](https://preview.redd.it/jtxacny3whx61.png?width=772&format=png&auto=webp&s=8fea66e244ed1e994aa7423affaf1d618ddd1276)
|
||||
|
||||
Back to GME specifically. In one of my previous posts on the FTD cycle, I used this chart to make sense of T+35:
|
||||
|
||||
[](https://preview.redd.it/cht9r9c6whx61.png?width=1304&format=png&auto=webp&s=a424f956cc9fbed4a6e23f13923f2bf1794a6556)
|
||||
|
||||
Notice the low volume in February. I have long said that I don't think that the CFO being ousted is what caused GME to double in February, it just doesn't make sense. Instead, I believe that once brokerages turned off buying power in January, the HFs again amped up their naked shorting to get the price down to where they could possibly cover. Obviously, some people sold but OBV tells us that it wasn't enough people to get the price all the way down to $40. What explains this? Naked shorting in dark pools to disguise what's really going on. Then, at the end of February, T+35 starts coming in to play and HFs must cover for what they did to end the January squeeze. Obviously, they continued to apply more naked shorts throughout this (March 10th anyone?), so their short positions continue to grow and the FTD cycle continues to persist. Perhaps today's low volume, slightly downward price action is similar to what was happening in February (just a thought).
|
||||
|
||||
Conclusion 8: The February rise was the result of forced coverings from the January drop and demonstrates that the shorts still have large positions.
|
||||
|
||||
Back to the dark pool data. One of my favorite things from that was the fact that there is not just one player. There are multiple players in this game, which suggests that they are working in tandem. What I posit happened is that these funds all saw the same thing in early 2020: GME is struggling, covid will likely bankrupt it, so let's take some risk and apply naked shorts to hit the bankruptcy jackpot. Instead, the market roared back, GME had a slew of good news in mid-late 2020, and the shorts got themselves in this abyss because they continued to apply more and more pressure on GME. Again, a naked short makes your obligation double because you have to pay back the share that you borrowed and you also have to fulfill the obligation of the share you nakedly created. So every time they apply more pressure, sure the stock goes down, but their net short position goes up exponentially. This is why the FTD cycle persists. Just to kick the can down the road, they use synthetic longs and ETFs to hide and delay their FTDs.
|
||||
|
||||
Conclusion 9: Funds are working in tandem because they are both in too deep but it is futile and is just delaying the inevitable.
|
||||
|
||||
But what are some of their other tricks? As we know, they like to hide/delay their FTDs through synthetic longs (ITM calls). But what they also do is short the ETFs that contain GME. This applies much less efficient pressure to GME and shows that they are getting really desperate. How do we know that they are doing this? Well, just look at the FTD numbers of those ETFs.
|
||||
|
||||
Conclusion 10: Their activity on GME-containing ETFs demonstrates how desperate they are getting
|
||||
|
||||
But wait a minute, Hank. Do you have any actual hard data that can back up the FTD squeeze theory? If you would've asked me this any other day except for today the answer would have been no. Thanks to [u/AOCsquad126](https://www.reddit.com/u/AOCsquad126/) and [u/leenixus](https://www.reddit.com/u/leenixus/) [for this beauty of a post](https://www.reddit.com/r/Superstonk/comments/n5trot/i_dont_to_tout_the_horn_without_knowing_anything/). In short, the post uses a model with a linear margin call price trigger on GME. It's very fascinating and I suggest you take a look. In short, I believe this post gives further credence to the idea that the shorts are bleeding more day by day because it is getting more and more expensive to maintain their positions. Why do you suppose it gets more expensive day by day? Oh I don't maybe it's because of they keep borrowing and borrowing. Finally, the OP makes an excellent point here that, when they get margin called, we will not know for up to T+35 days (he gives the example that Archegos was margin called in February but the effects weren't seen for another month). This gives further credence to the idea that the MOASS will come randomly and out of nowhere. Here's a screenshot from the post:
|
||||
|
||||
[](https://preview.redd.it/q2xvimp7whx61.png?width=1354&format=png&auto=webp&s=edeefebb873ff9330aae2bd294d931f6deb7daa3)
|
||||
|
||||
Conclusion 11: I like the stock. I like the FTD cycle.
|
||||
|
||||
Putting all of the conclusions together and putting them in context:
|
||||
|
||||
Below is what I believe is the timeline of GME thus far. This is a summary of my theory of everything:
|
||||
|
||||
[](https://preview.redd.it/3sn7qdio0ix61.png?width=822&format=png&auto=webp&s=cde72d5259a47902b70d41ea9fba052b531322f0)
|
||||
|
||||
Conclusion 12: Tendies
|
||||
|
||||
[](https://preview.redd.it/jjldjgb9whx61.png?width=705&format=png&auto=webp&s=49ce44de339ed741405e21fffe1fe2bc90d1eaf6)
|
||||
|
||||
Some other thoughts
|
||||
|
||||
Catalysts
|
||||
|
||||
It has long been a sentiment that a catalyst will cause the MOASS. Though I wholeheartedly agree that this COULD be true, I want to emphasize that is not the only option. First, as I've said above GME reacts strangely to catalysts because of FTDs and shorting (doubled on CFO ousting but went down on RC being named daddy/master/lord/senpai of the board). We still have many possible catalysts: CEO announcement, partnerships, crypto shit, etc. However, it's important to remember that January was not caused by a catalyst. Sure, the events leading up to January were caused by catalysts (SI being sky-high, media coverage, RC, tweets, etc.); however, the actual squeeze in January wasn't spurred by a catalyst. It was just the shorts being forced to cover due to the price rising. After seeing how GME reacts to catalysts, I believe that the squeeze will not happen because of a catalyst but will happen in a similar fashion to January: completely unexpected because the shorts were forced to cover. Could a catalyst cause the squeeze? Hell yes. I personally think that a catalyst might cause it to rocket, but similar to January, the real squeeze will happen after an initial rocket due to catalysts and will be the result of the shorts being forced to throw in the towel, not a catalyst squeezing them out. Essentially: catalyst-> rapid price jump but not squeeze (think early January) -> parabolic price jump caused by rapid price jump squeezing out shorts (think January squeeze).
|
||||
|
||||
How this is disturbingly similar to 2008
|
||||
|
||||
In 2008 institutions sold risky mortgages to people who shouldn't have qualified for them. That was bad. They also created mortgage-backed securities with these risky mortgages in them and sold them across Wallstreet, which gave the entire financial system exposure to bad mortgages. That was worse. They then created collateralized debt obligations that were essentially bets for and against a default on these loans (i.e. they made derivatives of these MBS). That was fucking terrible. They then made synthetic CDOs, which were bets on the reverse side of the CDO (i.e. a derivative of a derivative). That was a nuke. All the while half of Wallstreet was buying credit default swaps, which are derivatives that bet for a default to happen. This was Wallstreet canabalizing itself. That was a huge generalization of 2008, though. So essentially, the derivates market for these bad mortgages was about 10-50x more than the value of the actual underlying asset (the MBS), which is why when the underlying failed, it almost caused another Great Depression. By making bets on bets on risky assets, they created a web that, once volatility happens, would unravel (because once the underlying fails the derivatives fail and the derivatives of the derivatives fail). They essentially dug themselves into a hole that you couldn't get out of because they made all of these derivative bets that far exceeded the actual value of the underlying asset. Sound familiar to what I said above? Financial crises happen when institutions place risky bets and make bets on these bets. When they make layers of derivates like this, it makes the system seem like it's booming for a while but as soon as something goes bad, it all unwinds in a tragic way. That's what's happening now with these webs of naked shorts.
|
||||
|
||||
The Future
|
||||
|
||||
With all of this in mind, here are my thoughts about the future. As I have said, I believe that the FTD cycle is slowly chewing away at the shorts, and I think that the dark pool data helps confirm this. I also believe that the timing and contents of the aforementioned rules is very interesting.
|
||||
|
||||
Therefore, I believe that either A. the pressure on the shorts will overwhelm them and their positions will be forced to unravel, or B. with the safeguards put in place from the new rules, a whale will come in and unravel the positions for them.
|
||||
|
||||
This post has no dates. I personally like posts with dates if they have a ton of research behind them and are logical. However, as we've seen, though some people can predict certain price action, no one can predict the MOASS. The MOASS will come, we just won't know when because we don't know exactly how much blood the MMs have lost yet and how close they are to dying. All we know is that they've lost a lot of blood and keep losing more. So, none of us will see the MOASS coming, but it will come (just like my wife when she's with the mailman).
|
||||
|
||||
Though I have no dates as to the happening of the MOASS, I leave with this:
|
||||
|
||||
[](https://preview.redd.it/paptvkxbwhx61.png?width=577&format=png&auto=webp&s=2f7e28415c832a42569db24ad4c22274933b4814)
|
||||
|
||||
If you have FUD, read this
|
||||
|
||||
I, like all of you, have been a victim of FUD. I often think to myself, "they know more than us, there's no way they'll let this happen again" or "it's been trading sideways, it's all over" or "they have more resources than us and will end this quick." FUD is a bitch. FUD is the type of girl that your wife's boyfriend avoids. To help some of you who are experiencing FUD, here is what I always remember whenever those thoughts enter my head:
|
||||
|
||||
The thesis of this part of the post is that what's happening to GME is not normal, which validates all/most of the topics discussed in this sub. Yes, a short squeeze to that magnitude is abnormal, but what really gets me with GME is what happened AFTER the squeeze. Find any stock that has been massively squeezed, and you will see that it doesn't behave like GME has been for the past few months. If GME would have held around $30-50 like it did post-squeeze and didn't rocket up to 100>200>300 in the past few months with all of this crazy trading action then all of these theories would be very farfetched. However, as I have said a billion times, the chart and data are all that you need to see to know that this stock is still not normal.
|
||||
|
||||
Therefore,
|
||||
|
||||
It is not normal for a stock double in the span of a few hours on news of a CFO getting fired (2/24). It is not normal for a stock to open at above 250, go to 350 before noon and then fall down to 172 all before 2pm on absolutely no news (3/10). It is not normal for a stock to tank on earnings and then literally make back those losses the very next day on absolutely no news (3/25). It is not normal for a stock to double on news of the CFO being ousted but to go down 5% on news that the key player (Cohen) is being announced as the senpai of the board of directors. It is not normal for a stock to stay above $150 when every Wallstreet analyst says it's not worth more than $50. It is not normal for a stock to have an extremely negative beta. It is not normal for a stock to fluctuate in value by 10x over the span of a few months (up AND down) on very little fundamental news. It is not normal for multiple forums talking about the same stock to be infiltrated repeatedly by suspicious accounts trying to create FUD (i.e. shills really on exist on forums discussing GME, not regular retail investing forums like [r/investing](https://www.reddit.com/r/investing/) and [r/stocks](https://www.reddit.com/r/stocks/) (which I am banned from hahahaha)). It is not normal for a stock to be universally hated by mainstream finance yet still be trading over 5x what they believe the fair value to be. It is not normal for a stock to get squeezed, fall back down, then almost regain its squeeze price on no fundamental news. It is not normal for a stock to have OTC activity that is multiples higher than its daily volume and float. It is not normal for that OTC volume to be comparable to the January squeeze levels despite "ThE sQuEeZe BeInG oVer." It is not normal for DTC to be implementing a slew of rules about the very things we are talking about. It is not normal for a stock to have random volume spikes in the middle of the day on absolutely no news. It is not normal for ETFs containing said stock to be abusively shorted as well. I could go on and on. If you have FUD, come back to this, and you'll realize that though we might be early, we're not wrong.
|
||||
|
||||
Does it really make sense for GME to be trading on volume below 5 million consistently (on Wednesday we hit a number we haven't seen since early October) when every boomer analyst says it's 5x overvalued in price and there's an insane amount of interest from retail investors? No. It makes zero sense. On one hand, you'd expect those boomers to short it because it's so overvalued, but they're not. That's because it's almost impossible to borrow (unless you're a MM) and they know what's going on. On the other hand, you'd expect the media to be saying "this is crazy, it shouldn't be 5x overvalued, short short short" every day, but they aren't. That's because they know what's going on. Apes, I'll say it again, THIS ISN'T NORMAL!
|
||||
|
||||
Conclusion
|
||||
|
||||
Well apes, if you've made it this far I applaud you. That was a mouthful to say the least. Thank you for sticking with me to the end of it, this was probably my most in-depth DD and also the one I enjoyed making the most. Please take this with a grain of salt and remember that it is just my opinion, you should always do your own DD before making any decisions.
|
||||
|
||||
Apes, I hope you realize what this community has done because it's astounding. Between WSB, GME, and SuperStonk, regular, novice investors have pieced together the puzzle that only large financial institutions are usually able to do. What's even more amazing is that this was done using limitedly available, often incomplete public data. The level of complexity of some of the DDs that I've read is on the level of publishable. The volume, complexity, and completeness of data in this sub is spectacular. Fuck Robinhood's "DeMoCrAtIzIng iNvEsTiNg" bullshit. This sub is democratizing investing, and let me tell you, it's been an honor to be a part of this community. As always...
|
||||
|
||||
Stay strong, apes.
|
||||
|
||||
TL;DR
|
||||
|
||||
See "Putting all of the conclusions together and putting it in context" section with the 17 numbered points.
|
||||
|
||||
********** I am not a financial advisor, this is not financial advice **********
|
||||
@ -0,0 +1,222 @@
|
||||
Here is a Complete Compilation Documenting the Existence of Every Market Manipulation Tactic Used by Hedge Funds in this GameStop Saga
|
||||
======================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Golden_D9](https://www.reddit.com/user/Golden_D9/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/n8mizw/here_is_a_complete_compilation_documenting_the/) |
|
||||
|
||||
---
|
||||
|
||||
[Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1)
|
||||
|
||||
TL;DR To all the shills screaming "SuPeRsToNk iS lItErAlLy QaNoN", here is a complete list of market manipulation tactics used by Hedgies so far as documented by PhDs, professors, CEOs, and people that are generally in all accounts way smarter than you. Enjoy. 💎🙌 🚀
|
||||
|
||||
-------------------
|
||||
|
||||
As shills and FUD posts continue to attack apes on their personal decisions to hold GME shares, I feel that it is necessary to create a central hub displaying every market manipulation tactic used by hedge funds in this GameStop Saga so far. To be absolutely honest, the mere fact that there are shills that care so much about other people's personal financial decisions is basically proof that the GameStop situation is not over. That being said, I understand that there are people suspicious of [r/Superstonk](https://www.reddit.com/r/Superstonk/) and that actions by certain members in this subreddit is definitely not helping. If there are any journalists willing to report on this incident, this can be a good place to start researching as well.
|
||||
|
||||
This compilation will start with the overall thesis on Naked short selling, the influence of the DTCC, and then go on in a somewhat chronological order of the discovered tactics.
|
||||
|
||||
Naked Short Selling
|
||||
|
||||
Top of the list is obviously the book Naked, Short and Greedy by Dr. Susanne Trimbath. Below is a link to buy her book.
|
||||
|
||||
- Naked, Short and Greedy--- Wall Street's Failure to Deliver
|
||||
|
||||
- <https://spiramus.com/naked-short-and-greedy>
|
||||
|
||||
If you are interested in the impact of Naked short selling on proxy voting, here's an article recommended by Dr. Trimbath during the Superstonk AMA. It was written by Bob Drummond and published in *Bloomberg Markets*.
|
||||
|
||||
- Corporate Voting Charade
|
||||
|
||||
- <https://web.archive.org/web/20060421085925/http://www.rgm.com/articles/FalseProxies.pdf>
|
||||
|
||||
And of course, here's the link to the AMA interview with Dr. T herself.
|
||||
|
||||
- [r/Superstonk](https://www.reddit.com/r/Superstonk/) Live - Dr. Susanne Trimbath, PhD - April 29, 2021
|
||||
|
||||
- <https://www.youtube.com/watch?v=fGVY2Kco8ng&t=2451s>
|
||||
|
||||
If you simply want a fairly concise version of what is naked short selling, here is an article published in *The Journal of Trading* by Robert Brooks and Clay M. Moffett. You should be able to finish this in around 45 minutes.
|
||||
|
||||
- The Naked Truth: Examining Prevailing Practices in Short Sales and the Resultant Voter Disenfranchisement
|
||||
|
||||
- <https://csbweb01.uncw.edu/people/moffettc/about/Research%20Papers/IIJ-JOT-BROOKS.pdf>
|
||||
|
||||
If you prefer to listen to a business CEO instead of an academic, here's a lecture recorded by Patrick Byrne, CEO of [Overstock.com](https://overstock.com/).
|
||||
|
||||
- Dark Side of the Looking Glass -- UNCUT and intact audio
|
||||
|
||||
- <https://www.youtube.com/watch?v=qtkaMx12otQ&t=2323s>
|
||||
|
||||
And here's a basic 4-minute video explaining what is Naked short selling by Patrick Byrne.
|
||||
|
||||
- Patrick Byrne: What is Naked Shorting?
|
||||
|
||||
- <https://www.youtube.com/watch?app=desktop&v=BdBe5_8z53A>
|
||||
|
||||
If you prefer to watch documentaries instead, here's a documentary laying out the basics of Naked short selling directed by Kristina Leigh Copeland. Must watch if you have no idea what's going on.
|
||||
|
||||
- The Wall Street Conspiracy Full Movie Free Online With Permission of Owner.
|
||||
|
||||
- <https://www.youtube.com/watch?v=Kpyhnmd-ZbU>
|
||||
|
||||
If you prefer to read blog posts instead, here's a series of blog posts written by Larry Smith, someone who has worked on Wall Street for nearly 30 years.
|
||||
|
||||
- Part 1 in a Series of Reports on Blatant, Widespread Stock Manipulation that is Enabled by Illegal, Naked Shorting
|
||||
|
||||
- <https://smithonstocks.com/part-1-in-a-series-of-reports-on-blatant-widespread-stock-manipulation-that-is-enabled-by-illegal-naked-shorting/>
|
||||
|
||||
If you want a super technical explanation on how profitable Naked short selling and general manipulative short selling behaviours are, here's a paper written by Professor of Finance at Fordham University, John D. Finnerty. This paper is reposted by the SEC itself.
|
||||
|
||||
- Short Selling, Death Spiral Convertibles, And The Profitability of Stock Manipulation
|
||||
|
||||
- <https://www.sec.gov/comments/s7-08-08/s70808-318.pdf?fbclid=IwAR25gnSvXR0Fo0FCVrzlgmnwiN4MikTgxAKU5jQFBLNQ__GEzvYAtPFB7cI>
|
||||
|
||||
For some bonus sources, here is a letter to the SEC written by Dr. Jim DeCosta talking about Naked short selling abuse. Full letter here.
|
||||
|
||||
- Letter by Dr. Jim DeCosta
|
||||
|
||||
- <https://www.sec.gov/comments/s7-08-08/s70808-428.pdf>
|
||||
|
||||
DTCC
|
||||
|
||||
If you want to know all about the DTCC and how you don't actually own the stocks that you have, here's a paper written by Prof. David C. Donald,
|
||||
|
||||
- The Rise and Effects of the Indirect Holding System: How Corporate America Ceded Its Shareholders To Intermediaries
|
||||
|
||||
- <https://www.ilf-frankfurt.de/fileadmin/_migrated/content_uploads/ILF_WP_068.pdf>
|
||||
|
||||
Short Ladder Attacks (aka Wash Trades)
|
||||
|
||||
One of the first uncovered tactics (allegedly) used by hedge funds are Short Ladder Attacks. For months shills have claimed that Short Ladder Attacks do not exist and are created by "Wall Street Bet conspiracy theorists". Turns out, we simply got the name wrong--- Short Ladder Attacks are actually called Wash Trades. The only reason I added "allegedly" is because Wash Trades are, in fact, very illegal.
|
||||
|
||||
- Wash Trading
|
||||
|
||||
- <https://www.investopedia.com/terms/w/washtrading.asp>
|
||||
|
||||
Here is ex-Citadel employee Dave Lauer confirming that wash trades could happen.
|
||||
|
||||
- AMA with [u/dlauer](https://www.reddit.com/u/dlauer/) from earlier today. 🚨awesome interview🚨 All the short ladder attacks we've been talking about, price manipulation? Yup. So amazing to have a true wrinkle brain let us know what's going on. I highly recommend you watch the full video. Thanks [u/jsmar18](https://www.reddit.com/u/jsmar18/)**.**
|
||||
|
||||
- <https://www.reddit.com/r/Superstonk/comments/n5svjw/ama_with_udlauer_from_earlier_today_awesome/>
|
||||
|
||||
Edit: Now, we have evidence that Wash Trades exist, we have evidence that Wash Trades could technically happen in Citadel. But do we have evidence that Citadel actually committed Wash Trading? Now, we don't know if they did this time, but we *definitely know* that they have committed Wash Trading *in the past*. Here is some direct evidence. Citadel was fined a grand total of $115,000 on 1/9/2014 for alleged Wash Trading. Check out Disclosure 40 in this document. (Credits to u/[scienceismydogma](https://www.reddit.com/user/scienceismydogma/))
|
||||
|
||||
- BrokerCheck Report--- Citadel Securities LLC
|
||||
|
||||
- <https://files.brokercheck.finra.org/firm/firm_116797.pdf>
|
||||
|
||||
-------------------
|
||||
|
||||
It is important to note that all of the following allegations came up *after* the 28th of Jan. This is concrete proof that the GameStop situation is *not* over and that shorts have *not* covered.
|
||||
|
||||
Shorting Through ETFs
|
||||
|
||||
Shills are quick to jump in and say things like "tHeY'rE uSiNg OlD dAtA" when it comes to the GME Short Interest. But what if they're not shorting GameStop directly but indirectly through ETFs that *contain* GME? What if hedgies have gone so desperate that they are shorting the entire Russell 2000? Here is a paper written by Prof. Richard B. Evans, a professor from the University of Virginia. Interestingly, his last edit was in March of 2021 to include in the GameStop situation.
|
||||
|
||||
- ETF Short Interest and Failures-to-Deliver: Naked Short-Selling or Operational Shorting?
|
||||
|
||||
- <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2961954>
|
||||
|
||||
If you prefer to watch lectures instead, here's a lecture Prof. Evans did on the same paper.
|
||||
|
||||
- ETF Short Interest and Failures-to-Deliver: Naked Short Selling or Operational Shorting?
|
||||
|
||||
- <https://www.youtube.com/watch?v=ncq35zrFCAg&t=1641s>
|
||||
|
||||
And here are the ppt slides for the lecture.
|
||||
|
||||
- PowerPoint Slides
|
||||
|
||||
- <https://jacobslevycenter.wharton.upenn.edu/wp-content/uploads/2018/09/Evans-Slides.pdf>
|
||||
|
||||
Hiding/ Resetting FTDs in Deep ITM Options
|
||||
|
||||
This is a more technical theory that claims Market Makers are hiding/ resetting FTDs through deep ITM options. Personally, I'm not an options expert, so I haven't been following this theory this closely. But you know who *is* an expert on this theory? John W Welborn at Dartmouth College. You know who else is an expert? The bloody SEC. Here are their papers.
|
||||
|
||||
- Married Puts, Reverse Conversions and Abuse of the Options Market Maker Exception on the Chicago Stock Exchange (John W Welborn)
|
||||
|
||||
- <https://www.deepcapture.com/wp-content/uploads/2007.10.09-J-Welborn-Married-Puts-and-Reverse-Conversions.pdf>
|
||||
|
||||
- Strengthening Practices for Preventing and Detecting Illegal Options Trading Used to Reset Reg SHO Close-out Obligations (SEC)
|
||||
|
||||
- <https://www.sec.gov/about/offices/ocie/options-trading-risk-alert.pdf>
|
||||
|
||||
Buying Shares in Dark Pools & Selling Them in the Open Market
|
||||
|
||||
This theory suggests that Money Makers and Hedge Funds (allegedly) buy shares in Dark Pools like the FADF, and then selling them in the open market, thus suppressing the price of GameStop. The original evidence can be found here in this Reddit post.
|
||||
|
||||
- Sells through the major exchanges. Buys through the FADF - a dark pool.
|
||||
|
||||
- <https://www.reddit.com/r/Superstonk/comments/mpebkz/sells_through_the_major_exchanges_buys_through/>
|
||||
|
||||
Now, are there any credible individuals or groups who support this claim? Shills are quick to draw a literal dark pool in a meme and laugh at it on [r/gme_meltdown](https://www.reddit.com/r/gme_meltdown/). Dennis Kelleher, CEO of the non-profit group Better Markets, risked his reputation to file an amicus brief against Citadel. You can find it here.
|
||||
|
||||
- Better Markets Amicus Brief in Citadel v. SEC
|
||||
|
||||
- <https://bettermarkets.com/sites/default/files/Better%20Markets%20Brief%20in%20Citadel%20v.%20SEC.pdf>
|
||||
|
||||
Payment for Order Flow
|
||||
|
||||
After all the market manipulation we have seen, the problem of Payment for Order Flow seems oddly insignificant. Personally, I believe that the only reason this was brought up in the hearing was to purposely ignore the many elephants in the room. But if anyone is interested, here's the testimony of Dennis Kelleher from the second GameStop hearing.
|
||||
|
||||
- Testimony of Dennis Kelleher Before the U.S. House Committee on Financial Services Hearing: "Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide, Part II"
|
||||
|
||||
- <https://bettermarkets.com/sites/default/files/Kelleher%20HFSC%20Testimony%20GameStop%20Hearing%203-17-2021%20FINAL%20%282%29.pdf>
|
||||
|
||||
Bonus Material
|
||||
|
||||
Apart from the above (alledged) tactics, there are many more that we simply can't prove. The reason for restricting the buying of GME and many other "meme stocks" by Robinhood, the collusion with the media to pump up other unrelated investments and to reduce the attractiveness of GME, and many more. But as a bonus piece, here is the host of CNBC show *Mad Money*, Jim Cramer, bragging on live TV how he and other hedge funds manipulate the stock market.
|
||||
|
||||
- Jim Cramer explaining the basics of stock market manipulation
|
||||
|
||||
- <https://www.youtube.com/watch?v=8DJlogbrDcA>
|
||||
|
||||
And here is Robinhood CEO, Vlad Tenev, lying under oath when asked about liquidity problems.
|
||||
|
||||
- GameStopped Hearing May 6th -did Vlad Tenev of Robinhood commit perjury during the Feb 18 hearing?
|
||||
|
||||
- <https://www.youtube.com/watch?v=j0CSzev8T4Q>
|
||||
|
||||
For a full list of how malicious actors control internet forums, here's a post that details it. (Credits to [u/TheGoombler](https://www.reddit.com/user/TheGoombler/) for making the post and u/[DishwashingUnit](https://www.reddit.com/user/DishwashingUnit/) for reminding me.) Of course, no academic can confirm this, but you could basically tell by yourself that these tactics do work.
|
||||
|
||||
- PUTTING SHILLS ON BLAST, A CONCERNED /BIZ/NESSMAN HAS COME TO SNITCH ON HEDGIE SPYS. MORE INSIDE.
|
||||
|
||||
- <https://www.reddit.com/r/Superstonk/comments/mscsb5/putting_shills_on_blast_a_concerned_biznessman/>
|
||||
|
||||
Now, ok. A list of forum manipulation tactics isn't really actual evidence. Do we have actual evidence of bots infiltrating subreddits? Yes! Here are screenshots of bots pumping up obviously fake stocks with tickers such as $SSR, $CUM, and $ASS.
|
||||
|
||||
- WSB shill bots think SSR is a ticker and are spamming it🤣🤣🤣
|
||||
|
||||
- <https://www.reddit.com/r/GME/comments/lxo166/wsb_shill_bots_think_ssr_is_a_ticker_and_are/>
|
||||
|
||||
- LADIES AND GENTLEMEN, WE GOT EM
|
||||
|
||||
- <https://www.reddit.com/r/GME/comments/ly07ap/ladies_and_gentlemen_we_got_em/>
|
||||
|
||||
- Ass and Twitty
|
||||
|
||||
- <https://imgur.com/gallery/q4GECmh>
|
||||
|
||||
Last but not least, for those who would like to "know thy enemy" so to say, here is a speech by Ken Griffin uploaded in 2013.
|
||||
|
||||
- Ken Griffin Speech - Economic Club of Chicago (ECC) - May 2013
|
||||
|
||||
- <https://www.youtube.com/watch?v=9cwf-JrrE9g>
|
||||
|
||||
-------------------
|
||||
|
||||
I'd like to leave this post with two quotes from our boy Kenny taken directly from his speech above.
|
||||
|
||||
(34:29) "No company in America deserves the privilege of being too big to fail. None." ~Ken Griffin
|
||||
|
||||
(36:05) "Market discipline is a really important function. When companies are poorly managed, they fail. And that releases the resources that are trapped in poorly running businesses to explore and undertake new opportunities." ~Also Ken Griffin
|
||||
|
||||
Well Kenny, let's just say that a lot of your resources will be going to be used to "explore and undertake new opportunities." And as you've said, "No company in America deserves the privilege of being too big to fail."
|
||||
|
||||
-------------------
|
||||
|
||||
This is, of course, by no means an exhaustive list. If anyone has any other important sources feel free to put them down in the comment section. To the GME sceptics, now you have it. To all the journalists, now is the time to do your job.
|
||||
|
||||
Peace out. 💎🙌 🚀
|
||||
@ -0,0 +1,222 @@
|
||||
I've estimated the current SI% based on the SI Report Cycle and Deep ITM CALL purchases.
|
||||
========================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nc1lny/ive_estimated_the_current_si_based_on_the_si/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
Not a financial advisor. Yada yada. If you actually listen to me you might want to get your brain checked for crayons.
|
||||
|
||||
Probably no need for any more DDs from me after this one - its a cumulation of my thoughts over the past few months. People were interested in an SI% estimate so I thought, hell yeah, that's interesting shit. Why not?
|
||||
|
||||
On a side note, I've learned pretty much everything I have about the stock market from Peppa Pig. Good stuff. Definitely recommend.
|
||||
|
||||
[](https://preview.redd.it/wfiam0y2t0z61.png?width=549&format=png&auto=webp&s=49c513b5110df562a5032214966ddf0990c1c7a2)
|
||||
|
||||
Once again I'll be referencing charts from the mastermind [/u/broccaaa](https://www.reddit.com/u/broccaaa/) and their post [The Naked Shorting Scam](https://www.reddit.com/r/Superstonk/comments/mvdgf5/the_naked_shorting_scam_in_numbers_ai_detection/). Go read that shit. Seriously.
|
||||
|
||||
Also, sorry. TLDR is very difficult besides the bullets of Section 0 and my calculated result in Section 2.
|
||||
|
||||
0\. What's Going On Here?
|
||||
|
||||
I've posted a few DDs in the past, and have basically come to the conclusion of the following per the data I've seen. I'll show you a few charts from [/u/broccaaa](https://www.reddit.com/u/broccaaa/)'s post to support this:
|
||||
|
||||
- The price movements we've been seeing, both volatile moves up and down, are caused by the shorters themselves by holding back buy pressure and then unleashing it at a later date. They are the reason we see bursts of high volume and large surges on certain days. This is due to the "SI Report Loop" that they're trapped in, paired with the fact that there are no more shares left in GME and there have been no shares for quite some time. I'll go into more detail in the next section because it is the basis of the SI% calculation.
|
||||
|
||||
- They held back buy pressure from May 1 to May 12, and then it started to be unleashed on May 13. Refer to Section 1 where I discuss the SI Report Cycle.
|
||||
|
||||
- I do not believe they are delaying FTDs or hiding FTDs. Ever. They are satisfying them immediately with fake shares and simply hiding their ever-growing SI%. This is why we never see the "FTD squeeze" theory play out. They aren't juggling a pile of FTDs - they're simply adding to their ever growing short position until they inevitably get margin called from too high of a risk. (Hello??? Reverse repo loans coming out at higher frequencies lately?!)
|
||||
|
||||
- Each type of option is used for a very specific play. We see large purchases of OTM PUTs, ITM PUTs, OTM CALLs, and ITM CALLs popping up in anomalies.
|
||||
|
||||
- OTM PUTs = Used to hide their SI%. This has no effect on the price of GME because these are not being exercised and they maintain OI even until expiration. The shorters are using these to hide their SI% from the world. The main counter-argument to the MOASS is "their SI% is 20%, they covered". So if you're a shorter and you hide your SI%, you can push that narrative that you covered and hope people sell. Supporting Data: Figure 1, PUT OI Versus SI%. Check out how SI% drops when PUT OI skyrockets.
|
||||
|
||||
- ITM PUTs = Used to flash crash the price. This is an expensive move and I believe we only saw this happen once, on March 10. This is a last-ditch effort move where you mass exercise ITM PUTs to crash the price down from a critical point. If you don't remember - March 10 the price hit $350 before being flash crashed down. They have purchased up many more ITM PUTs lately, so they might attempt this again. Supporting Data: Figure 2, PUT OI For Options, March 9 to March 11. Look at how the PUT OI dropped on March 10, indicating mass exercise of options to flash crash.
|
||||
|
||||
- OTM CALLs = Used by other large players who want a profit. [We only just recently started seeing these from what I can tell](https://www.reddit.com/r/Superstonk/comments/nafcuh/a_couple_deep_itm_puts_and_lots_of_otm_calls_were/). I'm assuming that because these just started popping up that other big players are looking to make some cash. The ones that were purchased expire on July 16, 2021. They might be hoping for the squeeze before then and maybe thought $140 was the bottom.
|
||||
|
||||
- ITM CALLs = Used by shorters to filter synthetic shares through and satisfy FTDs. These purchases occur a lot when FTDs pile up. I believe that they continue to use this in conjunction with Citadel in order to fulfil FTDs because there is no liquidity. These options have an effect on price because they are immediately exercised so that the shares can be delivered. Supporting Data: Figure 3, ITM Call Volumes Versus FTDs. Deep ITM CALL volume skyrockets when FTDs increase.
|
||||
|
||||
- And my most important finding: shorts r fuk
|
||||
|
||||
[](https://preview.redd.it/bz6rqprd70z61.png?width=1848&format=png&auto=webp&s=6af2d251b49b225cfc94a8b8ecdfbda05b371e87)
|
||||
|
||||
Figure 1: PUT OI Versus SI%
|
||||
|
||||
[](https://preview.redd.it/br8zshfy70z61.png?width=792&format=png&auto=webp&s=17a336296450a063c9d656891fc0ce95cc74ab56)
|
||||
|
||||
Figure 2: PUT OI For Options, March 9 to March 11
|
||||
|
||||
[](https://preview.redd.it/8haclqqp80z61.png?width=1894&format=png&auto=webp&s=ea99b5a40cd13293e51f68e9a99e3a15e70a5196)
|
||||
|
||||
Figure 3: ITM Call Volumes Versus FTDs
|
||||
|
||||
1\. There Are No Shares Left. Every Share Being Bought Is Synthetic
|
||||
|
||||
Well, at least most of them are synthetic. A vast majority are synthetic due to SI% being over 100% since December. You don't just suddenly find liquidity in GameStop after naked shorting the shit out of it. It's going to have to be continuously naked shorted (and produce synthetics) to satisfy buyers until the MOASS. Otherwise, whoopsie. They'll have to start unwinding a bunch of FTDs from being forced to deliver (and find the shares). So instead of that route, they'll make fake shares for the FTDs.
|
||||
|
||||
I've been trying to understand what the hell has been going on with the price. Why did it surge in January? Why did it surge in February? Why March? Why did we see volatile jumps all over the place? Why does buying pressure seemingly get negated? T+13? T+21? T+35? No, no, no. It is all SI Report Loop. They're stuck in that loop and can't get out. I've talked about this in [my other DD](https://www.reddit.com/r/Superstonk/comments/n792mf/all_shorts_must_cover_theyre_entering_the_danger/) but I'll recap because it's very relevant here for why we can use ITM CALLs to calculate SI%:
|
||||
|
||||
The shorters are stuck in a loop revolving around [Fina Short Interest Reporting](https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest). What exactly is this?
|
||||
|
||||
> FINRA requires firms to report short interest positions in all customer and proprietary accounts in all equity securities twice a month.
|
||||
|
||||
There's three columns on that link. What are they:
|
||||
|
||||
- Settlement Date: The date at which short interest positions must be determined.
|
||||
|
||||
- Due Date: The date at which the report of the SI from the settlement date is due by.
|
||||
|
||||
- Exchange Receipt Date: The date when FINRA finalizes the reports and delivers them.
|
||||
|
||||
You want to make sure that your short positions are hidden by the Settlement Date so that it pops up to the world on the Receipt Date. For example, they opened up a shitload of OTM PUTs (Figure 1, PUT OI Versus SI%) prior to January 29th Settlement. Upon February 9th, SI% dropped like a rock. As long as short positions are hidden or covered by the Settlement date, then the receipt date will not take those into account.
|
||||
|
||||
Refer to Figure 1 on PUT OI skyrocketing when SI% dropped. At that point in time (early February), they could claim to the world that they covered, and they did claim that, but they actually just hid their short position from the world's eyes.
|
||||
|
||||
Here's a copy/paste of the dates for 2021. I'm going to only copy the ones through the start of June:
|
||||
|
||||
| Settlement Date | Due Date | Exchange Receipt Date |
|
||||
| --- | --- | --- |
|
||||
| January 15 | January 20 | January 27 |
|
||||
| January 29 | February 2 | February 9 |
|
||||
| February 12 | February 17 | February 24 |
|
||||
| February 26 | March 2 | March 9 |
|
||||
| March 15 | March 17 | March 24 |
|
||||
| March 31 | April 5 | April 12 |
|
||||
| April 15 | April 19 | April 26 |
|
||||
| April 30 | May 4 | May 11 |
|
||||
| May 14 | May 18 | May 25 |
|
||||
| May 28 | June 2 | June 9 |
|
||||
| June 15 | June 17 | June 24 |
|
||||
|
||||
So we can say that between each Settlement Date is a loop where they'll have new shorts open up, and then they want to hide those new shorts by the next Settlement Date so that it doesn't appear on the SI% report and increase it. (Imagine if one day we saw SI% jump back up from 20% to 140% or more. Imagine the headlines. They can't risk that happening).
|
||||
|
||||
And what exactly goes on between each loop? Let me bring up my handy-dandy chart again before continuing. I've plotted the Settlement Dates here and boxed volatility moments. You'll see that there is ALWAYS a volatile move up and a volatile move down between these dates.
|
||||
|
||||
[](https://preview.redd.it/il7rvu09d0z61.png?width=1423&format=png&auto=webp&s=e80d44e1b085ef132070f37c5cc45171519ca58e)
|
||||
|
||||
Figure 4: SI Report Loop And Volatility
|
||||
|
||||
Here's what I am assuming happens:
|
||||
|
||||
1. Retail starts buying. They (Citadel & Co) create synthetics to match this buy pressure because there's no liquidity/no shares available. This negates buy pressure and any additional shorts (iborrowdesk) helps drive the price downward.
|
||||
|
||||
2. Retail doesn't get their shares delivered. FTDs start piling up. The synthetics created in #1 and the shorts that were opened in #1 need to be hidden by the next SI report date otherwise it will pump the SI% up again. The FTDs must be satisfied as well or it will start an unwinding of their massive web of bullshit.
|
||||
|
||||
3. They feed these synthetics into Deep ITM CALLs that are then purchased up, exercised, and used to satisfy the FTDs that were created by retail buying. This process drives the price up. Retail now owns more fake shares and their overall short position continues to grow.
|
||||
|
||||
4. Combination of #1 and #3 cancels out the downward pressure on the price. GME creates a higher low as long as retail didn't sell. If you look at the GME price chart, you'll notice how it continues to create a higher floor between each SI Report Cycle. Basically, the "true" GME price is revealed after #1 and #3 cancel each other out because it shows how retail buying increased the price relative to the prior SI Report Cycle.
|
||||
|
||||
5. Any additional shorts they have will be pushed under the rug with OTM PUTs.
|
||||
|
||||
Each cycle they continuously grow an ever larger short position and thus an ever larger SI% with these synthetics and additional borrowing. Meaning they continue to have higher risk, and their margin call price slowly moves downward. They keep making it worse for themselves. Every cycle they spend a little money kicking it down the road. Every cycle the price floor rises. Every cycle they increase their short position.
|
||||
|
||||
You know how we see >=50% short volume each day? That's most likely them pairing 1:1 with retail buys for synthetics so that they can be later delivered through ITM CALLs. A bold assumption of course, but it could be relevant and might explain why we've been seeing that data of short volume.
|
||||
|
||||
That's why I believe that the volatile price movements both up AND down are caused by the shorters themselves by holding back buy pressure and then unleashing it at a later date. They are the reason we see bursts of high volume and large surges on certain days. They suppress the buy pressure with synthetics, but then must deliver those synthetics to satisfy FTDs. Upon exercising the ITM CALLs to deliver these synthetics, they cause the price to surge upward.
|
||||
|
||||
I am assuming that every one of these Deep ITM CALL purchases are synthetic-covered and thus 100 fake shares per contract.
|
||||
|
||||
2\. Assumptions In Calculating SI%, And Results
|
||||
|
||||
We're assuming that the Deep ITM CALLs are not used to hide FTDs but they are rather used to satisfy the FTDs immediately with fake shares. This is most likely why we never saw the "hidden FTDs" pop out again to support the FTD squeeze theory. Because they've already been delivered, and the synthetics keep pumping into their total SI%. So they're in the process of juggling an ever-increasing SI% position while the price also continues to rise.
|
||||
|
||||
Per [/u/Dan_Bren](https://www.reddit.com/u/Dan_Bren/), between March 1st and March 11th, inclusive, [there were approximately 27,650 Deep ITM CALLs purchased](https://www.reddit.com/r/GME/comments/m31f8b/2day_update_168_million_on_6650_deep_itm_calls/). If we assume that all of those were to fulfill FTDs and are synthetic due to no liquidity in the market, then that comes out to 27,650 * 100 = 2,765,000 synthetic shares from March 1st to March 11th.
|
||||
|
||||
In another post, on April 1st, [there were approximately 5,960 Deep ITM CALLs purchased](https://www.reddit.com/r/GME/comments/mk6e2q/106m_of_deep_itm_calls_were_purchased_on_thursday/). Likewise, this equates to 5,960 * 100 = 596,000 synthetic shares on April 1st.
|
||||
|
||||
[](https://preview.redd.it/eznmnbrc20z61.png?width=1890&format=png&auto=webp&s=c3002fadc94ca03ab92d3a4b17f322f97c2c5091)
|
||||
|
||||
Figure 5: Cumulative Deep ITM CALL Volumes, March 1st to March 11th
|
||||
|
||||
Look at the volumes between March 1st and March 11th compared to everything else. Oof. All those blips of ITM CALL anomalies is nothing compared to January and the spike in February.
|
||||
|
||||
To be conservative I'm going to ignore straight up "volume" and rather calculate SI% based on a ratio of [/u/Dan_Bren](https://www.reddit.com/u/Dan_Bren/)'s data to the volumes we see. Here's results based on March 1st to March 11th, and April 1. I'm going to do an even value closer to the lower bound of 0.25 to get our "Average". It just makes the math easier.
|
||||
|
||||
| | March 1st to March 11th | April 1 |
|
||||
| --- | --- | --- |
|
||||
| Cumulative ITM Calls | 27,650 | 5,960 |
|
||||
| Cumulative Volume | ~110,000 | ~14,000 |
|
||||
| Ratio of Volume to CALLs | ~0.25 | ~0.42 |
|
||||
| "Average" Ratio | | ~0.3 |
|
||||
|
||||
Since we don't have historical data prior to 3/1, I'm going to use these two data points (March 1-March 11, and April 1) as our estimated "synthetics created" per volume.
|
||||
|
||||
With a conservative estimate, we'll say that we get 30 synthetic-covered CALLs that are exercised for every 100 volume (0.3 ratio). And thus 3,000 synthetic shares per 100 volume.
|
||||
|
||||
Let's tally it up based on Figure 5. I'm doing approximations for volumes because I do not have the data sheet that was used to create this figure. It's also easier to work with even numbers. Sorry for the long table.
|
||||
|
||||
| Date | Volume | Approximate Synthetic CALLs (Volume*0.3) | Approximate Synthetic Shares (CALLs*100) |
|
||||
| --- | --- | --- | --- |
|
||||
| Janaury 7 | 3,125 | 938 | 93,800 |
|
||||
| January 11 | 3,125 | 938 | 93,800 |
|
||||
| January 13 | 62,500 | 18,750 | 1,875,000 |
|
||||
| January 14 | 25,000 | 7,500 | 750,000 |
|
||||
| January 15 | 12,500 | 3,750 | 375,000 |
|
||||
| January 19 | 13,000 | 3,900 | 390,000 |
|
||||
| January 20 | 6,250 | 1,875 | 187,500 |
|
||||
| January 21 | 10,000 | 3,000 | 300,000 |
|
||||
| January 24 | 125,000 | 37,500 | 3,750,000 |
|
||||
| January 25 | 100,000 | 30,000 | 3,000,000 |
|
||||
| January 26 | 210,000 | 63,000 | 6,300,000 |
|
||||
| January 27 | 260,000 | 78,000 | 7,800,000 |
|
||||
| January 28 | 80,000 | 24,000 | 2,400,000 |
|
||||
| January 29 | 61,500 | 18,450 | 1,845,000 |
|
||||
| February 1 | 62,500 | 18,750 | 1,875,000 |
|
||||
| February 2 | 18,750 | 5,625 | 562,500 |
|
||||
| February 3 | 13,000 | 3,900 | 390,000 |
|
||||
| February 4 | 3,125 | 938 | 93,800 |
|
||||
| February 5 | 3,125 | 938 | 93,800 |
|
||||
| February 8 | 3,125 | 938 | 93,800 |
|
||||
| February 9 | 6,000 | 1,800 | 180,000 |
|
||||
| February 10 | 3,125 | 938 | 93,800 |
|
||||
| February 11 | 1,000 | 300 | 30,000 |
|
||||
| February 16 | 1,000 | 300 | 30,000 |
|
||||
| February 19 | 3,125 | 938 | 93,800 |
|
||||
| February 24 | 120,000 | 36,000 | 3,600,000 |
|
||||
| February 25 | 60,000 | 18,000 | 1,800,000 |
|
||||
| February 26 | 14,000 | 4,200 | 420,000 |
|
||||
| March 1 | 13,000 | 3,900 | 390,000 |
|
||||
| March 2 | 4,000 | 1,200 | 120,000 |
|
||||
| March 3 | 10,000 | 3,000 | 300,000 |
|
||||
| March 4 | 8,000 | 2,400 | 240,000 |
|
||||
| March 8 | 24,000 | 7,200 | 720,000 |
|
||||
| March 9 | 15,000 | 4,500 | 450,000 |
|
||||
| March 10 | 26,000 | 7,800 | 780,000 |
|
||||
| March 11 | 6,500 | 1,950 | 195,000 |
|
||||
| March 12 | 2,000 | 600 | 60,000 |
|
||||
| March 15 | 2,000 | 600 | 60,000 |
|
||||
| March 17 | 6,000 | 1,800 | 180,000 |
|
||||
| March 18 | 3,125 | 938 | 93,800 |
|
||||
| March 25 | 3,125 | 938 | 93,800 |
|
||||
| March 29 | 3,125 | 938 | 93,800 |
|
||||
| March 31 | 4,000 | 1,200 | 120,000 |
|
||||
| April 1 | 10,000 | 3,000 | 300,000 |
|
||||
| Total | | | 42,713,000 |
|
||||
|
||||
Yup. Assuming only 30% of the volumes resulted in actual synthetic CALLs being exercised to cover FTDs, we come up with a potential of 42,713,000 synthetic shares being created between January 7th and April 1st.
|
||||
|
||||
Just for fun though, and I'm sure some of you are curious. Let's assume 100% of the volumes were accounted for. What would that give us? Dun dun dun... 142,375,000 synthetic shares. But I'll stick with the conservative estimate for now. Just thought I'd slap that in there for fun.
|
||||
|
||||
Now let's assume that these were all NEW synthetics created because the SI was already over 100%. (Why else would they be buying these? The assumption is ITM CALLs are necessary for zero liquidity.) So we'll take the peak SI% since shitheads never covered and never will cover. The SI was 141% at its peak. Since 141% is based on 55,000,000 float, we'll say the original short position was 77,550,000, resulting in a grand total of 120,263,000 shares short as of April 1.
|
||||
|
||||
What is the theoretical SI% now with our estimated shorts/synthetics just up to April 1st if the GME float is either 55,000,000 or the theoretical 30,000,000 as of late?
|
||||
|
||||
| GME Total Float | SI% |
|
||||
| --- | --- |
|
||||
| 55,000,000 | 218% |
|
||||
| 30,000,000 | 400% |
|
||||
|
||||
Oh dear god. That's a lot of tendies.
|
||||
|
||||
They're amassing such a huge position that keeps growing every single SI Report Cycle. It's no surprise these reverse repo rates are coming out more frequently and in larger sums. They are battling a massive risk position now and GME is continuing to rise in price. They've got to be on their last legs.
|
||||
|
||||
GME has been edged so much and so long that when it explodes it's going to rip a hole in the fabric of space and time and the simulation we live in will crash.
|
||||
|
||||
Cheers apes. I'll see you on the other side.
|
||||
106
01-Must-Read/2021-05-18-Summary-of-New-ICC-Rules.md
Normal file
106
01-Must-Read/2021-05-18-Summary-of-New-ICC-Rules.md
Normal file
@ -0,0 +1,106 @@
|
||||
New ICC rules summary. They are preparing for defaulting members and are ready to pull the plug.
|
||||
================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nfl69o/new_icc_rules_summary_they_are_preparing_for/) |
|
||||
|
||||
---
|
||||
|
||||
[Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1)
|
||||
|
||||
0\. Preface
|
||||
|
||||
We got a spicy new post today of a few more rules being passed (SR-ICC-2021-008 + SR-ICC-2021-014 + SR-OCC-2021-006) and put into effect:
|
||||
|
||||
<https://www.reddit.com/r/Superstonk/comments/nfhswb/3_new_filings_sricc2021008_sricc2021014/>
|
||||
|
||||
Along with ICC-007, the haircut rule for ICC, being put into effect:
|
||||
|
||||
<https://www.reddit.com/r/Superstonk/comments/nfjivc/icc2021007_passed_approved_today/>
|
||||
|
||||
And this is some good 👌👌 shit 👌👌 right here. 👌👌👌👌
|
||||
|
||||
Tl;dr: ICC might have just pulled the plug on its members (banks) via ICC-005, ICC-007, and ICC-008, or is about to.
|
||||
|
||||
Edit: GameStop must have acquired the infinity stones... <https://www.instagram.com/p/CPBzJMHtUms/?utm_medium=share_sheet>
|
||||
|
||||
1\. Rule "Prefixes" and ICC
|
||||
|
||||
For any apes confused on the prefixes, DTC, ICC, and OCC are all different clearing entities and they all submit their own rules. They all operate different parts of the market.
|
||||
|
||||
In a more general sense, DTC = stocks, ICC = default swaps, OCC = options.
|
||||
|
||||
Since we're talking ICC, you probably want to know who's a member of them. Well, it's banks. Lots of banks. Lots of big banks for that matter:
|
||||
|
||||
> ICE apparently operates the NYSE group.
|
||||
>
|
||||
> ICC is composed of all of these banks: Bank of America, N.A., Barclays Bank PLC, Barclays Capital Inc., BNP Paribas, BNP Paribas Securities Corp., BofA Securities, Inc., Citibank N.A., Citigroup Global Markets Inc., Credit Suisse International, Credit Suisse Securities (USA) LLC, Deutsche Bank AG, Goldman Sachs & Co. LLC, Goldman Sachs International, HSBC Bank USA, N.A., HSBC Bank plc, HSBC Securities (USA) Inc., JPMorgan Chase Bank, National Association, J.P. Morgan Securities LLC, Merrill Lynch International, Morgan Stanley Capital Services LLC, Morgan Stanley & Co. LLC, Nomura International PLC, Nomura Securities International, Inc., Société Générale, SG Americas Securities, LLC, The Bank of Nova Scotia, UBS AG, London Branch, UBS Securities LLC, Wells Fargo Securities, LLC
|
||||
|
||||
Quote from [this comment by Ridn2Lo](https://www.reddit.com/r/Superstonk/comments/ncq8jt/sricc2021005_filed_today_with_the_sec_basically/gy6loes?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
2\. New Rule Summaries
|
||||
|
||||
SR-ICC-2021-008 - [Link](https://www.sec.gov/rules/sro/icc/2021/34-91918.pdf)
|
||||
|
||||
- Approved and I believe in effect.
|
||||
|
||||
- Updates to their "model" on determining margin requirements / risk management.
|
||||
|
||||
- Makes a note that the model will take into account scenarios of extreme price decreases and extreme price increases.
|
||||
|
||||
- The model will take into account hypothetical extreme movements. So it is forward-looking. If they determine a security will have an extreme movement, they'll take that into account in their model. AKA, "X is going to go up next week. We are going to calculate your risk is based on IF it actually goes up". That's nuts!!
|
||||
|
||||
- Pair this with SR-ICC-2021-007, the haircut rule, which eliminates some collateral, and you've got an easy way to just rip the plug from these guys and margin call them (have a defaulting member). SR-ICC-2021-007 will be in effect TOMORROW.
|
||||
|
||||
SR-ICC-2021-007 - [Link](https://www.sec.gov/rules/sro/icc/2021/34-91894.pdf)
|
||||
|
||||
- Updates to haircut rule and collateral that can be used for your capital.
|
||||
|
||||
- Haircuts are additional subtractions to your total capital. You want to maintain enough capital to not default.
|
||||
|
||||
- They are allowed to introduce higher haircuts depending on volatility of securities and the general market. Easier to margin call.
|
||||
|
||||
- Badly-backed collateral cannot be used any more, which eats away more at your net capital.
|
||||
|
||||
- E.g. Think of Citadel's BBB- bonds. Those are poorly backed, literally the worst kind of bonds. If you had $600 million in these bonds as collateral, then the ICC could say, "Nope. Can't use that". It's possible that the $10-15 Billion bonds the big banks got in April are going to be rejected for collateral.
|
||||
|
||||
SR-ICC-2021-014 - [Link](https://www.sec.gov/rules/sro/icc/2021/34-91922.pdf)
|
||||
|
||||
- Immediately effective, but starting June 1, 2021
|
||||
|
||||
- They're giving discounts on credit default swaps to make them more enticing for the 2nd half of 2021.
|
||||
|
||||
- This implies that nobody is going to want to do default swaps with ICC while in a suffering market. So they're introducing incentives to hopefully bring in more customers.
|
||||
|
||||
- They are giving out ~25% discounts, which seems pretty damn big.
|
||||
|
||||
SR-OCC-2021-006 - [Link](https://www.sec.gov/rules/sro/occ/2021/34-91920.pdf)
|
||||
|
||||
- Reducing fees of option contracts for clearing because they believe it can be reduced while still maintaining enough revenue for the OCC.
|
||||
|
||||
- Just them wanting to reduce fees to the OCC members because they have enough money sloshing around already.
|
||||
|
||||
- They propose it will come into effect June 1, 2021, "because OCC believes that this date is the first date that the industry could be prepared to process the new fee without disruption based on consultations with market participants."
|
||||
|
||||
- Does this mean they expect some disruption between now and June 1? Maybe.
|
||||
|
||||
SR-ICC-2021-005 - [Link](https://www.sec.gov/rules/sro/icc/2021/34-91806.pdf)
|
||||
|
||||
- Already in effect as of Friday, May 14, 11:59PM EST. Literally last minute filing.
|
||||
|
||||
- This is basically the DTC-004 equivalent for ICC. This is their unwinding plan in the event of extreme market stress in order to remain afloat by wiping out members with high risk positions.
|
||||
|
||||
- Something really cool is they'll not only wipe out members who default on a certain security, they'll wipe out similar positions in that same security of all their other members IF it's high risk/stress to the market. E.g. if a member defaults due to their position in X, then they'll cascade that to all other members who hold a position on X and tell them to get rid of it. This could inevitably lead to more defaulting members.
|
||||
|
||||
- This means ICC is getting ready for member defaults
|
||||
|
||||
3\. Other TL;DR
|
||||
|
||||
1. SR-ICC-008 will perform a HYPOTHETICAL situation of extreme price movements when determining margin requirements.
|
||||
|
||||
2. SR-ICC-007 will rip their collateral from them and introduce higher haircuts, making the model from 008 easier to hit their risk threshold and be margin called.
|
||||
|
||||
3. SR-ICC-005 will cause all other members to eliminate their risky position if it causes any member to default from that same position. Cascade/snowball effect.
|
||||
|
||||
And with lots of things pointing to this week or next being the bang... well, this just adds to that pile.
|
||||
@ -0,0 +1,199 @@
|
||||
The flurry of rules before the storm. DTC, ICC, OCC are prepared. GME might be hitting T+35 and T+21 crossover next week, pulling the house of cards down.
|
||||
==========================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/ngru15/the_flurry_of_rules_before_the_storm_dtc_icc_occ/) |
|
||||
|
||||
---
|
||||
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
I'm not a financial advisor - and I am not providing you financial advice! This is all my interpretation of what is going on.
|
||||
|
||||
Anyways, I wanted to ask...
|
||||
|
||||
[](https://preview.redd.it/2dwpksdkv6071.png?width=1009&format=png&auto=webp&s=1c382f5643f751cc18844d2af7a33bac21f504d9)
|
||||
|
||||
I'm hype. Are you pretty hype? I keep coming back because I love you guys, and I love the fact that there has been so much research freely accessible to teach millions of people all the nooks and crannies of the market. I'll just say - once this is all over, I'll miss you apes. Thank you all. ❤️
|
||||
|
||||
TL;DR: The market is an overleveraged and rehypothecated bomb. The banks have been fighting a collateral crisis since the end of March due to the government emergency liquidity programs ending and inflation kicking in. The repo market could blow up at any moment from a lack of collateral and short squeeze the US Treasury market itself. The entire market is hanging by a thread and the DTC, ICC, and OCC are prepared for the fallout. The moment GME surges again, they can cascade defaults to members in all clearing corps and end it in one fell swoop.
|
||||
|
||||
1\. The DTC, ICC, and OCC
|
||||
|
||||
Let's clear up some confusion! Lots of apes are posting rule numbers with no prefix, so it's going to be a problem understanding one another. Let's forge some wrinkles! 🧠🔨🦍
|
||||
|
||||
These are all major clearing corps of the market. They all are their own beasts in and of themselves. For simplicity, we'll label them as such:
|
||||
|
||||
DTC = stocks
|
||||
|
||||
ICC = default swaps
|
||||
|
||||
OCC = options
|
||||
|
||||
Each of them operate independently, so they're all filing their own rules that affect them individually. Important distinction. The DTC rules don't apply to the ICC, and vice-versa. That is why we see the rule prefixes. These prefixes can help you distinguish between each of the entities.
|
||||
|
||||
- Example 1: SR-DTC-2021-004 is a rule for the DTC
|
||||
|
||||
- Example 2: SR-ICC-2021-005 is a rule for the ICC
|
||||
|
||||
- Example 3: SR-OCC-2021-004 is a rule for the OCC
|
||||
|
||||
It helps a lot to add the prefix before the rule number since we're now seeing multiple 003/004/005 rules. Less confused ape = happy ape!
|
||||
|
||||
2\. Almost Everyone Is Ready For Member Defaults
|
||||
|
||||
You've probably heard the term defaulting member being thrown around a lot lately. You can think of that as being equivalent to a margin call. The member defaulted on something - making them go negative in net capital - and thus they're in debt. Bye bye!
|
||||
|
||||
The DTC, ICC, and OCC all pretty much share the same members. Market Makers and Banks. Except of course the ICC which only has Banks as members. You might think that all these rules being passed have nothing to do with GME, but it deals with the market itself blowing up, which in turn effects GME. All three of them passing similar rules is spooky and not a good sign for the market.
|
||||
|
||||
If a member defaults in the ICC, they most likely default in the DTC and OCC as well. The DTC, ICC, and OCC do not want to be left paying up for the defaulting member's debts in the event of a default. They also want to contain the nuke as much as possible so that it doesn't completely obliterate the market.
|
||||
|
||||
To prepare for the market nuke, the DTC, ICC, and OCC have passed rules/plans to deal with defaulting members.
|
||||
|
||||
We won't go into super detail here. Just a brief summary of the infinity stones which the DTC, ICC, and OCC have collected:
|
||||
|
||||
- DTC-004: Wind-down and auction plan. In effect.
|
||||
|
||||
- ICC-005: Wind-down and auction plan. In effect.
|
||||
|
||||
- OCC-004: Auction plan. Allows third parties to join in (E.g. Blackrock). In effect.
|
||||
|
||||
- OCC-003: Shielding plan. Protects the OCC from paying up too badly by having extra liquidity. Will be in effect on June 1. ~~Not in effect, but the OCC deposit of ~$600m that was due the morning of May 19th could have supplemented for this~~~~.~~ ~~If not, can go into effect any day between now and May 31st.~~
|
||||
|
||||
Every single one of them now has some form of rule which allows the defaulting members assets to be auctioned off. This allows other members to buy the defaulters assets at a discount while funding the defaulting member's positions. Say someone defaults from GME short positions and has, oh, I don't know, 500 million shares short. The money used to pay for the covering of the GME short position will be funded partially by this auction.
|
||||
|
||||
In the end, this transfers assets to other entities while also pushing the damage to those entities as much as possible - a way to contain the nuke. It's a win-win situation. Other members get securities/assets on the cheap, while the DTC, ICC, and OCC worry less about payout, and the market might be able to prop itself up.
|
||||
|
||||
Now the case with the OCC, third-party members can join in on the fun. E.g. Blackrock. There's some theories that Blackrock will delete Citadel from existence and press the MOASS button. I don't think so. I think they've just been waiting this out to gather enough cash to bid on as many assets as possible. They're not going to waste their money on igniting the MOASS, they're going to spend it to feast on the defaulters remains.
|
||||
|
||||
The key takeaway is that all three of them, the DTC, ICC, and OCC are ready to pull the plug.
|
||||
|
||||
Any one of the DTC, ICC, or OCC can margin call a member and cause a default.
|
||||
|
||||
The moment a member defaults in the DTC, ICC, or OCC, it will cascade to the other clearing corps and cause them to default over there as well. In one fell swoop, all the stocks, options, and swaps of defaulting members are up for auction.
|
||||
|
||||
3\. Do We Need The Other Rules?
|
||||
|
||||
You're probably thinking about DTC-005, NSCC-002/801, and others. And no, from my understanding GME does NOT need them to squeeze.
|
||||
|
||||
GME doesn't even really need a catalyst. The T+21 and T+35 crossover event is probably enough to push it over the edge (discussed later). The market is literally hanging by a thread right now and a big move in GME can push it into margin call territory, causing the cascading defaults.
|
||||
|
||||
The DTC-005 and NSCC-002/801 rules are to protect the future market. The guys in charge might have finally learned to impose more restrictions, and hopefully they stick to it.
|
||||
|
||||
DTC-005 will help avoid another stock from becoming over-shorted again. No more naked shorting. No more adding to your short pile with malicious options practices. It prevents another group of absolute retarded hedgefunds from doing this again. The T+21 and T+35 loop will cause the price floor to increase regardless of this rule and eventually cause margin calls. Remember, liquidity bomb is a growing issue, so the margin call price is most likely dropping as well.
|
||||
|
||||
NSCC-002/801 will speed up margin calls for extreme volatile movements like we saw in the January and March squeezes. They will make sure that if someone enters margin call city territory, they'll issue it with a one-hour timeframe. Pay up within one hour or you're toast. This ensures that volatility will kill off shorters who get caught with their pants down.
|
||||
|
||||
Those rules help the future market avoid this bullshit again. They are not necessary for the MOASS.
|
||||
|
||||
The ICC itself has introduced a wild rule ICC-008, which is in effect, that performs hypothetical margin calculations based on market movements. So again, the ICC could trigger a margin call to its bank members based on their new margin model rather than the DTC. Boom, the defaulting bank cascades through the banks members and eventually to GME.
|
||||
|
||||
After all is said and done, the DTC will ensure that these rules are in place so that nobody can cause a GameStop situation again.
|
||||
|
||||
The most important rules are the wind-down and auction plans. They cover the DTC, ICC, and OCC's asses and try to protect the market as much as possible. These wind-down and auction plans are the OK 👍 to initiate launch when the time is right.
|
||||
|
||||
4\. Shit Is Close To Hitting The Fan
|
||||
|
||||
The whole market is an overleveraged bomb. GME isn't the only problem here.
|
||||
|
||||
I'm sure you guys remember Archegos. Those guys abused what, 5x leverage? And you all saw what effect they had on the market.
|
||||
|
||||
Imagine how bad leverage must have been abused by all the large firms which are STILL standing today. Imagine what will happen if a very large firm with equivalent or larger margin goes bust. How about a handful of them going bust? Bad, bad things, my fellow ape. Bad things.
|
||||
|
||||
I'm sure you guys have seen this posted a million times today. This screams liquidity crisis in the banks because they've been really fucking stupid for the past couple of years, even more so since 2020 by allowing firms to abuse the pandemic.
|
||||
|
||||
[](https://preview.redd.it/9crnr1z707071.png?width=637&format=png&auto=webp&s=34c47d7b115f699d9d29c481e0e31e7c27be0700)
|
||||
|
||||
When did these reverse repos start showing up?
|
||||
|
||||
January 29th.
|
||||
|
||||
February 25th.
|
||||
|
||||
March 11th.
|
||||
|
||||
Woah what? Liquidity problems around the dates GME surged? It's not necessarily connected but hey, nice coincidence - right? 😉
|
||||
|
||||
The reverse repos started coming at ever-increasing frequency towards the end of March. Hmmm. Wonder why? [Could it be that the fed ended their liquidity programs](https://www.reuters.com/article/us-usa-fed-facilities/fed-says-extending-four-emergency-liquidity-programs-to-march-31-2021-idUSKBN28A1YG)?
|
||||
|
||||
[](https://preview.redd.it/ryip19nz07071.png?width=848&format=png&auto=webp&s=a4b56e2f18aab8af2073247c017a8845cc9fc4e8)
|
||||
|
||||
Yup. Those programs dried up on March 31, 2021. This suddenly put much more liabilities on the Banks balance sheets, where they need to obtain assets to counteract their liabilities.
|
||||
|
||||
Ever since then, banks have been STRUGGLING with their balance sheets, and the potential of a short squeeze on the US Treasury Bond Market (See "[Everything Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)" by [/u/atobitt](https://www.reddit.com/u/atobitt/)):
|
||||
|
||||
1. Banks have a "balance sheet" of assets and liabilities. Liabilities? Could be cash they owe to people/entities. Assets? Some form of collateral, such as treasury bonds
|
||||
|
||||
2. Banks have ever-increasing liabilities every day due to over-leveraged borrowers.
|
||||
|
||||
3. In order to not default, banks need to maintain balance on their sheets by obtaining assets/collateral.
|
||||
|
||||
4. Banks will go to Fed and to get their collateral in order to avoid defaulting (Reverse Repo).
|
||||
|
||||
5. When the banks borrow collateral they might even 'short' sell those borrowed bonds into the treasury market, hoping to flip a profit due to inflation.
|
||||
|
||||
6. Repeat #2 -> #5 and you get your ever increasing reverse repo amount.
|
||||
|
||||
7. Not only this, the Fed is sucking out $80Billion in treasuries (collateral) each month. Reducing the supply in the market.
|
||||
|
||||
8. As the reverse repo amount continues to increase, demand continues to go up for collateral.
|
||||
|
||||
9. As the fed continues to suck out collateral, the supply of collateral drops.
|
||||
|
||||
10. Eventually you hit a critical point where the supply is too low, and the treasury value shoots up. Banks who are short might now be forced to buy back up the treasuries on the market and cause a short squeeze in the US Treasury Market itself.
|
||||
|
||||
11. Banks default. Members default. Everything collapses except some Banks/HFs/Financial Institutions which weren't completely stupid.
|
||||
|
||||
At any moment, the collateral bomb can pop and drag the whole system down. Definitely recommend [George Gammon's Summary](https://www.youtube.com/watch?v=fttA-rNRYG4).
|
||||
|
||||
5\. The T+35 and T+21 Crossover Event of Meme Stocks
|
||||
|
||||
I've posted a theory about us getting close to another February 24th repeat where massive amounts of volume and buy pressure could surge GME. You can find the post here:
|
||||
|
||||
[FTD Loop Missing Link T+35 and T+21](https://www.reddit.com/r/Superstonk/comments/nf22qz/theory_on_the_ftd_loop_missing_link_a_t35_surge/)
|
||||
|
||||
The actual why to the mechanics behind these loops might not actually be FTDs. But instead Net Capital, which operates on a similar timeframe. T+7, T+14, T+21, T+28. They're forced to buy up shares, causing buy pressure, in order to return neutral and deliver. You can find that post here:
|
||||
|
||||
[Net Capital Bomb](https://www.reddit.com/r/Superstonk/comments/n4h832/major_deep_itm_call_option_dates_a_massive_net/)
|
||||
|
||||
In quick summary of T+35 and T+21, we seem to be in multiple price spike loops. And a new one is about to pop up. Where did these originate from? So far, it looks like three main dates:
|
||||
|
||||
- January 15th: Major option date. One of the only 2021 option dates available in early 2020. Shorters must have piled in here.
|
||||
|
||||
- ~~February 5th~~**~~:~~** ~~The date Robinhood and other brokers fully lifted restrictions. Most likely reset the clock from another options date or some other factor. [Trying to pin this down]~~ Edit: I think we can ignore this. The only option expirations that matter are Jan 15 and April 16 due to them being two of the major option dates that were available in 2020.
|
||||
|
||||
- April 16th: Major option date. One of the only 2021 option dates available in early 2020. Once again, shorters must have piled in here. I'm pretty sure Melvin's PUTs expired on this date, FYI. 😉
|
||||
|
||||
Each date coincides with the following loop:
|
||||
|
||||
1. Option Expire date. T+35 days later a price spike occurs. (January 15 -> February 24th)
|
||||
|
||||
2. An endless cycle of price spikes T+21 days later starts. (February 24th -> March 25th -> April 26th -> May 25th)
|
||||
|
||||
The first T+35 spike is more significant than the T+21 spikes. Check it out. I've also plotted the hypothetical next price spikes which occur on May 24 (T+35) and May 25 (T+21).
|
||||
|
||||
Please note: T+35 is CALENDAR days. T+21 is BUSINESS days. Take a look at the above DD for the walkthrough of this timing.
|
||||
|
||||
[](https://preview.redd.it/nmg3oj2nn7071.png?width=1436&format=png&auto=webp&s=589a978f5c90d3ff1ad5d71e7ea40d92e89eeae5)
|
||||
|
||||
GME T+35 and T+21 Loop
|
||||
|
||||
Guess what? This happens in AMC too. You can apply this to KOSS as well, and find the same exact patterns. Anyone want to have fun and check more meme stocks? Be my guest!
|
||||
|
||||
[](https://preview.redd.it/ukts9ax547071.png?width=1432&format=png&auto=webp&s=8bbb4512b90d99eec4530ca76dc5198779a4b050)
|
||||
|
||||
AMC T+35 and T+21 Loop
|
||||
|
||||
See that shit? We're lining up for not just a T+35 spike, but a T+21 spike one day after another next week. This is going to effect all meme stocks if the cycle continues and April 16th actually triggers another loop.
|
||||
|
||||
The timing of all of the wind-down and auction plans being in effect along with the increasing collateral issue of the banks with reverse repos means there's a massive collateral bomb being juggled, which could blow up with another volatile movement in GME or the market itself. When that happens, anyone could default. And what happens when a member defaults in DTC, ICC, or OCC? It cascades to the other two clearing corps. The margin calls start blasting out to all of the way overleveraged firms who get screwed by this volatility, and down goes the house of cards.
|
||||
|
||||
Call me a tinfoil hat wearer, but it sure as hell feels like the SEC, DTC, ICC, OCC, everyone high up, planned this all out. The flash crashes, everything, in order to get their nuke fallout plans in place. They probably always knew the timer was going to tick, tick, tick, run out, and boom the week of May 24th due to April 16th options expiration.
|
||||
|
||||
So the SEC, DTC, ICC, OCC, all the higher-ups shut things down in January. They shut things down on March 10th. They crash the price on March 15th to avoid a pre-emptive margin-call. They pull many strings to buy time, pump all their wind-down plans in place at the last minute, wait for the next surge of GME, and then...
|
||||
|
||||
[](https://preview.redd.it/62pndywok7071.png?width=702&format=png&auto=webp&s=298ffb0386b18492962652f7a748a725bec01bb2)
|
||||
267
01-Must-Read/2021-05-23-We-Are-All-Fucked.md
Normal file
267
01-Must-Read/2021-05-23-We-Are-All-Fucked.md
Normal file
@ -0,0 +1,267 @@
|
||||
We're All Fucked
|
||||
================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/CoffeeLaxative](https://www.reddit.com/user/CoffeeLaxative/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nj1guf/were_all_fucked/) |
|
||||
|
||||
---
|
||||
|
||||
[Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1)
|
||||
|
||||
I have no background in macroeconomics. In fact, I'm in healthcare. However, this is what I've gathered in all of my 3 months of investing, learning more about econ and finance than my own field. You tell me what you think and where we stand. The title of my post... pretty much sums up my thoughts. If I made any mistakes, please let me know. After all, I'm a smooth 🧠.
|
||||
|
||||
1\. S&P 500 inflation-adjusted earnings yield 🔥
|
||||
|
||||
You may have seen this picture from this [post](https://www.reddit.com/r/Superstonk/comments/niem73/sp_500_inflationadjusted_earnings_yield_falls/). It's the S&P 500 inflation-adjusted earnings yield that's now falling below zero, setting a 40-year low. The last times it fell below 0 were in 2008 (housing bubble), 2000 (dotcom bubble), 1987 (Black Monday), 1973 (recession). And it's going under again. Here's [another post about it, with Crescat Capital's letter.](https://www.reddit.com/r/Superstonk/comments/nil0ww/sp_500_negative_yield_crescat_capital_letter_may/) Essentially, impending boom ?
|
||||
|
||||
[](https://preview.redd.it/jgvo3ctrpb171.png?width=721&format=png&auto=webp&s=6417c2f97f4dbbdfb4c114fff9abfa1b0fe034f8)
|
||||
|
||||
2\. The Repo Market 💣
|
||||
|
||||
It's been all the talk lately. Lately, the Fed has been conducting reverse repo operations at higher and higher amounts. On May 20th, we hit the 5th highest ever with $351B and 48 participating counterparties.
|
||||
|
||||
Then on May 21st, reverse repos reached $369B with 52 participants! Compare this to two weeks ago where we had less than half that amount, $155B on May 6th. Here's a chart showing reverse repos from January til today. Notice the exponential increase ? Ya, shit is fucked.
|
||||
|
||||
[](https://preview.redd.it/cf707nbxpb171.png?width=793&format=png&auto=webp&s=a804fd59f761970edd40cf1a76b2ca4e8fb5ac65)
|
||||
|
||||
Data from: <https://apps.newyorkfed.org/markets/autorates/temp>
|
||||
|
||||
Edit: 05/25: reverse repo @ $432.96 billion.
|
||||
|
||||
If you are not familiar with the repo market, I recommend reading this: [The Imminent Liquidity Crisis & Reverse Repos Usage](https://www.reddit.com/r/Superstonk/comments/nhepn1/the_imminent_liquidity_crisis_reverse_repos_usage/) or watching George Gammon's YouTube video (Repo Market Rates Turn Negative).
|
||||
|
||||
Wat mean? Means there is too much cash in the system and not enough collateral (like treasury bonds). It means there's an imbalance between dollars (which are essentially IOUs) and whatever is backing the dollar's worth.
|
||||
|
||||
Why imbalance ?
|
||||
|
||||
- Quantitative easing (money printer go BRRRR)
|
||||
|
||||
- Rehypothecation (the same treasury bond being lent to A for 10k, who lent it to B for 10k, who lent it to C for 10k, ... but there is only 1 treasury bond and now 30k was lent.)
|
||||
|
||||
- Probably more reasons
|
||||
|
||||
So now, nobody wants $ (except you and I) and all of these institutions want treasury bonds. And as of May 21, treasury bonds have a negative interest rate! Source: <https://www.dtcc.com/charts/dtcc-gcf-repo-index>
|
||||
|
||||
[](https://preview.redd.it/fbzehm75rb171.png?width=474&format=png&auto=webp&s=860034b8555e891462abedd4753be32043dfece4)
|
||||
|
||||
U. S. Treasury < 30-year maturity (371487AE9).
|
||||
|
||||
In other words, banks and institutions want these treasury bonds so bad, they're ready to pay (lend) what it's worth and pay some more cash to get their hands on it.
|
||||
|
||||
3\. Crypto Correction / Crash ⚡
|
||||
|
||||
The crypto market dropped $1 trillion in the past 2 weeks ($700 billion last week and ~$300 billion the week before if I got my facts right). The leading coin went from ~$59k to ~$30k and all other coins followed.
|
||||
|
||||
So there's a LOT of differing opinions on this matter, on why it happened... Elon Musk, China, etc. Let's agree that it was probably a combination of everything. It also seems that the leading coin followed a textbook Wyckoff distribution, essentially a method to fleece retail investors (yet again!).
|
||||
|
||||
[](https://preview.redd.it/hynaaywmrb171.png?width=1759&format=png&auto=webp&s=d70c230eed55df463d46d74b763ae978fe064896)
|
||||
|
||||
Huge volume spike on May 19th. Very sus
|
||||
|
||||
[](https://preview.redd.it/kmksmruzrb171.png?width=738&format=png&auto=webp&s=3ce95a840845a0178cd303acf4acef3b938192bc)
|
||||
|
||||
The sell off occurred mostly between 8:50 - 8:55 AM EST and continued til 9:10 AM on May 19th.
|
||||
|
||||
What happened on May 19th ? Oh, right! OCC had previously issued a letter to members notifying them of temporary increase in deposits for clearing fund size totaling [$588M due at 9:00 AM on 5/19/2021](https://www.reddit.com/r/Superstonk/comments/nftyg4/occ_has_issued_a_statement_to_all_clearing/). So, let's all agree the crash was caused by a combination of everything.
|
||||
|
||||
[](https://preview.redd.it/n8lb7266sb171.png?width=1048&format=png&auto=webp&s=d2400092f719b7759f880782309592d56db1f66f)
|
||||
|
||||
Many coins were affected 6 days ago. Screenshot by u/incandescent-leaf
|
||||
|
||||
Edit:
|
||||
|
||||
- Here's an interesting DD that could shed some light on these crypto whales: <https://www.reddit.com/r/Superstonk/comments/nkde38/bitcoin_address_activity_appear_to_mirror_gme/>
|
||||
|
||||
- It's also interesting how Goldman Sachs now considers the leading coin as an asset class. The timing is what's most intriguing. Last weekend, crypto had another big sell off. <https://finance.yahoo.com/news/bitcoin-is-officially-a-new-asset-class-goldman-sachs-103540636.html>
|
||||
|
||||
4\. Commercial mortgage backed securities (CMBS) 🏬
|
||||
|
||||
According to Fitch Ratings, US CMBS delinquencies ticked up in April for the first time since October 2020, mostly from hotels and regional malls.
|
||||
|
||||
[](https://preview.redd.it/9uq512i9sb171.png?width=991&format=png&auto=webp&s=eda234c027d79eb6d1318e5036dde2b2aa7f1538)
|
||||
|
||||
Source: <https://www.fitchratings.com/research/structured-finance/us-cmbs-delinquencies-tick-up-in-april-for-first-time-since-october-2020-07-05-2021>
|
||||
|
||||
I don't know about you, but this suuure reminds me of something... and this don't look good.
|
||||
|
||||
🚀🚀 Edit 🚀🚀
|
||||
|
||||
*Thank you to* [u/Due-Mountain-9044](https://www.reddit.com/u/Due-Mountain-9044/) *for this:*
|
||||
|
||||
In his interview and in his new article, Ryan Grim calls CMBS a BIGGER problem than the 2008 housing crisis:
|
||||
|
||||
- Article: <https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/>
|
||||
|
||||
- YouTube: <https://www.youtube.com/watch?v=pRHwhvUc54A>
|
||||
|
||||
- Podcast: <https://theintercept.com/2021/04/23/deconstructed-whistleblower-financial-crisis/>
|
||||
|
||||
4.1 Mortgages 🏠
|
||||
|
||||
*Thank you to* [u/plasticbiner](https://www.reddit.com/u/plasticbiner/) *for also pointing this out:*
|
||||
|
||||
New Report From Consumer Financial Protection Bureau Finds Over 11 Million Families At Risk Of Losing Housing (March 1, 2021)
|
||||
|
||||
[](https://preview.redd.it/jvx7x1an3b171.png?width=1015&format=png&auto=webp&s=1574c782f2610c6712f6605be9bc02cade2d0bd9)
|
||||
|
||||
Source: https://www.consumerfinance.gov/about-us/newsroom/new-report-from-consumer-financial-protection-bureau-finds-over-11-million-families-at-risk-of-losing-housing/
|
||||
|
||||
🚀🚀End of edit 🚀🚀
|
||||
|
||||
5\. Banks, hedge funds, and the Fed working 24/7 🏦
|
||||
|
||||
We've seen the night pics and enjoyed them. Quite the norm nowadays, but quite unusual still.
|
||||
|
||||
<https://preview.redd.it/tw0ubnrays071.png?width=1902&format=png&auto=webp&s=f7fae2895a00a4292eb6c22b3cf92fbbb9d6cccb>
|
||||
|
||||
But wait! There's more. Not only do they have to deal with the stock market, the repo market, CMBS, paying their employees for overtime... they're also losing money with fines.
|
||||
|
||||
- UBS, Nomura fined $452 million by the EU. Bank of America, Credit Suisse Group AG and Credit Agricole were fined about 28.5 million euros last month. Source: <https://finance.yahoo.com/news/ubs-nomura-unicredit-fined-452-100701721.html>
|
||||
|
||||
- Since January 2021 up until today, the SEC has awarded ~$163.2 million to whistleblowers. Whistleblowers get 10-30% of the money collected, which means someone is bleeding from $544 million to $1.632B.
|
||||
|
||||
- And then the petty fines by the SEC that I won't list. Chump change for them.
|
||||
|
||||
There's also weird or bad news every week :
|
||||
|
||||
- The European Bank Issues Financial Stability Warning. [Reddit post on this](https://www.reddit.com/r/Superstonk/comments/nh913m/the_european_bank_issues_financial_stability/)
|
||||
|
||||
- In Mexico, [BBVA closes 867 branches and 1 million credit cards.](https://www.reddit.com/r/Superstonk/comments/nhgrt5/closing_867_bank_branches_and_a_million_credit/) In Spain, they closed 530 branches.
|
||||
|
||||
- Banks are planning on launching a pilot program where they will issue credit cards to people with no credit scores: <https://www.wsj.com/articles/jpmorgan-others-plan-to-issue-credit-cards-to-people-with-no-credit-scores-11620898206>
|
||||
|
||||
- Not to mention the margin calls already happening on [Wall Street as reported by European financial news](https://www.reddit.com/r/Superstonk/comments/nb9pon/european_financial_news_is_reporting_major_margin/)
|
||||
|
||||
- Much more... won't dig further. It's 1:30 am lol
|
||||
|
||||
🚀🚀 Edit 🚀🚀 I'm back at it 3 days later
|
||||
|
||||
Here are a few more articles to make you go "Hmmmm 🤔"
|
||||
|
||||
- Right after supposedly great earnings, Morgan Stanley sells $6 billion worth of bonds, following JP Morgan which sold $13 billion of bonds. Goldman Sachs also issued $6 billion of bonds. Source: <https://www.bnnbloomberg.ca/morgan-stanley-joins-bank-bond-bonanza-with-three-part-sale-1.1592121>
|
||||
|
||||
- Over-leveraged Archegos Capital Management cost Credit Suisse $4.7+ billion in losses. Morgan Stanley dumped $5 billion in shares in Archegos' stocks before fire sale. Nomura losses could be as much as $2 billion. Source: <https://www.cnbc.com/2021/04/06/morgan-stanley-dumped-5-billion-in-archegos-stocks-before-fire-sale.html> and <https://www.cnn.com/2021/03/29/investing/wall-street-hedge-fund-archegos/index.html>. Keep in mind Archegos was just a small family firm. How many more are there ?
|
||||
|
||||
- Italian bank collapses on exposure to Greensill and GFG. Source : <https://www.ft.com/content/c02a6e97-5505-4d4a-933f-a0e934ca6eda>
|
||||
|
||||
🚀🚀 End of edit 🚀🚀
|
||||
|
||||
On top of that, the CEOs of all major US banks have to testify before Congress this week on May 26th and 27th. Source : <https://www.bloomberg.com/news/articles/2021-04-15/wall-street-bank-ceos-called-to-testify-before-congress-in-may>
|
||||
|
||||
How often does this happen ? Since 2008, they were called twice to testify before Congress according to above article.
|
||||
|
||||
6\. The rich divorcing and/or selling stocks 💔
|
||||
|
||||
So Bill Gates divorced and Gabe Plotkin divorced ? Huh. Weird...
|
||||
|
||||
[](https://preview.redd.it/npk8r7sisb171.png?width=1843&format=png&auto=webp&s=4d0027e7f8aff470b5261852c4c9d77eca4e3380)
|
||||
|
||||
Wow. That's a lotta shares. A week before the tech sector dumped.
|
||||
|
||||
[](https://preview.redd.it/zaru329qsb171.png?width=1851&format=png&auto=webp&s=e454d39dc0c95a2b9774b013d988be25ff038d3f)
|
||||
|
||||
Mark Zuckerberg selling his FB shares. Goes all the way back to February.
|
||||
|
||||
[](https://preview.redd.it/f2ouo5l4tb171.png?width=1852&format=png&auto=webp&s=ab00893677a8db4726d740bef4520169e1e5896e)
|
||||
|
||||
Google too?
|
||||
|
||||
Source: [finviz.com](https://finviz.com/)
|
||||
|
||||
Edit:
|
||||
|
||||
- Let's not forget Warren Buffett and his company Berkshire Hathaway sold most of their bank shares (Goldman Sachs, JPMorgan, M&T Bank, PNC Financial, Synchrony Financial, Wells Fargo, US Bancorp, and BNY Mellon) during the past 5 quarters. Source : <https://www.msn.com/en-us/money/markets/warren-buffett-dumped-goldman-sachs-jpmorgan-and-other-bank-stocks-last-year-they-ve-now-surged-to-record-highs-meaning-the-investor-left-billions-on-the-table/ar-AAKc7Dr>
|
||||
|
||||
7\. The domestic market and the international markets 📉
|
||||
|
||||
Let's look back at the past 2 weeks.
|
||||
|
||||
[](https://preview.redd.it/duhmxe5itb171.png?width=1284&format=png&auto=webp&s=9c6bfde6a2be1b567cdb1452511b99cc9bfc9872)
|
||||
|
||||
05/19 by u/CryptoFX1
|
||||
|
||||
[](https://preview.redd.it/geupg0nmtb171.png?width=1136&format=png&auto=webp&s=8f07d1be7f95801e2515e780313342ce1d5e2d6f)
|
||||
|
||||
On May 12, Nikkei Bled. Only 1% Away From the Low of Jan 28. by u/incandescent-leaf
|
||||
|
||||
[](https://preview.redd.it/yylsva8stb171.png?width=960&format=png&auto=webp&s=d60431874a4b4df632980e526b9af812ada31d7f)
|
||||
|
||||
"Taiwan Stock Exchange Index just wiped out YTD gains. This is abnormal. Very likely that it will also affect the US markets (though many can argue that this is actually a reflection of the US markets, and I would agree)" by u/_atworkdontsendnudes
|
||||
|
||||
- [Asian markets](https://www.reddit.com/r/Superstonk/comments/nahhak/asian_markets_are_tanking_once_again_following/) and [other international markets](https://www.reddit.com/r/Superstonk/comments/nafv9y/international_markets_are_doing_super_well_honest/) are tanking, following another day of decline in the US markets (May 12-13)
|
||||
|
||||
Ok, the market has had its green days here and there. But overall, it's been pretty unusually red, right ? Yeah, also, all of this could be unrelated. Could be a coincidence. What do I know ? You be the judge.
|
||||
|
||||
8\. The media 📰
|
||||
|
||||
Usually very biased or bought out, but there are some exceptions like this article: [Are we on the verge of a new financial crisis?](https://www.reddit.com/r/Superstonk/comments/ncgojw/are_we_on_the_verge_of_a_new_financial_crisis_the/) The GameStop case, the signals of Hedge Funds and the rise of crypto.
|
||||
|
||||
What's concerning is that even "biased media" is warning of inflation, hyperinflation and an impending crash. No links, just go on YouTube. If they're talking about it, we know shit's about to hit the fan soon...
|
||||
|
||||
Edit:
|
||||
|
||||
- Ever doubted media manipulation ? Remember this video ["Independent" media using the EXACT same words](https://www.reddit.com/r/Superstonk/comments/nbpusp/if_you_ever_doubted_media_manipulation_remember/) and this video of the 2008 crash: [Not a single expert/spokesperson mentioned the true cause of the crash; Mortgage Bonds.](https://www.reddit.com/r/Superstonk/comments/nbrl8h/watch_this_video_of_cnbc_during_the_2008_crash/)
|
||||
|
||||
- Remember "Bear Stearns is fine" back in 2008 ? Cramer says he's confident inflation will not end up crushing US economy. Source : <https://www.msn.com/en-us/money/markets/cramer-says-hes-confident-inflation-will-not-end-up-crushing-us-economy/ar-AAKl951>
|
||||
|
||||
- Motley Fool agrees, as per their "38 reasons you don't have to fear a stock market crash" article: <https://www.fool.com/investing/2021/05/23/38-reason-you-dont-have-to-fear-stock-market-crash/>
|
||||
|
||||
9\. GameStop 🎮
|
||||
|
||||
I think you know what I'm thinking of. Let me just repeat this. We have played the game while following the rules. We played against players that had cheat codes in an unfair game, designed for us to lose. Yet, here we are.
|
||||
|
||||
Buy, hodl, and vote fellow 🐈 & 🦍& 🐜. I appreciate you all. The rest can fuck right off.
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
```
|
||||
Edit: alright, who the f reported me ? Seems like the shills don't like this. To everyone else, I am perfectly happy with my life 😉🤑
|
||||
|
||||
Edit 2: I guess I was too subtle. I was reported for self-harm and potential suicide. Let me make it clear, I have absolutely zero thoughts about this. I love my life, even if it's a mess.
|
||||
|
||||
Also, thank you all for the awards and kind feedback! Was not expecting to gain so much traction. "Controversial" title is a reference to the movie The Big Short. Some of you (superstonkers) caught on.
|
||||
|
||||
Lots of great input and good discussion in the comments.
|
||||
|
||||
A few people questioning my sources and my background. Listen... forget it.
|
||||
|
||||
```
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
10\. The flurry of new rules and regulations 📝
|
||||
|
||||
- Let's not forget Gary Gensler, Chairman of the SEC, was sworn in on a Saturday (April 17, 2021). [Why the Weekend Swear in Ceremony for Gary Gensler is of Significance](https://www.reddit.com/r/Superstonk/comments/mtikm9/why_the_weekend_swear_in_ceremony_for_gary/)
|
||||
|
||||
- Also interesting how the DTCC, OCC, ICC, and NSCC have been implementing new rules and regulations like crazy in such a short time-span. Below is an overview of them (credits to [u/MATTATI2005](https://www.reddit.com/u/MATTATI2005/)). And here's [another great DD](https://www.reddit.com/r/Superstonk/comments/ngru15/the_flurry_of_rules_before_the_storm_dtc_icc_occ/) tying them in with the FTD cycles of GME.
|
||||
|
||||
[](https://preview.redd.it/hdabo7p6vc171.png?width=975&format=png&auto=webp&s=d089ca7c3e1d9cf27bfdb9ed0762f9b036c4b643)
|
||||
|
||||
- Michael J. Burry, famous for seeing the early signs of the 2008 crash and making bank, also got shushed a few months ago, deleting his Twitter account. In his profile, he linked this, only to remove it 1 day later: <https://www.federalreserve.gov/econres/notes/feds-notes/ins-and-outs-of-collateral-re-use-20181221.htm>. Here's a great DD explaining how Michael Burry Handed us the Missing Piece on a Silver Plate, [How Financial Institutions Using US Treasury Securities Nearly Caused the Market to Collapse and What Does it Mean for Us](https://www.reddit.com/r/GME/comments/mil875/michael_burry_handed_us_the_missing_piece_on_a/)
|
||||
|
||||
11\. Margin debt 💵
|
||||
|
||||
FINRA Margin Debt is at a current level of 822.55B, up from 813.68B last month and up from 479.29B one year ago. This is a change of 1.09% from last month and 71.62% from one year ago. Source: <https://ycharts.com/indicators/finra_margin_debt>. Thank you to [u/CapoeiraCharles](https://www.reddit.com/u/CapoeiraCharles/) who reminded me of this.
|
||||
|
||||
[](https://preview.redd.it/szaksdemvb171.png?width=1154&format=png&auto=webp&s=b8b26435ab2e534370f322600c2a7ffa1098ce13)
|
||||
|
||||
[](https://preview.redd.it/9ot4jz0nqb171.png?width=910&format=png&auto=webp&s=1fe3c5cad336c78e6aa3846438430e3f4d94a8ff)
|
||||
|
||||
12\. More charts 📉
|
||||
|
||||
I'm just going to leave this here. You be the judge of what this all means. Credits to [u/peruvian_bull](https://www.reddit.com/u/peruvian_bull/).
|
||||
|
||||
[](https://preview.redd.it/b5k88sr7pb171.png?width=640&format=png&auto=webp&s=76a3b153b728898635c81fa78de60d775554210b)
|
||||
|
||||
13\. Final words 💎
|
||||
|
||||
My goal is not to incite panic but to share data and encourage discussion. Without knowledge, where would we even begin, let alone be prepared ? Imo, this is what makes [r/superstonk](https://www.reddit.com/r/superstonk/) great. It's like a hive mind of 300k+ people sharing info.
|
||||
|
||||
To those who are panicking, I believe US banks insure up to $250k for each account. The comment section below is quite informative as well.
|
||||
|
||||
Are all the points in my post correlated ? Maybe, maybe not. Saying they are would be speculation. However, each point was based on facts and I think that's what matters. The rest is up for you to decide.
|
||||
|
||||
This is not financial advice. If I missed anything, please let me know.
|
||||
|
||||
🚀🚀🚀
|
||||
12
01-Must-Read/2021-05-25-Breakdown-of-Regulations.md
Normal file
12
01-Must-Read/2021-05-25-Breakdown-of-Regulations.md
Normal file
@ -0,0 +1,12 @@
|
||||
Great breakdown/overview of new rules
|
||||
=====================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/MATTATI2OO5](https://www.reddit.com/user/MATTATI2OO5/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nkn84o/great_breakdownoverview_of_new_rules/) |
|
||||
|
||||
---
|
||||
|
||||
[Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1)
|
||||
|
||||
[](https://i.redd.it/5f76sdgo29171.jpg)
|
||||
470
01-Must-Read/2021-05-26-Mother-of-All-Short-Squeezes-Thesis.md
Normal file
470
01-Must-Read/2021-05-26-Mother-of-All-Short-Squeezes-Thesis.md
Normal file
@ -0,0 +1,470 @@
|
||||
I. IMPORTANT LINKS FOR NEW MEMBERS TO [r/superstonk](https://old.reddit.com/r/superstonk)
|
||||
=========================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/HCMF_MaceFace](https://old.reddit.com/user/HCMF_MaceFace) | [Reddit](https://old.reddit.com/r/Superstonk/comments/nletnn/gme_the_mother_of_all_short_squeezes_moass_thesis/) |
|
||||
|
||||
---
|
||||
|
||||
- [APE Security Protocol (how to secure and protect yourself online)](https://www.reddit.com/r/Superstonk/comments/nsgv3d/ape_security_protocols/)
|
||||
- [DD Beginners Guide Page](https://www.reddit.com/r/Superstonk/comments/njwv6n/the_gme_masters_guide_a_dd_campaign_for_apes/?utm_medium=android_app&utm_source=share)
|
||||
- [Wiki](https://www.reddit.com/r/Superstonk/wiki/index)
|
||||
|
||||
II. INTRO / INTENTION OF POST
|
||||
=============================
|
||||
|
||||
The core intention of this post was to frame the MOASS Thesis in a way that was understandable to individuals inside and outside of the community (especially those who are relatively new to the market). It also is intended to serve as a reference to leverage if you are ever trying to explain to someone why you think it is a good investment option.
|
||||
|
||||
This post will give a *relatively* simplistic breakdown of the current situation and landscape of GameStop Stock (GME). It will summarize the theory that GME's price will soon reach astronomical levels during a massive short squeeze, AKA "The Mother of all Short Squeezes (MOASS) Thesis". The bulk of this post is a breakdown of the market terms and concepts that will need to be understood in order to fully comprehend the who-what-when-where-why-how.
|
||||
|
||||
III. Personal note
|
||||
==================
|
||||
|
||||
Feel free to use the contents of this post however you want. Don't worry about asking for permission to copy it, cross-post it, translate it, refine and use it in your own posts, etc.
|
||||
|
||||
Leave a comment if you have any questions. If you prefer Chat or do not meet karma requirements, you can hit me up on chat as well
|
||||
|
||||
> Note that, while I may have a good grasp on the concepts broken down in this post, my background is not in finance, investing, or trading, so there may be some questions I do not have the answer do (especially if they are not called out in this post)
|
||||
|
||||
I have found myself more active on [Twitter](https://twitter.com/intent/user?screen_name=HCMF_MaceFace) than I ever really expected to be, so feel free to [follow me](https://twitter.com/intent/user?screen_name=HCMF_MaceFace) if you want things like the below:
|
||||
|
||||
- Antagonizing Market Adversaries, MSM Shills, etc.
|
||||
- Meme-ing with SuperStonk and the other Apes in the community
|
||||
- Getting Notifications for Future DD I post
|
||||
|
||||
Disclaimer
|
||||
|
||||
> This writeup is NOT intended to serve as a source of proof/evidence behind this theory, and it operates under the assumption that the theory is valid and that the conditions it is built on are valid. Credit for the DD this Thesis is based on belongs to the broader retail community inside and outside of [r/superstonk](https://old.reddit.com/r/superstonk). I personally contributed very little beyond synthesizing and summarizing the thesis and mechanics in a digestible way to help enable others to get the word out, and I am not an expert on really any of these topics despite having some knowledge in them.
|
||||
|
||||
IV. TL;DR (Also at Bottom)
|
||||
==========================
|
||||
|
||||
1. Toxic Market Participants have built up massive [short positions](https://www.investopedia.com/terms/s/short.asp) made through [Naked Shorting](https://www.investopedia.com/terms/n/nakedshorting.asp)
|
||||
2. Retail caught on to this strategy and discovered it can backfire if the company being shorted does not go bankrupt, especially if shares are bought and held indefinitely
|
||||
3. Rules and regulations have implemented by the DTCC and its subsidiaries have been geared towards preventing market collapse, as well as to minimize the ability to perform illegal trades (naked shorting)
|
||||
4. The SEC is also doing more to enforce compliance with the "rules"
|
||||
5. The manipulators are at the mercy of a vicious trade cycle (t+21 FTD Cycle) that is forcing those with naked short positions to perform actions to [cover](https://www.investopedia.com/terms/s/shortcovering.asp) (buy back shares that are short), or risk regulatory consequences
|
||||
6. This act of rapid covering drives up the price, making it more expensive to cover during the next cycle if the share price continues to increase week over week
|
||||
7. Eventually, the prices of GME will get so high that prime brokers/clearing houses will have no choice but to [Margin Call](https://www.investopedia.com/terms/m/margincall.asp) these participants which most likely will not be affordable due to the nature of [Short Squeezes](https://www.investopedia.com/terms/s/shortsqueeze.asp), causing them to default
|
||||
8. The [Prime-Brokers](https://www.investopedia.com/terms/p/primebrokerage.asp) will then take on the position, and if the Prime Brokers cannot cover them and also defaults, the NSCC will be next to attempt to settle all positions left over based on their [Recovery and Wind-down Plan (p42)](https://www.dtcc.com/~/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf)
|
||||
9. If NSCC cannot afford to close everything with the money reserved for this type of situation, they the Fed must navigate the remaining positions (potentially via printing money/bailout)
|
||||
|
||||
V. KEY CONCEPTS
|
||||
===============
|
||||
|
||||
These terms are key to understanding the theory and speculated value of a GME investment. Hyperlinks to [Investopedia](https://www.investopedia.com/), "the world's leading source of financial content on the web", have been included for most market terms and concepts and it is recommended to check them out if they are not clear. We will be breaking down some of the more complex terms and concepts within the post and framing them within the context of GME.
|
||||
|
||||
Table of Contents for Key Concepts
|
||||
|
||||
1. Stocks Concepts
|
||||
1. Share/Stock
|
||||
2. Synthetic Shares
|
||||
3. Outstanding Shares
|
||||
4. Restricted Shares
|
||||
5. The Float
|
||||
6. Annual General Meeting
|
||||
7. Shareholder Votes
|
||||
2. Trade Positions
|
||||
1. Long Position - Buying/Selling Stock
|
||||
2. Short Position - Shorting/Covering Stock
|
||||
3. Naked Short Position - Naked Shorting/Covering Stock
|
||||
3. Market Participants
|
||||
1. Retail Investors
|
||||
2. Institutional Investors
|
||||
3. Market Makers
|
||||
4. Prime Brokers
|
||||
5. Clearinghouses
|
||||
6. MSM
|
||||
4. IMPORTANT MARKET/TRADE MECHANICS (MOASS)
|
||||
1. Fails to Deliver (FTD)
|
||||
2. Margin
|
||||
3. Margin Calls
|
||||
4. Margin Calls Who Calls Who
|
||||
5. Short Squeeze
|
||||
|
||||
1 - STOCKS CONCEPTS
|
||||
===================
|
||||
|
||||
1.1 - Shares/Stock
|
||||
------------------
|
||||
|
||||
[Shares](https://www.investopedia.com/ask/answers/difference-between-shares-and-stocks/#shares) are the smallest unit of a Companies [Stock](https://www.investopedia.com/ask/answers/difference-between-shares-and-stocks/#stocks)
|
||||
|
||||
- Stocks and Shares are often used interchangeably
|
||||
- Technically "shares" would represent how many of a specific company's stock, where buying multiple "stocks" would main that shares of multiple company's were bought
|
||||
- ex. I bought 2 stocks; 10 shares of GME, and 60 shares of AMC
|
||||
- There are different [classes of shares](https://www.investopedia.com/terms/c/class.asp) that are distinguished on their voting rights, sales charges, and other factors
|
||||
- Classes of shares have relatively complex dynamics, but I will not go further into them here, as it is not as relevant to GME/AMC
|
||||
|
||||
1\. 2 - Synthetic Shares
|
||||
------------------------
|
||||
|
||||
[Synthetic Shares](https://www.investopedia.com/terms/s/synthetic.asp) are the financial instruments that get produced through [Naked Shorting](https://www.investopedia.com/terms/n/nakedshorting.asp)
|
||||
|
||||
- Not to be confused with [synthetic options](https://www.investopedia.com/articles/optioninvestor/08/synthetic-options.asp) positions, which are legal/legitimate trade strategies that "simulate" the profits/losses as if the trader actually held those shares
|
||||
- Synthetic shares entitle the owner to all of the same rights as an investor owning a non-synthetic share
|
||||
- Cases where there is an excessive amount of synthetic shares point to the possibility that a stock is being abused or manipulated
|
||||
- Cannot be easily measured due to limited public transparency at the Market Maker and Prime Broker level
|
||||
|
||||
1.3 - Outstanding Shares
|
||||
------------------------
|
||||
|
||||
The number of [Outstanding shares](https://www.investopedia.com/terms/o/outstandingshares.asp) encompasses the amount of issued shares held by all shareholders (both private and public)
|
||||
|
||||
- It is possible for there to be more shares outstanding through Naked shorting, which produces Synthetic shares
|
||||
- The number of issued AND synthetic shares outstanding is very difficult to measure, as they are only recorded on the books of the market makers generating synthetic shares and the prime-brokers they trade through
|
||||
- These parties are not incentivized to be transparent and actively obscure these numbers, as the practice of naked shorting excessively is fraudulent and illegal
|
||||
|
||||
1.4 - Restricted Shares
|
||||
-----------------------
|
||||
|
||||
[Restricted shares](https://www.investopedia.com/terms/r/restrictedstock.asp) include the number of issued shares held by insiders of the company
|
||||
|
||||
- These shares are not publicly traded on the stock market
|
||||
|
||||
1.5 - The Float
|
||||
---------------
|
||||
|
||||
[The Float](https://www.investopedia.com/terms/f/floating-stock.asp), or Floating Stock is the number of shares of stock that are available to be publicly traded (the number of [Outstanding shares](https://www.investopedia.com/terms/o/outstandingshares.asp) minus the amount of [Restricted shares](https://www.investopedia.com/terms/r/restrictedstock.asp) that are owned by insiders).
|
||||
|
||||
- In theory, the number of shares owned by [retail investors](https://www.investopedia.com/terms/r/retailinvestor.asp) and [institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) should not exceed the float
|
||||
- GME's float total is currently ~[56.89 Million](https://finance.yahoo.com/quote/GME/key-statistics/) shares (as of 6/10/21)
|
||||
|
||||
1.6 - Shareholder Votes
|
||||
-----------------------
|
||||
|
||||
[Annual General Meetings](https://www.investopedia.com/terms/a/agm.asp) basically is an annual meeting that allows shareholders to vote
|
||||
|
||||
- Votes are cast for things like
|
||||
- Appointment of directors
|
||||
- Executive compensation
|
||||
- Dividend adjustments
|
||||
|
||||
1.7 - Shareholder Votes
|
||||
=======================
|
||||
|
||||
[Shareholder Voting](https://www.investopedia.com/terms/v/votingright.asp) is a right extended to shareholders holding shares in the stock that entitle the owner to vote on cooperate policies
|
||||
|
||||
- Examples of what votes are cast for
|
||||
- Appointment of directors
|
||||
- Executive compensation
|
||||
- Dividend adjustments
|
||||
- [Overvoting (info in the middle of this page)](https://www.sec.gov/spotlight/proxyprocess/proxyvotingbrief.htm)
|
||||
- When there is an overvote (like GME on 6/9), the votes will be normalized to a number based on the amount of shares that are held by DTC
|
||||
- The official 8K form cannot be officially submitted with an overvote
|
||||
- When this happens, the SEC and Company are notified
|
||||
|
||||
2 - TRADE POSITIONS
|
||||
===================
|
||||
|
||||
2.1 - Long Position - Buying/Selling Stock
|
||||
------------------------------------------
|
||||
|
||||
When an investor buys a stock they are considered [long](https://www.investopedia.com/terms/l/long.asp) on it (this is the type of position most people associate with trading stocks)
|
||||
|
||||
- Not to be confused with a [long-term](https://www.investopedia.com/terms/l/longterminvestments.asp) investment
|
||||
- In other words, holders of long positions have a positive number of shares
|
||||
- To [close](https://www.investopedia.com/terms/c/closeposition.asp) a long position the owner would sell their shares on the stock market
|
||||
|
||||
Basic flow of obtaining/closing a long position is:
|
||||
|
||||
1. Buy the stock
|
||||
2. Hold it until the price of it increases to a desired amount
|
||||
3. Sell it for a profit
|
||||
|
||||
2.2 - Short Position - Shorting/Covering Stock
|
||||
----------------------------------------------
|
||||
|
||||
When a short seller shorts a stock they hold a [short position](https://www.investopedia.com/terms/s/short.asp) on the stock, or owe the party they borrowed from however many shares they shorted
|
||||
|
||||
- Not to be confused with a [short-term](https://www.investopedia.com/terms/s/shorterminvestments.asp) investment
|
||||
- Investors with short positions effectively are *in debt* or *owe* the number of shares that they have shorted and can be considered *negative* on the stock
|
||||
- To close that position, short-sellers must buy a number of shares equal to the size of their short position (buying to close a short position is known as [covering](https://www.investopedia.com/terms/s/shortcovering.asp))
|
||||
- Short positions must be reported to regulators (unlike naked short sales)
|
||||
|
||||
Basic flow of obtaining/closing a short position:
|
||||
|
||||
1. Borrow a share owned by a lender
|
||||
2. Sell the stock that was borrowed
|
||||
3. Gaining the cash based on the price it was at the time it was "shorted"
|
||||
4. Pay interest as a percentage of the stock's value
|
||||
5. Since this is a percentage the cost of interest increases if the stock's value increases
|
||||
6. Hold the position until the price has dropped to a desired price
|
||||
7. Buy the stock on the open market
|
||||
8. Ideally the stock is bought back at a lower price than originally borrowed for so the investor can pocket the difference
|
||||
9. Return the share back to the lender
|
||||
|
||||
2.3 - Naked Short Position - Naked Shorting/Covering Stock
|
||||
----------------------------------------------------------
|
||||
|
||||
[Naked Shorting](https://www.investopedia.com/terms/n/nakedshorting.asp) effectively allows a Short Seller, working with a market maker, to short a stock using a without having a borrowed share like normal short selling
|
||||
|
||||
- Naked short sales do NOT have to be reported the same way as normal "Short Sales" and can be "hidden"
|
||||
- Failures to Deliver the shares that were "fake-borrowed" to the buyer are on of the main ways to find evidence of naked shorting
|
||||
- Due to a loophole and lack of oversight by regulation, Naked short selling can be used to manipulate the price of certain stocks
|
||||
- This type of trade illegal outside of specific situations involving Market Makers
|
||||
- Naked shorting was targeted for tighter regulation during the financial crisis of 2008 but enforcement has unfortunately not been effective in preventing it from manipulating the market
|
||||
|
||||
Basic flow of obtaining/closing a naked short position (kind of complex and involves two specific parties for 2 initial trades called a married put)
|
||||
|
||||
1. A Short Seller "A" buys 100 shares from a Market Maker "Z" who can technically sell them without locating them
|
||||
1. Market Maker is Naked Shorting the stock, and the Short Seller is receiving 100 synthetic shares
|
||||
2. Short Seller "A" now buys a [Put Option](https://www.investopedia.com/terms/p/putoption.asp) (1 options contract is worth 100 shares) from Market Maker "Z" who is the [writer](https://www.investopedia.com/terms/w/writing-an-option.asp) of the put
|
||||
1. Writing/selling a put nets +100 shares to the Market Maker, which results in the -100 shares that were naked shorted to be neutralized, so the Market Maker no is at a neutral position (Market Makers generally try to remain net 0 on trades
|
||||
2. Short Seller "A" now has 100 shares that can be short sold (they "borrowing" the synthetic shares the Market Maker effectively printed out of thin air), and one put contract that they can make money on as long as the price goes down
|
||||
3. The steps or the short seller are basically the same as a normal short sale now (2.2 steps 2-8), however, interest from the Short seller does not need to be paid to a lender (no one is formally lending it)
|
||||
1. The premium from the put being purchased from the Market Maker is how they benefit
|
||||
2. Short Seller "A" now has a short position that they can cover simply by buying 100 shares, which would cancel out the synthetic short position
|
||||
|
||||
3 - MARKET PARTICIPANTS
|
||||
=======================
|
||||
|
||||
3.1 - Retail Investors
|
||||
----------------------
|
||||
|
||||
- Retail Investors, also known as individual investors, are your average investors (not a company or organization)
|
||||
- Referred to as the "Dumb Money" by Wall Street and the "professional" financial community
|
||||
- Reddit communities
|
||||
- Notable subreddits
|
||||
- [r/Superstonk](https://old.reddit.com/r/Superstonk)
|
||||
- [r/gme](https://old.reddit.com/r/gme)
|
||||
- [r/amcstock](https://old.reddit.com/r/amcstock)
|
||||
- [r/wallstreetbets](https://old.reddit.com/r/wallstreetbets)
|
||||
|
||||
3.2 - Institutional Investors
|
||||
-----------------------------
|
||||
|
||||
[Institutional Investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) are organizations that invest on individuals' behalf
|
||||
|
||||
- Examples of Institutional Investors
|
||||
- Endowment Funds
|
||||
- Commercial Banks
|
||||
- Mutual Funds
|
||||
- Hedge funds
|
||||
- Pension funds
|
||||
- Insurance companies
|
||||
|
||||
3.3 - Market Makers
|
||||
-------------------
|
||||
|
||||
- [Market Makers](https://www.investopedia.com/terms/m/marketmaker.asp) are very different from "Investors" and are a bit harder to explain but basically are there to increase [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) in the market
|
||||
- When you buy and sell stock those trades are often going between you and a market maker
|
||||
- Market makers get "special rules" that enable them to keep liquidity in the market when there is low liquidity
|
||||
- Naked shorting is one of the options Market Makers have when navigating a trade that other investors do not have
|
||||
|
||||
3.4 - Prime Brokers
|
||||
-------------------
|
||||
|
||||
- A [Prime-Broker](https://www.investopedia.com/terms/p/primebrokerage.asp) is a bundled group of services that investment banks and other financial institutions offer to hedge funds and other large investment clients that need to be able to borrow securities or cash in order to engage in [netting](https://www.investopedia.com/terms/n/netting.asp) to achieve [absolute returns](https://www.investopedia.com/terms/a/absolutereturn.asp)
|
||||
- [Broker](https://www.investopedia.com/terms/b/broker.asp) vs [Prime-Broker](https://www.investopedia.com/terms/p/primebrokerage.asp)
|
||||
- A broker is an individual or entity that facilitates the purchase or sale of securities, such as the buying or selling of stocks and bonds for an investment account. A prime broker is a large institution that provides a multitude of services, from cash management to securities lending to risk management for other large institutions.
|
||||
- [Market Makers](https://www.investopedia.com/terms/m/marketmaker.asp) like go through Prime Brokers
|
||||
- The Prime Broker is who would Margin Call Shitadel if their short position gets too large or they bleed too much capital
|
||||
|
||||
3.5 - Clearinghouses
|
||||
====================
|
||||
|
||||
[Clearinghouses](https://www.investopedia.com/terms/c/clearinghouse.asp) are intermediaries between buyers and sellers
|
||||
|
||||
- Finalize transactions
|
||||
- Regulates delivery of assets
|
||||
- Reports on trading data
|
||||
|
||||
3.6* - MSM (Mainstream Media)
|
||||
=============================
|
||||
|
||||
Though not a traditional market participant (as in they are not trade/financial entities) the [MSM](https://www.investopedia.com/terms/m/media_effect.asp) is worth noting due to its role in influencing the financial atmosphere and landscape
|
||||
|
||||
4 - IMPORTANT MARKET/TRADE MECHANICS (MOASS)
|
||||
============================================
|
||||
|
||||
4.1 - Failures to Deliver (FTD)
|
||||
-------------------------------
|
||||
|
||||
- [FTDs](https://www.investopedia.com/terms/f/failuretodeliver.asp) occur when a buyer of a stock ends up not having the money to purchase the stock that they traded for OR, when a short seller does not own the stock at the time of settlement
|
||||
- FTDs are one of the main check-balances to naked shorting, so very high amounts of Failures to Deliver are indicative of this
|
||||
- Spoiler: GME and AMC have tons of FTDs reported
|
||||
|
||||
4.2 - Margin
|
||||
------------
|
||||
|
||||
- [Margin](https://www.investopedia.com/terms/m/margin.asp) is basically credit that that an investor can use to buy more stock
|
||||
- When you buy on margin you must stake the assets you have already purchased with your own cash as collateral
|
||||
- The amount of Margin you can have depends on the value of your collateral
|
||||
- The value of your collateral and cash but meet the margin requirements in order to continue to buy on margin
|
||||
- Keep in mind the value of your collateral can change if the price goes up or down and if the value of your collateral/cash drops below the margin requirement you will received a [Margin Call](https://www.investopedia.com/terms/m/margincall.asp) Another way to think about it:
|
||||
|
||||
1. Imagine I have $1,000 in stock
|
||||
2. You obtain a personal loan for another $1000
|
||||
3. To get the credit you stake your $1000 in stock (if you default it goes to the lender to cover your debt)
|
||||
4. You buy $1000 more stock with that loan (you now own $2000 in stocks, half in cash half on margin)
|
||||
5. You will pay interest on the $1000 on margin but if your investment makes more money than the interest then you are still profiting
|
||||
6. If your investment turns bad (lets say the price of your stock falls 50% and you are left with $1000) your lender can forcibly close out your positions (everything you bought in cash and staked as collateral along with what you bought on margin so that they can get the $1000 they loaned you back)
|
||||
|
||||
4.3 - Margin Call
|
||||
-----------------
|
||||
|
||||
- A Margin Call is a notice indicating you have a specific amount of time to deposit enough of your own funds to meet your margin requirement (if you cannot meet the requirement the lender is entitled to sell all of your holdings to recover what you borrowed
|
||||
|
||||
Margin Examples:
|
||||
|
||||
> This is a slightly complicated scenario that can be a little hard to follow. Give it a few reads if it doesn't make sense the first time, but basically, Margin is a credit line that you can use to buy more assets (effectively a loan backed by collateral and cash in your own account). If you buy assets with it, you have to pay back what you borrowed, whether the value of your investment goes up or down (if the investment goes up in value, you make more than you normally would, but if the investment goes down in value, you lose more than you otherwise would have without margin).
|
||||
>
|
||||
> This gets even more (or less maybe) complicated when you have short positions AND long positions, like most institutional investors. To have short positions, I still need to have margin, but I do not need to use it to buy stocks, It can act as a buffer if I have a short position on a stock that is increasing in value (with a short position, if the price of something I short goes up, I am losing money), and if it gets too high, it can run against my margin line, causing a margin call.
|
||||
|
||||
GAIN: Long Positions
|
||||
|
||||
1. Imagine I have $1000 in stock XXX (let's say 10 shares worth $100 each)
|
||||
2. My broker may lend me margin credit line equal to the value of my assets (so $1000 in margin), and let's say they give me a margin requirement of $800, meaning that the value of my non-margin assets (the ones I bought with my money) must be above $800 in order to keep using margin (so as long as stock XXX stays above $80 a share, then I will not get a margin call for being below the requirement)
|
||||
3. I then choose to use the margin, buying 10 more shares of stock XXX for $100 each, so I now have 20 shares of stock XXX, valued at 100$ a piece
|
||||
4. If the price of stock XXX goes up to %25 per share, and I sell all 20 shares, I just profited $500 (+$25 on 20 shares)
|
||||
1. In this case, closing the position clears me from the margin debt, as I am no longer using it in an open position
|
||||
2. If I had not used margin, I would have only walked away with $250 in profit ($25 per share on 10 shares), but instead I made $500, and paid back the credit, plus a little bit of interest.
|
||||
5. Yay.
|
||||
|
||||
LOSS: Long Positions
|
||||
|
||||
1. Imagine I have $1000 in stock XXX (let's say 10 shares worth $100 each)
|
||||
2. My broker may lend me margin credit line equal to the value of my assets (so $1000 in margin), and let's say they give me a margin requirement of $800, meaning that the value of my non-margin assets (the ones I bought with my money) must be above $800 in order to keep using margin (so as long as stock XXX stays above $80 a share, then I will not get a margin call for being below the requirement)
|
||||
3. I then choose to use the margin, buying 10 more shares of stock XXX for $100 each, so I now have 20 shares of stock XXX, valued at 100$ a piece
|
||||
4. If the price of stock XXX goes down %25, bringing the value per share down to $75 a share, the value of my total position is now $1500, and the value of my non-margin assets is $750, which is below the margin requirement (keep in mind, I borrowed $1000, so that is still the amount I have to pay back)
|
||||
5. My lender will give me a margin call, indicating I have two business days to deposit 50$ into my account in order to meet the margin requirement
|
||||
1. If I have the cash to deposit the extra $50 would take my assets to $800 ($750 in stock XXX + 50$ cash)
|
||||
1. If the price of stock XXX recovered to above $80 per share, it could also satisfy the requirement
|
||||
2. If I do not have the cash to deposit, then I am in trouble, as after two days, they are allowed to liquidate (sell) the assets I bought with my own money, as well as the assets I bought on margin
|
||||
1. Let's say this happens, all my borrowed assets are sold first to cover my $1000 loan (since the price of stock XXX was only $750, it only covers $750 of my $1000 margin line
|
||||
2. I now have $750 left in assets of Stock X, but I still owe money from margin, so my lender is entitled to sell $250 work of my shares in order to get their full $1000 back
|
||||
3. I am now left with $500 total ($750 in 10 shares of stock XXX - $250)
|
||||
6. Not Yay
|
||||
|
||||
LOSS: Short and Long Positions
|
||||
|
||||
THIS IS THE RELEVANT ONE TO GME/AMC
|
||||
|
||||
1. Imagine I have $1000 in stock XXX (let's say 10 shares worth $100 each)
|
||||
2. My broker may lend me margin credit line equal to the value of my assets (so $1000 in margin), and let's say they give me a margin requirement of $800, meaning that the value of my non-margin assets (the ones I bought with my money) must be above $800 in order to keep using margin
|
||||
3. Instead of using the margin to buy more, I instead short 10 shares of stock YYY which is at $50 a share currently (giving me $500 in extra cash), which I use to buy 5 more shares of stock X
|
||||
1. I am now long 15 shares of stock XXX valued at $1500 and short 10 shares of stock YYY valued at -$500 (negative $500) for a net value of $1000
|
||||
2. No margin is actively committed to open positions, and I am still using my $1000
|
||||
4. Now, lets say a short squeeze happens involving stock Y, causing the price to skyrocket to $200 per share
|
||||
1. My short position is now -$2000 (10 shares of -$200 each)
|
||||
5. My net account value is now $-500 ($1500 - $2000) which is now using my margin, and because my account's value is no longer above $800, I no longer meet margin requirements so I get a margin call
|
||||
6. If I cannot balance my account, the lender will liquidate my $1500 in stock XXX in order to pay the -$2000 I owe, leaving me with -$500 left in debt
|
||||
1. I have now defaulted, as I cannot pay the $500
|
||||
7. Now that I have defaulted, the lender who gave me margin owns my short positions, meaning they are now short whatever was left
|
||||
1. The lender can now navigate the short positions however they want (they can hold them and hope the price goes down, and cover to close them, or they can close them immediately, costing them the whole $500 I still owed)
|
||||
8. GUH! (Translation if you are not WSB: Ah @#$%)
|
||||
|
||||
4.4 - Margin Calls Who Calls Who
|
||||
--------------------------------
|
||||
|
||||
- Margin calls happen at levels 1-4 when the cell to the left cannot meet margin requirements
|
||||
- Broker Margin Calls Retail Traders
|
||||
- Prime Brokers Margin Call Brokers, Hedge Funds, and Market Makers
|
||||
- The NSCC Margin Calls Prime Brokers
|
||||
- Defaults roll up left to right
|
||||
- If Retail Trader defaults, Broker must take on their leftover positions
|
||||
- If Broker, Hedge Fund, or Market Maker defaults, the Prime Broker must take on their leftover positions
|
||||
- If Prime Broker Defaults, the NSCC must take on Position
|
||||
- If the NSCC Defaults, the Fed must take on the position
|
||||
|
||||
| Level 1 | Level 2 | Level 3 | Level 4 | Level 4 |
|
||||
| :-- | :-- | :-- | :-- | :-- |
|
||||
| Retail Trader | Broker | Prime Broker | NSCC (DTCC) | Fed (JPOW) |
|
||||
| x | Market Maker | Prime Broker | NSCC (DTCC) | Fed (JPOW) |
|
||||
| x | Hedge Fund | Prime Broker | NSCC (DTCC) | Fed (JPOW) |
|
||||
|
||||
4.5 - Short Squeeze
|
||||
-------------------
|
||||
|
||||
- A [Short Squeeze](https://www.investopedia.com/terms/s/shortsqueeze.asp) is a market event that occurs when there is a large short position on a stock whose price rapidly increases higher than expected, normally due to a catalyst
|
||||
- During the short squeeze, the losses of those who have short positions continue to increase higher it goes
|
||||
- Since they owe shares, the cost to cover their position increases depending on how high the price goes (there is theoretically no limit on how high a stock can go)
|
||||
- As market participants who are short on the stock buy to cover, supply decreases and demand increases, causing the price to increase even more rapidly
|
||||
- While short sellers are scrambling to cover their positions, the rapid price change may entice investors who are not short on the stock to buy it in order to make a quick profit
|
||||
- Again, lowering supply and increasing demand
|
||||
|
||||
VI. The Mother of All Short Squeezes (MOASS)
|
||||
============================================
|
||||
|
||||
Explanation
|
||||
===========
|
||||
|
||||
Now that we have gone through the many important terms, we can get to the theory behind MOASS.
|
||||
|
||||
Due excessive short-selling and naked shorting of GME by certain market participants (primarily large hedge funds and market makers), retail investors and long institutional investors collectively own a number of shares that exceeds the the float. The amount of shares that are currently owned is theorized to range roughly between 200%-400% of the float if not more, meaning that 100%-300% of the float has a corresponding short position (mostly naked shorts). For context, most stocks generally have around 1% Short Interest, and 10%-20% short interest is considered to be excessive, let alone over 100% of it.
|
||||
|
||||
Short sellers must eventually close, or cover, their short position
|
||||
|
||||
- The only way to do that is to buy the shares owned by the investors who are long
|
||||
- in the meantime Short-sellers are paying interest on that short position until it is closed proportional to the cost of the shares, which bleeds their capital over time
|
||||
- Unfortunately for the short sellers, the owners of the shares ARE NOT obligated to sell their shares.
|
||||
- The short-sellers, however, ARE obligated to buy in order to close their position (or else keep paying interest)
|
||||
|
||||
So what happens if no one is selling the shares they are "long" on, but short sellers need to buy them?
|
||||
|
||||
- Supply and Demand
|
||||
- With very little supply and high demand, the price of a stock can increase far beyond its fundamental value
|
||||
- If short sellers receive a margin call due to no longer meeting their margin requirement and are unable to meet it in time, their assets will be forcibly liquidated by their lender in order to pay back the margin, as well as close out the position if the borrower defaults
|
||||
|
||||
If you are wondering why an organization would abusively short a stock like this if they eventually have to cover their positions:
|
||||
|
||||
- If a company goes bankrupt or gets delisted from the stock market:
|
||||
- The short sellers DO NOT have to close the position
|
||||
- All of the proceeds from the short sale effectively disappear from their books
|
||||
- They do not even have to pay taxes on this profit
|
||||
|
||||
Short positions amount to the total number of long positions minus the float, meaning (based on the theorized range) that somewhere between ~56-170 Million shares will need to be bought in order to close all short positions
|
||||
|
||||
- It is expected that the members with short positions (hedge funds and market makers who have been naked shorting the stock) will be unable to cover their short positions, resulting in a situation where their lenders, all the way up to the clearinghouse (DTCC) will have to sort out the positions
|
||||
- If the DTCC/NSCC is forced to unwind the positions, it is widely believed that they will rapidly cover short positions at whatever price they are available for (this is how their systems are said to handle a member default), liquidating whatever assets are necessary from the defaulting member
|
||||
|
||||
Consideration
|
||||
=============
|
||||
|
||||
This is a totally unprecedented situation, so, in truth, there is a lot of uncertainty around what wind-down will look like once this gets to the Prime Brokers (major banks) and NSCC, as well as around how high the price peak will reach. There is a real risk of broad negative impact across the entire market because of this and the current Repo Rates and margin debt.
|
||||
|
||||
A few things I think are safe to assume are:
|
||||
|
||||
- Before anything happens that will cap or negatively affect the MOASS, all of the Hedge Funds and Market Makers who conspired to manipulate the market will likely have been bankrupted and eliminated from the market landscape by then
|
||||
- Prime Brokers will have been dealt a massive blow (like Credit Suisse after Archegos Collapse by way worse) that should hopefully ensure regulators tie up every loophole that was exploited to manipulate the market and harm it
|
||||
- The peak will reach higher than any other short squeeze in history and will likely never be beaten in the future (EVER)
|
||||
|
||||
VII. Final thoughts...
|
||||
======================
|
||||
|
||||
This is the GME MOASS thesis. GME is a stock that stands to hit an unprecedented price point due to the fact that manipulators of the market have failed to bankrupt GameStop thanks in huge part to [the Legendary Keith Gill AKA u/DeepFuckingValue](https://en.wikipedia.org/wiki/Keith_Gill), [Ryan Cohen](https://en.wikipedia.org/wiki/Ryan_Cohen), [Michael Burry](https://en.wikipedia.org/wiki/Michael_Burry), and all of the GME investors who took part in this saga. It may not be today, this week, or even this month, but one day soon, these toxic participants have no choice but to buy the stock to close out their short positions.
|
||||
|
||||
In some schools of thought, it is thought that these participants over-estimated how "reasonable" retail investors can be (who could be dumb enough to hold a stock as it fell from almost $500 to $40?). In truth, these manipulators didn't understand the demographic they were fighting with. Gamers are some of the most stubborn people on the planet. These are individuals who will sink tens of thousands of hours into the same video game because "they just like it". Well, "we like the stock", and to us, the adversaries on Wall Street just are just another "boss". We may have needed to retry a couple times, but we always win eventually. On top of that, they pissed off reddit, and under no circumstances, should you ever piss off reddit.
|
||||
|
||||
At this point, if you are still reading this, know that it is up to you to decide your next move, whether that is to do some due diligence of your own, walk away, or say screw it and buy a few (or a lot of) shares just in case we are right. Many of us have set our floor (minimum amount of acceptable gains) at $20,000,000 per share, and you might think that is crazy, but in truth, we know we can pick our own price if we hold long enough. We don't care if anyone else buys or not, because we know the outcome is inevitable. Time is running out for the toxic market participants involved, and even the news can't hide that we are on the brink of a massive market event that will ripple through the entire global financial system, and we will probably never see an event like this again in our lifetime.
|
||||
|
||||
This is a fight Wall Street, Shitadel, Melvin Capital, and ever other toxic party is not going to win against the "dumb money". Chances are this will truly be "THE MOASS", meaning there will never be another like it in our lifetime (or ever). While the conditions in play (the ability for big money to brutally manipulate the market) enabled what may end up being the greatest transfer of wealth in history, actual reformation to prevent a landscape like this from forming again is probably best long term (I say this as a pragmatist, and am honestly very far from an idealist). If you want to influence reform, Buy, Hold, Vote. If you are just here for the tendies, Buy, Hold, Vote.
|
||||
|
||||
VIII. TL;DR
|
||||
===========
|
||||
|
||||
1. Toxic Market Participants have built up massive [short positions](https://www.investopedia.com/terms/s/short.asp) made through [Naked Shorting](https://www.investopedia.com/terms/n/nakedshorting.asp)
|
||||
2. Retail caught on to this strategy and discovered it can backfire if the company being shorted does not go bankrupt, especially if shares are bought and held indefinitely
|
||||
3. Rules and regulations have implemented by the DTCC and its subsidiaries have been geared towards preventing market collapse, as well as to minimize the ability to perform illegal trades (naked shorting)
|
||||
4. The SEC is also doing more to enforce compliance with the "rules"
|
||||
5. The manipulators are at the mercy of a vicious trade cycle (t+21 FTD Cycle) that is forcing those with naked short positions to perform actions to [cover](https://www.investopedia.com/terms/s/shortcovering.asp) (buy back shares that are short), or risk regulatory consequences
|
||||
6. This act of rapid covering drives up the price, making it more expensive to cover during the next cycle if the share price continues to increase week over week
|
||||
7. Eventually, the prices of GME will get so high that prime brokers/clearing houses will have no choice but to [Margin Call](https://www.investopedia.com/terms/m/margincall.asp) these participants which most likely will not be affordable due to the nature of [Short Squeezes](https://www.investopedia.com/terms/s/shortsqueeze.asp), causing them to default
|
||||
8. The [Prime-Brokers](https://www.investopedia.com/terms/p/primebrokerage.asp) will then take on the position, and if the Prime Brokers cannot cover them and also defaults, the NSCC will be next to attempt to settle all positions left over based on their [Recovery and Wind-down Plan (p42)](https://www.dtcc.com/~/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf)
|
||||
9. If NSCC cannot afford to close everything with the money reserved for this type of situation, they the Fed must navigate the remaining positions (potentially via printing money/bailout)
|
||||
|
||||
IX. STILL TL;DR
|
||||
===============
|
||||
|
||||
Margin Calls happen across the market and force all market participants with short positions in GME to cover or go bankrupt if they cannot afford to. The NSCC's systems that will settle positions after mass defaults liquidates all short hedge funds and covers as much GME as it can. If the NSCC cannot pay everything, it fails up to the Fed and JPOW to print money to settle the trades.
|
||||
|
||||
X. Hedgies, velkommen til helvete. Vi kommer for tårene dine.
|
||||
=============================================================
|
||||
|
||||
PDF Link - I recommend accessing through an incognito browser so that no one else is able to see your email address if you are logged into google (I initially had this on OneDrive, which did not do this, however, shills seem to have gotten my Microsoft account blacklisted so I cannot access OneDrive now lol):
|
||||
|
||||
<https://drive.google.com/file/d/18SDUrEd-wNjKDwblo3ykoIxn627Vni0G/view?usp=sharing>
|
||||
|
||||
EDIT: updated on 6/13/2021 to version 2.0 (kept the same post since it is referenced in a few places).
|
||||
127
01-Must-Read/2021-06-05-Definitive-Guide-about-Naked-Shorting.md
Normal file
127
01-Must-Read/2021-06-05-Definitive-Guide-about-Naked-Shorting.md
Normal file
@ -0,0 +1,127 @@
|
||||
Everything Superstonk Knows About Naked Shorting - A Definitive Guide
|
||||
=====================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/sharkbaitlol](https://www.reddit.com/user/sharkbaitlol/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nt0ojl/everything_superstonk_knows_about_naked_shorting/) |
|
||||
|
||||
---
|
||||
|
||||
|
||||
[🚀 Moderator 🚀](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22%F0%9F%9A%80%20Moderator%20%F0%9F%9A%80%22&restrict_sr=1)
|
||||
|
||||
Hi apes; sharkbaitlol here again chomping away at MSM this time. This is a quick post surrounding a particular news station confirming the concept of naked short selling (for anyone [out of the loop](https://www.reddit.com/r/Superstonk/comments/nspmql/naked_shorts_yeah/)); while this is hilarious, it's something the apes here at Superstonk know all too well as we've been researching this for a while now!
|
||||
|
||||
Over the last few months, we've had fantastic DD written on the subject and even had AMA guests come on to speak about it. The great news is, that this topic has picked up so much speed that we even see it trending on Twitter right now across various parts of the world.
|
||||
|
||||
With that being said this serves as a great time for us to showcase all the research apes here have worked on over the last several months. If you feel there's a great thread that should be included below (that I've missed); please feel free to comment and I'll edit it in.
|
||||
|
||||
[](https://preview.redd.it/o0nbqlzlfh371.png?width=1091&format=png&auto=webp&s=e9e7cb830ed3490fd11adf58b87db6079c3469ef)
|
||||
|
||||
the world is taking notice
|
||||
|
||||
Lets start off with a text book definition of naked short selling:
|
||||
|
||||
[](https://preview.redd.it/yecxm5507h371.png?width=611&format=png&auto=webp&s=59d8c9f2e09a1cd46ed532814ccc7ced06ae2a67)
|
||||
|
||||
https://www.investopedia.com/terms/n/nakedshorting.asp
|
||||
|
||||
Essentially it is the practice of shorting a stock (which is totally legal), but without the shares on hand (this is what's illegal). This is equivalent to spending shares you do not have; this becomes a slippery slope to create scenarios like what we see with GME where [140% of the float was shorted.](https://en.wikipedia.org/wiki/GameStop_short_squeeze) This shouldn't be possible as it suggests that an incremental 40% of shares (more than exist) were fabricated. This can be put on the same level of severity as printing out currency.
|
||||
|
||||
This process artificially increases the amount of shares in circulation without the affected companies approval; devaluing shares significantly. If you own mutual funds, ETFs, retirement plans or straight up stocks this should be a concern for you as these players (naked short hedge funds, financial institutions) are stealing from you. It's through this process that they killed off Toys'r'us, Sears and thousands of other companies.
|
||||
|
||||
Some great resources from over the last few months:
|
||||
|
||||
-----------------------------------------------------------------------------
|
||||
|
||||
AMAs With Wes Christian
|
||||
|
||||
-----------------------------------------------------------------------------
|
||||
|
||||
Wes Christian joined us recently for two amazing AMAs!
|
||||
|
||||
Just as a reminder for his background;
|
||||
|
||||
> *Wes Christian is a Texas attorney with* [*an accent as big as his list of accomplishments*](http://www.csj-law.com/attorneys/jchristian.html)*!* *His primary focus in the last 11 years has been suing Wall Street for fraud and is a* *US legal expert on naked short selling.*
|
||||
|
||||
[](https://preview.redd.it/ragcur5s7h371.png?width=170&format=png&auto=webp&s=66da029065ebe745b0b671c1e0f778cf7c3e3bff)
|
||||
|
||||
- Catch him in part 1 in an interview with the brilliant [u/dlauer](https://www.reddit.com/u/dlauer/) : <https://www.youtube.com/watch?v=2rJujnpKiqM>
|
||||
|
||||
- And part 2 with heavyweight investigative journalist Lucy Komisar: <https://www.youtube.com/watch?v=q8-JO3g5bm4>
|
||||
|
||||
I highly suggest watching the AMAs to get an insight into the financial world; but here are some great quotes from Wes himself during the interviews;
|
||||
|
||||
> *Lucy:* *"Well, what was going on? What tactics were they using?"*
|
||||
>
|
||||
> *Wes:* *"Let's see back then what they did is they really naked short sold, what I would call small cap companies, bulletin board companies, not NASDAQ companies, not NYSE Amex companies, bulletin board companies, and back then those companies always needed capital. So they would enter into the the bad guys would enter into a convertible debenture, that is a basically a legal note a promise to pay money. In an exchange for that the note would say we the person who's owed the money can take shares, or we can take cash for payment. Well, the bad guys would always take shares. And so what would happen is the company the public company would sign the note because I needed the money. Because the people said, Oh, we'd love your company, we want to invest, we really think you've got great technology will loan you this money. In fact, we'll even let you repay us in shares with the company thought that's a winning proposition. Because my God, I don't have to part with cash, I'm gonna get cash in the door, it's great. But in reality, what that was, was a predator, or predator who was coming in getting inside information and loaning you money. And at the time, let's say that this company stock which was internet law library was making it up, but it's close $8 a share. And at the time, the amount of shares that would have to be given to the person who the note was made payable to would have been, let's say, a million shares. And it that time the stock started going down and down and down, and the volume of the sales went up and up and up. Of course, as we know, loosely, anytime sales, exceed demand or supply exceeds demand, the price is going to go down. So what was happening is the mission of the bad guys was to loan you two and a half million dollars, and be entitled, at least at that time to a million shares. So by the time sorry that they got through with you, you would have to give them 20 million shares."*
|
||||
|
||||
Shark's take: It wasn't always about going after big companies; Wall Street's appetites have grown over time as Wes suggests.
|
||||
|
||||
> *Lucy:* *"but just to just to intervene a little bit just to explain what it means. If you make a loan, and I think in this case for Sedona, it was two and a half million, you have to pay back, maybe it was 3 million in shares, but its shares and you think everything's going up, you're getting this loan is going to grow the business. But if they knock the share price down with naked short selling, 3 million worth of shares, may be the whole company, because the shares now are worth what a 10th a 20th. So that the number is important. $3 million worth of shares, gives them the whole company. And that's that's the deal. And that's how it"*
|
||||
>
|
||||
> ***Wes: "****That is exactly how it works. It is a way when you think about it to take the company over. Over the years, we've done 20 of these cases and and so and we're getting ready to file a couple more, we just found one in the southern district as you know the Harrington case. Basically, it is a way to either destroy the company and bury the dead bodies that the stock certificates that don't exist, or it's a way to steal the technology. I've seen it both ways. If they really like your technology, they will go in and right before the company Totally dies, they'll put it in bankruptcy, buy the assets out of bankruptcy for what they're owed, and go from there. So you're right. Their mission is to start out with 3 million shares and ultimately you owe 100 million shares in order to pay your two and a half million dollars worth of debt."*
|
||||
|
||||
Shark's take: This has been ongoing for such a long time that it no longer a new or shocking concept. The process of a naked short company takedown is well documented, and understood. They'll drag the company into significant debt before killing it off.
|
||||
|
||||
> ***Dave: "****So I think there are two things that I've seen on the on the subreddit, consistently, and that I think, you know, might be of interest to dive a little deeper into. And so, you know, we've talked about this a lot, and we've thrown the terms around today. But maybe, maybe it would be great to get a little deeper into it, which is the idea of synthetic shares and, and failures, right. And so maybe if you if you don't mind just going a little deeper into that dynamic. You know, what is that mechanism that that that these firms are using to create these synthetic shares? And what have you seen in the past?"*
|
||||
>
|
||||
> *Wes: "Yeah, and again, I'm going to qualify that my answer, but to make it clear that I'm only using what's in the regulatory actions and out in the public marketplace, because again, I can't use any particular from a specific case. What I'm seeing is, is the creation of futuristic instruments. They've been called rehypothecation instruments they've been called repost certificates. They've been called putting a put in a call together. They've been called reverse conversions. There's many fancy names for them, but I call them I call them the Popeye and Whitby principle, okay. It's like, give me the hamburger today, and I'll pay you next Wednesday. Okay, except next Wednesday, incidentally, never comes okay. So So ultimately, you know, that principle needs to not be allowed because ultimately it culminates in the dissemination of false information. it culminates in that false information comes in several places. David's a great question you pose. Number one, they'll show it to the compliance department because Don't forget, each one of these firms has a compliance department. And that compliance department gets a knock on the door from the regulator or from the auditor that says, hey, what about this Charlie or Sally? And ultimately say, Oh, we got to fix that. Okay. And so they go to the broker and say, What Is this okay? Because Don't forget The proprietary trading desk is a whole section of that firm, there are traders that do nothing, but do prop trading. And so ultimately, they then say, well, we got to, we got to figure this out. So they'll go create this, you know, as to members in the conspiracy that puts in the calls. Or if they're short, they'll get a friend of theirs to sell them a bunch of shares, which, incidentally, are short also, but they'll mark them long. So guess what happens when they when the naked short seller is has this contingent liability on the brokerage firms books, he calls a buddy sell me some long shares, he sells in the long shares, well, that that cancels out net, magically, the number of long shares he got sold, netted out his his naked short to zero, he's he's all good, until the compliance guy comes knocking again. So the mission is to kick the can down the road kick the can down the road. So basically, you know, at the end of the day, it's creating a futuristic instrument it to to, you know, deal with the option market, the repossession or repo? hapa, hapa, rehypothecation. market. And anything else that is a futures contract? It's basically a futures contract to do something, in some form representative of shares that never gets consummated."*
|
||||
|
||||
Shark's take: We start venturing into the concept of rehypothecation when we enter into the realm of naked short selling. Of course these "synthetic shares" must be coming from somewhere. Wes confirms that the goal for these naked shorters is to keep kicking the can down the road infinitely. Short hedge funds just keep saying "I'll pay you next Wednesday" and continue saying it every week. Eventually the company gets killed off in this process as this can take months/years. With everything that's happening now, we hope it'll spur change.
|
||||
|
||||
-----------------------------------------------------------------------------
|
||||
|
||||
AMA With Dr. Trimbath
|
||||
|
||||
-----------------------------------------------------------------------------
|
||||
|
||||
Dr. Trimbath has been an incredible ally to the ape initiative;
|
||||
|
||||
A quick blurb about her incredible work:
|
||||
|
||||
> *" Susanne Trimbath holds a Ph.D. in Economics from New York University and received her MBA from Golden Gate University. Prior to forming STP Advisory Services, Dr. Trimbath was Senior Research Economist in Capital Studies at Milken Institute (Santa Monica, CA) and Senior Advisor on the Russian Capital Markets Project (USAID-funded) with KPMG in Moscow and St. Petersburg. She previously served as a manager in operations at Depository Trust Company in New York and the Pacific Clearing Corporation in San Francisco; she started her career in financial services operations at the Federal Reserve Bank of San Francisco. Since 1989, Dr. Trimbath has taught economics and finance in university graduate and undergraduate programs as adjunct, associate and full-time professor. In 2009, she was certified to teach in the distance-learning environment by both Bellevue University (Nebraska) and University of Liverpool (UK, by Laureate International, Amsterdam). "*
|
||||
|
||||
You can watch the AMA [here](https://www.youtube.com/watch?v=fGVY2Kco8ng); I also highly recommend her book called "Naked, Short and Greedy" goes into MUCH deeper detail as to the oversight of what went on at the DTC (Depository Trust Company) during her time there as senior management. This is the same security depository which the stock market sits on. It is a large component of how naked shorting is allowed to exist in the current landscape.
|
||||
|
||||
Fellow mod [u/atobitt](https://www.reddit.com/u/atobitt/) did a fantastic write up on the very topic of how the DTC has allowed this mess to happen in the first place. Highly recommend reading through his "[A House of Cards](https://www.reddit.com/r/Superstonk/comments/mvk5dv/a_house_of_cards_part_1/)" series.
|
||||
|
||||
[](https://preview.redd.it/t0q55lyxyh371.png?width=1526&format=png&auto=webp&s=57b0a5dc5081fb925a6e5607e2187181790d6310)
|
||||
|
||||
-----------------------------------------------------------------------------
|
||||
|
||||
Other fantastic threads by apes:
|
||||
|
||||
-----------------------------------------------------------------------------
|
||||
|
||||
- " [Explain w/ Crayons Series: What is Naked Shorting? Indicators GME is Being Naked Short](https://www.reddit.com/r/Superstonk/comments/nk40b6/explain_w_crayons_series_what_is_naked_shorting/) " by [u/AaronJamesArq](https://www.reddit.com/u/AaronJamesArq/)
|
||||
|
||||
- Great powerpoint type formatting that quickly and easily explains the concept of naked short selling and how it relates to meme stocks
|
||||
|
||||
- " [The naked shorting scam revealed: lending of market maker privileges, the married put trade and why inflicting max pain will bleed them dry](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/) " by [u/broccaaaa](https://www.reddit.com/u/broccaaaa/)
|
||||
|
||||
- Amazing deepdive into how the naked short selling scam may work with some intensive mathematical research done around the topic.
|
||||
|
||||
- " [Reason why they didn't speak about naked shorting](https://www.reddit.com/r/Superstonk/comments/n6qilq/reason_why_they_didnt_speak_about_naked_shorting/)" by [u/Badgerv12](https://www.reddit.com/u/Badgerv12/)
|
||||
|
||||
- Further proving why a slip up on news stations may be important. It's one of the first few times it's heard from MSM them confirming the concept.
|
||||
|
||||
- " [This is HUGE NEWS: Investment Banking Company Jefferies suspends short sells and naked shorts on $GME](https://www.reddit.com/r/Superstonk/comments/nrgdlo/this_is_huge_news_investment_banking_company/) " by [u/FDAz](https://www.reddit.com/u/FDAz/)
|
||||
|
||||
- News suggesting that multiple financial institutions trying to potentially control the naked shorting issue.
|
||||
|
||||
- " [Naked Short Sellers have set our cancer research back decades from their abusive short selling.](https://www.reddit.com/r/Superstonk/comments/ndrjl8/naked_short_sellers_have_set_our_cancer_research/) " by [u/phoenixfenix](https://www.reddit.com/u/phoenixfenix/)
|
||||
|
||||
- The ugly reality of naked short selling and just how damaging it has been to the world historically.
|
||||
|
||||
- " [ELINA (Explain Like I'm Not Ape)](https://www.reddit.com/r/Superstonk/comments/mwylrj/elina_explain_like_im_not_ape/?utm_source=share&utm_medium=ios_app&utm_name=iossmf) " by [u/writerofjots](https://www.reddit.com/u/writerofjots/)
|
||||
|
||||
- In-case you're still REALLY confused, this one does a good job breaking it down into the barebones.
|
||||
|
||||
Just to echo my statement on the daily thread, the mod team will be removing any further content referring to the reporter or the news station in question at this time to make room for the excellent research you all do. I urge you all to rely on your humanity (apemanity?) when discussing this further.
|
||||
|
||||
Please remember that the reporter is an individual as well; whether intentional or not, they should not be harassed. This paints a very negative image on the apes, and we're better than that.
|
||||
|
||||
Please feel free to retweet my post to get superstonk's voice out there! <https://twitter.com/u_sharkbaitlol/status/1401233432060076032>
|
||||
|
||||
With that being said, stay excellent to each other and stay hungry.
|
||||
@ -0,0 +1,226 @@
|
||||
Hank's Big Bang: Quant Apes Glitch the Simulation
|
||||
=================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/HomeDepotHank69](https://www.reddit.com/user/HomeDepotHank69/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nu9qq9/hanks_big_bang_quant_apes_glitch_the_simulation/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
********** I am not a financial advisor, this is not financial advice **********
|
||||
|
||||
Edit: Credit for the correlation tables to [u/phalanxhydra](https://www.reddit.com/u/phalanxhydra/)
|
||||
|
||||
Edit 2: I am retarded. It's [u/Ivorypetal](https://www.reddit.com/u/Ivorypetal/).
|
||||
|
||||
Introduction
|
||||
|
||||
Apes, because of the sheer amount of information in this post and because I wanted to get it to you at the beginning of this week because of earnings and the meeting, this post will not have the usual funny intro and memes.
|
||||
|
||||
Usually, my DDs are done completely by me with maybe some inspiration from a few apes or a section/link from an ape or two. This one is not that. This DD is an orgy. Apes, I have gathered an army. A fucking army of quant apes. They have been gracious enough to team up and answer the questions that I posed in my previous post and..... I am astonished at what they did. Seriously, I didn't expect this in my wildest dreams. Quant apes, I am eternally grateful for what you've done and I know that this sub is too. Again, this just shows how many extremely smart apes we have in this fight. This is going to be by far my most data-driven DD of all time.
|
||||
|
||||
Many of you have probably seen the spoilers that I gave in my request for data that this DD would be about using correlations, models, and data to get to an extremely high level of certainty that shorts have indeed not covered by analyzing GME as compared to the other meme stocks and some other indicators as well. This was inspired by the pretty obvious fact that they all have traded in very similar patterns since around December. I also noticed that they all seemed to have some sort of FTD cycle component to them as well. I really drew the line when all of these stocks started this upward momentum in the past week - it was just too much of a coincidence for there not to be a relationship. A short squeeze is rare. Stocks following the same trading pattern is weird. A stock squeezing two times in less than a year is weird. A stock trading at over 4x it's book value consistently for months is weird. But 6 stocks doing all of those things simultaneously is..... ASININE. Some might call it improbable, but I think we all know what it is. This DD will use data, a shit ton of it, to give us the closest proof next to actually seeing HFs positions that they have indeed not covered..... ENJOY
|
||||
|
||||
Roadmap
|
||||
|
||||
In this DD, I will discuss why the meme stock craze is not a just a bunch of retail traders pumping up stocks. Instead, it is the product of the greatest shorting fail in the market of all time that was made possible by easy money policies and apes' uncanny ability to buy and hold. Next, I will discuss the statistical significance and origin of the FTD cycle. Finally, I will give you a random dump of DD at the end of my thoughts.
|
||||
|
||||
Part 1: A data driven approach to the meme stock craze
|
||||
|
||||
A visualization of what you already knew
|
||||
|
||||
As many of you know from some of my previous posts, my thesis is that the "meme stocks" are all related. This was based on observations that the charts looked similar from December to now in terms of price action and volume. The quant apes did an excellent job of visualizing this. Below is a visualization of the meme stocks compared to cryptos and boomer stocks for reference. The parameters are volatility and volume.
|
||||
|
||||
[](https://preview.redd.it/sfs0rlgprt371.png?width=1626&format=png&auto=webp&s=f28599498018462de65d04a0663206ff4d64a623)
|
||||
|
||||
[](https://preview.redd.it/ckanpxbqrt371.png?width=1652&format=png&auto=webp&s=553e7ceae6eddd1a387febf88e0e1a3ffe03e117)
|
||||
|
||||
[](https://preview.redd.it/6wb6ze0rrt371.png?width=1624&format=png&auto=webp&s=46a16bda7b06735d23ed2b6cb9def15472d53703)
|
||||
|
||||
(Credit for above three charts to u/Ivorypetal)
|
||||
|
||||
A visualization of what you already assumed
|
||||
|
||||
This is a visualization of what we already know but haven't been able prove: the stocks are related. Looks like there's a relation, right? How can we be sure? If you took a college or high school statistics course, you probably know that there are certain tests you can run to determine if inputs are correlated, the degree of the correlation, the certainty, and the statistical significance. Below, the quant apes used a statistical test (I won't explain it because if you aren't familiar with statistics it'll take too long to explain, but this is not a guess, it uses an equation to determine the level of correlation, so it is extremely accurate) to determine the correlation of GME to other meme stocks and the VIX. I put GME in red because it's all we care about right now. The top is a comparison of these stocks entire data (i.e. all time), while the bottom compares them in the last year:
|
||||
|
||||
[](https://preview.redd.it/92ks0y4trt371.png?width=860&format=png&auto=webp&s=03932694664e27f9dbfde8042d03f3be181a2559)
|
||||
|
||||
[](https://preview.redd.it/hbahq3rtrt371.png?width=862&format=png&auto=webp&s=328a0b47ad63faae068e12c847dacdc1df2ef9bb)
|
||||
|
||||
(Credit to u/phalanxhydra)
|
||||
|
||||
As you can see, the difference between all time and the last year is striking. The above decimals are called correlation coefficients. They go up to 1 (which means they are identically correlated). Anything above 0.7 is considered a strong correlation. As you can see all of them except for NAKD and NOK have a strong correlation to GME. What really struck me was the VIX. Because the market usually goes down when the VIX goes up, the fact that GME and the VIX have such a strong correlation in the past year is extremely important for our thesis that HFs are actively acting against it.
|
||||
|
||||
OTC Data
|
||||
|
||||
The chart below takes the OTC data from FINRA and plots it for each of the meme stocks. Notice how they all seem to follow a pattern of spiking every few weeks (FTD cycle) except for the blue one. The blue one is not a meme stock, it's Apple. I used Apple as a reference security so you can contrast how weird this is. Sadly, we don't have FINRA data before 2019, so it's difficult to analyze this in terms of when it started, but you can definitely see a related pattern of abnormality:
|
||||
|
||||
[](https://preview.redd.it/psbp9arwrt371.png?width=2766&format=png&auto=webp&s=1286b2fb12123ba6bf01eaf408917a7f47915530)
|
||||
|
||||
(Credit to all of the quant apes who made this customizable program that allowed me to do this)
|
||||
|
||||
How common are squeezes?
|
||||
|
||||
Squeezes are rare. Extremely rare. Whether you think the January price run up was a short squeeze, a gamma squeeze, or just a big price increase does not matter because, in asking the quant apes to find the exact number of short squeezes that have occurred in the stock market, I gave them VERY broad parameters. The parameters I gave them were: any stock that has doubled in price within a week. Because of this, this is undoubtedly a gross overestimate of the number of short squeezes in the history of the market (i.e. some little known penny stock getting FDA approval and going 4x overnight). The numbers that they found show us just how rare a short squeeze is, and remember, even this is an overestimate, so they're probably even rarer. The quant apes used the major exchanges NYSE, NASDAQ, and AMEX. Here are the results:
|
||||
|
||||
[](https://preview.redd.it/o1rcuupyrt371.png?width=2032&format=png&auto=webp&s=a16b8200dde9417a18b25c4eed0e353557879555)
|
||||
|
||||
(Credit to u/jyzaya)
|
||||
|
||||
If you can't understand that data, here's the point: they are rare, even with parameters that purposefully overestimate it. They are so rare that you could call them an anomaly because that's what they are. Remember that's a purposeful overestimate that allows small stocks getting good news, IPOs, etc. to be considered. So yes, short squeezes are rare. Multiple squeezes following the same pattern and all squeezing at the exact same time? Some might call it improbable, but we all know what we call it.
|
||||
|
||||
My take
|
||||
|
||||
So, you've seen the data. These stocks are correlated. Does a correlation mean that there is some orchestration going on or that something is forcing them to move in concert? No. It means that they typically move in the same direction, reason unknown. A statistical test can't tell us the reason for the correlation, it can just tell us the correlation. I think I know the reason.
|
||||
|
||||
What I think many people, especially the media, take for granted is just how weird January was. As you now know from above, short squeezes are rare. Stocks correlating is weird. Stocks correlating for months is weird. Stocks squeezing at the same time is weird. Stocks doing all of those things at the same time is unheard of. The weird thing about January is that brokers, all of them, simultaneously restricted the buying of all of these stocks. Because liquidity works both ways (buy and sell), if they really had liquidity issues, they would've stopped buying and selling. Also, does it make any sense that every single broker would have liquidity issues at the exact same time during the times of the lowest interest rates ever and an easing of banking restrictions? No. None of that makes sense. My thesis is that all of these stocks are related and the data backs that up. I believe that the brokerages saw that these stocks posed a SYSTEMIC risk because of how exposed major market makers and HFs were on the short side. Why else would they all simultaneously ban only buying?
|
||||
|
||||
To add even further to that, many brokerages have banned the shorting of these stocks (months after the squeeze). Even more is all of the shill activity of people messaging us saying "I'll pay you to write something bad about GME." Moreover, the brokerages must have seen that retail, and now the rest of the market, was piling on buying orders and that eventually, some of the most important institutions could go bankrupt and cause an economic crisis. So what did they do? They restricted all buying. Even if every single ape hodled, the price would still be able to go down significantly due to shorting and institutional selling. So yes, they forced it to go down. Now, what was that systemic risk I was talking about? What exactly did the HFs do? As most of you know, I was one of the apes that started the talk of FTD cycles and found many of the rules behind it. The FTD cycle has been the only thing that we've been able to consistently predict (well that and the media being retarded but I digress). IMO, the FTD cycle is our clue into what the HFs did to cause a systemic problem. The FTD cycle has been increasing exponentially, which leads me to believe that the systemic risk has only gotten worse, and I think I've discovered it's origins...
|
||||
|
||||
PART 2: The statistical significance and origins of the FTD cycle
|
||||
|
||||
Now that I've left you with that cliff hanger and probably a half chub, it's time to take an extremely in-depth dive into the FTD cycle. First, I will be demonstrating the statistical significance of the FTD cycle, so that we know it's not just a fluke. Next, I will discuss the origins of the FTD cycle. Finally, I will discuss what I think it all means.
|
||||
|
||||
First, let's start with a brief summary and update on the FTD cycle. The FTD cycle is the idea that because of SEC regulations requiring market makers to cover FTDs within 35 calendar days, there is a predictable increase in price and volume every 21ish trading days or 35 calendar days. So far, it has continued to repeat itself. The idea is that shorts are in so deep that they are doing the bare minimum to cover and continue to dig themselves in a deeper hole by kicking the can down the road. It is currently increasing exponentially, which indicates that it is getting more and more expensive for shorts to stay in the game.
|
||||
|
||||
[](https://preview.redd.it/pgikvf01st371.png?width=1412&format=png&auto=webp&s=8eecc3c7176aa22a77b37c302a9d57bc197f7477)
|
||||
|
||||
Orange line represents FTD cycle increases each month. Yellow lines are FTD cycles. Disregard the red lines, those were my trend lines before we broke out
|
||||
|
||||
SI by the charts
|
||||
|
||||
Below is a chart that the quant apes gathered from Ortex showing the SI of the meme stocks over time. Many of you will say that this is inaccurate because the real SI is hidden. While we have many instances of that being true, this is the best concrete data that we can gather (much better than Fintel and FINRA), so it's what we must use to avoid speculation. So, yes these numbers are probably an understatement but that's a good thing because we do not want to speculate. If we can find significant results on incomplete data, our thesis is strengthened:
|
||||
|
||||
[](https://preview.redd.it/88i9r528st371.png?width=1750&format=png&auto=webp&s=89c540227a2e8d7f969d110a7d0ef60042ec423b)
|
||||
|
||||
(Credit to u/orangecatmasterrace)
|
||||
|
||||
I noticed some very interesting things from this chart. First, I noticed that the SI of most of the meme stocks markedly increased in mid 2019. GME had an exceptional increase (I think because of their issuance of bonds, shorts saw that as a debt death sentence). There was also a slight, but noticeable, rise in SI of most of these in mid 2016 as well. Hmmmmmm. My original thesis was that they were all heavily shorted after the covid crash because HFs predicted a bad economy and the destruction of brick and mortars, so they used the low interest rate and low liquidity environment to their advantage. That is still probably true as I bet they did it with naked shorts, but this chart made me think even more. What happened before Covid that could've led to these SI increases.
|
||||
|
||||
Friend of the shorts: The US economy
|
||||
|
||||
The first thing I did was get a chart of short volume data in the stock market over time to get the big picture:
|
||||
|
||||
[](https://preview.redd.it/lhxdy8t9st371.png?width=1374&format=png&auto=webp&s=f8f711ef8dab8cc36f77ee6d55fc852ed693393b)
|
||||
|
||||
As you can see SI has increased markedly in 2015 and 2019. So that got me thinking, there must be some kind of law, some correlation with FED policy, or some kind of macroeconomic happening that led to this. So next, I looked at the interest rates for interbank lending:
|
||||
|
||||
[](https://preview.redd.it/z3677egbst371.png?width=1234&format=png&auto=webp&s=ac740b8236851f40bb01e0eb7fce99a80b550396)
|
||||
|
||||
This is not mortgage interest rate, this is federal funds interest rate, which is essentially the interbank interest rate for excess lending. As you can see it's been insanely low since the 1990's, but particularly low as of recently. Next, I looked at the balance sheet of the FED. This essentially shows the Fed's buying of assets over time.
|
||||
|
||||
[](https://preview.redd.it/rd1ye3ddst371.png?width=1630&format=png&auto=webp&s=f284394415c8cd127d750bbcd45f55ef676d0fd0)
|
||||
|
||||
[](https://preview.redd.it/ygpfqudest371.png?width=1554&format=png&auto=webp&s=5cf6fa82247426f7a83db8d202be1f85b3c5f8be)
|
||||
|
||||
The above graph is especially striking. It shows the FED's balance sheet is increasing proportionately with the SP500. The FED's Quantitative easing policies have been extremely aggressive since 2008. QE is where the FED purposefully stimulates the economy by buying assets like bonds. This was necessary after 2008 and the FED kept it going for a while then started tightening (QT). However, and this chart doesn't show it, the FED had to parabolically increase its QE policies duirng covid. You know what else parabolically increased? Yep, the stock market.
|
||||
|
||||
The statistical significance of the FTD cycle
|
||||
|
||||
[](https://preview.redd.it/79rg4j9gst371.png?width=1284&format=png&auto=webp&s=33e2deedfeb5f2caa5c1914e8caa828071214862)
|
||||
|
||||
[](https://preview.redd.it/3qzw1f0hst371.png?width=1274&format=png&auto=webp&s=5b591b0a0bfe04debd67f0561a971ac797651e78)
|
||||
|
||||
[](https://preview.redd.it/y9iekcuist371.png?width=1284&format=png&auto=webp&s=39b9bc492e20a346bdeef2ab210cdf6d9196303a)
|
||||
|
||||
(User wished to remain anonymous for this)
|
||||
|
||||
The above charts show GME's FTD cycle increases after a certain number of days. I put TSLA and MSFT in there so that you could see how abnormal GME is. Even compared to a volatile stock like TSLA, GME has a way more recognizable pattern, which gives us further statistical evidence of the FTD cycle. Also, note that there were many other users in different posts on this sub who found the FTD cycle statistically significant, this is another view to add to the body of work. Below shows the short interest of the meme stocks in relation to each other, so you can see when they started and how they've increased together:
|
||||
|
||||
[](https://preview.redd.it/765vp0kqst371.png?width=510&format=png&auto=webp&s=03d70c989c96d63c0d3321acdd8e081b9ed903c8)
|
||||
|
||||
(credit to u/orangecatmasterrace)
|
||||
|
||||
Keep the above chart in mind while reading below.
|
||||
|
||||
The takeaway:
|
||||
|
||||
We are in an EXTREMELY easy lending environment. Rates are dirt cheap. The FED is buying up assets, which is pushing up the prices of literally all assets. The market is flush with liquid assets, so much so that the FED was trying to slow it down. This makes the perfect storm for a short-friendly environment. We were also in the longest and biggest bull market run of all time in 2010's, so it would make sense for it to come to an end soon - that's where shorts really make a killing.
|
||||
|
||||
What I think happened is that we saw the longest bull market of all time in the 2010 decade. HFs realized that this bull market was propped up on the FED's massive balance sheet and that there would need to be more economic tightening soon and/or a correction. Anticipating an end to the bull market, they initiated a giant short campaign in 2019 with the aforementioned meme stocks and probably tons of others (the meme stocks are just the ones that retail investors took interest in). Once Covid hit, their campaign was successful, but they wanted more. They wanted to hit the bankruptcy jackpot, so they turned it up with the naked shorts, which is why the data doesn't show that, in an attempt to put brick and mortars out of business.
|
||||
|
||||
Instead, the FED accelerated its easy money policies and the economy had one of the quickest recoveries of all time. This is why I think we started seeing the FTD cycle in late 2020 - it was a result of their failed mega short during covid. This alone would've made them lose money but they've run into roadblocks like this before so it's not what caused the squeeze and mania. What caused that was the fact that apes literally buy and hold but never sell. This essentially created a giant wall that wouldn't allow the HFs to short down out of their positions and got them into this mess. Then some retail investors caught wind of it and bought into some of their most shorted stocks, which is why we saw what happened in January. They are still in that hole because the brokers' pausing of buying didn't solve the problem, it just delayed it. That's why we see the FTD cycle exponentially increasing. This economic environment has been brewing for this for a long time, and it would have continued if not for reddit (mainly DFV). I mean how crazy is it that GME's SI was over 100% for so long and no one noticed?
|
||||
|
||||
I am convinced that this would not have been able to continue to happen if apes didn't hold. That's why this was all able to happen. It's because there has never been a phenomena in the market where a significant portion of investors in a stock will hold it no matter what the market conditions are. So when shorts started aggressively shorting and things turned south because of the FED's recovery policies, retail's refusal to sell just added insult to injury and is why we are in this position now.
|
||||
|
||||
(Please note that the above data I only actually displayed a fraction of the quant apes' data. They gave me an amazing amount. I used some of it to inform my/guide myself and displayed charts that went well with my DD, so believe their work is even more in-depth than this post portrays)
|
||||
|
||||
Part 3: DD Drop
|
||||
|
||||
Alright apes, the above was a mouthful, but wow aren't our quant apes amazing! Now that you've read all of that, I am going to do another one of my DD drops on some random theories, updates, etc.
|
||||
|
||||
Everyone remember what happened with Archegos? That was a real funny one wasn't it? Bill Hwang plead guilty to insider trading, so he had to operate a family office. The man lost $20 billion in the span of 2 days, now that's a level of yolo retardation we should all strive for. One of the companies that Hwang invested in was Discovery, here's it's chart:
|
||||
|
||||
[](https://preview.redd.it/4qnz2xesst371.png?width=2206&format=png&auto=webp&s=f4c7320665b27f95a8b9ffe05328d7e93bb26b3a)
|
||||
|
||||
See that purple line? I bet you probably think that's VWAP or a SMA line, right? NOPE. That's VIAC (Viacom CBS), one of the other companies he bet big on. Hwang used an instrument called total return swaps, which basically allow you to "swap" the delta of one baseline security for another. Here's an example: a total return swap of Apple and SPY. You get the returns of APPL. If AAPL outperforms SPY, you make money, but if not, you owe them money. That was all a huge oversimplification but essentially, it allows you to have exposure to a company without owning it (derivative). That above chart was just a 1 year chart, but essentially, Hwang applied so much leverage to these companies through these swaps that they were trading at double their fair market price.
|
||||
|
||||
This hypothesis is backed by no data whatsoever and is really just a thought experiment. Based on the fact that meme stocks correlate (as shown above), what if HFs are using some type of swap on them? It would make sense given the extremely low interest rates. It would make even more sense given the negative beta of GME (i.e. SPY would be the reference security). Perhaps they use total return swaps or another instrument to cover or to add more pressure? Idk. Just a thought.
|
||||
|
||||
Another hypothesis: could this all be the work of an algo? I mean, there's no more observing the similarities, we now know they are statistically significant and related. IMO, it's impossible for human traders to create this pattern -- it's just too precise and based on too much volume, so the options are either they shorted all of these at the exact same time and are being forced to cover at the exact same time (FTD cycle), an algo is doing that for them, or some algo is orchestrating all of this. I find that unlikely because of the difficulty and obvious market manipulation charge they'd get but we have to consider it! Again, just another thought, not much else to it.
|
||||
|
||||
The Midday Spikes: An Answer
|
||||
|
||||
Apes, we might have an answer to the midday volume spike phenomena. If you don't know what I'm talking about, see my other post. My hypothesis was that these midday spikes were HFs covering to satisfy some kind of requirement or to avoid some kind of FTD cycle. I had no evidence for the cause, I just had tons of observations for the occurrence. Let tell you though, if there's one thing I know, it's that it's not retail. Whatever is behind the midday spikes is a single entity. It is impossible for a bunch of unorganized people to consistently buy a stock in the same minute interval in mass. That is a single entity doing that and I think whoever it is is our enemy. A beautiful ape by the name of [u/KFC_just](https://www.reddit.com/u/KFC_just/) turned me on to the idea that it may be to comply with net negative rules. I scoured the interwebs and found this on NASDAQ:
|
||||
|
||||
[](https://preview.redd.it/qvze3s1vst371.png?width=1954&format=png&auto=webp&s=296a2ead951725c90722f157d402a86b34854748)
|
||||
|
||||
Notice that it also talks about clearing corporation requirements, which adds another elements into the mix. Though I can't find any information about exact requirements in terms of liquidity/numbers, I think that this is pretty definitive proof of the reasons for the midday spikes. Essentially, it seems as though these midday spikes are some fund covering in order to "maintain net capital sufficient to comply with the requirements of the Clearing Corporation." Also, the final sentence explains why they need to cover (i.e. to remain positive).
|
||||
|
||||
Earnings and 6/9
|
||||
|
||||
A lot of you are probably extremely excited for earnings and the annual meeting on 6/9. I am too. However, I wanted to make this to tell you to not get your hopes up too much and to not be surprised if it doesn't go our way. What I will say is, I am confident that we will see a dildo candle one way or another. For earnings, remember that last quarter the earnings were not even bad and the stock had a GIANT red dildo candle. Unless earnings are absolutely spectacular, I could see HFs using it as a way to put negative momentum on the stock (remember, it's all about the narrative). Now, earnings could be spectacular. GME has gotten so much more attention this past quarter and I know that apes have been feverishly shopping there, so we do have hope.
|
||||
|
||||
As far as the annual meeting I have absolutely no clue what to expect. However, like earnings, I expect another dildo one way or another. If you remember last earnings, we all thought that the guidance/conference call is what would put us over the edge. Instead, it was barebones minimum, and we succumbed to the HFs earnings downward momentum. I expect this to be different. An annual meeting is different from an earnings call and definitely warrants more speaking, more guidance, and more detail. If GME was going to announce some blockbuster move, it would be during this because, assuming they know about the massive short interest, that gives them plausible deniability against market manipulation charges. Some important topics we could hear about are: Ryan Cohen speaking in general, a new CEO, crypto/NFT, acquisitions, digital transformation / direction, and, most importantly, the voting results. Is there a guarantee that these things will be discussed? No. Do I expect many of them to be discussed? Yes. Similar to earnings, we could get great news and see a giant red dildo candle. Remember, expect anything. If we get more shorting on positive news, it just keeps proving we are right.
|
||||
|
||||
As for my thoughts on when we moon, I personally don't think we'll moon here almost no matter what. I think that it will be overall good and that we will see a very significant jump, but instead of that being the MOASS, I think it will be what starts the MOASS. The only thing we've been able to predict has been FTD cycles so far. The MOASS will come when a HF gets margin called and we just can't predict the exact time for that. So, I believe that if we see a big jump next week, the MOASS should be coming in the near future but will nevertheless be unpredictable.
|
||||
|
||||
Clarification of my statements about retail buying
|
||||
|
||||
In one of my past posts, I said something along the lines of "retail is tapped out." Thankfully, another user made a post disagreeing with that and it got tons of replies of apes saying things like "I have tripled my position in the past month." If you haven't seen that post, I'd look at it, the responses are amazing. With that in mind, I wanted to clarify what I said about that. What I meant in that post is that retail is not responsible for the mass, synchronized buying that we've seen in the past week or so, I think that is HFs being forced to cover. Retail, instead, has been holding like champs and steadily buying. IMO it's pretty hard to believe that retail just randomly decided to buy every stock that squeezed in January at the same time. Instead, I think it's something much bigger but apes' ability to hold is why it's able to happen. However, I do think that once we start squeezing again, it will bring in a new wave of retail that formerly wasn't in just like January, so we still do have gas in the tank (or ions in the battery if you drive electric).
|
||||
|
||||
Big Thanks to the Quant Apes
|
||||
|
||||
I can't tell you how seriously amazing the quant apes are. They deserve all of the credit in the entire world and they are one of the most valuable parts of this sub.
|
||||
|
||||
Here is a list of some of the quants who helped with this post (this is not exhaustive as some wanted to remain anonymous)
|
||||
|
||||
[u/orangecatmasterrace](https://www.reddit.com/u/orangecatmasterrace/)
|
||||
|
||||
[u/spambot9k](https://www.reddit.com/u/spambot9k/)
|
||||
|
||||
[u/rubberbootsinmotion](https://www.reddit.com/u/rubberbootsinmotion/)
|
||||
|
||||
[u/Ivorypetal](https://www.reddit.com/u/Ivorypetal/)
|
||||
|
||||
[u/creativelord](https://www.reddit.com/u/creativelord/)
|
||||
|
||||
[u/collegeneral](https://www.reddit.com/u/collegeneral/)
|
||||
|
||||
[u/xpurplexamyx](https://www.reddit.com/u/xpurplexamyx/)
|
||||
|
||||
[u/jyzaya](https://www.reddit.com/u/jyzaya/)
|
||||
|
||||
[u/epk-lys](https://www.reddit.com/u/epk-lys/)
|
||||
|
||||
[u/head4headsup](https://www.reddit.com/u/head4headsup/)
|
||||
|
||||
[u/squirrel_of_fortune](https://www.reddit.com/u/squirrel_of_fortune/) (he made a great DD as well and I would encourage you to check that out to see another perspective with a very interesting, advanced method)
|
||||
|
||||
[u/sudoshu](https://www.reddit.com/u/sudoshu/) (Special thanks to him as he was the organizer of the group. If you are a quant ape, he said to message him if you are interested in being in the group, but serious inquiries only).
|
||||
|
||||
Mods: many of these users do not have the karma requirements to comment on posts. If you could somehow waive that requirement for the listed users, I think it would really benefit the sub because the amount of knowledge that these apes possess is amazing. They put so much time into this and gathered so much data (I literally couldn't even show close to all of it) and I believe that they will be integral to the continued success of this sub.
|
||||
|
||||
Finally, the quant apes have created a website: <https://www.superstonkquant.org/>
|
||||
|
||||
They are still currently working on the mechanics of it but I encourage you to monitor it in the future because I have witnessed first hand what they are capable of and it is nothing short of amazing.
|
||||
|
||||
Conclusion
|
||||
|
||||
Alright apes, that was very long but I appreciate you for reading. This sub keeps doing a great job of pumping out DD and I think we will be rewarded for it in the very near future. I am going to take a break from making DDs because it is really time consuming and can be extremely tiring, but I will still be looking at this sub, commenting, and possibly making short posts. As always,
|
||||
|
||||
*Stay strong, apes.*
|
||||
|
||||
********** I am not a financial advisor, this is not financial advice **********
|
||||
216
01-Must-Read/2021-06-12-Revisiting-Net-Capital-and-T+21-Loops.md
Normal file
216
01-Must-Read/2021-06-12-Revisiting-Net-Capital-and-T+21-Loops.md
Normal file
@ -0,0 +1,216 @@
|
||||
A revisit to Net Capital. What is truly driving these T+21 loops, the March and June gamma runs, and how skyrocketing ETF FTDs might cause big price movements in the coming weeks.
|
||||
===================================================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/ny2ov4/a_revisit_to_net_capital_what_is_truly_driving/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
Well well, I think it's time to revisit an old topic. Net Capital. I posted about this in the past and for some reason gave up on it. I can now provide counter DD to my own T+21/T+35 theory.
|
||||
|
||||
Remember - I am not a financial advisor and I do not provide financial advice! Everything in here is based on research and discussion with others on the topics. As always, do your own research and criticize. Take my opinions with a grain of salt.
|
||||
|
||||
Wanting to revisit the Net Capital topic was a few things. There were posts about ETF FTDs spiking severely as of May 12th - even more than the highest peaks of January. I had my own doubts over time of how we could possibly have multiple cycles overlapping, when it felt more like there would be only a single cycle. And of course, some people commented and/or posted counter DD! Which I think is awesome, it's always good to provide counter DD.
|
||||
|
||||
Kenny and his gang love to continue digging a hole for themselves - while the whole financial world tries desperately to contain this potential market crash from coming to fruition.
|
||||
|
||||
GME shorts and Reverse Repo Market go brrrrrrrr.
|
||||
|
||||
TLDR: Sorry I'm too lazy right now. About to post this and go to sleep. 😎
|
||||
|
||||
[](https://preview.redd.it/p9ruup81br471.png?width=1016&format=png&auto=webp&s=459845688e21d10000f45ba7e81c9de8a6839321)
|
||||
|
||||
Kenny And The Boys
|
||||
|
||||
My previous post about [Net Capital](https://www.reddit.com/r/Superstonk/comments/n4h832/major_deep_itm_call_option_dates_a_massive_net/) was thinking that we'd see significant price movement T+14 days after April 16th options expirations. That didn't happen, so I tossed it out of the window. (Criand, you dumb bitch)
|
||||
|
||||
Which then led me down the path of the [T+21 Loop Missing Link](https://www.reddit.com/r/Superstonk/comments/nf22qz/theory_on_the_ftd_loop_missing_link_a_t35_surge/). It got pretty popular. It's the whole T+21/T+35 conjunction theory that occurred May 24th and May 25th. While it definitely appears to be right, I have been doubting it ever since May 24th. Especially after a courageous ape [u/dentisttft](https://www.reddit.com/u/dentisttft/) posted the [Counter DD to T+21](https://www.reddit.com/r/Superstonk/comments/nsady3/t21_is_not_actually_a_thing_counter_dd/) theory. T+35 (May 24th) didn't have significant enough price movement. If it truly was a new T+35 initiating a loop, then it should have exploded up in price on May\
|
||||
24th. And for that, I think it's time to put that theory to bed.
|
||||
|
||||
The counter DD that [/u/dentisttft](https://www.reddit.com/u/dentisttft/) posted is excellent and you should definitely take a look. If my post is wrong, [/u/dentisttft](https://www.reddit.com/u/dentisttft/) still proposes another possibility: that T+35 from the FTD spike could initiate buy pressure around June 17th.
|
||||
|
||||
Ever since the counter DD, I decided to revisit Net Capital since that is what [/u/keijikage](https://www.reddit.com/u/keijikage/) brought to my attention so many weeks ago. Very smart guy by the way! Always very knowledgeable and provides amazing discussion!
|
||||
|
||||
Looking back on Net Capital now, especially with the ETF FTD spike that occurred on May 12th, it might finally paint the picture as to what has been going on this whole time with the "T+21 cycle", the March Gamma Ramp, and the June Gamma Ramp.
|
||||
|
||||
1\. GME FTDs, ETF FTDs, Massive Resurgence Started May 12
|
||||
|
||||
First, I want to discuss ETF FTDs, as something absolutely wild occurred in May. Note that we do not have the full months FTD data yet. The SEC releases the data in first half and second half of the month reports. So, it cuts off quite conveniently when FTDs began to go haywire.
|
||||
|
||||
For a while now it's been theorized ([with some pretty damn good evidence](https://www.reddit.com/r/Superstonk/comments/nrpjle/almost_1b_ftd_on_may_14th_between_gme_and/)) that ETFs containing GME have been heavily shorted. Supposedly they will short the ETF, buy up all of the other stocks in the ETF that were shorted, but leave GME alone. There's a net 0 effect on the other stocks but a net short on GME. This then starts to cause ETF FTD anomalies which they also try to suppress, but they can't hide forever. Because it appears that as of May 12th, these FTDs have begun to spill out of hiding.
|
||||
|
||||
[u/basketas87](https://www.reddit.com/u/basketas87/) posted about this surge of ETF FTDs in "[New data shows a large increase of ETF FTDs](https://www.reddit.com/r/DDintoGME/comments/nx013v/new_data_shows_a_large_increase_of_etf_ftds/)":
|
||||
|
||||
[](https://preview.redd.it/h7iq2v4njq471.png?width=1122&format=png&auto=webp&s=b4fbbca80002197058a20c5d8654e08ba8b4dbae)
|
||||
|
||||
GME Price Vs. GME FTDs and ETF FTDs (which contain GME); Source: /u/basketas87
|
||||
|
||||
You can immediately see the ETF FTDs absolutely SKYROCKETED just before the cutoff of the SEC FTD bi-monthly report. We don't even know how high this has gone in the following days or if its come crashing back down. Remember - these are aggregate. We don't sum up the FTDs between dates. Whatever the number is upon a date is the current total of FTDs reported.
|
||||
|
||||
For a date-by-date tracking for these FTDs between January and the end of March, [/u/broccaaa](https://www.reddit.com/u/broccaaa/) provided an excellent chart in "[The naked shorting scam using ETFs: mass shifting of FTDs from GME to 20+ ETFs & 27+ billion dollars still owed in remaining SI](https://www.reddit.com/r/DDintoGME/comments/n1x75w/the_naked_shorting_scam_using_etfs_mass_shifting/)". This gives us an easier look at the exact dates when FTDs spiked earlier in the year.
|
||||
|
||||
> I selected GME and 19 ETFs containing GME. I chose to only look at the ETFs that contain the most GME shares and had large numbers of FTDs in 2021. - [/u/broccaaa](https://www.reddit.com/u/broccaaa/)
|
||||
|
||||
[](https://preview.redd.it/choe9jjris471.png?width=1709&format=png&auto=webp&s=3e907654b1e054734098c010839ec5ad07ab0633)
|
||||
|
||||
Aggregate FTDs for GME; GME and ETFs; Source: /u/broccaaa
|
||||
|
||||
Some notable aggregate FTD dates from this chart:
|
||||
|
||||
1. January 29th
|
||||
|
||||
2. February 2nd
|
||||
|
||||
3. February 18th
|
||||
|
||||
And of course, the latest absolutely insane May 12th. Once again, we don't even know what the FTD numbers are for the second half of May. It could very well be much higher.
|
||||
|
||||
2\. Net Capital And Market Makers; Citadel's Can-Kicked Bag
|
||||
|
||||
Net Capital is detailed out [in this post](https://www.reddit.com/r/Superstonk/comments/n4h832/major_deep_itm_call_option_dates_a_massive_net/) but I will do a quick summary. It revolves around [Net Capital Requirements For Brokers or Dealers - 240.15c3-1](https://www.law.cornell.edu/cfr/text/17/240.15c3-1):
|
||||
|
||||
> ...is designed to ensure that a broker-dealer holds, at all times, more than one dollar of highly liquid assets for each dollar of liabilities (e.g., money owed to customers and counterparties), excluding liabilities that are subordinated to all other creditors by contractual agreement. The premise underlying the net capital rule is that if a broker-dealer fails, it should be in a position to meet all unsubordinated obligations to customers and counterparties and generate resources sufficient to wind down its operations in an orderly manner without the need of a formal proceeding...\
|
||||
> ...A broker-dealer must ensure that its actual net capital exceeds its required minimum net capital at all times. - [Source](https://www.mercatus.org/system/files/peirce_reframing_ch6.pdf)
|
||||
|
||||
Or in other words, you must have enough capital to not be "margin-called". In this case, Citadel is a prime victim to this rule as they are a Market Maker and must sustain enough net capital to not go bust. If they do not, they're a risk to their customers and counterparties. This rule tries to ensure that they have enough money to pay up in the event of a default.
|
||||
|
||||
The very interesting part of this rule comes down to how they're calculating Net Capital in regards to short securities:
|
||||
|
||||
[](https://preview.redd.it/jzzkxo2qsq471.png?width=1311&format=png&auto=webp&s=9b26ce9297defa1c10492f9d1e2b2c6a1bc07252)
|
||||
|
||||
Net Capital Rule; Short Securities Deduction From Net Capital Per "Days After Discovery"
|
||||
|
||||
What this basically means is that after the short security difference is found to be unresolved after discovery (think FTD popping up is the "discovery"), then it's going to slowly start eating away at their net capital the longer it remains unresolved/undelivered:
|
||||
|
||||
- Day 0 after discovery = 0% of the unresolved short security is calculated into their net capital
|
||||
|
||||
- Day 7 after discovery = 25% of the unresolved short security is calculated into their net capital
|
||||
|
||||
- Day 14 after discovery = 50% of the unresolved short security is calculated into their net capital
|
||||
|
||||
- Day 21 after discovery = 75% of the unresolved short security is calculated into their net capital
|
||||
|
||||
- Day 28 after discovery = 100% of the unresolved short security is calculated into their net capital
|
||||
|
||||
When you have these debts accounted for into your net capital, it is taking away that value, because it is a short difference you owe. As the days go by, net capital starts chunking down. So, if you have a rather large short security difference discovered one day (such as May 12th) then you want to resolve it quickly or risk defaulting.
|
||||
|
||||
Do you find a way to stuff the unresolved shorts back under the rug? Do you deliver and force buy-ins? Both? That appears to be the loop they've been stuck in, which slowly bumps the price floor upward.
|
||||
|
||||
You'll notice that there's a familiar number in there. Day 21. T+21? Oooh. Tasty. Here we go.
|
||||
|
||||
The total timeframe for Net Capital is [28 days](https://www.youtube.com/watch?v=ST2H8FWDvEA), but Citadel most likely cannot allow the Net Capital threshold to go past 75%. They must kick-the-can and force buy-ins on or before T+7, T+14, T+21 but complete the entire process by the net 75% threshold of T+21. They can't risk it going to 100% or else they'll most likely default.
|
||||
|
||||
Wham, bam, the T+21 loop ignites itself continuously.
|
||||
|
||||
3\. Plotting The Net Capital Loop - The Counter of T+21 and T+35
|
||||
|
||||
The major option dates still play a big role. But I don't think T+35 theory is what's really applying here.
|
||||
|
||||
What are "major options"? These are the only options that were available for the year 2021 back in early 2020. These are the option dates that were most likely opened up initially by shorters at the start of COVID. Perfect time to place bets and start their kill shot on GameStop:
|
||||
|
||||
- January 15, 2021
|
||||
|
||||
- April 16, 2021
|
||||
|
||||
- July 16, 2021
|
||||
|
||||
Upon expiration, unrealized losses now became realized losses, and their overall capital receives a dent. It most likely gets harder to hide FTDs and hide them under the rug.
|
||||
|
||||
You know the most curious thing?
|
||||
|
||||
Posts about Citadel working the night-shift started just after April 16th options expirations.
|
||||
|
||||
That's also right around when Bank of America shut down a bunch of their locations. I won't buy their excuses. Bank of America looks like they're a bag holder and is freaking out too.
|
||||
|
||||
Something big had to of happened as of April 16th, and it's most likely that they had a huge dent in their capital that is now causing a slow bleed-out of FTDs that they've hidden, which then must be satisfied within the Net Capital timeframe of T+7, T+14, T+21, T+28, or else they can go net negative and default.
|
||||
|
||||
And of course, following April 16 options expirations, the ETF FTDs start to skyrocket on May 12th. My main intuition is that they were unable to hide these any more and they have started to spill out. Ruh-roh.
|
||||
|
||||
First, I'll plot out the T+21 Net Capital loop so that it isn't too cluttered:
|
||||
|
||||
[](https://preview.redd.it/xh4u2ugmfs471.png?width=1438&format=png&auto=webp&s=85188eccc2bf3841bb98e37e5be98b8badcc01c7)
|
||||
|
||||
Plotted Net Capital "T+21" Cycle, December 22 to July 26
|
||||
|
||||
Upon December 22, the clock starts ticking. It's possible that at this point the price was too high for them to NOT worry about Net Capital any more, and they had to start can-kicking and forced buy-ins.
|
||||
|
||||
Each loop is separated T+21 because it appears that they cannot sustain higher than the 75% threshold each time. You can see the T+21 loop we're familiar with, starting December 22, and then traveling through January 25, February 24, March 25, April 26, May 25. And potentially continuing on to June 24 and July 26. [The next two dates if any apes are curious].
|
||||
|
||||
To get a closer look of the potential effects of the various Threshold amounts (T+7 (25%), T+14 (50%), T+21 (75%)) I've zoomed in on March 25th to May 25th. ENHANCE!
|
||||
|
||||
[](https://preview.redd.it/p6q5gox9fs471.png?width=1438&format=png&auto=webp&s=4da6c3ed2e8547ccd755b95ee895be235cbf9d44)
|
||||
|
||||
Plotted Net Capital "T+21" Cycle, March 25 to May 25, Price Spikes Prior to Each Threshold (T+7, T+14) Date
|
||||
|
||||
In the above it's unlikely but there is a chance that they have too many FTDs to shuffle around by the time Net Capital 25% (T+7) Threshold hits. This could initiate some buy-in pressure on or before that date, typically the day before, as outlined in the light green circle. The day before because they don't want those positions to be 50% upon the next day. They must be resolved BEFORE.
|
||||
|
||||
It is also unlikely but a greater chance that they have too many FTDs to shuffle around by the time Net Capital 50% (T+14) Threshold hits. This again could initiate some buy-in pressure on or before that date, typically the day before, as outlined in the blue circle.
|
||||
|
||||
And of course upon Net Capital 75% (T+21) Threshold, they must complete their rug-hiding and/or buy-ins to avoid going Net Negative. It is possible that the rug-hiding and buy-ins are in conjunction with one another, slowly increasing the price floor, and that between each threshold they try to short the stock more to push down the price.
|
||||
|
||||
Looping back to Section 1 when we identified the major FTD dates:
|
||||
|
||||
1. January 29th
|
||||
|
||||
2. February 2nd
|
||||
|
||||
3. February 18th
|
||||
|
||||
4. May 12th
|
||||
|
||||
There's a potential relationship to be seen with these insane FTD dates. Now this chart I'm about to show is highly speculative. I'm unsure if the Net Capital loop initiates upon the FTD spikes (though it certainly should, per Net Capital rule, because that would be when they are "discovered").
|
||||
|
||||
I say I'm unsure because I only see one data point here so far and somewhat of a second data point from the price run-up we've been seeing the past few days.
|
||||
|
||||
[](https://preview.redd.it/424mtt66sq471.png?width=1433&format=png&auto=webp&s=7b11bb6a0a8f06bafb2471e7dfc0b64c90f1cb1a)
|
||||
|
||||
Plotted Net Capital "T+21" Cycle, December 22 to July 26, and FTD Spike Relationship
|
||||
|
||||
In the above picture, look at January 29th's FTD spike. Plotting the full 28 days of Net Capital out where 100% of the debts would be accounted for, that lands it on March 11th. They want to resolve this before March 11th, while the debts are still 75% accounted for. Remember that date? March 10th? I sure do. This could be why we saw the price spike, and why T+35 is incorrect in theory. But, it appears the major option dates still play a role, because of the May 12th FTD spike that just occurred, which followed April 16th options. Likewise, the January 15th options may have initiated the FTD spikes around January 29th and February 2nd.
|
||||
|
||||
If the same situation occurs due to the May 12th FTDs, then plotting out the full 28 days of Net Capital lands us on June 22nd. If these FTDs initiated Net Capital T+0 upon May 12th, then things could get crazy on or before June 22nd.
|
||||
|
||||
It is very possible that the run-up from May 25th to June 8th was all due to this new set of FTDs, and they had to start buy-ins on or before T+14 and T+21 from May 12th due to the sheer amount of unresolved shorts that were eating away at their Net Capital. If the FTDs aren't fully hidden again or all the buy-ins aren't complete, there's still T+28 to look towards, which lands on June 22nd. They would need to hide these FTDs again and/or buy-in on or before June 22nd. This would keep in line with the March 10th squeeze.
|
||||
|
||||
This could also very well explain what was going on with AMC. (Don't freak out on me yet, I love looking at AMC because it's very good analysis to track. It's been following the same exact T+21 pattern as GME)
|
||||
|
||||
4\. AMC Behavior - Given Up On By Shorts? Too Expensive To Juggle With GME?
|
||||
|
||||
AMC has gone on an absolute RUN. It increased nearly 70% in one day. Take a look at the following chart now that you know about Net Capital and the different T+7, T+14, T+21, T+28 Thresholds:
|
||||
|
||||
[](https://preview.redd.it/xn0tukmw4r471.png?width=1434&format=png&auto=webp&s=a679b5628fd370944ba680b6de0bf5e6dcadd35a)
|
||||
|
||||
AMC Behavior from May 12th to June 24th
|
||||
|
||||
Damn. Did they just GIVE UP on AMC and decide that it's too much to deal with? Do they not have enough capital to deal with both GME and AMC (and possibly other short meme stocks)? I think so, because this lines up quite well. They had to fix Net Capital for AMC by T+7 (25%) Threshold on June 4th probably because it was too expensive to handle alongside GME, and GME is the one they really need to keep their ammo for.
|
||||
|
||||
Between T+7 and T+14, they of course short some more, trying to pull the price down in preparation of the next Threshold cycle of T+14, which will probably cause an equivalent or greater amount of buy-ins. This lands on... June 15th. And if it's like previous cycles, that would imply that they want to do the buy-ins by June 14th (next Monday) to avoid those unresolved shorts hitting the next threshold amount. Big price spike coming again?
|
||||
|
||||
Even then, the current T+21 cycle isn't over. The threshold of 75% doesn't land until June 24th, where things very likely will continue to spike upward with an equivalent or greater spike of the run before T+7 (25%) Threshold.
|
||||
|
||||
I truly think that they've put all of their effort into containing GME and have more or less "given up" on AMC because it's not as big of a deal to them. That's why it's mooning like crazy while GME is taking a little time to wake up.
|
||||
|
||||
5\. GME Behavior - Shorts Holding On As Long As They Can
|
||||
|
||||
With the same exact timeframe of AMC, let's finally look at GME and the current cycle going on. The ETF FTDs from May 12th line up T+28 (100% Net Capital Threshold) on June 22nd. Again, if the Net Capital loop initiated upon that FTD spike, then things could get absolutely wild on or just before June 22nd.
|
||||
|
||||
Otherwise, it might just be the standard T+21 Net Capital loop, which has that extra pressure from the ETF FTDs, where the Net Capital loop initiated on May 25th, and ends on June 24th.
|
||||
|
||||
[](https://preview.redd.it/p3yueytz4r471.png?width=1441&format=png&auto=webp&s=48a0f3e70ac922a345e5b58c0219bd1470dff2ab)
|
||||
|
||||
GME Behavior from May 12th to June 24th
|
||||
|
||||
By the time of T+7 (25% Threshold), it appears that they really needed to apply some buy-ins, and the price started to rise quite significantly. Just like AMC, but not as extreme, because they want to put all of their energy into keeping this bad boy from popping off.
|
||||
|
||||
Once again... take a look when T+14 (50% Threshold) will hit. June 15th. From the above analysis, the buy-ins would occur on or before this threshold date, typically right before. Know where that lands? Next Monday. June 14th.
|
||||
|
||||
It's possible that they won't be able to sustain to the 75% threshold any more, but now must sustain the 50% threshold of T+14 where they need to resolve their unresolved shorts by.
|
||||
|
||||
Maybe there will be a big price spike next Monday. Otherwise, keep an eye out for the T+28 date of the ETF FTDs, landing June 22nd, or the original T+21 date, landing June 24th.
|
||||
|
||||
I believe we're also waiting for the Russell 1000 change the week of June 24th. ;)
|
||||
@ -0,0 +1,148 @@
|
||||
In death by 1000 cuts, SHF just received their 999 cut
|
||||
======================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/No1Important_4real](https://www.reddit.com/user/No1Important_4real/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/o0mn0y/in_death_by_1000_cuts_shf_just_received_their_999/) |
|
||||
|
||||
---
|
||||
|
||||
[Education 👨🏫 | Data 🔢](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Education%20%F0%9F%91%A8%E2%80%8D%F0%9F%8F%AB%20%7C%20Data%20%F0%9F%94%A2%22&restrict_sr=1)
|
||||
|
||||
EDIT: Love you apes. Sorry again for the crass language and the tone. It was part frustration, part trying an alternate strategy to reach people. I will try and fix my typos and errors as I find them but this took me like three hours to write and I really need to get some work done.
|
||||
|
||||
EDIT 2: I updated the percentages on the numbers chart, as people correctly pointed out the implied increase negated the need for the 100% base. Thank you so much for everyone taking the time to understand. I do want to mention that I'm not saying the MOASS is on a date. I just wanted to get attention drawn to a point of data that, to me at least, seems urgent and critical for apes to see, especially while the price dips. I always reserve the right to be wrong. Thank you all so much for your comments, I appreciate them all and read them as I can.
|
||||
|
||||
PREFACE
|
||||
|
||||
I am screaming from the rooftops about this to any apes who will listen. The bells are tolling for hedgies and no one is noticing or caring. I've made two other posts trying to draw attention to this and both got downvoted into obscurity or spammed with cries of "Shill!"
|
||||
|
||||
I try to make every post respectful, concise, and as clear as possible but that isn't working and this needs to be heard, so I'm going to go crass. Prepare for a meandering, poorly edited, train of though addled wall of text! I'm going to worry less about citing and more about getting this out there. I'll edit in citations later if anyone fucking pays attention and this doesn't get downvoted to hell.
|
||||
|
||||
I love all you apes, but the hedgies are bleeding out right in front of us and you dense mother fuckers are busy upvoting cat videos and low effort memes to the front page instead of useful discussion. You aren't all diamond hands, you're diamond skull too. If I need to make a puppet show I will, you're going to understand how important today is.
|
||||
|
||||
TOPIC
|
||||
|
||||
Today is the settlement date for the short interest reports due to FINRA twice a month. These dates are as important as FTD cycle dates but no one ever fucking pays any attention to them. Every single time these dates come around the price will bump UP by 25% to 35%. What did we see this cycle? A DROP OF 40%!
|
||||
|
||||
This is the first time in a year that the price fell for a SI report cycle. It has always risen by as much as 500% during the Jan squeeze or as little as 22% in April while the stock was running flat but it ALWAYS GOES UP!
|
||||
|
||||
Pay the fuck attention here. The price goes up when these dates come around, not down. There is a very simple reason why, if you give two shits about it you can read my first DD:
|
||||
|
||||
<https://www.reddit.com/r/Superstonk/comments/nztx4l/finra_short_interest_reporting_the_current_price/>
|
||||
|
||||
GRADE SCHOOL LEVEL EXPLANATION
|
||||
|
||||
I'm going to use an analogy and then a real world example with numbers to try and hold as many people's hands here and explain what's happening.
|
||||
|
||||
Let's say you get a small cut and it bleeds a little bit. You're not going to die. You get cut again and again and again and you're still not going to die but every cut makes the bleeding come faster and faster. Eventually so many cuts will accumulate that the bleeding will kill you.
|
||||
|
||||
Now imagine you're getting these cuts but don't want anyone to know you're bleeding, so you cover the cuts up with bandages. You're still fucking bleeding, you're still going to die, but at least nobody knows it. People can see you're a little cut, but no one can clearly tell you're fucking hamburger and being held together by duct tape and stubbornness.
|
||||
|
||||
Now what happens when you run out of bandages and you get a new cut. That cut is going to show, people are going to see it. Worst, your old bandages need to be changed from time to time. You're now not just fucked, but everyone is going to start realizing you're fucked and they're going to go after your weak ass.
|
||||
|
||||
That's the hedge funds right now, they're out of bandages.
|
||||
|
||||
These pieces of shit have been creating synthetic shares of GME for months now, since before the Jan squeeze. In Jan they were over 100% short, so what happens when someone buys a share of a stock that has no shares to sell? The price goes up. It goes WAY the fuck up. To counter, the hedge funds have been creating synthetic shares.
|
||||
|
||||
There are piles and piles of DD on this topic, please use the DD search button and read some of them if you're lost.
|
||||
|
||||
So, let's say it's April 16th. You have synthetically created MILLIONS of shares of GME and apes keep buying. You create more shares every time they want to buy more so that the price doesn't climb. But every time you create shares you have to balance your books. Luckily, the SEC is shit at their jobs and you can fudge 10% or so of the shares you create out of thin air, but there is still just way too many shares getting created day after day.
|
||||
|
||||
Then, here comes a settlement date on April 30th. In that time you've synthetically created 20 million shares and fucked the stock price in the process, only letting sell pressure materialize. You even got super sneaky and only marked half the shares you created out of thin air as short. You're still holding your dick and 10 million fucking shares that have to be balanced before your system creates an automated report and sends it to FINRA. Fuck. OK, so you start buying up deep in the money calls and shoving hundreds of thousands of shares into them, but there's only so many of those in a day. Here you are three days before the report is due and you've still got 7 million shares to fucking deal with. No option, you're going to cover 6 million of them, let the stock price concentrate a few percent, and then short the fuck out of it in a couple days. The report you send in, which is completely fucked and not even close to accurate, only shows you have 20% of the stock shorted, because you managed to lie about half of them, shove a quarter of them into options, juggled the rest into the share price for a couple days. April 30th hits and the report fires, you now can start the stupid fucking cycle all over again!
|
||||
|
||||
MIDDLE SCHOOL LEVEL
|
||||
|
||||
If you're with me so far, then I'm proud of you and you get a star.
|
||||
|
||||
The hedgies are trapped in this cycle, it is married to the FTD cycle that everyone focuses on, but both of these cycles feed each other and compound on each other.
|
||||
|
||||
Every time a report is due they have to cover whatever amount of shares they can't hide into options. If you want to know more about how hedge funds hide their shit in options, please use the DD button, there are a lot of VERY deep dives into that topic.
|
||||
|
||||
Every time there is a settlement date looming, the shorts cover any open excessive shares they haven't yet hidden. Every time. Without exception.
|
||||
|
||||
Now, half you retards skimming here read this as 'the shorts have covered'. THE SHORTS HAVE NOT COVERED! They are not closing the hundreds of millions of short positions they have open every settlement cycle, what they are closing is a fraction of the shares they created. Their strategy is to balance their bullshit between "accounting errors" and not marking synthetic shares as being short, shoving shares into options, and covering the remained. They cannot over do any one of the three. If they pump too many shares into options, the next FTD cycle will hit too hard. If they fuck up their report too much, it will cross the line from a fine and end up with jail time. If they cover too much it will send the share price too high. They use ALL THREE!
|
||||
|
||||
WHAT HAPPENED
|
||||
|
||||
I hope you're still with me, we're almost there....
|
||||
|
||||
[](https://preview.redd.it/g49n3z9peh571.png?width=1866&format=png&auto=webp&s=45312c14e7656455d6791d0e765be717c4eed00e)
|
||||
|
||||
Pretty pictures
|
||||
|
||||
[](https://preview.redd.it/zlu198bxvh571.png?width=308&format=png&auto=webp&s=b1b91ba7bd00b5f164716d4d5390fd666b18dd7b)
|
||||
|
||||
Scary numbers!
|
||||
|
||||
Here is a chart of settlement dates, the high that resulted from the date, and the low a day or two previous to the high. The highs are always (except for in 2 exceptions) the day BEFORE settlement. For the two exceptions, the high was two days before settlement. The lows occur before the high within a day or two. Lastly is the percent increase.
|
||||
|
||||
You can ignore everything the Jan and Feb squeezes, their behavior is not typical for reasons I really shouldn't have to explain. You can see that before settlement the price always goes up. Always.
|
||||
|
||||
This settlement cycle, for the first time ever the price went down, it went down 40 god damn percent.
|
||||
|
||||
That's not a weird fluke, that's a fucking alarm bell ringing and everyone is ignoring it to watch anchors on CNBC yell at each other.
|
||||
|
||||
EXPLANATIONS
|
||||
|
||||
There are three possible solutions to why the price went down but only one of them makes any logical sense. Now, deep breath, you have to apply deductive reasoning. I will now attempt to make my case for the three arguments and why only one of them can be true. Hold onto your butts.
|
||||
|
||||
ARGUMENT 1: *SHF managed to hide their short positions using their usual tactics, and sell pressure was so high they never needed to cover the shares they typically have to.*
|
||||
|
||||
I want to point your attention to everyone's favorite datapoint, OBV:
|
||||
|
||||
[](https://preview.redd.it/evzz891m7h571.png?width=1298&format=png&auto=webp&s=e1385a64ef72920fb447d91a2019252dd8244008)
|
||||
|
||||
OBV is not the answer to all questions, but it can show us with a good enough clarity that no one is selling. After April 12 the OBV has only increased. This flat out tells you people are buying and not selling. Notice at the end there, the last few days, that dip is fucking pathetic. Even the paper hand bitches that joined in the last two weeks haven't sold.
|
||||
|
||||
So the sell pressure didn't deflate shit, what about options, maybe they just shoved so many god damned shares into options this week...
|
||||
|
||||
<https://www.optionsonar.com/unusual-option-activity/GME/latest-trades>
|
||||
|
||||
Well, nope, according the optionsonar this week isn't exceptional. No more deep ITM buys then we'd expect to see. So they didn't hide the shares and they didn't cover the shares. This argument is fucked.
|
||||
|
||||
ARGUMENT 2: *Hedge funds lie, they're just going to lie on this report.*
|
||||
|
||||
This argument is slightly more plausible but still doesn't cover it. I want to emphasis, these dates are married to the FTD cycle. The FTD cycle is the noose around the hedgies necks. The cycle is strangling their stupid asses out. If they could just cheat away their short positions, they'd have been doing that YEARS ago.
|
||||
|
||||
What's that I hear you saying over you bowl of cheerios with no milk? "Oh, but they're desperate now and trying desperate measures" They've been desperate since Feb when the dick parked behind them started inching into their asses. They've been doing everything they possibly can since at least Feb with no way out. If it was as simple as lying don't you think they would have tried that by now?
|
||||
|
||||
I don't want to tell you jack shit about me, who I am or what I do in the real world, but I do have personal experience on this front, I do know what I'm talking about. The SEC may have their thumbs up their asses but if you fuck the dog too much, they will have no choice but to prosecute you. You can stick a finger or two in, but when you go balls deep there will be consequences.
|
||||
|
||||
<https://www.ussc.gov/sites/default/files/pdf/research-and-publications/quick-facts/Securities_Fraud_FY19.pdf>
|
||||
|
||||
Fraud, actual fucking fraud, not the stupid ass bullshit people on here like to call fraud, but REAL fucking fraud gets the government wet. USDAs will jump on them, it's a slam dunk easy case, the government gets to collect a bunch of sweet cash from their restitution payments, probation offices get to toss them onto the low risk caseload and check in with them a couple times a year. Everyone on the federal side wins. Again, I don't want to say too much but I know what I'm talking about on this topic, these assholes get prosecuted, they get years of probation and sometimes small stints in prison. Worst of all, you lose your ability to EVER practice finance again. Scarlett letter, they're fucked.
|
||||
|
||||
So, they might push the envelope, they might fudge the numbers egregiously, but they wont erase 100 million shares and expect it not to get found.
|
||||
|
||||
Reports like those sent the FINRA are created with automated workflows. In order for them to fraudulently mark all of their synthetic shares as long a worker at the bottom of the barrel would have to have gone in and done it. Some programmer, trader, or middle manger would have knowingly put his career, his freedom, his family's security on the line. For what? So his job lasts a couple weeks longer? So his boss will give him a thumbs up? Fucking no, no one is that stupid. No one is going to gamble away their entire life for a couple more weeks at a paycheck or a good performance review.
|
||||
|
||||
If it were that simple, if cheating at that level were an option, they would already be doing it.
|
||||
|
||||
I'm running in circles here but this is the first time the price dropped from a settlement, not just didn't go up, fucking dropped by 40%. It was shorted to shit. This isn't Ken going in with some whiteout and a pen, there are dozens of people involved with this action and they aren't all going to sacrifice themselves for no god damned reason, especially when they could get a sweet whistleblower reward for reporting it.
|
||||
|
||||
ARGUMENT 3: They aren't going to cover.
|
||||
|
||||
When you rule out all the other possibilities, what you're left with is the only logical argument. These assholes are unable to or unwilling to cover the shares they need to.
|
||||
|
||||
Maybe the number of them is so egregious there is no point.
|
||||
|
||||
Maybe the move to the Russell 1000 on the 25th will make the entire exercise pointless.
|
||||
|
||||
Maybe there's too much scrutiny on them with the SEC finally investigating.
|
||||
|
||||
Who the fuck knows, all I know is, they didn't cover.
|
||||
|
||||
They didn't hide them all, they didn't sell them all, they aren't going to willingly go to jail, THEY'RE SURRENDERING whether intentional or not.
|
||||
|
||||
When the report gets published on the 25th, it will show all the shares they couldn't fudge or hide. It will show tens of thousands of shares. Not just 20%, it'll be 60% minimum, and it'll be just the tip of the iceberg. That number will only represent a couple weeks of shorting.
|
||||
|
||||
Blood in the water, the sharks will circle. This is massive.
|
||||
|
||||
Apes need to fucking see this. Everyone is crying over a little price dip while the god damned final blows are being struck.
|
||||
|
||||
You may downvote this again, spam accusations of Shill, but I'm not going to stop trying to get this topic to people's attention.
|
||||
|
||||
I'm done for now and will go back to a polite demeanor.
|
||||
|
||||
To all the apes who took the time to read, thank you!
|
||||
430
01-Must-Read/2021-06-15-The-Bigger-Short.md
Normal file
430
01-Must-Read/2021-06-15-The-Bigger-Short.md
Normal file
@ -0,0 +1,430 @@
|
||||
The Bigger Short. How 2008 is repeating, at a much greater magnitude, and COVID ignited the fuse. GME is not the reason for the market crash. GME was the fatal flaw of Wall Street in their infinite money cheat that they did not expect.
|
||||
===========================================================================================================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/o0scoy/the_bigger_short_how_2008_is_repeating_at_a_much/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
I am not a financial advisor, and I do not provide financial advice. Many thoughts here are my opinion, and others can be speculative.
|
||||
|
||||
TL;DR - (Though I think you REALLY should consider reading because it is important to understand what is going on):
|
||||
|
||||
- The market crash of 2008 never finished. It was can-kicked and the same people who caused the crash have still been running rampant doing the same bullshit in the derivatives market as that market continues to be unregulated. They're profiting off of short-term gains at the risk of killing their institutions and potentially the global economy. Only this time it is much, much worse.
|
||||
|
||||
- The bankers abused smaller amounts of leverage for the 2008 bubble and have since abused much higher amounts of leverage - creating an even larger speculative bubble. Not just in the stock market and derivatives market, but also in the crypt0 market, upwards of 100x leverage.
|
||||
|
||||
- COVID came in and rocked the economy to the point where the Fed is now pinned between a rock and a hard place. In order to buy more time, the government triggered a flurry of protective measures, such as mortgage forbearance, expiring end of Q2 on June 30th, 2021, and SLR exemptions, which expired March 31, 2021. The market was going to crash regardless. GME was and never will be the reason for the market crashing.
|
||||
|
||||
- The rich made a fatal error in way overshorting stocks. There is a potential for their decades of sucking money out of taxpayers to be taken back. The derivatives market is potentially a $1 Quadrillion market. "Meme prices" are not meme prices. There is so much money in the world, and you are just accustomed to thinking the "meme prices" are too high to feasibly reach.
|
||||
|
||||
- The DTC, ICC, OCC have been passing rules and regulations (auction and wind-down plans) so that they can easily eat up competition and consolidate power once again like in 2008. The people in charge, including Gary Gensler, are not your friends.
|
||||
|
||||
- The DTC, ICC, OCC are also passing rules to make sure that retail will never be able to to do this again. These rules are for the future market (post market crash) and they never want anyone to have a chance to take their game away from them again. These rules are not to start the MOASS. They are indirectly regulating retail so that a short squeeze condition can never occur after GME.
|
||||
|
||||
- The COVID pandemic exposed a lot of banks through the Supplementary Leverage Ratio (SLR) where mass borrowing (leverage) almost made many banks default. Banks have account 'blocks' on the Fed's balance sheet which holds their treasuries and deposits. The SLR exemption made it so that these treasuries and deposits of the banks 'accounts' on the Fed's balance sheet were not calculated into SLR, which allowed them to boost their SLR until March 31, 2021 and avoid defaulting. Now, they must extract treasuries from the Fed in reverse repo to avoid defaulting from SLR requirements. This results in the reverse repo market explosion as they are scrambling to survive due to their mass leverage.
|
||||
|
||||
- This is not a "retail vs. Melvin/Point72/Citadel" issue. This is a "retail vs. Mega Banks" issue. The rich, and I mean all of Wall Street, are trying desperately to shut GameStop down because it has the chance to suck out trillions if not hundreds of trillions from the game they've played for decades. They've rigged this game since the 1990's when derivatives were first introduced. Do you really think they, including the Fed, wouldn't pull all the stops now to try to get you to sell?
|
||||
|
||||
End TL;DR
|
||||
|
||||
A ton of the information provided in this post is from the movie Inside Job (2010). I am paraphrasing from the movie as well as taking direct quotes, so please understand that a bunch of this information is a summary of that film.
|
||||
|
||||
I understand that The Big Short (2015) is much more popular here, due to it being a more Hollywood style movie, but it does not go into such great detail of the conditions that led to the crash - and how things haven't even changed. But in fact, got worse, and led us to where we are now.
|
||||
|
||||
Seriously. Go. Watch. Inside Job. It is a documentary with interviews of many people, including those who were involved in the Ponzi Scheme of the derivative market bomb that led to the crash of 2008, and their continued lobbying to influence the Government to keep regulations at bay.
|
||||
|
||||
[](https://preview.redd.it/vvdd32qkei571.png?width=776&format=png&auto=webp&s=982445a99f17af054bd351990017e364b137cf02)
|
||||
|
||||
Inside Job (2010) Promotional
|
||||
|
||||
1\. The Market Crash Of 2008
|
||||
|
||||
1.1 The Casino Of The Financial World: The Derivatives Market
|
||||
|
||||
It all started back in the 1990's when the Derivative Market was created. This was the opening of the literal Casino in the financial world. These are bets placed upon an underlying asset, index, or entity, and are very risky. Derivatives are contracts between two or more parties that derives its value from the performance of the underlying asset, index, or entity.
|
||||
|
||||
One such derivative many are familiar with are options (CALLs and PUTs). Other examples of derivatives are fowards, futures, swaps, and variations of those such as Collateralized Debt Obligations (CDOs), and Credit Default Swaps (CDS).
|
||||
|
||||
The potential to make money off of these trades is insane. Take your regular CALL option for example. You no longer take home a 1:1 return when the underlying stock rises or falls $1. Your returns can be amplified by magnitudes more. Sometimes you might make a 10:1 return on your investment, or 20:1, and so forth.
|
||||
|
||||
Not only this, you can grab leverage by borrowing cash from some other entity. This allows your bets to potentially return that much more money. You can see how this gets out of hand really fast, because the amount of cash that can be gained absolutely skyrockets versus traditional investments.
|
||||
|
||||
Attempts were made to regulate the derivatives market, but due to mass lobbying from Wall Street, regulations were continuously shut down. People continued to try to pass regulations, until in 2000, the [Commodity Futures Modernization Act](https://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000) banned the regulation of derivatives outright.
|
||||
|
||||
And of course, once the Derivatives Market was left unchecked, it was off to the races for Wall Street to begin making tons of risky bets and surging their profits.
|
||||
|
||||
The Derivative Market exploded in size once regulation was banned and de-regulation of the financial world continued. You can see as of 2000, the cumulative derivatives market was already out of control.
|
||||
|
||||
[](https://preview.redd.it/9igfmi69di571.png?width=578&format=png&auto=webp&s=27fefbf3443e8be528849221f2eadeb1a5c10833)
|
||||
|
||||
https://www.hilarispublisher.com/open-access/investment-banks-and-credit-institutions-the-ignored-and-unregulateddiversity-2151-6219-1000224.pdf
|
||||
|
||||
The Derivatives Market is big. Insanely big. Look at how it compares to Global Wealth.
|
||||
|
||||
[](https://preview.redd.it/s22atssgdi571.png?width=1029&format=png&auto=webp&s=086dcebf3e710052f78b7490150203d0f8376b89)
|
||||
|
||||
https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2020/
|
||||
|
||||
At the bottom of the list are three derivatives entries, with "Market Value" and "Notional Value" called out.
|
||||
|
||||
The "Market Value" is the value of the derivative at its current trading price.
|
||||
|
||||
The "Notional Value" is the value of the derivative if it was at the strike price.
|
||||
|
||||
E.g. A CALL option (a derivative) represents 100 shares of ABC stock with a strike of $50. Perhaps it is trading in the market at $1 per contract right now.
|
||||
|
||||
- Market Value = 100 shares * $1.00 per contract = $100
|
||||
|
||||
- Notional Value = 100 shares * $50 strike price = $5,000
|
||||
|
||||
Visual Capitalist estimates that the cumulative Notional Value of derivatives is between $558 Trillion and $1 Quadrillion. So yeah. You are not going to cause a market crash if GME sells for millions per share. The rich are already priming the market crash through the Derivatives Market.
|
||||
|
||||
1.2 CDOs And Mortgage Backed Securities
|
||||
|
||||
Decades ago, the system of paying mortgages used to be between two parties. The buyer, and the loaner. Since the movement of money was between the buyer and the loaner, the loaner was very careful to ensure that the buyer would be able to pay off their loan and not miss payments.
|
||||
|
||||
But now, it's a chain.
|
||||
|
||||
1. Home buyers will buy a loan from the lenders.
|
||||
|
||||
2. The lenders will then sell those loans to Investment Banks.
|
||||
|
||||
3. The Investment Banks then combine thousands of mortgages and other loans, including car loans, student loans, and credit card debt to create complex derivatives called "Collateralized Debt Obligations (CDO's)".
|
||||
|
||||
4. The Investment Banks then pay Rating Agencies to rate their CDO's. This can be on a scale of "AAA", the best possible rating, equivalent to government-backed securities, all the way down to C/D, which are junk bonds and very risky. Many of these CDO's were given AAA ratings despite being filled with junk.
|
||||
|
||||
5. The Investment Banks then take these CDO's and sell them to investors, including retirement funds, because that was the rating required for retirement funds as they would only purchase highly rated securities.
|
||||
|
||||
6. Now when the homeowner pays their mortgage, the money flows directly into the investors. The investors are the main ones who will be hurt if the CDO's containing the mortgages begin to fail.
|
||||
|
||||
[](https://preview.redd.it/0xtaww3ydi571.png?width=1493&format=png&auto=webp&s=f448a113043b043243efd879f174493bd33423fe)
|
||||
|
||||
Inside Job (2010) - Flow Of Money For Mortgage Payments
|
||||
|
||||
[](https://preview.redd.it/uyk9ms4fei571.png?width=756&format=png&auto=webp&s=d61e9a0754b676e64a1f6c97277ba877e946fcb6)
|
||||
|
||||
https://www.investopedia.com/ask/answers/09/bond-rating.asp
|
||||
|
||||
1.3 The Bubble of Subprime Loans Packed In CDOs
|
||||
|
||||
This system became a ticking timebomb due to this potential of free short-term gain cash. Lenders didn't care if a borrower could repay, so they would start handing out riskier loans. The investment banks didn't care if there were riskier loans, because the more CDO's sold to investors resulted in more profit. And the Rating Agencies didn't care because there were no regulatory constraints and there was no liability if their ratings of the CDO's proved to be wrong.
|
||||
|
||||
So they went wild and pumped out more and more loans, and more and more CDOs. Between 2000 and 2003, the number of mortgage loans made each year nearly quadrupled. They didn't care about the quality of the mortgage - they cared about maximizing the volume and getting profit out of it.
|
||||
|
||||
In the early 2000s there was a huge increase in the riskiest loans - "Subprime Loans". These are loans given to people who have low income, limited credit history, poor credit, etc. They are very at risk to not pay their mortgages. It was predatory lending, because it hunted for potential home buyers who would never be able to pay back their mortgages so that they could continue to pack these up into CDO's.
|
||||
|
||||
[](https://preview.redd.it/wsr30iorei571.png?width=1447&format=png&auto=webp&s=59cf72f6eb8209d69e0a13ccf2f0127e69a45142)
|
||||
|
||||
Inside Job (2010) - % Of Subprime Loans
|
||||
|
||||
In fact, the investment banks preferred subprime loans, because they carried higher interest rates and more profit for them.
|
||||
|
||||
So the Investment Banks took these subprime loans, packaged the subprime loans up into CDO's, and many of them still received AAA ratings. These can be considered "toxic CDO's" because of their high ability to default and fail despite their ratings.
|
||||
|
||||
Pretty much anyone could get a home now. Purchases of homes and housing prices skyrocketed. It didn't matter because everyone in the chain was making money in an unregulated market.
|
||||
|
||||
1.4 Short Term Greed At The Risk Of Institutional And Economic Failure
|
||||
|
||||
In Wall Street, annual cash bonuses started to spike. Traders and CEOs became extremely wealthy in this bubble as they continued to pump more toxic CDO's into the market. Lehman Bros. was one of the top underwriters of subprime lending and their CEO alone took home over $485 million in bonuses.
|
||||
|
||||
[](https://preview.redd.it/io87r9vxei571.png?width=1494&format=png&auto=webp&s=944300df8faf8da35d75de6f10fb951a6d230154)
|
||||
|
||||
Inside Job (2010) Wall Street Bonuses
|
||||
|
||||
And it was all short-term gain, high risk, with no worries about the potential failure of your institution or the economy. When things collapsed, they would not need to pay back their bonuses and gains. They were literally risking the entire world economy for the sake of short-term profits.
|
||||
|
||||
AND THEY EVEN TOOK IT FURTHER WITH LEVERAGE TO MAXIMIZE PROFITS.
|
||||
|
||||
During the bubble from 2000 to 2007, the investment banks were borrowing heavily to buy more loans and to create more CDO's. The ratio of banks borrowed money and their own money was their leverage. The more they borrowed, the higher their leverage. They abused leverage to continue churning profits. And are still abusing massive leverage to this day. It might even be much higher leverage today than what it was back in the Housing Market Bubble.
|
||||
|
||||
In 2004, Henry Paulson, the CEO of Goldman Sachs, helped lobby the SEC to relax limits on leverage, allowing the banks to sharply increase their borrowing. Basically, the SEC allowed investment banks to gamble a lot more. Investment banks would go up to about 33-to-1 leverage at the time of the 2008 crash. Which means if a 3% decrease occurred in their asset base, it would leave them insolvent. Henry Paulson would later become the Secretary Of The Treasury from 2006 to 2009. He was just one of many Wall Street executives to eventually make it into Government positions. Including the infamous Gary Gensler, the current SEC chairman, who helped block derivative market regulations.
|
||||
|
||||
[](https://preview.redd.it/k87x53h7fi571.png?width=1619&format=png&auto=webp&s=b12004d6bb3e70643516ef0477303f4652ccd348)
|
||||
|
||||
Inside Job (2010) Leverage Abuse of 2008
|
||||
|
||||
The borrowing exploded, the profits exploded, and it was all at the risk of obliterating their institutions and possibly the global economy. Some of these banks knew that they were "too big to fail" and could push for bailouts at the expense of taxpayers. Especially when they began planting their own executives in positions of power.
|
||||
|
||||
1.5 Credit Default Swaps (CDS)
|
||||
|
||||
To add another ticking bomb to the system, AIG, the worlds largest insurance company, got into the game with another type of derivative. They began selling Credit Default Swaps (CDS).
|
||||
|
||||
For investors who owned CDO's, CDS's worked like an insurance policy. An investor who purchased a CDS paid AIG a quarterly premium. If the CDO went bad, AIG promised to pay the investor for their losses. Think of it like insuring a car. You're paying premiums, but if you get into an accident, the insurance will pay up (some of the time at least).
|
||||
|
||||
But unlike regular insurance, where you can only insure your car once, speculators could also purchase CDS's from AIG in order to bet against CDO's they didn't own. You could suddenly have a sense of rehypothecation where fifty, one hundred entities might now have insurance against a CDO.
|
||||
|
||||
[](https://preview.redd.it/7xoupx0ffi571.png?width=1258&format=png&auto=webp&s=869beb0d99b9fbb4108cd5af692d0a6332fd52dd)
|
||||
|
||||
Inside Job (2010) Payment Flow of CDS's
|
||||
|
||||
If you've watched The Big Short (2015), you might remember the Credit Default Swaps, because those are what Michael Burry and others purchased to bet against the Subprime Mortgage CDO's.
|
||||
|
||||
CDS's were unregulated, so AIG didn't have to set aside any money to cover potential losses. Instead, AIG paid its employees huge cash bonuses as soon as contracts were signed in order to incentivize the sales of these derivatives. But if the CDO's later went bad, AIG would be on the hook. It paid everyone short-term gains while pushing the bill to the company itself without worrying about footing the bill if shit hit the fan. People once again were being rewarded with short-term profit to take these massive risks.
|
||||
|
||||
AIG's Financial Products division in London issued over $500B worth of CDS's during the bubble. Many of these CDS's were for CDO's backed by subprime mortgages.
|
||||
|
||||
The 400 employees of AIGFP made $3.5B between 2000 and 2007. And the head of AIGFP personally made $315M.
|
||||
|
||||
1.6 The Crash And Consumption Of Banks To Consolidate Power
|
||||
|
||||
By late 2006, Goldman Sachs took it one step further. It didn't just sell toxic CDO's, it started actively betting against them at the same time it was telling customers that they were high-quality investments.
|
||||
|
||||
Goldman Sachs would purchase CDS's from AIG and bet against CDO's it didn't own, and got paid when those CDO's failed. Goldman bought at least $22B in CDS's from AIG, and it was so much that Goldman realized AIG itself might go bankrupt (which later on it would and the Government had to bail them out). So Goldman spent $150M insuring themselves against AIG's potential collapse. They purchased CDS's against AIG.
|
||||
|
||||
[](https://preview.redd.it/m54zv03yfi571.png?width=1411&format=png&auto=webp&s=f6cb605b4c9b36c22e60cd8205b80bd6ac770fac)
|
||||
|
||||
Inside Job (2010) Payment From AIG To Goldman Sachs If CDO's Failed
|
||||
|
||||
Then in 2007, Goldman went even further. They started selling CDO's specifically designed so that the more money their customers lost, the more Goldman Sachs made.
|
||||
|
||||
Many other banks did the same. They created shitty CDO's, sold them, while simultaneously bet that they would fail with CDS's. All of these CDO's were sold to customers as "safe" investments because of the complicit Rating Agencies.
|
||||
|
||||
The three rating agencies, Moody's, S&P and Fitch, made billions of dollars giving high ratings to these risky securities. Moody's, the largest ratings agency, quadrupled its profits between 2000 and 2007. The more AAA's they gave out, the higher their compensation and earnings were for the quarter. AAA ratings mushroomed from a handful in 2000 to thousands by 2006. Hundreds of billions of dollars worth of CDO's were being rated AAA per year. When it all collapsed and the ratings agencies were called before Congress, the rating agencies expressed that it was "their opinion" of the rating in order to weasel their way out of blame. Despite knowing that they were toxic and did not deserve anything above 'junk' rating.
|
||||
|
||||
[](https://preview.redd.it/tto0v644gi571.png?width=1332&format=png&auto=webp&s=f4361dcc23801691d46ec88b241c7d5fa56e2aaf)
|
||||
|
||||
Inside Job (2010) Ratings Agencies Profits
|
||||
|
||||
[](https://preview.redd.it/91dpnu78gi571.png?width=1259&format=png&auto=webp&s=1f196573f47a757a8bcca8b9e712c537be84cbe2)
|
||||
|
||||
Inside Job (2010) - Insane Increase of AAA Rated CDOs
|
||||
|
||||
By 2008, home foreclosures were skyrocketing. Home buyers in the subprime loans were defaulting on their payments. Lenders could no longer sell their loans to the investment banks. And as the loans went bad, dozens of lenders failed. The market for CDO's collapsed, leaving the investment banks holding hundreds of billions of dollars in loans, CDO's, and real estate they couldn't sell. Meanwhile, those who purchased up CDS's were knocking at the door to be paid.
|
||||
|
||||
In March 2008, Bear Stearns ran out of cash and was acquired for $2 a share by JPMorgan Chase. The deal was backed by $30B in emergency guarantees by the Fed Reserve. This was just one instance of a bank getting consumed by a larger entity.
|
||||
|
||||
[](https://preview.redd.it/gbgc30vlhi571.png?width=873&format=png&auto=webp&s=74def34d1783c5e3195492913370e6ae65670301)
|
||||
|
||||
https://www.history.com/this-day-in-history/bear-stearns-sold-to-j-p-morgan-chase
|
||||
|
||||
AIG, Bear Stearns, Lehman Bros, Fannie Mae, and Freddie Mac, were all AA or above rating days before either collapsing or being bailed out. Meaning they were 'very secure', yet they failed.
|
||||
|
||||
The Fed Reserve and Big Banks met together in order to discuss bailouts for different banks, and they decided to let Lehman Brothers fail as well.
|
||||
|
||||
The Government also then took over AIG, and a day after the takeover, asked the Government for $700B in bailouts for big banks. At this point in time, the person in charge of handling the financial crisis, Henry Paulson, former CEO of Goldman Sachs, worked with the chairman of the Federal Reserve to force AIG to pay Goldman Sachs some of its bailout money at 100-cents on the dollar. Meaning there was no negotiation of lower prices. Conflict of interest much?
|
||||
|
||||
The Fed and Henry Paulson also forced AIG to surrender their right to sue Goldman Sachs and other banks for fraud.
|
||||
|
||||
This is but a small glimpse of the consolidation of power in big banks from the 2008 crash. They let others fail and scooped up their assets in the crisis.
|
||||
|
||||
After the crash of 2008, big banks are more powerful and more consolidated than ever before. And the DTC, ICC, OCC rules are planning on making that worse through the auction and wind-down plans where big banks can once again consume other entities that default.
|
||||
|
||||
1.7 The Can-Kick To Continue The Game Of Derivative Market Greed
|
||||
|
||||
After the crisis, the financial industry worked harder than ever to fight reform. The financial sector, as of 2010, employed over 3000 lobbyists. More than five for each member of Congress. Between 1998 and 2008 the financial industry spent over $5B on lobbying and campaign contributions. And ever since the crisis, they're spending even more money.
|
||||
|
||||
President Barack Obama campaigned heavily on "Change" and "Reform" of Wall Street, but when in office, nothing substantial was passed. But this goes back for decades - the Government has been in the pocket of the rich for a long time, both parties, both sides, and their influence through lobbying undoubtedly prevented any actual change from occurring.
|
||||
|
||||
So their game of playing the derivative market was green-lit to still run rampant following the 2008 crash and mass bailouts from the Government at the expense of taxpayers.
|
||||
|
||||
There's now more consolidation of banks, more consolidation of power, more years of deregulation, and over a decade that they used to continue the game. And just like in 2008, it's happening again. We're on the brink of another market crash and potentially a global financial crisis.
|
||||
|
||||
2\. The New CDO Game, And How COVID Uppercut To The System
|
||||
|
||||
2.1 Abuse Of Commercial Mortgage Backed Securities
|
||||
|
||||
It's not just [/u/atobitt](https://www.reddit.com/u/atobitt/)'s "House Of Cards" where the US Treasury Market has been abused. It is abuse of many forms of collateral and securities this time around.
|
||||
|
||||
It's the same thing as 2008, but much worse due to even higher amounts of leverage in the system on top of massive amounts of liquidity and potential inflation from stimulus money of the COVID crisis.
|
||||
|
||||
Here's an excerpt from [The Bigger Short: Wall Street's Cooked Books Fueled The Financial Crisis of 2008. It's Happening Again](https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/):
|
||||
|
||||
> A longtime industry analyst has uncovered creative accounting on a startling scale in the commercial real estate market, in ways similar to the "liar loans" handed out during the mid-2000s for residential real estate, according to financial records examined by the analyst and reviewed by The Intercept. A recent, large-scale academic study backs up his conclusion, finding that banks such as Goldman Sachs and Citigroup have systematically reported erroneously inflated income data that compromises the integrity of the resulting securities.
|
||||
>
|
||||
> ...
|
||||
>
|
||||
> The analyst's findings, first reported by ProPublica last year, are the subject of a whistleblower complaint he filed in 2019 with the Securities and Exchange Commission. Moreover, the analyst has identified complex financial machinations by one financial institution, one that both issues loans and manages a real estate trust, that may ultimately help one of its top tenants --- the low-cost, low-wage store Dollar General --- flourish while devastating smaller retailers.
|
||||
>
|
||||
> This time, the issue is not a bubble in the housing market, but apparent widespread inflation of the value of commercial businesses, on which loans are based.
|
||||
>
|
||||
> ...
|
||||
>
|
||||
> Now it may be happening again --- this time not with residential mortgage-backed securities, based on loans for homes, but commercial mortgage-backed securities, or CMBS, based on loans for businesses. And this industrywide scheme is colliding with a collapse of the commercial real estate market amid the pandemic, which has business tenants across the country unable to make their payments.
|
||||
|
||||
They've been abusing Commercial Mortgage Backed Securities (CMBS) this time around, and potentially have still been abusing other forms of collateral - they might still be hitting MBS as well as treasury bonds per [/u/atobitt](https://www.reddit.com/u/atobitt/)'s DD.
|
||||
|
||||
John M. Griffin and Alex Priest released a study last November. They sampled almost 40,000 CMBS loans with a market capitalization of $650 billion underwritten from the beginning of 2013 to the end of 2019. Their findings were that large banks had 35% or more loans exhibiting 5% or greater income overstatements.
|
||||
|
||||
The below chart shows the overstatements of the biggest problem-making banks. The difference in bars is between samples taken from data between 2013-2015, and then data between 2016-2019. Almost every single bank experienced a positive move up over time of overstatements.
|
||||
|
||||
> Unintentional overstatement should have occurred at random times. Or if lenders were assiduous and the overstatement was unwitting, one might expect it to diminish over time as the lenders discovered their mistakes. Instead, with almost every lender, the overstatement *increased* as time went on. - [Source](https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/)
|
||||
|
||||
[](https://preview.redd.it/5xmcu9hwhi571.png?width=846&format=png&auto=webp&s=66f636574bd66afd3512b9587981e4caaa381cf3)
|
||||
|
||||
https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/
|
||||
|
||||
So what does this mean? It means they've once again been handing out subprime loans (predatory loans). But this time to businesses through Commercial Mortgage Backed Securities.
|
||||
|
||||
Just like Mortgage-Backed Securities from 2000 to 2007, the loaners will go around, hand out loans to businesses, and rake in the profits while having no concern over the potential for the subprime loans failing.
|
||||
|
||||
2.2 COVID's Uppercut Sent Them Scrambling
|
||||
|
||||
The system was propped up to fail just like from the 2000-2007 Housing Market Bubble. Now we are in a speculative bubble of the entire market along with the Commercial Market Bubble due to continued mass leverage abuse of the world.
|
||||
|
||||
Hell - also in Crypt0currencies that were introduced after the 2008 crash. Did you know that you can get over 100x leverage in crypt0 right now? Imagine how terrifying that crash could be if the other markets fail.
|
||||
|
||||
There is SO. MUCH. LEVERAGE. ABUSE. IN. THE. WORLD. All it takes is one fatal blow to bring it all down - and it sure as hell looks like COVID was that uppercut to send everything into a death spiral.
|
||||
|
||||
When COVID hit, many people were left without jobs. Others had less pay from the jobs they kept. It rocked the financial world and it was so unexpected. Apartment residents would now become delinquent, causing the apartment complexes to become delinquent. Business owners would be hurting for cash to pay their mortgages as well due to lack of business. The subprime loans all started to become a really big issue.
|
||||
|
||||
Delinquency rates of Commercial Mortgages started to skyrocket when the COVID crisis hit. They even surpassed 2008 levels in March of 2020. Remember what happened in 2008 when this occurred? When delinquency rates went up on mortgages in 2008, the CDO's of those mortgages began to fail. But, this time, they can-kicked it because COVID caught them all off guard.
|
||||
|
||||
[](https://preview.redd.it/cqbceix0ii571.png?width=848&format=png&auto=webp&s=da81781094a31ae1293b019c4e24f68dfdccc634)
|
||||
|
||||
https://theintercept.com/2021/04/20/wall-street-cmbs-dollar-general-ladder-capital/
|
||||
|
||||
2.3 Can-Kick Of COVID To Prevent CDO's From Defaulting Before Being Ready
|
||||
|
||||
COVID sent them Scrambling. They could not allow these CDO's to fail just yet, because they wanted to get their rules in place to help them consume other failing entities at a whim.
|
||||
|
||||
Like in 2008, they wanted to not only protect themselves when the nuke went off from these decades of derivatives abuse, they wanted to be able to scoop up the competition easily. That is when the DTC, ICC, and OCC began drafting their auction and wind-down plans.
|
||||
|
||||
In order to buy time, they began tossing out emergency relief "protections" for the economy. Such as preventing mortgage defaults which would send their CDO's tumbling. This protection ends on June 30th, 2021.
|
||||
|
||||
And guess what? Many people are still at risk of being delinquent. [This article](https://therealdeal.com/issues_articles/defusing-the-forbearance-time-bomb/) was posted just yesterday. The moment these protection plans lift, we can see a surge in foreclosures as delinquent payments have accumulated over the past year.
|
||||
|
||||
When everyone, including small business owners who were attacked with predatory loans, begin to default from these emergency plans expiring, it can lead to the CDO's themselves collapsing. Which is exactly what triggered the 2008 recession.
|
||||
|
||||
[](https://preview.redd.it/b68fsf5aii571.png?width=945&format=png&auto=webp&s=daa8c725185480d988802023a27291ee782b5c5f)
|
||||
|
||||
https://www.housingwire.com/articles/mortgage-forbearance-drops-as-expiration-date-nears/
|
||||
|
||||
2.4 SLR Requirement Exemption - Why The Reverse Repo Is Blowing Up
|
||||
|
||||
Another big issue exposed from COVID is when SLR requirements were leaned during the pandemic. They had to pass a quick measure to protect the banks from defaulting in April of 2020.
|
||||
|
||||
> In a brief announcement, the Fed said it would allow a change to the supplementary leverage ratio to expire March 31. The initial move, announced April 1, 2020, allowed banks to exclude Treasurys and deposits with Fed banks from the calculation of the leverage ratio. - [Source](https://www.cnbc.com/2021/03/19/the-fed-will-not-extend-a-pandemic-crisis-rule-that-had-allowed-banks-to-relax-capital-levels.html)
|
||||
|
||||
What can you take from the above?
|
||||
|
||||
SLR is based on the banks deposits with the Fed itself. It is the treasuries and deposits that the banks have on the Fed's balance sheet. Banks have an 'account block' on the Fed's balance sheet that holds treasuries and deposits. The SLR pandemic rule allowed them to neglect these treasuries and deposits from their SLR calculation, and it boosted their SLR value, allowing them to survive defaults.
|
||||
|
||||
This is a big, big, BIG sign that the banks are way overleveraged by borrowing tons of money just like in 2008.
|
||||
|
||||
The SLR is the "Supplementary Leverage Ratio" and they enacted quick to allow it so banks wouldn't fail under mass leverage for failing to maintain enough equity.
|
||||
|
||||
> The supplementary leverage ratio is the US implementation of the Basel III Tier 1 leverage ratio, with which banks calculate the amount of common equity capital they must hold relative to their total leverage exposure. Large US banks must hold 3%. Top-tier bank holding companies must also hold an extra 2% buffer, for a total of 5%. The SLR, which does not distinguish between assets based on risk, is conceived as a backstop to risk-weighted capital requirements. - [Source](https://www.risk.net/definition/supplementary-leverage-ratio-slr)
|
||||
|
||||
[Here is an exposure of their SLR](https://www.fool.com/investing/2020/07/26/which-of-the-large-us-banks-is-most-leveraged.aspx) from earlier this year. The key is to have high SLR, above 5%, as a top-tier bank:
|
||||
|
||||
| Bank | Supplementary Leverage Ratio (SLR) |
|
||||
| --- | --- |
|
||||
| JP Morgan Chase | 6.8% |
|
||||
| Bank Of America | 7% |
|
||||
| Citigroup | 6.7% |
|
||||
| Goldman Sachs | 6.7% |
|
||||
| Morgan Stanley | 7.3% |
|
||||
| Bank of New York Mellon | 8.2% |
|
||||
| State Street | 8.3% |
|
||||
|
||||
The SLR protection ended on March 31, 2021. Guess what started to happen just after?
|
||||
|
||||
The reverse repo market started to explode. This is VERY unusual behavior because it is not at a quarter-end where quarter-ends have significant strain on the economy. The build-up over time implies that there is significant strain on the market AS OF ENTERING Q2 (April 1st - June 30th).
|
||||
|
||||
[](https://preview.redd.it/ijp4wkxdii571.png?width=1455&format=png&auto=webp&s=46f67d7efcc98ee475ba27fa41850fbf5d894064)
|
||||
|
||||
https://fred.stlouisfed.org/series/RRPONTSYD
|
||||
|
||||
Speculation: SLR IS DEPENDENT ON THEIR DEPOSITS WITH THE FED ITSELF. THEY NEED TO EXTRACT TREASURIES OVER NIGHT TO KEEP THEM OFF THE FED'S BALANCE SHEETS TO PREVENT THEMSELVES FROM FAILING SLR REQUIREMENTS AND DEFAULTING DUE TO MASS OVERLEVERAGE. EACH BANK HAS AN ACCOUNT ON THE FED'S BALANCE SHEET, WHICH IS WHAT SLR IS CALCULATED AGAINST. THIS IS WHY IT IS EXPLODING. THEY ARE ALL STRUGGLING TO MEET SLR REQUIREMENTS.
|
||||
|
||||
2.5 DTC, ICC, OCC Wind-Down and Auction Plans; Preparing For More Consolidation Of Power
|
||||
|
||||
We've seen some interesting rules from the DTC, ICC, and OCC. For the longest time we thought this was all surrounding GameStop. Guess what. They aren't all about GameStop. Some of them are, but not all of them.
|
||||
|
||||
They are furiously passing these rules because the COVID can-kick can't last forever. The Fed is dealing with the potential of runaway inflation from COVID stimulus and they can't allow the overleveraged banks to can-kick any more. They need to resolve this as soon as possible. June 30th could be the deadline because of the potential for CDO's to begin collapsing.
|
||||
|
||||
Let's revisit a few of these rules. The most important ones, in my opinion, because they shed light on the bullshit they're trying to do once again: Scoop up competitors at the cheap, and protect themselves from defaulting as well.
|
||||
|
||||
- DTC-004: Wind-down and auction plan. - [Link](https://www.sec.gov/rules/sro/dtc/2021/34-91429.pdf)
|
||||
|
||||
- ICC-005: Wind-down and auction plan. - [Link](https://www.sec.gov/rules/sro/icc/2021/34-91806.pdf)
|
||||
|
||||
- OCC-004: Auction plan. Allows third parties to join in. - [Link](https://www.sec.gov/rules/sro/occ/2021/34-91935.pdf)
|
||||
|
||||
- OCC-003: Shielding plan. Protects the OCC. - [Link](https://www.sec.gov/rules/sro/occ/2021/34-92038.pdf)
|
||||
|
||||
Each of these plans, in brief summary, allows each branch of the market to protect themselves in the event of major defaults of members. They also allow members to scoop up assets of defaulting members.
|
||||
|
||||
What was that? Scooping up assets? In other words it is more concentration of power. Less competition.
|
||||
|
||||
I would not be surprised if many small and large Banks, Hedge Funds, and Financial Institutions evaporate and get consumed after this crash and we're left with just a select few massive entities. That is, after all, exactly what they're planning for.
|
||||
|
||||
They could not allow the COVID crash to pop their massive speculative derivative bubble so soon. It came too sudden for them to not all collapse instead of just a few of them. It would have obliterated the entire economy even more so than it will once this bomb is finally let off. They needed more time to prepare so that they could feast when it all comes crashing down.
|
||||
|
||||
2.6 Signs Of Collapse Coming - ICC-014 - Incentives For Credit Default Swaps
|
||||
|
||||
A comment on this subreddit made me revisit a rule passed by the ICC. It flew under the radar and is another sign for a crash coming.
|
||||
|
||||
This is [ICC-014](https://www.sec.gov/rules/sro/icc/2021/34-91922.pdf). Passed and effective as of June 1st, 2021.
|
||||
|
||||
Seems boring at first. Right? That's why it flew under the radar?
|
||||
|
||||
But now that you know the causes of the 2008 market crash and how toxic CDO's were packaged together, and then CDS's were used to bet against those CDO's, check out what ICC-014 is doing as of June 1st.
|
||||
|
||||
[](https://preview.redd.it/phrxcouvii571.png?width=731&format=png&auto=webp&s=469560cf06458b51b1b5439d84062e9f6e04bda4)
|
||||
|
||||
ICC-014 Proposed Discounts On Credit Default Index Swaptions
|
||||
|
||||
They are providing incentive programs to purchase Credit Default Swap Indexes. These are like standard CDS's, but packaged together like an index. Think of it like an index fund.
|
||||
|
||||
This is allowing them to bet against a wide range of CDO's or other entities at a cheaper rate. Buyers can now bet against a wide range of failures in the market. They are allowing upwards of 25% discounts.
|
||||
|
||||
There's many more indicators that are pointing to a market collapse. But I will leave that to you to investigate more. Here is quite a scary compilation of charts relating the current market trends to the crashes of Black Monday, The Internet Bubble, The 2008 Housing Market Crash, and Today.
|
||||
|
||||
[](https://preview.redd.it/y4reiv86hi571.jpg?width=550&format=pjpg&auto=webp&s=8845b7b90adf28409772483c6eeeef1763bbaaaf)
|
||||
|
||||
Summary of Recent Warnings Re Intermediate Trend In Equities
|
||||
|
||||
3\. The Failure Of The 1% - How GameStop Can Deal A Fatal Blow To Wealth Inequality
|
||||
|
||||
3.1 GameStop Was Never Going To Cause The Market Crash
|
||||
|
||||
GameStop was meant to die off. The rich bet against it many folds over, and it was on the brink of Bankruptcy before many conditions led it to where it is today.
|
||||
|
||||
It was never going to cause the market crash. And it never will cause the crash. The short squeeze is a result of high abuse of the derivatives market over the past decade, where Wall Street's abuse of this market has primed the economy for another market crash on their own.
|
||||
|
||||
We can see this because when COVID hit, GameStop was a non-issue in the market. The CDO market around CMBS was about to collapse on its own because of the instantaneous recession which left mortgage owners delinquent.
|
||||
|
||||
If anyone, be it the media, the US Government, or others, try to blame this crash on GameStop or anything other than the Banks and Wall Street, they are WRONG.
|
||||
|
||||
3.2 The Rich Are Trying To Kill GameStop. They Are Terrified
|
||||
|
||||
In January, the SI% was reported to be 140%. But it is very likely that it was underreported at that time. Maybe it was 200% back then. 400%. 800%. Who knows. From the above you can hopefully gather that Wall Street takes on massive risks all the time, they do not care as long as it churns them short-term profits. There is loads of evidence pointing to shorts never covering by hiding their SI% through malicious options practices, and manipulating the price every step of the way.
|
||||
|
||||
The conditions that led GameStop to where it is today is a miracle in itself, and the support of retail traders has led to expose a fatal mistake of the rich. Because a short position has infinite loss potential. There is SO much money in the world, especially in the derivatives market.
|
||||
|
||||
This should scream to you that any price target that you think is low, could very well be extremely low in YOUR perspective. You might just be accustomed to thinking "$X price floor is too much money. There's no way it can hit that". I used to think that too, until I dove deep into this bullshit.
|
||||
|
||||
The market crashing no longer was a matter of simply scooping up defaulters, their assets, and consolidating power. The rich now have to worry about the potential of infinite losses from GameStop and possibly other meme stocks with high price floor targets some retail have.
|
||||
|
||||
It's not a fight against Melvin / Citadel / Point72. It's a battle against the entire financial world. There is even speculation from multiple people that the Fed is even being complicit right now in helping suppress GameStop. Their whole game is at risk here.
|
||||
|
||||
Don't you think they'd fight tooth-and-nail to suppress this and try to get everyone to sell?
|
||||
|
||||
That they'd pull every trick in the book to make you think that they've covered?
|
||||
|
||||
The amount of money they could lose is unfathomable.
|
||||
|
||||
With the collapsing SI%, it is mathematically impossible for the squeeze to have happened - its mathematically impossible for them to have covered. [/u/atobitt](https://www.reddit.com/u/atobitt/) also discusses this in [House of Cards Part 2](https://www.reddit.com/r/Superstonk/comments/nlwaxv/house_of_cards_part_2/).
|
||||
|
||||
[](https://preview.redd.it/6hge0pxfhi571.png?width=871&format=png&auto=webp&s=aab736cc279cc727524d2cf96384ea3e33109250)
|
||||
|
||||
https://www.thebharatexpressnews.com/short-squeeze-could-save-gamestop-investors-a-third-time/
|
||||
|
||||
And in regards to all the other rules that look good for the MOASS - I see them in a negative light.
|
||||
|
||||
They are passing NSCC-002/801, DTC-005, and others, in order to prevent a GameStop situation from ever occurring again.
|
||||
|
||||
They realized how much power retail could have from piling into a short squeeze play. These new rules will snap new emerging short squeezes instantly if the conditions of a short squeeze ever occur again. There will never be a GameStop situation after this.
|
||||
|
||||
It's their game after all. They've been abusing the derivative market game for decades and GameStop is a huge threat. It was supposed to be, "crash the economy and run with the money". Not "crash the economy and pay up to retail". But GameStop was a flaw exposed by their greed, the COVID crash, and the quick turn-around of the company to take it away from the brink of bankruptcy.
|
||||
|
||||
The rich are now at risk of losing that money and insane amounts of cash that they've accumulated over the years from causing the Internet Bubble Crash of 2000, and the Housing Market Crash of 2008.
|
||||
|
||||
So, yeah, I'm going to be fucking greedy.
|
||||
@ -0,0 +1,300 @@
|
||||
The Fed is pinned into a corner from the 2008 can-kick utilizing QE, and the economic effects of COVID. They are stuck battling a collateral crisis AND a liquidity crisis. The Fed is currently fudging the numbers of treasuries to hide a collateral shortage and to try to prop the economy up.
|
||||
===================================================================================================================================================================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/o4rfnu/the_fed_is_pinned_into_a_corner_from_the_2008/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
I am not a financial advisor. I do not provide financial advice. Many thoughts here are my opinion, and others can be speculative.
|
||||
|
||||
I'm personally happy to see that there is a shift from GME DD to macro-economics DD. Because it provides a much wider insight into how the market is behaving, and how GME would NOT be the cause of a market crash. Everything has been a pressure cooker over the past decade, ready to burst, and the new DD provides insight on when things might go down.
|
||||
|
||||
The new DD also diverges from the expectations of things to shoot up in price every week, where everyone is watching T+21/T+35/Net Capital cycles. It gives a general "MOASS will most likely occur when everything falls due to liquidation of defaulting Banks / Hedge Funds / Financial Institutions".
|
||||
|
||||
It gives me peace of mind, because I do not watch for specific dates around GME to cause the surge. I watch the economy at the macro scale to understand when things could blow.
|
||||
|
||||
And to any skeptics - yes, it is possible that GME could never blow up. Do I think it will blow up? Sure I do. But I encourage YOU to read this post, disregarding GME, and to instead understand what is going on with the economy on the macro scale.
|
||||
|
||||
Even if the GME play is wrong in your eyes, it is good to understand how the economy could crash harder than it did in 2008. I don't care if you don't believe in GME. I care about you, and don't want YOU to be hurt.
|
||||
|
||||
[](https://preview.redd.it/pscahu4lxk671.png?width=727&format=png&auto=webp&s=2e5ee31eaef0413023a8cc4be07087210081554c)
|
||||
|
||||
Me IRL - Maybe - Sometime
|
||||
|
||||
1\. Before We Begin: An Overview of Repo And Reverse Repo
|
||||
|
||||
Repo and Reverse Repo might be a bit confusing. You probably saw on this subreddit or in news that the reverse repo market has been blowing up, and it's a bit concerning.
|
||||
|
||||
It's not too complicated if you just imagine it between two entities: the Federal Reserve and Banks.
|
||||
|
||||
For both Repo and Reverse Repo, it is an agreement between two parties for one of them to sell some security for a price, and they agree to buy that security back at a later date at a higher price based on some interest rate (usually). This is called a "Repurchase Agreement", where "Repo" is a standard "Repurchase Agreement" and the "Reverse Repo" is a "Reverse Repurchase Agreement", the inverse of a "Repo".
|
||||
|
||||
The length of these Repurchase Agreements can be various lengths. Such as overnight, one month, three month, etc.. But what we're seeing is short-term overnight Reverse Repos. The parties swap, and then the next trading day they swap back. It is not a permanent extraction of the underlying security. It is an overnight swap. A permanent extraction comes from Quantitative Easing or Quantitative Tightening, both of which I will discuss later.
|
||||
|
||||
- Repo (Repurchase Agreement) - This is where the bank swaps collateral (such as US Treasuries) for cash. This is used when the banks have too much collateral and not enough cash, or when the banks want to generate profit off of giving loans to other parties in the repo market.
|
||||
|
||||
- Reverse Repo (Reverse Repurchase Agreement) - This is where the bank swaps cash (liquidity) for collateral (such as US Treasuries). This is used when the banks have too much cash (liquidity) and not enough collateral. The main reason behind this behavior is to pump balance sheets for the night.
|
||||
|
||||
Below is a diagram I made which might make this more clear. It is between the Fed (left) and Banks (right):
|
||||
|
||||
[](https://preview.redd.it/ukum83cf2k671.png?width=1920&format=png&auto=webp&s=99d4c612df82013aed06ff2b22621500a80071cf)
|
||||
|
||||
Repo and QT Versus Reverse Repo and QE
|
||||
|
||||
2\. Quantitative Easing Can-Kick of 2008, Slowly Draining Collateral From The Market
|
||||
|
||||
Note: If you want an overview of what led to the 2008 crash, check out [my previous post](https://www.reddit.com/r/Superstonk/comments/o0scoy/the_bigger_short_how_2008_is_repeating_at_a_much/) which has a summary of the documentary "Inside Job (2010)". It also describes where we're probably headed based on SLR, the DTC, ICC, OCC, NSCC rules, and mortgage default protections expiring June 30th, 2021.
|
||||
|
||||
Zoom back in time to 2008. The economy took a massive dump due to Wall Street's abuse of derivatives and leverage. They created a bunch of toxic CDOs mostly consisting of [subprime Mortgages](https://www.investopedia.com/terms/s/subprimeloan.asp) to create an economic apocalyptic scenario around Mortgage Backed Securities (MBS). Everything was overleveraged and was a massive balloon of bets based on the performance of the MBS's.
|
||||
|
||||
Currently, there's evidence of Wall Street doing the same abuse of toxic CDO's but this time with Commercial Mortgage-Backed Securities (CMBS). [See above linked post for this detail]
|
||||
|
||||
The economy was hurting pretty bad from the 2008 crash, and it was going to continue going into a complete death spiral until the Federal Reserve (Fed) introduced Quantitative Easing (QE):
|
||||
|
||||
> The Fed announced QE1 on November 25, 2008. Fed Chairman Ben Bernanke announced an aggressive attack on the financial crisis of 2008. The Fed began buying $500 billion in mortgage-backed securities and $100 billion in other debt. QE supported the housing market that the subprime mortgage crisis had devastated. - [Source](https://www.thebalance.com/what-is-qe1-3305530)
|
||||
|
||||
If you're still scratching your head on what QE is, here's the Wikipedia overview definition, as well as (hopefully) a more simplified definition.
|
||||
|
||||
[Quantitative Easing](https://en.wikipedia.org/wiki/Quantitative_easing) (QE) - is a monetary policy whereby a central bank purchases at scale government bonds or other financial assets in order to inject money into the economy to expand economic activity.
|
||||
|
||||
- This is what the Fed will do to extract collateral (including US Treasuries) from the economy in order to push in liquidity. The Fed started doing this in 2008 to extract toxic collateral from the market and encourage economic growth because it allowed more cash flow in the economy.
|
||||
|
||||
- This pulls out collateral from the economy, and pushes cash (liquidity) in.
|
||||
|
||||
- It was a ticking timebomb ever since it started, because it extracts collateral from the market, slowly creating a collateral shortage issue.
|
||||
|
||||
Check out the effects of QE on the Dow Jones Industrial Average ($DJI):
|
||||
|
||||
[](https://preview.redd.it/cktjwttu8k671.png?width=1528&format=png&auto=webp&s=4e23f2e54e6204d8c56323d7e6bc8772c1a02535)
|
||||
|
||||
DJI Before And After Quantitative Easing Begins
|
||||
|
||||
It was helping the economy reverse the death spiral, and it has been pumping the economy ever since the introduction of QE. The problem is, of course, that collateral would continue to be sucked out of the market through the mechanics of QE.
|
||||
|
||||
And QE can't continue forever, because collateral is a fundamental part of the repo market which allows cash to flow in the economy. When you don't have collateral, you can't post the collateral in the market for cash from banks, and thus the flow of cash basically shuts down. You cannot perform a normal repo transaction between a Bank / Hedge Fund / Financial Institution.
|
||||
|
||||
The Fed tried to stop QE after a while. Instead of pulling collateral out of the economy, they needed to try to push collateral back into the economy. In order to stop QE, they tried what was, in essence, the "reverse" of QE called Quantitative Tightening (QT).
|
||||
|
||||
[Quantitative Tightening](https://en.wikipedia.org/wiki/Quantitative_tightening) (QT) - (or quantitative hardening) is a contractionary monetary policy applied by a central bank to decrease the amount of liquidity within the economy. The policy is the reverse of quantitative easing (QE), aimed to increase money supply in order to "stimulate" the economy.
|
||||
|
||||
- This is what the Fed will do to extract liquidity from the economy in order to push in collateral. It is used to attempt to reverse the effects of QE, to try to regain balance in the economy.
|
||||
|
||||
- This pulls out cash (liquidity) from the economy, and pushes collateral in.
|
||||
|
||||
- The Fed attempted QT in 2018, but it proved to have very bad consequences on the economy. So, they went back to QE in 2019, continuing to can-kick the effects of the 2008 crash.
|
||||
|
||||
This is a chart showing the Fed's "Total Assets", where collateral is an asset for the Fed. So when collateral was extracted from the economy through QE, it went onto their "Assets" side of their balance sheet. When collateral was pushed back into the economy through QT, it was extracted from their "Assets" side of their balance sheet.
|
||||
|
||||
1. At the start of QE in 2008, there is a surge of assets due to the buying up of MBS's and treasuries.
|
||||
|
||||
2. Around 2018 the assets began to decline because the Fed attempted QT by pushing collateral back into the economy and sucking liquidity out.
|
||||
|
||||
3. Around September 2019 the assets began to increase again because the Fed went back to QE after realizing the negative effects it was having on the economy due to causing a liquidity shortage.
|
||||
|
||||
So... what happened in September of 2019? Why did QT fail after a decade of QE?
|
||||
|
||||
[](https://preview.redd.it/x6pfomz2ck671.png?width=893&format=png&auto=webp&s=1c667c5cc3dbc94de50944208f107aac1dd72d73)
|
||||
|
||||
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
|
||||
|
||||
3\. Quantitative Easing Cannot Be Reversed. The Can-Kick Continues Until The Economy Crashes
|
||||
|
||||
Despite pumping in a bunch of liquidity into the market through QE, the economy was still lacking liquidity. When the Fed started to reverse QE through QT, the liquidity in the market tightened and thus the negative effects on the economy began to surface in September of 2019.
|
||||
|
||||
[](https://preview.redd.it/9sd32gdxdk671.png?width=630&format=png&auto=webp&s=0ee9d749419bc2b6c0a84682f6f9b0b886ceca93)
|
||||
|
||||
https://blog.pimco.com/en/2019/09/repo-rate-spike-a-tail-of-low-liquidity
|
||||
|
||||
Less than a year after starting QT, a liquidity crisis emerged on September 15th, 2019, when the repo rate spiked up severely. This was a clash of events surrounding the lower liquidity issue.
|
||||
|
||||
> Banks' "reporting" dates are known inflection points in the short-term funding markets and typically fall at the end of the month, quarter, and of course the year. But periodically, the 15th of the month is also a pressure point. Such was the case this past Monday when a short-term funding rate that had been hovering around 2.21% soared as high as 10%.
|
||||
>
|
||||
> The funding market succumbed to a trifecta of pressures:
|
||||
>
|
||||
> 1. Payments on corporate taxes were due on 15 September, leading to high redemptions of more than $35 billion in money market funds.
|
||||
>
|
||||
>
|
||||
> 2. Cash balances increased by an additional $83 billion in the U.S. Treasury general account, which reduces excess reserves and simultaneously acts to reduce the aggregate supply of overnight liquidity available in funding markets.
|
||||
>
|
||||
>
|
||||
> 3. Dealers needed an additional $20 billion in funding to finance the settlement of recent scheduled U.S. Treasury issuance.
|
||||
>
|
||||
>
|
||||
>
|
||||
> ...
|
||||
>
|
||||
> ...
|
||||
>
|
||||
> On September 15, as so many institutions needed funding, repo rates climbed well above the fed funds upper-end target at the time of 2.25% to briefly touch 5%. The following day, cash repo markets traded as high as 10% for those looking to finance agency mortgage positions overnight. Later that morning, the Federal Reserve Bank of New York acknowledged the pressures and conducted its first Open Market Operation (OMO) in more than a decade to add reserves to the funding markets that were clearly in need of the liquidity. Subsequently, after its meeting Wednesday, the Federal Open Market Committee (FOMC) announced a cut in the interest on excess reserves (IOER) of 0.30% -- five basis points more than its cut in the fed funds rate -- providing some relief to the upper bound of money-market yields. - [Source](https://blog.pimco.com/en/2019/09/repo-rate-spike-a-tail-of-low-liquidity)
|
||||
|
||||
Due to the reduced liquidity from QT, because it sucks out liquidity and pushes in collateral, the markets hit a critical point where there was too much cash that was needed and not enough to supply those who needed the cash. There was huge amounts of strain on the economy.
|
||||
|
||||
This was most likely due to continued large leverage + derivatives abuse stemming from what led to the 2000-2007 Housing Market Bubble. The Fed realized that QT could not continue because of the liquidity shortage that was arising. They had to stop QT and continue QE in order to continue to pull out collateral and pump in liquidity. And thus, the collateral shortage time bomb continued ticking.
|
||||
|
||||
Below is the figure of when the repo rate shot up to ~10% within a day. This was awful, because it was much more expensive for loans to go out. The repo market would have shut down from nobody wanting to spend 10% on a repurchase agreement to get cash for the day. How would ANYONE get 10% return overnight to pay for these loans? The flow of cash was about to halt.
|
||||
|
||||
[](https://preview.redd.it/86p3getwwj671.png?width=771&format=png&auto=webp&s=2a503c9055d655f80557da8bf46744c205f60011)
|
||||
|
||||
https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-in-money-markets-in-september-2019-20200227.htm
|
||||
|
||||
4\. COVID Initiated A Liquidity Crisis In The Banks, Which Now Fights With The Collateral Shortage
|
||||
|
||||
QE continued on until 2020, when suddenly, COVID came in. Nobody expected it.
|
||||
|
||||
And boy, oh boy, did COVID wreak havoc on the economy and the financial world. While the Fed was slowly approaching a collateral crisis through QE, COVID exacerbated the issue due to the sudden impact it had on liquidity. COVID increased liquidity, and when you have a sudden surge of liquidity, you need to balance it with collateral. The economic balance was tipping as of March of 2020.
|
||||
|
||||
This does not even take into account the effects of many people losing their jobs, being unable to pay rent/mortgages, and other issues that arose from COVID. Those all apply to another ticking time bomb: the CMBS issue, equivalent to the MBS bubble of 2000-2007, which I discussed in my other post.
|
||||
|
||||
The COVID pandemic caused a surge of money being printed from stimulus packages in the US. When you print a bunch of money into the economy on a whim, you risk driving inflation of the currency itself. What does inflation encourage? Less spending from companies, due to the higher price. This leads to less loaning of cash in the repo market, and banks obtaining an ever-surplus of cash.
|
||||
|
||||
COVID caused a sudden surge of trillions of dollars worth that the economy couldn't handle naturally. Compare the treasury balance versus the deposits over time, and the surge that occurred in 2020 in response to the pandemic. The COVID stimulus bills pumped in a massive amount of money into the economy at the risk of inflation. And we're already seeing the effects of inflation occur on the [supply chain](https://www.businessinsider.com/why-supply-shortages-economy-inventory-chips-lumber-cars-toilet-paper-2021-5):
|
||||
|
||||
[](https://preview.redd.it/amwahlvykk671.png?width=877&format=png&auto=webp&s=1e343c265451a1b2d6754a4d04971bb445e58f43)
|
||||
|
||||
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
|
||||
|
||||
Stimulus checks were sent out to retail. Companies were bailed out. Unemployment increased, resulting in more unemployment benefits going out due to the relief bills. More money printed. More money deposited at banks.
|
||||
|
||||
There was a ton of cash (liquidity) being pumped into the economy over the past year from March 2020 to June 2021. Because of this, due to inflation and an excess of cash, banks began to get a surplus of cash deposited. People had more cash. They didn't need to spend money on rent/mortages. Companies didn't want to spend more due to fears of inflation. So, bank deposits went up.
|
||||
|
||||
The main problem with this is that the cash deposited with the banks became a liability on their balance sheets. When you have a surplus of liabilities on your balance sheet, you need to 'balance' it out with assets, such as US Treasuries.
|
||||
|
||||
The banks were now in trouble because they had way, way too many deposits. They were at risk of defaulting due to their SLR requirements. Here is a figure showing how deposits (liabilities) of banks increased over time. It mushroomed during the COVID pandemic:
|
||||
|
||||
[](https://preview.redd.it/6dm07sa3oj671.png?width=891&format=png&auto=webp&s=9acce6ceb03841c64828198eefff21eb06b1e310)
|
||||
|
||||
https://www.ft.com/content/a5e165f7-a524-4b5b-9939-de689b6a1687
|
||||
|
||||
To combat this issue, the Fed decided to introduce a relief program for banks regarding SLR because of the massive increase of liquidity due to the uppercut that COVID created on the financial world.
|
||||
|
||||
> The supplementary leverage ratio (SLR) is the US implementation of the Basel III Tier 1 leverage ratio, with which banks calculate the amount of common equity capital they must hold relative to their total leverage exposure. Large US banks must hold 3%. Top-tier bank holding companies must also hold an extra 2% buffer, for a total of 5%. The SLR, which does not distinguish between assets based on risk, is conceived as a backstop to risk-weighted capital requirements. - [Source](https://www.risk.net/definition/supplementary-leverage-ratio-slr)
|
||||
|
||||
In more of a simplified summary, SLR is a requirement of total equity that a bank must hold compared to their total leverage exposure. If they are exposed to leverage, they need to hold enough capital for that position otherwise they are at risk of defaulting. In this case, they only need to hold a measly 3%-5%, dependent on how large of a bank they are. Just like in 2008 - these banks can have massive leverage and SLR is to "help protect the economy" from them abusing leverage.
|
||||
|
||||
But hey, the Fed put in place some protections for the year to help these banks since they were obviously overleveraged to begin with. These protections expired on March 31st, 2021.
|
||||
|
||||
[](https://preview.redd.it/14pa4yngtj671.png?width=1433&format=png&auto=webp&s=534726bcf83b0bf40ede7b196191d66c29094d6e)
|
||||
|
||||
https://www.fool.com/investing/2021/03/29/the-fed-is-ending-one-of-its-pandemic-relief-progr/
|
||||
|
||||
> The Fed's relief program last year allowed banks to exclude U.S. Treasuries and central bank reserves from the SLR calculation. The relief program was a response to the many non-banking institutions selling Treasuries to raise cash, and coincided with other measures, including the $2.2 trillion CARES Act, which resulted in even more Treasuries being sold into the market. - [Source](https://www.fool.com/investing/2021/03/29/the-fed-is-ending-one-of-its-pandemic-relief-progr/)
|
||||
|
||||
Right after the expiration of the protection plans of SLR, the Reverse Repo market began to blow up because the banks had way too much liquidity and not enough treasuries on their balance sheets.
|
||||
|
||||
The argument that the banks were "parking their money at the Fed" was a reasonable explanation at first. Though, with 0% ROI from the RRP at the time, the banks would literally get no return on their investments. So for that argument, all of their other investments would have had to yield negative in order for RRP to be more enticing. Does this make sense to you that they'd use 0% RRP to be an 'investment'?
|
||||
|
||||
The fact that the RRP began to ramp up and then explode after the SLR protections lifted makes this look like a collateral shortage issue. And of course, with QE occurring over the past decade, makes it more likely, because collateral was sucked out of the economy and onto the Fed's balance sheet over the years.
|
||||
|
||||
That was of course questionable on whether it was a liquidity or collateral issue, until, the RRP rate dropped negative in March of 2021, as well as in April of 2021.
|
||||
|
||||
5\. Reverse Repo Rate Flips Negative; Warnings Of Collateral Shortage
|
||||
|
||||
Think about it quite simply in a supply/demand factor and the reverse repo when the RRP rate dropped negative.
|
||||
|
||||
You are a bank. You want to get Collateral from the Fed to balance your sheets. The Fed says they'll give you a small amount of interest for borrowing their collateral overnight. But now, imagine that the supply of collateral is too low and demand is too high. The Fed will no longer want to pay you for borrowing its collateral so it will shift the interest rate down. If demand really outweighs supply, then the Fed would then want cash from YOU in order for YOU to borrow the collateral.
|
||||
|
||||
[](https://preview.redd.it/eysh9mx9ok671.png?width=961&format=png&auto=webp&s=4d9d1695922b01651eae06c6bcc2753ad0f5b789)
|
||||
|
||||
https://www.reuters.com/article/us-usa-bonds-repo-explainer/explainer-u-s-repo-market-flirts-with-negative-rates-as-fed-seeks-to-absorb-excess-cash-idUSKBN2C32AI
|
||||
|
||||
This was just one of the warning signs that a collateral issue was arising. The RRP rates were already at 0%, so the only way for them to move was either up or down. An increase in treasury demand could shift it down, into the negatives, which it did.
|
||||
|
||||
6\. The Fed Is Fudging The Numbers And Hiding A Collateral Shortage
|
||||
|
||||
The drop in RRP interest rates to the negative came after the Fed increased the total borrowing amount of counterparties in the RRP from $30 Billion to $80 Billion.
|
||||
|
||||
[](https://preview.redd.it/by2ftlpopk671.png?width=1028&format=png&auto=webp&s=747f50e2fb63aabaedb6e9e947aa117f6c75f91b)
|
||||
|
||||
https://finadium.com/fed-increases-rrp-limits-from-30-billion-to-80-billion-to-ensure-supply-at-near-0-rates/
|
||||
|
||||
Why did they do this? Think of it again as a supply versus demand issue. For simple math, imagine the Fed has 50 members.
|
||||
|
||||
- At a limit of $30 Billion per member, that is a total of $30B * 50 = $1.5 Trillion that can be borrowed.
|
||||
|
||||
- At a limit of $80 Billion per member, that is a total of $80B * 50 = $4 Trillion that can be borrowed.
|
||||
|
||||
What is this doing? Why did the Fed increase the limit?
|
||||
|
||||
It's artificially inflating the total "supply" of treasuries that can be borrowed by counterparties in the RRP. It is attempting to keep the interest rate positive because there is so much demand for collateral and not enough supply in the markets and on the Fed's balance sheet. The RRP was already at 0%, there was nowhere for it to go besides negative, which as you know implies a shortage of collateral and a red flag for the financial world.
|
||||
|
||||
Not only did they artificially inflate the total supply to combat the demand by increasing the total borrow amount, the Fed decided to not affect the assets side of its balance sheet during these RRP transactions. This effectively leaves the supply of treasuries on the Fed's balance sheet the same. This is another method to can-kick to avoid interest rates going negative and flashing a collateral issue.
|
||||
|
||||
> When the Desk conducts RRP open market operations, it sells securities held in the System Open Market Account (SOMA) to eligible RRP counterparties, with an agreement to buy the assets back on the RRP's specified maturity date. This leaves the SOMA portfolio the same size, as securities sold temporarily under repurchase agreements continue to be shown as assets held by the SOMA in accordance with generally accepted accounting principles, but the transaction shifts some of the liabilities on the Federal Reserve's balance sheet from deposits held by depository institutions (also known as bank reserves) to reverse repos while the trade is outstanding. - [Source](https://www.newyorkfed.org/markets/rrp_faq/rrp-faq-archive/rrp-faq-200715)
|
||||
|
||||
We can see this visually from the Fed's balance sheet that they're not affecting their assets during the RRP. They're allowing counterparties to borrow treasuries WITHOUT affecting the supply - desperately trying to get away from the rising demand for treasuries and avoid treasury yields from snapping down (and likewise the price of treasuries up):
|
||||
|
||||
[](https://preview.redd.it/evxua80crk671.png?width=893&format=png&auto=webp&s=6a925b05e7a460b252457923ca97c730c511da6b)
|
||||
|
||||
https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm
|
||||
|
||||
On top of this, the Fed showed their hand ONCE AGAIN of fudging the numbers on June 16th when they bumped up the RRP rate to 0.05%. The short-term treasury yields briefly went BELOW the RRP interest amount of 0.05% on June 17th when the new RRP ROI was in effect.
|
||||
|
||||
This is a BAD sign because now overnight RRP had a higher return than 2-month and 3-month treasury bonds.
|
||||
|
||||
The Fed is fudging the numbers trying to hide the treasury bond shortage.
|
||||
|
||||
The Fed cannot keep this up. They're trying to keep the T-bill yield curve propped up despite the treasury shortage. They're not affecting their balance sheet, and they also artificially increased the amount of treasuries in their "supply" by increasing the counterparty borrow limit from $30 Billion to $80 Billion.
|
||||
|
||||
[](https://preview.redd.it/sp52qka5tj671.png?width=858&format=png&auto=webp&s=69d7ec8971035a7939f7bed116f7c923215019d6)
|
||||
|
||||
https://alhambrapartners.com/2021/06/17/the-fomc-accidentally-exposes-itself-reverse-repo-style/
|
||||
|
||||
[](https://preview.redd.it/1f64o77tsk671.png?width=972&format=png&auto=webp&s=48e83c02895066c4e300c5a8adf3d3a065a6b016)
|
||||
|
||||
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
|
||||
|
||||
The Fed is also planning on increasing interest rates. This starts to scare the economy, which is most likely why we're now seeing the dump of the stock market over the past few days and the dump leading into the week of June 21st. This is bad for the markets because it means it's going to cost more for the economy to function (e.g. what happened in 2019 when Repo Rates spiked to 10%). Companies have to spend more to hire, produce, etc. It costs the economy more to function.
|
||||
|
||||
The Fed is pinned between a collateral issue from QE sucking out collateral, and a liquidity issue and COVID pumping in too much liquidity for the banks to handle.
|
||||
|
||||
[](https://preview.redd.it/uhhhzguotk671.png?width=1202&format=png&auto=webp&s=cab32cef615311320c6cf27461fa7fb18b0fc7af)
|
||||
|
||||
https://www.cnbc.com/2021/06/16/fed-holds-rates-steady-but-raises-inflation-expectations-sharply-and-makes-no-mention-of-taper.html
|
||||
|
||||
[](https://preview.redd.it/p0v9ij2b0k671.png?width=1013&format=png&auto=webp&s=bf8f525bfc55e8f1287e921bbaaa408c5c27a253)
|
||||
|
||||
https://www.bbc.com/news/business-57090421
|
||||
|
||||
7\. Quarter Ends Explode The Reverse Repo. The Next Quarter End Is June 30th, 2021.
|
||||
|
||||
This is not a date to look forward to for GME potentially rising. This is a date of "Holy shit. The RRP could explode to the point where treasury supply vs demand is unable to take it any more".
|
||||
|
||||
About 3-4 days prior to quarter ends, the RRP explodes up in the amount of collateral that is borrowed from the Fed. This is because of the underlying plumbing of the financial markets, identified in Section 3 above, causes additional strain on the financial markets. The banks need more collateral to prop up their balance sheets for the night of the quarter-ends.
|
||||
|
||||
The RRP borrowed amount can shoot up almost 2-4x the current levels. The amount of RRP at the moment is $747 Billion. The RRP could explode 2-4x the amount it is at upon June 25th, 2021. What if it's $1 Trillion by then due to the massive amount of collateral needed by the banks? More?
|
||||
|
||||
Can the Fed handle it?
|
||||
|
||||
Can they still prop the yield curve up?
|
||||
|
||||
Will the short-term treasuries dip below the RRP amount once more due to this shortage and flash red flags to the world of financial instability in the US?
|
||||
|
||||
[](https://preview.redd.it/63daa1s8gk671.png?width=1277&format=png&auto=webp&s=d04d4a6b577152d26d6f7ea6e0c31f05f7ce80dc)
|
||||
|
||||
https://www.reddit.com/r/Superstonk/comments/nylihz/previous_rrp_behavior_on_quarter_ends_massive/
|
||||
|
||||
If the US Treasury yield curve snaps down from this instability and the Fed no longer able to prop up the yield curve, then it can drive treasury prices up.
|
||||
|
||||
If [/u/atobitt](https://www.reddit.com/u/atobitt/)'s "[Everything Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)" is true and they're actually shorting treasuries, then that can lead to banks defaulting due to the price of treasuries shooting up. When they default, they'll be forced to buy up all the treasuries that they've shorted into the market.
|
||||
|
||||
And it is very possible that they are shorting treasuries.
|
||||
|
||||
When performing RRP of 0%, the repo market was most likely shut down due to nobody needing cash loaned out. The banks only profitable move was to perform the RRP with the Fed and then short treasuries into the market, rehypothecating the treasuries to other parties. This would have also helped prop up the market by artificially increasing the supply of treasuries (collateral) in the market.
|
||||
|
||||
If it's true, and they have truly been performing the "Everything Short", then it could initiate a Global Financial Crisis equivalent to The Great Depression.
|
||||
|
||||
Do I want that to happen? No. But is there a chance? Yes, there is.
|
||||
|
||||
Is GME going to squeeze? Is the DD just false hopium? I don't think it's just hopium. I believe in the DD.
|
||||
|
||||
But some users might think otherwise and not believe in GME or the DD. Hello users outside of [r/superstonk](https://www.reddit.com/r/superstonk/)! If you're reading this, check out the DD on the subreddit!
|
||||
|
||||
Even if there's a slight chance of a GME squeeze in your eyes, and all of these signs are pointing to a market crash...
|
||||
|
||||
[Why not give it a shot](https://www.youtube.com/watch?v=l4nSHsbFe-o)?
|
||||
421
01-Must-Read/2021-06-23-Updated-Go-No-Go-Launch-Checklist.md
Normal file
421
01-Must-Read/2021-06-23-Updated-Go-No-Go-Launch-Checklist.md
Normal file
@ -0,0 +1,421 @@
|
||||
UPDATE -- Go / No-Go For Launch - The checklist keeping GME on the launchpad.
|
||||
=============================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/nothingbuttherainsir](https://www.reddit.com/user/nothingbuttherainsir/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nhh0f1/update_go_nogo_for_launch_the_checklist_keeping/) |
|
||||
|
||||
---
|
||||
|
||||
[Possible DD 👨🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Possible%20DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)
|
||||
|
||||
*TL;DR:*\
|
||||
DTCC / OCC / ICC etc. & Wall St want key things in place before GME unwinds, and we're now looking at a list that's been mostly checked off. This rocket is just about cleared for launch.
|
||||
|
||||
*Last updated: 2021-06-23* | [Original post from 2021-04-22](https://www.reddit.com/r/Superstonk/comments/mvq6rs/go_nogo_for_launch_the_dtcc_checklist_keeping_gme/)
|
||||
|
||||
Go / No-Go For Launch
|
||||
|
||||
Opinion - Status: Hold ❌\
|
||||
*We're on a scheduled hold. Preliminary system checks are good enough to launch, and now we are being held for atmospheric conditions to be just right.*
|
||||
|
||||
*GME ignition needs to appear from the outside to be organic, or it will be fairly obvious to the public that The System is built on lies, and run by liars, completely unfair, and this stock was just being flat out controlled for months. Even if Wall St survives financially by implementing all these rules, if they lose the public trust then it is literally "game stopped." They need plausible cover to launch now, the rest is in place.*
|
||||
|
||||
1 - Rules of Engagement ✅
|
||||
|
||||
2 - Funding ✅
|
||||
|
||||
3 - Cover Story for Timing ❌
|
||||
|
||||
4 - Avoiding Perception of Responsibility ✅
|
||||
|
||||
--- *End TL;DR* ---
|
||||
|
||||
Busy few weeks, eh Apes? Figured I'd give this a brush up and post it again since it was a month ago I posted the original. So here's the refreshed, reviewed, reassessed, reformatted, and return of the Go / No-Go Checklist. Freshness stamp at the top, changes by date at the bottom. Please comment with any additions and corrections as always.
|
||||
|
||||
Official notice that this is not financial advice, etc etc. I have no idea if any of this is indeed why these things are happening, or if they are even what I think they are. I bought a handful of shares before DFV's Congressional hearing because something seemed fucky, and that was my first stock purchase EVER. If you make financial decisions off of this speculation, you probably do eat crayons like me. I am literally just some Ape on the internet mashing buttons and you're gonna have to explain to your wife's boyfriend why you took this as advice and then spent your whole allowance already this week.
|
||||
|
||||
So this [post](https://reddit.com/r/Superstonk/comments/mu9xed/why_were_still_trading_sideways_and_why_we_havent/) from [u/c-digs](https://www.reddit.com/u/c-digs/) is about as close as anyone has come to my personal theory that there is a literal checklist somewhere that is getting marked off before this is allowed to unravel. The DTCC and Wall St (and probably the SEC) definitely do not want this spring to unwind before they are ready, and certainly not in a way in which they don't feel they are in control. These players are Big Corporate dicks with Big Corporate mindsets, and its my bet that they don't do anything without a plan that at least addresses all eventualities.
|
||||
|
||||
However, as it is now probably alarmingly clear to them this isn't just gonna go away on its own (cue Apes waving from the windows of the rocket sitting on the launchpad), the DTCC and pals are now scrambling to get the last things in place before somebody trips over the cord to the shredder at 3am and lands on the launch button.
|
||||
|
||||
I think the list goes something like this, but am intending this to be a crowdsourced document because there is no way I can keep this all straight on my own, and the GME Investor community has done so so much great DD already. There is definitely more to add in terms of DTCC / OCC / NSCC / SEC rules, and please comment with additional items & sources and I'll try to keep up with editing them into the list. Compiling it here can possibly help determine just how close GME probably is to liftoff. It feels like we aren't that far from it now.
|
||||
|
||||
1 - Rules of Engagement
|
||||
|
||||
Opinon - Status: Go for Launch ✅\
|
||||
*The System would benefit most if new rules about payments in a member default situation are in effect prior to launch, and as far as we know at this point, all rules to cover that scenario that were filed are now in place. They can use remaining days to shore up a few more monetary rules, but there aren't any disaster-level rules still pending out there. My opinion is at 100% Go for rules being in place.*
|
||||
|
||||
Let's cover some basics before getting into each specific rule.
|
||||
|
||||
Whose rules cover what:
|
||||
|
||||
DTCC stands for Depoisitory Trust and Clearing Corporation which is made up of 3 self-regulating bodies:
|
||||
|
||||
- [DTC](https://www.dtcc.com/about/businesses-and-subsidiaries/dtc) - The Depository Trust Company
|
||||
|
||||
- [NSCC](https://www.dtcc.com/about/businesses-and-subsidiaries/nscc) - National Securities Clearing Corporation
|
||||
|
||||
- [FICC](https://www.dtcc.com/about/businesses-and-subsidiaries/ficc) - Fixed Income Clearing Corporation
|
||||
|
||||
and handles:
|
||||
|
||||
- Physical Stock Certificates and ownership records, big institutional trades (DTC)
|
||||
|
||||
- Securities trades, clearing, and settlement for nearly all transactions involving US based marketplaces (NSCC)
|
||||
|
||||
- Government Securities and Mortgage-Backed Securities (FICC)
|
||||
|
||||
[OCC](https://www.theocc.com/) - Options Clearing Coroporation handles:\
|
||||
Options (shocker, I know)
|
||||
|
||||
[ICC](https://www.theice.com/clear-credit) - Intercontinental Exchance (ICE) Clear Credit handles:\
|
||||
Credit Default Swaps, or CDS for short.
|
||||
|
||||
Naming Scheme (yes the whole thing is important)\
|
||||
example: SR-DTC-2021-005
|
||||
|
||||
- SR - Type of document filed, SR = Self Regulation
|
||||
|
||||
- DTC - Name of self regulated entity filing it
|
||||
|
||||
- 2021 - Year regulation was filed
|
||||
|
||||
- 005 - Sequence filed in (5th, so far)
|
||||
|
||||
✅ = in effect now\
|
||||
❌ = pending review / revision
|
||||
|
||||
Rules To Protect The System
|
||||
|
||||
Stocks/Securities
|
||||
|
||||
- SR-DTC-2021-003: Obligation to Reconcile Activity on a Regular Basis ✅\
|
||||
*The "You're gonna report your risk daily now, you little shits" Rule.*\
|
||||
Filed 2021-03-09\
|
||||
Effective 2021-03-16\
|
||||
[src](https://www.reddit.com/r/GME/comments/m793h7/new_dtcc_rule_just_passed_in_effect_immediatly/)
|
||||
|
||||
- SR-DTC-2021-004: Amend the Recovery & Wind-down Plan ✅\
|
||||
*The "We'll liquidate your asse(t)s if you default, then make your pals chip in, before we pay a dime ourselves" Rule.*\
|
||||
Also stipulates what the DTCC is willing to cover when reconciling, as in only shares on the books, and why you (yes you Ape) should have a cash account and not a margin account.\
|
||||
Filed 2021-03-29\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/GME/comments/mgs05i/analysis_of_srdtc2021004_dtcc_changing_the_game/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
|
||||
|
||||
- SR-DTC-2021-005: Modify the DTC Settlement Service Guide and the Form of DTC Pledgee's Agreement ✅\
|
||||
*The "We're tagging the shares you lend out so you can't do it more than once" Rule.*\
|
||||
While this won't help prevent the current GME squeeze scenario, and would likely ignite the engines on its own, this will prevent a *GME-like* scenario from happening again in the future. [u/Leenixus](https://www.reddit.com/user/Leenixus/) has posted lots of info around DTC-2021-005 if you'd like to follow the saga.\
|
||||
Filed 2021-04-01 [archived original](https://www.reddit.com/r/Superstonk/comments/o2nx3z/i_have_the_original_sec_srdtc2021005_before_it/)\
|
||||
Removed for further review src-1\
|
||||
Refiled 2021-06-15 src-2\
|
||||
Effective Immediately upon re-filing\
|
||||
[src-1](https://www.reddit.com/r/Superstonk/comments/mpmcyz/good_news_update_on_dtc2021005_according_to_john/), [src-2](https://www.dtcc.com/-/media/Files/Downloads/legal/rule-filings/2021/DTC/SR-DTC-2021-005.pdf)
|
||||
|
||||
- SR-DTC-2021-006: Remove the Security Holder Tracking Service ✅\
|
||||
*The "We're dropping the old way of tracking shares, cause it didn't work well, and DTC-2021-005 will do it better" Rule.*\
|
||||
It was speculated in another post that the old system of tracking needed to be removed so there was no conflict in implementing DTC-2021-005 (I can't find that post here on reddit anymore, src needed!). It's likely that this could pave the way for 005 to be implemented. As if 2021-05-20 I am more inclined to think that it was removed to keep anyone from implementing share tracking prior to 005 being implemented. Filed 2021-04-22\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/mwhyhw/sec_files_srdtc2021006_removing_the_old_and/) <- also my post
|
||||
|
||||
- SR-DTC-2021-007: Update the DTC Corporate Actions Distributions Service Guide ✅\
|
||||
*The "Stop bickering back and forth over the manual adjustments to your peer to peer trade records via the dumb APO method, and just use the GD computer validated Claim Connect system, please" Rule.*\
|
||||
Way to make a super vague title DTC... This is mostly about borrowed shares and updating who pays how much when circumstances - like rates - change. The old system (APO) needed both parties to just agree on the adjustments and one side could only submit an adjustment at a time, so it was rarely agreed upon in one pass and the bad guys could likely stall with many back and forths. To me this reads as a please use this better thing now, because APO will go away on July 9th 2021 so you'll have to use Claim Connect by then anyways. Since the lender is likely incentivized to use the new system, it may get adopted in higher numbers sooner.\
|
||||
Filed 2021-04-30\
|
||||
Effective Immediately\
|
||||
Mandatory 2021-07-09\
|
||||
[src](https://www.sec.gov/rules/sro/dtc.htm#SR-DTC-2021-007), [Explainer post](https://www.reddit.com/r/Superstonk/comments/n28jes/new_dtc_regulation_posted_srdtc2021007/)
|
||||
|
||||
- SR-DTC-2021-009: Provide Enhanced Clarity for Deadlines and Processing Times ✅\
|
||||
*The "Don't assume we'll be keeping up with our own deadlines just because we have been in the past. We'll do what we want when we want. Also dont cry to us if our choices about deadlines, or someone else's rules about deadlines, kick you in the wallet. We're not chipping in for that." Rule.*\
|
||||
This is basically a re-statement of an ongoing policy by the DTC that their precedent around deadlines/timetables that they themselves have control over should not be misunderstood as a guarantee of them adhering to those same deadlines/timetables in the future. This does not effect deadlines imposed by external regulations though. Further, the DTC stipulates that they are not liable for damages (monetary losses) that are incurred by members from the DTC's choices to act or not act in the same timeframes as they had before, or damages from the actions of anybody else's rules, (SEC, OCC, NSCC, etc).\
|
||||
Filed 2021-06-08\
|
||||
Effective Immediately\
|
||||
[src](https://www.sec.gov/rules/sro/dtc/2021/34-92198.pdf), [Explainer post](https://www.reddit.com/r/Superstonk/comments/o1ds30/new_dtc_filing_srdtc2021009_notice_of_filing_and/), [more info](https://reddit.com/r/Superstonk/comments/o63ev5/dtc2021009_implemented_tomorrow_saying_the_dtc/)
|
||||
|
||||
- SR-NSCC-2021-002: Amend the Supplemental Liquidity Deposit Requirements ✅\
|
||||
*The "We'll margin call your ass if your new daily reports say you're overextended and make us feel scared" Rule.*\
|
||||
Works in conjunction with DTC-2021-003. This rule now appears to be clear to be acted on by the SEC. NSCC filed a Partial Ammendment to this on June 17th for clarification.\
|
||||
Possible insight on why this may have been strategically delayed, via [/u/yosaso](https://www.reddit.com/u/yosaso/) src-4\
|
||||
NSCC-2021-801 Gave Advance Notice of this, and as of 2021-05-04 is cleared to be included with NSC-2021-002. src-2\
|
||||
Filed 2021-03-05\
|
||||
Comment Period Extended to 05-31 / Expected action on or before 2021-06-21 src-3\
|
||||
Approved 2021-06-21 with partial ammendment src-4\
|
||||
Effective 2021-06-23 src-5 [src](https://www.reddit.com/r/GME/comments/mc0zfn/too_ape_didnt_read_summary_of_srnscc2021801/?utm_source=share&utm_medium=ios_app&utm_name=iossmf), [src-2](https://www.reddit.com/r/Superstonk/comments/n51u5d/sec_has_no_objections_to_nscc801/), [src-3](https://www.sec.gov/rules/sro/nscc/2021/34-91788.pdf), [src-4](https://www.reddit.com/r/Superstonk/comments/n67h63/the_reason_why_may_4th_was_important/), [src-4](https://www.sec.gov/rules/sro/nscc/2021/34-92213.pdf), [src-5](https://www.reddit.com/r/Superstonk/comments/o4z0jc/implementation_of_the_proposed_changes_to_the/?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
- SR-NSCC-2021-004: Amend the Recovery & Wind-down Plan ✅\
|
||||
*The "Just so we're clear about stocks specifically, we're really serious about us not paying for your fuckups unless we have to rule" Rule.*\
|
||||
Works in conjunction with DTC-2021-004, but this is specific to securities and was filed first. src-1 This ALSO has language in it about clarifying the mass transfer of customer accounts from a failing member to a stable member. src-2\
|
||||
Filed 2021-03-05\
|
||||
Effective 2021-03-18\
|
||||
[src-1](https://www.reddit.com/r/GME/comments/mc0zfn/too_ape_didnt_read_summary_of_srnscc2021801/?utm_source=share&utm_medium=ios_app&utm_name=iossmf), [src-2](https://www.reddit.com/r/Superstonk/comments/mvybgf/sec_is_expecting_the_need_for_a_mass_emergency/)
|
||||
|
||||
- NSCC-2021-005: Increase the NSCC's Minimum Required Fund Deposit *pending* ❌\
|
||||
*The "We're gonna up your minimum deposit with us from an hysterically low $10K each, to an almost certainly still not enough $250k each" Rule.*\
|
||||
DTCC has submitted this to SEC, but SEC has not approved / published yet, so details may change. src-1\
|
||||
Filed 2021-04-26\
|
||||
Published: 2021-05-10\
|
||||
Approved: Pending, expected action on or before 2021-06-24 (45 days after publication)\
|
||||
Effective: Approval + 10 days max\
|
||||
[src-1](https://www.dtcc.com/legal), [Explainer post](https://www.reddit.com/r/Superstonk/comments/mz9gl6/nscc2021005_has_been_signed_today_implementation/)
|
||||
|
||||
Options
|
||||
|
||||
- SR-OCC-2021-003: Increase Persistent Minimum Skin-In-The-Game / Waterfall ✅\
|
||||
*The "You Market Makers are gonna give us more money now in case you fuck up with options later and owe someone more than you have" Rule.*\
|
||||
This is the rule associated with the SR-OCC-2021-801 advanced notice, and SIG filed an opposition during the review period delaying the implementation. src-1 You can read that whiney rant here via this [comment](https://www.reddit.com/r/Superstonk/comments/nhh0f1/update_go_nogo_for_launch_the_checklist_keeping/gznui8r?utm_source=share&utm_medium=web2x&context=3)\
|
||||
OCC-2021-003 is now approved and both should be in effect no later than Tuesday 2021-06-01 10am Eastern (if SEC approval notice counts as the official written notice to OCC members). src-2\
|
||||
Filed 2021-02-10\
|
||||
Approved 2021-05-27\
|
||||
Effective on or before 2021-06-01 10am EST\
|
||||
[src-1](https://www.reddit.com/r/Superstonk/comments/mm8pnz/update_from_sec_on_srocc2021801_aka_srocc2021203/), [src-2](https://www.reddit.com/r/Superstonk/comments/nmjbov/srocc2021003_approved_that_one_was_needed_for/gzqwqzc?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
Credit Default Swaps
|
||||
|
||||
- SR-ICC-2021-005: Amend the ICC Recovery & Wind-down Plan ✅\
|
||||
*The "Guys, DTC had a pretty good idea, lets also liquidate members first before touching our own cash." Rule.*\
|
||||
Fairly straightforward with this nugget as described by [u/Criand](https://www.reddit.com/u/Criand/):\
|
||||
"Something really cool is they'll not only wipe out members who default on a certain security, they'll wipe out similar positions in that same security of all their other members IF it's high risk/stress to the market."\
|
||||
Filed 2021-03-23\
|
||||
Approved 2021-05-10\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/nfl69o/new_icc_rules_summary_they_are_preparing_for/)
|
||||
|
||||
- SR-ICC-2021-007: Update the ICC's Treasury Operations Policies and Procedures ✅\
|
||||
*The "Your capital balance sheet is looking a little shaggy there, we think you need a Collateral Haircut" Rule.*\
|
||||
Tightens up what can and cant be considered as collateral, trimming off the stuff that is not deemed worthy, and reducing overall capital, which means you can handle less total risk and/or volatile CDS contracts.\
|
||||
Filed 2021-03-29\
|
||||
Approved 2021-05-13\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/nfl69o/new_icc_rules_summary_they_are_preparing_for/)
|
||||
|
||||
- SR-ICC-2021-008: Update the ICC Risk Management Model Description ✅\
|
||||
*The "We're gonna start using our best guesses on if the collateral for the loans these psuedo-insurance contracts are based on might go crazy in the near future, 'cause shit is getting weird out there" Rule.*\
|
||||
This is about [Credit Default Swaps](https://www.investopedia.com/terms/c/creditdefaultswap.asp), which are a bit complex. Essentially this rule appears it primarily will help to reduce the chances of say, BofA failing because they agreed to get paid to take on some of the risk of a loan made by say JP Morgan, and then BofA got fucked over just because JP Morgain made the loan using a volatile stock as collateral and then that stock went bananas... a stock which everyone probably knew was volatile but somehow wasn't a big factor in making the agreement before this rule. The rule also limits the ICC maximum total losses/payout, and ups initial margin requirements.\
|
||||
Filed 2021-03-31\
|
||||
Approved 2021-05-18\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/nfl69o/new_icc_rules_summary_they_are_preparing_for/)
|
||||
|
||||
- SR-ICC-2021-009: Update the ICC Risk Parameter Setting and Review Policy ✅\
|
||||
*The "We're basing risk on day to day averages now instead of month to month averages" Rule.*\
|
||||
When something strays too far outside of the acceptable baseline, it gets flagged. Now that baseline is automatically calculated day to day, instead of month to month, and manualy reviewed the old way at least monthly. It will result in faster response time to fast moving changes and real risks (safer), but also less shock from too few updates (smoother). All that so they can keep margin levels appropriate. Also cleans up some language to be more generic and descriptive like "Extreme Price Change Scenarios."\
|
||||
Filed 2021-04-02\
|
||||
Approved 2021-05-20\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/nhdw0f/rick_management_updates_just_went_from_monthly_to/)
|
||||
|
||||
- SR-ICC-2021-014: Update the ICC's Fee Schedules ✅\
|
||||
*The "Huuuuuuuge discounts on swaps! Get 'em while they last!" Rule.*\
|
||||
This cuts fees on CDS contracts about 25%, which sounds like they want to incentivize risk sharing even more. Program is for the 2nd half of 2021, and discounts start June 1st.\
|
||||
Filed 2021-05-07\
|
||||
Approved 2021-05-18\
|
||||
Effective Immediately\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/nfl69o/new_icc_rules_summary_they_are_preparing_for/)
|
||||
|
||||
Rules to protect the value of the market in general as best as possible
|
||||
|
||||
- SR-OCC-2021-004: Revisions to OCC's Auction Participation Requirements ✅\
|
||||
*The "Everyone can come to the feeding frenzy party when we liquidate one of you idiots" Rule.*\
|
||||
Allows more firms that were traditionally excluded from an auction of this type to now join in, probably making the market wide bleeding end sooner, and retain more value overall.\
|
||||
Filed 2021-03-19\
|
||||
Effective 2021-05-19\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/mnpzu5/srocc2021004_why_this_proposed_rule_change_is/)
|
||||
|
||||
Non-regulation / Other Announcments
|
||||
|
||||
- Exchange Act Rule 15c3-3 Compliance Letter: Staff Statement on Fully Paid Lending ✅\
|
||||
*The "We're making you keep full collateral on hand for your shit, you've got six months to get it together" letter.*\
|
||||
Letter sent 2020-10-22\
|
||||
Effective 2021-04-22\
|
||||
[src](https://www.sec.gov/news/public-statement/staff-fully-paid-lending?utm_medium=email&utm_source=govdelivery)
|
||||
|
||||
- GOV-1085-21: DTCC / FICC White Paper Announcing WABR added as a Sponsored Member ✅\
|
||||
WABR Cayman Limited is a firm specializing in helping Institutional Sales Traders in times of "thin markets". [u/stellarEVH](https://www.reddit.com/u/stellarEVH/) explains:\
|
||||
*"When a company needs to quickly pay off their debts as in the case of a margin call, it can be challenging for them to gather all the money from their various investments. There are firms in place that are specialized in liquidating their portfolio in a manner to minimize market impact while they pay off their debt."*\
|
||||
Announced 2021-04-23\
|
||||
Effective 2021-04-29\
|
||||
[src](https://www.dtcc.com/-/media/Files/pdf/2021/4/23/GOV1085-21PDF.PDF), via [this post & comments](https://www.reddit.com/r/Superstonk/comments/my1hio/friday_the_dtcc_approved_wabra_morgan_stanley/), linked from [It's Just a Bug, Bro Part 6 - Bug Spray Edition](https://www.reddit.com/r/Superstonk/comments/myl37p/its_just_a_bug_bro_part_6_bug_spray_edition/)\
|
||||
[Additional info on who WABR is](https://reddit.com/r/Superstonk/comments/mz4oza/the_rabbit_hole_of_wabr_cayman_company_limited/) 👀 *Spidey senses are tingling*\
|
||||
*I love this community*
|
||||
|
||||
- MBS978-21: FICC Notice on MBSD Intraday Mark-to-Market Charge - Timing of Intraday Collection ✅\
|
||||
*We've been lenient for the past year cause shit was wack, but we're going back on that regular hourly assesment for margins.* "Starting on May 3, 2021, the fixed time of 1:00PM will be eliminated and the MBSD Intraday Mark-to-Market Charge will return to an hourly assessment." This combined with other things will tighten the screws.\
|
||||
[/u/stellarEVH](https://www.reddit.com/u/stellarEVH/) bringing that good good again: *"For example, it'll be much harder to short GameStop and/or trade in dark pools when you're expected to cover your margin every hour. For the last year, they've only needed to prove they were covered at 1pm."*\
|
||||
Notice Date 2021-04-21\
|
||||
Effective 2021-05-03\
|
||||
[src post](https://www.reddit.com/r/Superstonk/comments/n3m0qu/the_mandatory_dtcc_common_stock_reallocation_for/), [explainer comment](https://www.reddit.com/r/Superstonk/comments/n3m0qu/the_mandatory_dtcc_common_stock_reallocation_for/gwr8n2a?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
- OCC Notice 48718: TEMPORARY INCREASE TO CLEARING FUND SIZE ✅\
|
||||
*Yeah if you could give us some more of your money for a bit, that would be great.*\
|
||||
Yeah they used all caps, and gave 2 days notice before they would just go into members bank accounts to get that money. Must've needed it bad for the 19th, because it normally is just increased monthly on the 1st. Total increase was $588,378,155.\
|
||||
Notice Date 2021-05-17\
|
||||
Deposit by Date 2021-05-19 [by 9am](https://www.reddit.com/r/Superstonk/comments/nfz9xa/huge_crypto_dump_currently_things_are_hotting_up/).\
|
||||
[src](https://www.reddit.com/r/Superstonk/comments/nftyg4/occ_has_issued_a_statement_to_all_clearing/)
|
||||
|
||||
*(please help me fill in other important rules via comments)*
|
||||
|
||||
2 - Funding
|
||||
|
||||
Opinion - Status: Go for Launch ✅
|
||||
|
||||
To pay out for shares of GME
|
||||
|
||||
- [SHF Pulling money from crypt0](https://finance.yahoo.com/news/bitcoin-doge-ethereum-ripple-price-monday-19-april-crypto-latest-081427050.html)
|
||||
|
||||
- SHF Pump and Dump on other stocks
|
||||
|
||||
- SHF Liquidate other Assets Under Management (market-wide dive on 2021-04-22?) [Citadel Sell-off?](https://www.reddit.com/r/Superstonk/comments/n0fwx2/kenny_might_be_in_a_bit_of_a_pickle_right_now/)
|
||||
|
||||
- Wind Down and Recovery Strategies (SR-DTC-2021-004, SR-ICC-2021-005)
|
||||
|
||||
- *(other suggestions w/ sources wanted)*
|
||||
|
||||
Secure cash to buy up liquidated assets to prevent total market collapse
|
||||
|
||||
- [Big Banks do a Bond Sales](https://www.reddit.com/r/Superstonk/comments/mu8a5m/6_out_of_the_7_top_listed_us_banks_have_made/), [Citigroup: "Me Too!"](https://www.reddit.com/r/Superstonk/comments/mzvcli/citigroup_borrowing_55_billion_in_latest_bank/)
|
||||
|
||||
- Need plausible reasons for making those sales such as earnings report, or LIBOR to SOFR switch, or *insert wildcard like $50 Bil Football League*, etc ...
|
||||
|
||||
- Banks Re-Structuring / Netting [src](https://www.reddit.com/r/Superstonk/comments/mur8bz/srdtc2021004_the_dtcc_and_jp_morgan_theyre/)
|
||||
|
||||
- [Wells Fargo to liquidate two of its trusts](https://www.reddit.com/r/Superstonk/comments/nh5ed7/wells_fargo_to_liquidate_two_of_its_trusts/)
|
||||
|
||||
- Rule SR-OCC-2021-004 allowing more players at the auction of the defaulting member's assets.
|
||||
|
||||
3 - Cover for Timing of Launch
|
||||
|
||||
Opinion - Status: No-Go for Launch ❌\
|
||||
*This will likely be the very last one, and we'll only know what they will use as an excuse once it's started. I think all the other pieces would need to be in place* (Narrator: They are.) *for them to feel most confident to light the fuse. This will be more oportunistic in nature, I think.*
|
||||
|
||||
I'm splitting this into 2 objectives: why GME is going up, and why the market in general is tanking.
|
||||
|
||||
GME Go BRRRRRRRRRRRR! Cover
|
||||
|
||||
Ideally a plausible Corporate or Market Event that the stock price "should" respond to in order to initiate upward price movement without the timing looking SUS AF and destabilizing the broader market due to fear of systemic problems and/or loss of public trust. These events are mostly out of the control of The System, and one will likely be the ignition.
|
||||
|
||||
- Corporate: ~~AGM Voting Proxy Release~~
|
||||
|
||||
- Corporate: ~~Quarterly Earnings (Q1 2021)~~
|
||||
|
||||
- Corporate: ~~CEO Announced~~
|
||||
|
||||
- Corporate: ~~AGM Vote Count + Board Elections~~
|
||||
|
||||
- Corporate: ~~RC Appointed as Chairman Official News~~
|
||||
|
||||
- Corporate: ~~New Cash Reserves from ATM Stock Offer~~
|
||||
|
||||
- Corporate: Dividend Issue / Stock Split
|
||||
|
||||
- Corporate: Major Partner Announcement
|
||||
|
||||
- Corporate: Possible NFT Announcement 2021-07-14?
|
||||
|
||||
- Market: Broader Retail Gains
|
||||
|
||||
- Market: $GME moves from Russell 2000 to Russell 1000 after close on 2021-06-25
|
||||
|
||||
- TBD / Unkown
|
||||
|
||||
Markets Go clank! Cover
|
||||
|
||||
Major policy announcements, world politics, regularly scheduled economic reports released... Pick your favorite here, cause they will and already have. This cover will justify why the markets are hemorhaging to hide the fact that positions are being liquidated to start paying for buying-back all those GME shares.
|
||||
|
||||
- Market: Global Supply Chain Issue
|
||||
|
||||
- Market: Liquidity Stress Tests
|
||||
|
||||
- [April 26th, 2021](https://www.reddit.com/r/Superstonk/comments/mww2ah/dtcc_planning_liquidity_risk_testing_on_26th/)
|
||||
|
||||
- [May 13th, 2021](https://www.reddit.com/r/Superstonk/comments/n763vq/dtcc_members_are_having_a_liquidity_check_may_13th/)
|
||||
|
||||
- Note: As far as I can tell, these happened yearly, typically in April/May, but only once... 2 back to back?
|
||||
|
||||
- Government: ~[POTUS joint address to Congress](https://apnews.com/article/joe-biden-nancy-pelosi-coronavirus-pandemic-267e753a5d1ab7a72d3274728b25f63c)\
|
||||
Green New Deal? Capital Gains Announcement: [similar to BS on 2021-04-22?](https://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy)
|
||||
|
||||
- Government: [2021-05-06 Congressional Hearing with SEC / Gensler, DTCC / Bodson, FINRA / Cook.](https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=407762)
|
||||
|
||||
- Government: [2021-05-26+27 Congressional Hearing with Big Banks](https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=407740)
|
||||
|
||||
- Government: Monthly [Consumer Price Index numbers released](https://www.bls.gov/schedule/news_release/cpi.htm), next is June 13th
|
||||
|
||||
- Government: [US Treasury Stability Council Meeting June 11th](https://www.reuters.com/article/usa-treasury-stability-idUSL2N2N638S)\
|
||||
Possible platform for policy announcement? Typically hold 6 +/- a year, but this would be first of 2021 and was postponed from May 21st.
|
||||
|
||||
- Government: [US 2022 Fiscal Year Budget Proposal](https://www.reuters.com/world/us/biden-propose-6-trillion-us-budget-2022-fiscal-year-nyt-2021-05-27/)
|
||||
|
||||
- *(other suggestions wanted)*
|
||||
|
||||
4 - Fallguy, and the Lack of Prevention
|
||||
|
||||
Opinion - Status: Go for Launch ✅\
|
||||
*While they will likely have a fallguy decided upon prior to launch, I don't see it as a necessity that would delay it, certainly not like the Rules of Engagement or Funding would. I also think that nothing would keep them from changing the story if something else influences the narrative in an acceptable way shortly after liftoff.*
|
||||
|
||||
Blame!
|
||||
|
||||
After the market pain is significant enough that the public wants answers, why not lay all the blame on bad actors, and defer attention from the system to try to avoid additional exterior regulation.
|
||||
|
||||
- SHFs (now liquidated) as overly greedy and got what they deserved
|
||||
|
||||
- Retail (as Anarchists, or greedy and oportunistic)
|
||||
|
||||
- [Forbes article on January Gamma Squeeze](https://www.reddit.com/r/Superstonk/comments/mvf7r3/forbes_reminder_as_we_hodl_towards_the_moass_gme/gvc5c8f/?context=3)
|
||||
|
||||
- Foreign Actors trying to destabilize the US Markets
|
||||
|
||||
- *(other suggestions w/ sources wanted)*
|
||||
|
||||
Control Public Image of the System via PR
|
||||
|
||||
- DTCC: ["We're doing a great job! Take our word for it!"](https://www.reddit.com/r/Superstonk/comments/mvozps/dtcc_trying_to_get_ahead_of_the_story_the_most/?utm_medium=android_app&utm_source=share)
|
||||
|
||||
- DTCC: "We're announcing our plan to keep working on a plan to kind of band-aid a problem that's pretty bad and we've known about for awhile, and like we have definitely been talking about it and stuff, but now we're like really gonna talk about it using words like "in-depth analysis" cause up to now we were mostly just talking about it like how you tell that one friend *"yeah, we should totally hang out soon"* and then you never do, but not now cause we're serious now, and it's definitely not because we've gotta talk to the US Congress this week or anything. Like, honestly." AKA the announcement of [the DTCC's T+1 Settlement Plan.](https://www.reddit.com/r/Superstonk/comments/n5b91j/dtcc_rolls_out_plan_and_faq_for_a_new_t1/)
|
||||
|
||||
* * * * *
|
||||
|
||||
...Meanwhile, at the SEC
|
||||
|
||||
"Let's at least *look* like we aren't asleep at the wheel here, lads"
|
||||
|
||||
- [Whistleblower Awards](https://www.reddit.com/r/Superstonk/comments/mrfxvg/secgov_sec_awards_over_50_million_to_joint/)
|
||||
|
||||
- [47.4% of the Amount of all SEC Whistleblower Awards Ever Given Have Been Awarded in the Last 12 Months (Out of 105 Months of Program Activity)](https://www.reddit.com/r/Superstonk/comments/nf3n64/474_of_the_amount_of_all_sec_whistleblower_awards/)
|
||||
|
||||
- [Closed door meetings](https://www.reddit.com/r/GME/comments/mihiv9/another_sec_closed_door_meeting_scheduled_for_48/)
|
||||
|
||||
- [2021-05-27 Sunshine Act Meeting - Scheduled](https://www.reddit.com/r/Superstonk/comments/nhgh3i/sunshine_meeting_rescheduled_may_27/)
|
||||
|
||||
- These have been cancelled 4 out of 7 times... so far!
|
||||
|
||||
- Speech by SEC Commissioner Peirce inlcuding the line that the SEC is *"working on a report about the events related to meme stock trading earlier this year, and some regulatory initiatives may come out of that work."* and a few other statements about how the SEC shouldn't be concerned with firms loosing money... aka Tough Titties Archegos, et al.\
|
||||
[src post](https://www.reddit.com/r/Superstonk/comments/n2ax63/something_apes_missed_read_this/)
|
||||
|
||||
- [SEC sues HF, filed 5/19/21- states NAKED SHORT SELLING is ILLEGAL and ask FOR a JULY TRIAL!!!](https://www.reddit.com/r/GME/comments/nhmaxw/sec_sues_hf_filed_51921_states_naked_short/)
|
||||
|
||||
Any and all additions you think may belong on this list, feel free to put in the comments, and I'll try to update and give credit where possible. If I got any of these wrong, or you've found better links that explain the rules, let me know in the comments and I'll make those edits.
|
||||
|
||||
Contributions noted where possible, and initial start from previous work on Recent Filings by [/u/Antioch_Orontes](https://www.reddit.com/u/Antioch_Orontes/) [here.](https://www.reddit.com/r/Superstonk/comments/msh5mt/a_brief_overview_of_recent_filings_from_the_dtc/)
|
||||
|
||||
Looking for the TL;DR? It's at the top.
|
||||
|
||||
* * * * *
|
||||
|
||||
Buy. Hodl. Buckle Up.
|
||||
|
||||
... and make history.
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
Edit 2021-05-22:\
|
||||
Typos, add expected effective timeframe for DTC-2021-005. May 27th SEC Meeting Scheduled. SEC Lawsuit. Restructured the 3rd/Cover section to clarify for some comments and feedback about why I think cover is important. Also by now I've got plenty of reddit points/currency, so spend new money on GME!
|
||||
|
||||
Edit 2021-05-28:\
|
||||
SR-OCC-2021-003 approved. Add CPI release as market drop cover, US Treasury meeting, US Budget Proposal.
|
||||
|
||||
Edit 2021-06-21:\
|
||||
SR-DTC-005 approved and in effect, SR-NSCC-2021-002 / 801 approved. SR-DTC-2021-009 added. Updated expected timeline for SR-NSCC-2021-005
|
||||
|
||||
Edit 2021-06-23:\
|
||||
SR-DTC-2021-009 updated with additional info. Added move to Russell 1000 as possible cover story (thanks [u/godkyle11](https://reddit.com/user/godkyle11/) for the prompt). Updated section 3 to better illustrate corporate events now in the past.
|
||||
@ -0,0 +1,34 @@
|
||||
Dark Pools, Price Discovery and Short Selling/Marking
|
||||
=====================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/dlauer](https://www.reddit.com/user/dlauer/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/o70lid/dark_pools_price_discovery_and_short/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
Recently, and since I've joined this sub-reddit, there have been a ton of questions around the role that Dark Pools play in US equity market structure. I wanted to put together a post to clarify some things about how they operate, what they do, and what they cannot do.
|
||||
|
||||
Dark pools were created as part of Regulation ATS (Alternative Trading System) in 1998. Originally they were predominantly ECNs (Electronic Crossing Networks), including ones you're familiar with today as exchanges such as Arca and Direct Edge. Ultimately though, most dark pools after Reg NMS was implemented in 2007 were either broker-owned (such as UBS, Goldman, Credit Suisse and JP Morgan, to name the top 4 DPs today) or independent block trading facilities, such as Liquidnet. Note that I am not discussing OTC trading, which is what Citadel and Virtu do to internalize retail trades. I'll talk about that in a bit.
|
||||
|
||||
To understand Dark Pools, and what makes them different from exchanges, you need to understand some regulatory nuances, and some market data characteristics. From a regulatory perspective, it is easier to get approval for a dark pool (regulated by FINRA), than an exchange (regulated by the SEC). This is on purpose - ATSs are supposed to be a way to foster competition and innovation. Unfortunately, that has resulted in 40+ dark pools and extreme off-exchange fragmentation.
|
||||
|
||||
Most dark pools are there ostensibly to allow institutional asset managers to post large orders that they do not want to be visible on an exchange. This is the fundamental difference between dark pools and exchanges - no orders are visible on dark pools (hence "dark"), whereas you can have visible orders on exchanges. Now, you can also have hidden orders on exchanges. And there's nothing preventing an ATS from posting quotes (Bloomberg used to do this on the FINRA ADF). However, generally speaking, today, there aren't dark pools that show any posted orders.
|
||||
|
||||
So what about trades? All trades in the national market system have to be printed to a SIP feed. It does not matter where they happen. And all trades during regular trading hours (9:30am - 4pm) MUST be within the NBBO. These are hard and fast rules that cannot be violated. All trades on exchanges are reported to the regular SIP. All trades that happen off exchange (ATS or OTC) are reported to the Trade Reporting Facility (TRF) run by NYSE, Nasdaq or FINRA (there are 3 of them). All trades have to be reported to the TRF within 10 seconds of being executed, though the reality is that they are reported nearly instantaneously:
|
||||
|
||||
[](https://preview.redd.it/32d06z9kn7771.png?width=827&format=png&auto=webp&s=726e2d7857e2bf6d1baeea21eff3e696127ed8d5)
|
||||
|
||||
There was a question on FOX and Twitter yesterday - can hedge funds "go short" in dark pools and not need to report it? I did not mean to be flippant in my tweet about how that is non-sensical, but I had a long day yesterday and had no brain power left. But such a statement is non-sensical. That's not how dark pools work.
|
||||
|
||||
There is practically no difference at all between trades executed on-exchange or off-exchange, especially when you're talking about reporting short positions or short sale marking. The rules are identical, regardless. Short-sale marking is not dependent on whether you trade on-exchange or off-exchange. I'm not trying to make a statement as to whether firms are doing it adequately or accurately, but there is no nexus with dark pools here. I also have never heard of this idea that firms will choose whether to execute on-exchange or off-exchange based on where they want "buying pressure" or "selling pressure" to show up. Every sophisticated trading firm out there is watching the TRF and categorizing every trade that takes place relative to the NBBO. Every time a trade happens at the ask (or near it) they characterize that as a buy. Every time a trade happens at the bid (or near it) they characterize it as a sell. You cannot hide what you are doing in dark pools or through OTC internalization - it cannot be done. All trades are public and reported within 10 seconds.
|
||||
|
||||
Here's what I think was trying to be said. If trades are taking place OTC, such as retail orders that are being internalized by Citadel or Virtu, both of those firms qualify as Market Makers. Market Makers DO have an exemption for short selling - they are allowed to do so without having located the shares first. However, they still have to mark those sales as "short" and they are still, under standard rules, required to ultimately locate those shares. Again, I'm not trying to get into whether there is naked shorting taking place, or whether these rules are being followed - that's a different conversation. I'm just trying to help you understand that dark pools are not nefarious, and that there is very little difference between dark pools and exchanges from a trading, position marking and reporting perspective.
|
||||
|
||||
Ok, so finally, to get to the meat of this - can you use dark pools and off-exchange trading to artificially hold down the price of a stock? I struggle to see the mechanism by which this can be done. I've never heard of it, other than here. As I've said several times, every trade needs to be reported. Every single retail trade that buys GME at the ask is reported to the tape. There's no hiding that. The only market manipulation I've ever studied and measured, and that has been subject to enforcement action by the SEC, has been on exchanges. That is done with layer and spoofing, or other manipulative practices such as banging the close. Retail buying pressure OTC will be picked up on by firms watching the tape, and it will also find its way on to exchanges as the internalizers need to lay off their inventory (they will accumulate shorts, and want to close out those positions). You might claim that this is where naked shorting comes in, but again that's a speculative leap, and really hard to imagine that firms that excel at risk management would put themselves in such a position. I'm not saying it doesn't happen - enforcement actions and lawsuits make it clear that this is an issue. But even if it does happen, the trades to open those short positions were printed to the tape for everyone to see - they cannot be hidden.
|
||||
|
||||
tldr; The only difference between dark pools and exchanges is that dark pools don't display quotes, where exchanges do. Dark pool trades are all publicly reported within 10 seconds. You cannot get around short sale marking and position reporting requirements based on where you trade (dark pool or exchange). I don't believe you can suppress the price of a stock through manipulation that only involves dark pools or off-exchange trading, as it is all publicly reported.
|
||||
|
||||
EDIT: Let me clear on something: There is WAY too much off-exchange trading. This harms markets. It acts as a disincentive to market makers on lit exchanges. I want market makers on exchanges to make money, and I want open competition for order flow. Off exchange trading is antithetical to those aims. It has its place for institutional orders. But the level of off exchange trading, especially in stocks traded heavily by retail such as GME is a symptom of a broken market structure with intractable conflicts-of-interest, such as PFOF. When the head of NYSE says that the NBBO isn't doing its job for price discovery, this is what she is referring to. If I, as a market maker, post a better bid on-exchange, and then suddenly a bunch of off-exchange trades happen at the price level I just created, then the off-exchange trades are free-riding my quote. They are taking no risk, and reaping the reward, while I take all the risk on-exchange and do not get the trade. That's a real problem in markets, and it's why I have pushed hard for rules to limit dark pool trading, such as you find in Canada, UK, Europe and other markets.
|
||||
@ -0,0 +1,326 @@
|
||||
Chaos Theory - The EVERYTHING Connection
|
||||
========================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/sharkbaitlol](https://www.reddit.com/user/sharkbaitlol/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mokvhk/chaos_theory_the_everything_connection/) |
|
||||
|
||||
---
|
||||
|
||||
[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 1: THE MODS DID NOT TAKE DOWN THE POST. THIS WAS A RESULT OF ME ATTEMPTING TO INCLUDE THE STORY BELOW IN EDIT 4 FROM A BLACKLISTED SITE ARTICLE WHICH CAUSED THE AUTOMOD TO DELETE THE POST. I hoped that the removal of the link fixed the text but it didn't, this is a Reddit issue, not a mod one. LAY OFF THE MOD NARRATIVE
|
||||
|
||||
EDIT 2: Thank you everyone for the feedback so far; I posted this here as a means to incite further conversation and thoughts. I'm modifying this post as I go, understanding that certain elements are simply TOO speculative.
|
||||
|
||||
EDIT 3: There seems to be concern in how I've represented Swiss Re as a reinsurer. I'd just like to confirm that they self-identify as such on most of their portals. You can verify this via a quick Google Search. They also [DO handle re/insurance asset management](https://www.swissre.com/our-business/managing-our-assets) contrary to what has been mentioned.
|
||||
|
||||
EDIT 4: [BlackRock appears to be eyeing Credit Suisse fund management arm](https://www.reuters.com/article/us-credit-suisse-asset-management-m-a-ex-idUSKBN2BW2CT). I'll let you speculate what this may mean in relation to their existing relationship with Swiss Re
|
||||
|
||||
EDIT 5: It is not my intention to make this community appear as a team of conspiracy theorists. There are some deep implications with the evidence that I've showcased that potentially show deeper interlinking between hundreds of the biggest companies. I couldn't possibly attempt to explain each and every single web, so I leave it to you to continue digging!
|
||||
|
||||
EDIT 6: Look I get it, some of you feel that the fact we have tax havens around the world AREN'T a big deal. What is interesting however is that all these players are registered to the same place, and it appears that the government wants to do something about it
|
||||
|
||||
EDIT 7 (April 12th, 2021): We now have the inclusion of Mr. Gary Gensler to the mix who will be heading the SEC starting the 19th of April (talk about timing huh). He specializes in cryptocurrencies and darkpools - but more importantly he was the only that finally called on the banks during the 2008 recession: <https://tax.thomsonreuters.com/news/senate-set-to-approve-gary-gensler-nomination-for-sec-chairman-but-likely-for-brief-term/>
|
||||
|
||||
EDIT 8: In-case you're curious, the former SEC chairman, Jay Clayton (brought in during the Trump administration) just took a job at Apollo Global Management (which [Tiger Global Management] holds a 14.8% stake in, making them the largest shareholder of Apollo other than a private holdings company from Apollo themselves (BRH) (<https://fintel.io/so/us/apo>));
|
||||
|
||||
Lets not forget about Mr. Heath Tarbert, who was the former chairmen of the CFTC (Commodity Futures Trading Commission) who just got hired by Kenny boy as one of his Chief Legal Officers at Citadel not even 2 weeks ago. Heath had this to say about his friend Jay Clayton.
|
||||
|
||||
> "It has been an honor to serve alongside Jay Clayton. He is one of the smartest and most capable transactional attorneys in the country and an even better colleague and friend. As leaders of the SEC and CFTC, we have worked together closely to harmonize our rules where appropriate and hold wrongdoers accountable.
|
||||
|
||||
Directly from the cftc site: <https://cftc.gov/PressRoom/PressReleases/8310-20> . Still not a conflict of interest?
|
||||
|
||||
Now back to the post,
|
||||
|
||||
Citadel, BlackRock, Susquehanna, and many others are intricately connected through a variety of sources; namely offshore tax havens as proven through the Panama & Paradise Papers. I attempt to piece together what I believe is the reason we are seeing certain behavior from each of these parties.
|
||||
|
||||
What you're about to read is MY ATTEMPT to amalgamate multiple pieces of DD by various users from across multiple subs, discord and private discussions in an attempt to piece together what may be happening behind the scenes in the darkside of the financial world. THIS DOES NOT MEAN IT'S 100% RIGHT, SIMPLY MY THOUGHTS ON HOW ALL THESE ELEMENTS MAY PIECE TOGETHER.
|
||||
|
||||
I INTEND FOR THIS TO BE THE START OF A FRAMEWORK THAT GETS DEVELOPED OVER TIME. I HOPE TO PROVIDE A STARTING POINT.
|
||||
|
||||
Now grab yourself a beer and strap in, this is about to get crazy. 👨🚀👩🚀
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
This is an incredibly complicated web with MULTIPLE moving pieces. I will attempt to streamline the findings as much as possible to ease of understanding.
|
||||
|
||||
1. Introduction; Prerequisites
|
||||
|
||||
2. Follow The Money
|
||||
|
||||
3. Let's take a trip to the Cayman Islands and Back Again
|
||||
|
||||
4. The Ugland House
|
||||
|
||||
5. A New Foe Has Appeared
|
||||
|
||||
6. Familiar Faces
|
||||
|
||||
7. What does this mean for apes?
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 1. INTRODUCTION
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
As a prerequisite I highly recommend reading through [/u/atobitt](https://www.reddit.com/user/atobitt) 's "[The EVERYTHING Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)" whitepaper. It provides a lot of context as to what's going on under the hood and gets you primed for this post. I'd also highly recommend reading through [/u/pinkcatsonacid](https://www.reddit.com/user/pinkcatsonacid) 's DD "[The Missing 🧩](https://www.reddit.com/r/Superstonk/comments/mlf82b/the_missing_citadels_frenemies_pfof_michael/gtneg3m/?context=3)"; for an understanding of how much deeper this potentially goes. Lastly thank you to [/u/tropicalsecret](https://www.reddit.com/user/tropicalsecret) for helping me hash out some missing pieces and their [investigative work](https://www.reddit.com/r/Superstonk/comments/mnlvhf/here_is_all_the_arms_of_susquehanna/) as well.
|
||||
|
||||
My name is [/u/sharkbaitlol](https://www.reddit.com/user/sharkbaitlol) and over the last couple of weeks or so I've prioritized investigating this story further while putting my consultancy on hold - I feel that this is the start of something bigger than any of us can imagine that can improve ours, and our children's lives. I've prided myself in my career as a data scientist and a lifelong gamer in being able to pick up on patterns. I hope that I'm able to help support our community further with this DD. Special thank you to all those who have contributed their time and expertise to getting us this far. I will be referencing other DD written and hope you understand that even if not mentioned, almost every single DD post written by apes has helped getting us closer to the truth.
|
||||
|
||||
With that being said, lets jump in.
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 2. FOLLOW THE MONEY
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
As we know Susquehanna has been of interest in recent weeks due to their suspicious nature of their position within the GME saga. This suspicion grew quickly when some Redditors pointed out that Dr. Burry may have been pointing a finger at Susquehanna through a hidden message on [Twitter](https://www.reddit.com/r/Superstonk/comments/mlf82b/the_missing_citadels_frenemies_pfof_michael/) (whether this is really what was happening is up to you) - now we have Sus attempting to [appeal new DTCC regulations](https://www.reddit.com/r/Wallstreetbetsnew/comments/mmh5jb/susquehanna_is_sus_part_2_elia_the_occ801_rule/) SR-OCC-2021-003 to make things even weirder. Their growing position prompted me me to start doing a deep dive on their positions across the market; particularly how they've [DOUBLED](https://i.imgur.com/KEE1ZQl.png) in size since the start of the pandemic, parties of association, and conflict of interest across the stock market. What I was able to find has left me baffled at how interconnected all this actually is. Remember this throughout this post, THERE ARE NO COINCINDICES.
|
||||
|
||||
We begin by looking at Susquehanna's filings to the SEC. We're able to figure out that they break down into multiple connections with the following:
|
||||
|
||||
- Susquehanna Investment Group
|
||||
|
||||
- Susquehanna Securities, LLC
|
||||
|
||||
- Capital Ventures International
|
||||
|
||||
- Susquehanna Advisors Group, Inc
|
||||
|
||||
- CVI Opportunities Fund I, LLLP
|
||||
|
||||
- G1 Execution Services, LLC
|
||||
|
||||
- Darby Financial Products
|
||||
|
||||
Now I've highlighted Capital Ventures International (CVI) as this will be our main point of interest of now for the peculiar reason that they're based out of Cayman Islands. You know, that little island of 64k people where Citadel is laundering bonds? Yeah it turns out they're not the only ones, not by a long shot.
|
||||
|
||||
[](https://preview.redd.it/uj4px3tl8hs61.png?width=703&format=png&auto=webp&s=aa693f06904bd495f05e773fbd954c580677b2d5)
|
||||
|
||||
"The ultimate beneficial owners of Susquehanna and CVI are substantially the same". Source: Finra
|
||||
|
||||
You can find the source for the address on BrokerCheck Report [here](https://files.brokercheck.finra.org/firm/firm_35865.pdf) under Finra's website. What they're saying basically saying is that description at the end there, is that Susquehanna Financial and CVI are beneficially owned by the same company (fancy speak for have 25% or more total control of the company); CVI hold around [$839 million.](https://fintel.io/i/cvi-investments)
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 3. LET'S TAKE A TRIP TO THE CAYMAN ISLANDS AND BACK AGAIN
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
Great now that we understand that CVI is in bed with Susquehanna and owned by them; lets go a layer deeper. It's mentioned that this address is located at Winward 1, Regatta Office Park, Grand Cayman, Cayman Islands. I was genuinely curious if this address was even real; after a quick Google search, none other than the PARADISE PAPERS come up. Remember the massive investigation that exposed some of the most powerful leaders to tax havens around the world?
|
||||
|
||||
[Offshoreleaks](https://offshoreleaks.icij.org/) is a pretty amazing website that allows you to do a network visualization to see who's connected with what. So we start digging; *keep in mind that the data from these papers are from 2014 so some names/elements have been slightly modified since then.*
|
||||
|
||||
[](https://preview.redd.it/je2dzgbn8hs61.png?width=1174&format=png&auto=webp&s=c9bc1b50175baaad96fb658ad807da37fd0a8f4b)
|
||||
|
||||
We connected directly to someone named William Walmsley. Source: Offshoreleaks
|
||||
|
||||
You'll notice that Mr. Walmsley comes up a few times throughout this post, but for now we see that he's connected to this address that CVI is registered to. We can confirm his participation in CVI via a 13G FILING through the SEC.
|
||||
|
||||
He's the director of CVI as seen [here](https://www.sec.gov/Archives/edgar/data/1649553/000110465919006973/a19-4181_31sc13g.htm).
|
||||
|
||||
[](https://preview.redd.it/yrsl1u9qchs61.png?width=1341&format=png&auto=webp&s=7fb91baef9bc9b5f159958496da49246d3c4bb2c)
|
||||
|
||||
*EDIT: FURTHER VALIDATION OF APOLLO INVESTMENTS LIMITED REQUIRED. THIS APPEARS TO BE A REGISTERED ENTITY IN THE CAYMAN ISLANDS AS A SHELL NAME. I CANNOT CONFIRM IF THIS IS ACTUALLY THE APOLLO INVESTMENTS MENTIONED BELOW YET. THERE'S MANY NAMES THAT COME CLOSE TO THIS SHELL COMPANY YOU SEE HERE. WE GET APOLLO VALUE INVESTMENT Offshore Fund LTD, WHICH IS AS YOU GUESSED - ANOTHER OFFSHORE SHELL COMPANY IN THE CAYMAN ISLANDS. YOU EITHER CHOOSE TO BELIEVE THAT THEY HAVE A COMPANY CALLED APOLLO INVEMENTS LIMITED BY CHANCE, OR THAT IT HAS SOMETHING TO DO WITH APOLLO INVESTMENTS. EVEN WITHOUT THIS PIECE WE STILL SEE APOLLO'S HAND IN THE UGLAND HOUSE:* [*https://whalewisdom.com/filer/apollo-total-return-co-investors-a-lp*](https://whalewisdom.com/filer/apollo-total-return-co-investors-a-lp)
|
||||
|
||||
We see a second address come up in the above screenshot for a place called the "Ugland House" located in the Cayman Islands in this filing associated with CVI. Hold that thought for now, we'll go over it soon.
|
||||
|
||||
Going back our network visualization screen shot with Mr. Walmsley, he leads us to yet another connection called "Apollo Investments" (you'll notice that CVI isn't on that screenshot, this is because the first filings we see for CVI is at the end of year 2017 whereas the Paradise Papers were published prior to that). "Apollo Investments" will be the next piece of the puzzle.
|
||||
|
||||
So who are they? Well we know they manage about $13bn and invest mostly in finance, industrials, and information technology (top buys being SPY puts (oof, there goes a chunk of change)) *[just want to clarify here that Apollo Investments is directly affiliated with Apollo Management, you get redirected on their site to the main Apollo Page].*
|
||||
|
||||
So to recap we know that Mr. Walmsley is located in the Cayman Islands, Director of CVI which is owned by Susquehanna, AND some sort of senior title in a a company called Apollo Investment.
|
||||
|
||||
EDIT: For a whole another rabbit hole check out Jay Clayton who was chairman of the SEC (as instated during the TRUMP administration) who now works for Apollo: <https://en.wikipedia.org/wiki/Jay_Clayton_(attorney)> with the following description: " In February 2021, [Apollo Global Management](https://en.wikipedia.org/wiki/Apollo_Global_Management) appointed Clayton to the newly created role of lead independent director on its board "
|
||||
|
||||
Lets not forget about Mr. Heath Tarbert, who was the former chairmen of the CFTC (Commodity Futures Trading Commission) who just got hired by Kenny boy as one of his Chief Legal Officers at Citadel not even 2 weeks ago. Heath had this to say about his friend Jay Clayton.
|
||||
|
||||
> "It has been an honor to serve alongside Jay Clayton. He is one of the smartest and most capable transactional attorneys in the country and an even better colleague and friend. As leaders of the SEC and CFTC, we have worked together closely to harmonize our rules where appropriate and hold wrongdoers accountable.
|
||||
|
||||
Directly from the cftc site: <https://cftc.gov/PressRoom/PressReleases/8310-20> . Still not a conflict of interest?
|
||||
|
||||
EDIT 2: Maybe I'm just cherry picking information here, but we see that Citadel had hired Apollo's head of corporate credit trade in the last 2 years; check out this excerpt "
|
||||
|
||||
> Since joining Citadel in 2019, Salame, one of Wall Street's most prominent trading executives, has expanded the credit team amid a hiring spree at the firm. He last week hired Prakash Narayanan from CQS, who was one of Michael Hintze's top performers. David Casner joined from Goldman Sachs Group Inc. last year as head of convertible bonds and equity volatility."
|
||||
|
||||
Interesting.. Head of convertible bonds and equity volatility...
|
||||
|
||||
<https://www.chicagobusiness.com/finance-banking/citadel-hires-apollos-head-corporate-credit-trading>
|
||||
|
||||
Now have a look at who are the [majority stakeholders](https://fintel.io/so/us/apo%201%20c38) are of Apollo Global Management:
|
||||
|
||||
[](https://preview.redd.it/opu7bsip8hs61.png?width=981&format=png&auto=webp&s=77e5d78bf2272a6886e22248131749b7e4cd2fc1)
|
||||
|
||||
Hmmm, some familiar faces. Source: Fintel
|
||||
|
||||
Wait... TIGER GLOBAL MANAGEMENT? Hasn't one of the Tiger Cubs associated with them -- you know, just gotten blown up? More on [The Archegos phiasco](https://finance.yahoo.com/news/rattled-archegos-stocks-investable-again-201150296.html) and how they screwed Credit Suisse. How VANGUARD is associated here, I'm not exactly sure yet...
|
||||
|
||||
Remember how I said there's no coincidences? Lets have a look where both APOLLO and TIGER GLOBAL MANAGEMENT are located in New York.
|
||||
|
||||
INTRODUCING THE SOLOW BUILDING
|
||||
|
||||
[](https://preview.redd.it/n0bywa0r8hs61.png?width=852&format=png&auto=webp&s=f32f2f8de1c3b0a12330dd3aab0efa5869b05e3a)
|
||||
|
||||
I can't remember where I saw it, but I believe Mr. Walmsley had something to do with Highland Capital too. I have hundreds of tabs open guys you'll have to give me a pass on this one. Source: Wikipedia
|
||||
|
||||
We'll totally ignore the other tenants for now; although I'm sure they have their hand in the cookie jar haha (cough* Chanel, cough* Bombardier). But lo and behold, one of the largest holders of Apollo are the Tigers which happen to be in the same building. [What a story](https://www.youtube.com/watch?v=ddu4Gj3hmgc) huh.
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SIDE QUEST TIME
|
||||
|
||||
Marc Rowan of Apollo became the new CEO just back in February of this year after the old CEO Leon Black stepped down due to links to "the late financier and convicted sex offender J3FFR3Y 3PST3IN". [WHAT LOL](https://www.reuters.com/article/us-apollo-global-ceo-idUSKBN2AO2XF).
|
||||
|
||||
Rowan was also quoted saying the following during a Credit Suisse Financial Services Forum:
|
||||
|
||||
> "The opportunity, nothing other than that, and in the middle of a pandemic taking a sabbatical is never a good idea," Rowan said during the Credit Suisse Financial Services Forum when asked why he wanted the role.
|
||||
|
||||
[](https://preview.redd.it/usiabvps8hs61.png?width=956&format=png&auto=webp&s=1041a9ba3cdb41004d191f9bf8c308661f95bd0e)
|
||||
|
||||
JUST WHEN YOU THOUGHT IT COULDN'T GET CRAZIER. Source: Reuters
|
||||
|
||||
SIDE QUEST PART 2
|
||||
|
||||
Tiger Global Management's Executive Scott Shleifer in the last month purchased a lovely $132 million dollar Palm Beach house on a piece of land owned by the former President. He also owns 14.8% of Apollo Global Managment:[SEC 13G/A Filing](https://sec.report/Document/0000919574-21-001610/)
|
||||
|
||||
[](https://preview.redd.it/pthryabv8hs61.png?width=629&format=png&auto=webp&s=3338924d3d43eb65d968c23de215b1ff62453790)
|
||||
|
||||
Sounds like someone we know, *cough Ken*. Source: Bloomberg
|
||||
|
||||
HOLD YOUR BREATHE, WE'RE GOING DEEPER
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 4. THE UGLAND HOUSE
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
Let's go back to that other address we saw registered with CVI Investments; we see another business address labelled under a place called the "Ugland House, Grand Cayman, Cayman Islands". I did some more research around this place and SURPRISE, right back to the Paradise Papers we go.
|
||||
|
||||
[](https://preview.redd.it/bn2g8g0y8hs61.png?width=1341&format=png&auto=webp&s=976494dea948c3d3e40f4d253ba889222718f48e)
|
||||
|
||||
This place is so COOL that it has it's own Wikipedia page! <https://en.wikipedia.org/wiki/Ugland_House>
|
||||
|
||||
I love this quote from Wikipedia on it:
|
||||
|
||||
> " During his first presidential campaign, U.S. President [Barack 0bama](https://en.wikipedia.org/wiki/Barack_Obama) referred to Ugland House as "the biggest tax scam in the world", raising questions over the number of companies with a registered office in the building."
|
||||
|
||||
Here's a picture of this monster sized building that houses 40,000 entities and businesses
|
||||
|
||||
[](https://preview.redd.it/juhw8s219hs61.jpg?width=1024&format=pjpg&auto=webp&s=0f8b0ccc24cd7ea9a3c2210c88e74d1c6a0d91d7)
|
||||
|
||||
Where do you think they fit all of them?
|
||||
|
||||
So lets see what's connected to this address
|
||||
|
||||
That EXACT address (the exact way it was written out on the CVI document), is linked to a company called MOUSSESCALE which is owned by Mousse Partners. REMEMBER, there's thousands of businesses registered here, but they seem to have some variants or "locations" within the Ugland House. However guess where the Mousse Partners NY office is... 9 West 57th street which is...
|
||||
|
||||
[](https://preview.redd.it/nj3z25g59hs61.png?width=463&format=png&auto=webp&s=98ebad8992d1e1cbe56a0b6ddcb9433850b63324)
|
||||
|
||||
REMEMBER NO COINCIDENCES
|
||||
|
||||
BTW look what's just around the corner of the Solow building
|
||||
|
||||
[](https://preview.redd.it/o709v7na9hs61.png?width=316&format=png&auto=webp&s=de1d7224f0d4276daf5d01c43a3d261b4e085677)
|
||||
|
||||
maybe just a coincidence, New York is a small place
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
ANOTHER SIDE QUEST
|
||||
|
||||
Did I also mention that the Chief Investment Officer of Mousse Partner Limited, Suzi Kwon Cohen (can't make this up), was the principal at Credit Suisse in Private Equity? Just 2 floors below Apollo?
|
||||
|
||||
There's also only 44 people that work at Mousse Partners... Man what are the *chances*.
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
FUN FACT
|
||||
|
||||
Susquehanna has associations with other "[organization affiliates](https://files.brokercheck.finra.org/firm/firm_35865.pdf) (see "SAL Trading, LLC"; "DARBY FINANCIAL PRODUCTS"; "SIG STRUCTURED PRODUCTS, LLLP") at 1201 N Orange St, Wilmington, DE, USA. You can read all about those shenanigans here: <https://en.wikipedia.org/wiki/Corporation_Trust_Center_(CT_Corporation)>
|
||||
|
||||
Spoiler, it's another tax loophole right in Delaware's backyard with 285,000 separate businesses registered to it.
|
||||
|
||||
EDIT: Some people seem to think this is a null point; it is your opinion on whether you think this is right or wrong even if it's a legal loophole. This location has been linked to 9.5 billion dollars of taxes have been evaded as a result of this location (as of 2012).
|
||||
|
||||
Here's the behemoth of a building that houses 285k businesses.
|
||||
|
||||
[](https://preview.redd.it/f3c09jwd9hs61.jpg?width=2560&format=pjpg&auto=webp&s=78d8ce5409e0fc6c2ef5c39f1f8c526c5acd6edd)
|
||||
|
||||
I hope they have enough parking space for everyone
|
||||
|
||||
I CAN'T BELIEVE I'M SAYING THIS, BUT WE'RE GOING EVEN DEEPER
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 5. A NEW FOE HAS APPEARED ----- TREAD LIGHTLY, SOME ELEMENTS HERE LIKE THE BLACKROCK -> CITADEL COMPONENTS ARE SPECULATIVE
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
Now how is Citadel involved with all this you may wonder? Well as it turns out, they have an entity tied to the Ugland house as well; that's right the same exact building that Apollo and CVI (Susquehanna) are connected to. [[Citadel Kensington Global is a direct subsidiary of Citadel]](https://whalewisdom.com/filer/citadel-kensington-global-strategies-fund-ltd) who are due for another D/A filing sometime in May. They manage a cool 17bn.
|
||||
|
||||
[](https://preview.redd.it/7yerskyg9hs61.png?width=788&format=png&auto=webp&s=449638a65214090de733db68847ab33857716ab7)
|
||||
|
||||
Turns out Citadel is doing some business overseas
|
||||
|
||||
Now we start to getting into [/u/atobitt](https://www.reddit.com/user/atobitt) 's territory of the "EVERYTHING Short" research. They're (Citadel) operating out of multiple places in the Cayman Islands and the Ugland House is the prime destination. They're flipping bonds here and making bank.
|
||||
|
||||
Now GUESS who we build a direct connection to?
|
||||
|
||||
[](https://preview.redd.it/qofbn2hh9hs61.png?width=1870&format=png&auto=webp&s=cdc0cee399c1623e461f81b4924ff514d424bf53)
|
||||
|
||||
Wait a minute, what's BlackRock doing here?
|
||||
|
||||
As it turns out BlackRock is the owner of a company called Swiss Re. Now who's Swiss Re?
|
||||
|
||||
Directly from their [Wikipedia Page:](https://en.wikipedia.org/wiki/Swiss_Re)
|
||||
|
||||
*The Swiss Reinsurance Company of Zurich was founded on 19 December 1863 by the Helvetia General Insurance Company (now known as* [*Helvetia Versicherungen*](https://en.wikipedia.org/wiki/Helvetia)*) in* [*St. Gallen*](https://en.wikipedia.org/wiki/St._Gallen)*,* *the Schweizerische Kreditanstalt (*[*Credit Suisse*](https://en.wikipedia.org/wiki/Credit_Suisse)*) in* [*Zurich*](https://en.wikipedia.org/wiki/Zurich) *and the Basler Handelsbank (predecessor of* [*UBS AG*](https://en.wikipedia.org/wiki/UBS_AG)*) in* [*Basel*](https://en.wikipedia.org/wiki/Basel)*.*
|
||||
|
||||
That's right, Swiss Re was formed by none other than CREDIT SUISSE
|
||||
|
||||
Some more on them:
|
||||
|
||||
They're basically something called a *reinsurer.* In-case you're not familiar:
|
||||
|
||||
*A* *reinsurer* *is an insurance company that insures the risks of other insurance companies. A cedant is an insurer who transfers all or part of a risk to a* *reinsurer**. The* *reinsurer* *covers all the insurance policies coming within the scope of the reinsurance contract.*
|
||||
|
||||
They're the insurance, FOR the insurance. Why is this important? Look who owns them as of 2012 [[BlackRock]](https://ir.blackrock.com/news-and-events/press-releases/press-releases-details/2012/BlackRock-to-Acquire-Swiss-Re-Private-Equity-Partners-AG-Announces-Strategic-Alternative-Investment-Partnership-with-Swiss-Re-Enhances-Private-Equity-Fund-of-Funds-Capabilities-Deepens-Presence-in-Switzerland/default.aspx). I should also mention at this point that Swiss Re manages a cool $240bn in assets as of 2019 - nothing to be scoffed at. Add to the fact that 39% of their investments are in government bonds, and 27% in credit bonds; *directly from their* [investor presentation](https://www.swissre.com/dam/jcr:205daff9-56f9-445f-a2cd-9d3aba31253e/fy-2020-slides-presentation-doc.pdf)*:*
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 6. FAMILIAR FACES -------- PLEASE NOTE THAT THIS COMPONENT IS PURELY MY SPECULATION ON THE MATTER YET AGAIN; WE CANNOT DEFINITELY SAY FOR CERTAIN THAT THIS CONNECTION BETWEEN BLACKROCK + SWISS RE AND CITADEL + PALAFOX EXISTS. UNFORTUNATELY THE DATA FROM THE PARADISE PAPERS AREN'T RECENT ENOUGH
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
Now that we understand who Swiss Re is; INTROOOOOOODUCING OUR BACK-TO-BACK ALL-STAR, PALAFOX TRADING LLC!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
|
||||
|
||||
Already made infamous in the "EVERYTHING Short" post once again, Palafox has been acting as a direct proxy for Citadel as a means to rehypothecate bonds to quickly cash out and add liquidity to the market.
|
||||
|
||||
Now how do THEY connect? First we see that the public accountant is a company called Pricewaterhousecoopers which work with Palafox. EDIT HERE: Thank you to the community for helping clear this point up. We know that this may be a null conclusion considering PWC works across a multitude of clients across the world. For now all that we can say for certain in this section is that Citadel & BlackRock have registered entities to the Ugland House. Do with that information what you will. THIS DOES NOT NECESSARILY MEAN THEY HAVE ANYTHING TO DO WITH EACH OTHER. REMEMBER 40K BUSINESSES ARE REGISTERED HERE!
|
||||
|
||||
Now lets zoom out on the network visualization from earlier that connect BlackRock with Citadel through the Ugland House.
|
||||
|
||||
[](https://preview.redd.it/9xf86o4n9hs61.png?width=1435&format=png&auto=webp&s=7fa60032511f78748d3e008455abcfb2c3bb2ee3)
|
||||
|
||||
EDIT: REMOVED SECTION ATTEMPTING TO EXPLAIN THE CONNECTION AS IT WAS TOO SPECULATIVE. JUST KNOW FOR NOW THAT BOTH MEMBERS HAVE ENTITIES ARE REGISTERED TO THE SAME TWO LOCATIONS IN CAYMAN ISLANDS AND BAHAMAS
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
SECTION 7. WHAT DOES THIS MEAN FOR APES
|
||||
|
||||
________________________________________________________________________________________________________
|
||||
|
||||
I believe the connection between Susquehanna > CVI > Apollo > Tiger Global Management> Credit Suisse > Swiss Re > Citadel > BlackRock is incredibly complex and has many moving pieces beyond what any of us imagined. I believe that there is a 5D game of chess being played, and apes are just a pawn that is plowing the way to victory. IT IS IN MY OPINION that BlackRock isn't just looking to kill off Mevlin. I think they may be working with the government + fed(which has been shown they've done on occasion) to make some major changes happen to the market. What's the end goal? It's not entirely obvious to me yet. You can read a bit more about it on Bloomberg under the title "Why BlackRock is now the 'fourth branch of government' ". Sorry I'd post the link but I don't want automoderator to kick in again (just google that title).
|
||||
|
||||
As I was compiling this information look for no further than the POTUS himself for confirmation bias just from 3 days ago: SKIP TO 38:20 OR SO <https://twitter.com/potus/status/1379857925875888128?s=21>
|
||||
|
||||
> *I've also proposed a global minimum tax... Let me tell you what the means, that means companies won't be able to hide their incomes in places like the Cayman Islands or Bermuda*
|
||||
|
||||
EDIT (April 12th, 2021): We now have the inclusion of Mr. Gary Gensler to the mix who will be heading the SEC starting the 19th of April (talk about timing huh). He specializes in cryptocurrencies and darkpools - but more importantly he was the only that finally called on the banks during the 2008 recession: <https://tax.thomsonreuters.com/news/senate-set-to-approve-gary-gensler-nomination-for-sec-chairman-but-likely-for-brief-term/>
|
||||
|
||||
TLDR; I think there's a lot of shady things going on in the world. Whether you believe all of it, or none of it; JUST HODL. I hope this framework can help you start your own research in figuring out what we're dealing with here!
|
||||
|
||||
We are approaching something huge apes. Diamond Fucking Hands 💎✋🦍
|
||||
@ -0,0 +1,52 @@
|
||||
CHAOS THEORY - Conflicts of Interest
|
||||
====================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/sharkbaitlol](https://www.reddit.com/user/sharkbaitlol/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mpmnzt/chaos_theory_conflicts_of_interest/) |
|
||||
|
||||
---
|
||||
|
||||
[Discussion 🦍](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Discussion%20%F0%9F%A6%8D%22&restrict_sr=1)
|
||||
|
||||
TLDR; Citadel's latest hire, Heath Tarbert is too interconnected to other parties for it to be NOT considered one conflict of interest after another.
|
||||
|
||||
I'm [/u/sharkbaitlol](https://www.reddit.com/u/sharkbaitlol/) back for a quick update on recent developments. This continues in collaboration with my previous DD, "[CHAOS THEORY - The EVERYTHING Connection](https://www.reddit.com/r/Superstonk/comments/mokvhk/chaos_theory_the_everything_connection/)" where we discussed off-shore tax havens in the Cayman Islands and Bermuda. More specifically how we're able to link companies like Apollo, Citadel, Tiger Global Management to places like the Ugland House in the Cayman Islands (just a reminder this connection in the Cayman Islands doesn't necessarily mean they're working with each other).
|
||||
|
||||
We also went over how there may be a larger agenda at play with BlackRock looking to [make a move on Credit Suisse now](https://finance.yahoo.com/news/blackrock-blk-mulling-buy-credit-174205125.html), and how they've collaborated with the Fed over the last year getting to help manage the economic impact of the pandemic as seen in the quote below:
|
||||
|
||||
> The contract, posted on the website for the New York Federal Reserve, was made public [just days after the Fed](https://www.nytimes.com/2020/03/25/business/blackrock-federal-reserve.html) announced it hired BlackRock's advisory business to run three programs aimed at stabilizing a corporate bond market that has been roiled by the economic fallout of the coronavirus pandemic. Contracts for the other two programs have not been released.
|
||||
|
||||
*Source:* [*https://www.nytimes.com/2020/03/27/business/coronavirus-blackrock-federal-reserve.html*](https://www.nytimes.com/2020/03/27/business/coronavirus-blackrock-federal-reserve.html)
|
||||
|
||||
In a related note, as it turns out Vanguard is one of the largest institutional holders of BlackRock ( thanks for pointing this out [/u/meatcrobe](https://www.reddit.com/u/meatcrobe/) )
|
||||
|
||||
[](https://preview.redd.it/bg7y3pd0cts61.png?width=691&format=png&auto=webp&s=82b34575af5e05d4fe72f84794c2484a610fc100)
|
||||
|
||||
_______________________________________________________________________
|
||||
|
||||
🔎WITH THAT BEING SAID THIS STORY GETS DEEPER YET AGAIN 🔍
|
||||
|
||||
Former SEC Chairman Jay Clayton (brought in during the Trump administration) just took a job at Apollo Global Management (which [Tiger Global Management] holds a 14.8% stake in, making them the largest shareholder of Apollo other than a private holdings company from Apollo themselves (BRH) (<https://fintel.io/so/us/apo>); don't forget that Bill Hwang is an alumni of the Tiger Group and the[mess he's been involved in](https://www.bloomberg.com/news/features/2021-04-08/how-bill-hwang-of-archegos-capital-lost-20-billion-in-two-days) with Archegos and how they've screwed Credit Suisse).
|
||||
|
||||
Just as a reminder the former CEO of Apollo stepped down last month because of his ties with Jeffery Epstein. Here's the story from a couple weeks ago ago: <https://www.theguardian.com/us-news/2021/mar/22/leon-black-quits-apollo-jeffrey-epstein-ties-inquiry> . This isn't conspiracy, it's fact. How is it not a conflict of interest when a former SEC chairman joins a hedge fund that has relations with a criminal?
|
||||
|
||||
Now lastly lets not forget about Mr. Heath Tarbert, who was the former chairmen of the CFTC (Commodity Futures Trading Commission) who just got hired by Ken Griffin as one of his Chief Legal Officers at Citadel not even 2 weeks ago. Heath had this to say about his friend Jay Clayton. 🤔
|
||||
|
||||
> "It has been an honor to serve alongside Jay Clayton. He is one of the smartest and most capable transactional attorneys in the country and an even better colleague and friend. As leaders of the SEC and CFTC, we have worked together closely to harmonize our rules where appropriate and hold wrongdoers accountable.
|
||||
|
||||
How much further does this go?
|
||||
|
||||
Directly from the CFTC site: <https://cftc.gov/PressRoom/PressReleases/8310-20> . Still not a conflict of interest?
|
||||
|
||||
THERE'S NOTHING STOPPING THEM FROM CONTINUALLY WORKING WITH EACH OTHER TO CREATE FAVOURABLE MARKET CONDITIONS FOR THEIR PARTIES.
|
||||
|
||||
_______________________________________________________________________
|
||||
|
||||
It's in my personal opinion that we're starting to see the bridges built, and it's team Citadel versus team BlackRock (I believe the Fed is on that team).
|
||||
|
||||
I think the light at the end of the tunnel is that Gary Gensler will take the seat in the SEC JUST a day prior to the share recall <https://tax.thomsonreuters.com/news/senate-set-to-approve-gary-gensler-nomination-for-sec-chairman-but-likely-for-brief-term/> he was the one that brought what happened in 2008 to light through his extensive knowledge of darkpools. He also has a deep background in cryptocurrencies from what I understand.
|
||||
|
||||
NOW get this; he's only stepping in until June when his terms will be renegotiated. It's quite concerning that he's making an appearance at this stage for such a short period of time.
|
||||
|
||||
TLDR; HODL FOR YOUR DEAR LIFE, THERE IS A FULL ON FINANCIAL WAR GOING ON ABOVE OUR HEADS AND GME IS THE GODDAMN ATOMIC BOMB 💎✋
|
||||
@ -0,0 +1,368 @@
|
||||
CHAOS THEORY - The FINAL Connection
|
||||
===================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/sharkbaitlol](https://www.reddit.com/user/sharkbaitlol/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mseyai/chaos_theory_the_final_connection/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
The final picture is starting to come together. The ties of the former CFTC (who now works for citadel) & SEC chairmen to the industry appear to be pointing to fraudulent activity in efforts to prolong the necessity of SOFR being implemented. SOFR the last time it was attempted to transitioned into (in 2019) almost IMPLODED the market due to many realizing that banks and others could not handle a higher interest rate (based off the [DAILY TRESURY YIELD RATE](https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield)) versus the fabricated one that banks provide.
|
||||
|
||||
With that being said, let's get into it.
|
||||
|
||||
[/u/sharkbaitlol](https://www.reddit.com/u/sharkbaitlol/) here again for another post in the "Chaos Theory" series that delves deeper into the underworking of the financial realm. Just for a reintroduction of myself from other posts, my career has revolved around the data realm having worked on data collection, interpretation and machine learning for the last decade or so. I am also a lifelong gamer and have always been addicted to identifying patterns in real-life and games. I do not claim to be a financial advisor; THIS POST IS NOT FINACIAL ADVICE. Apes should always challenge information and supplement with your own.
|
||||
|
||||
It is in my hopes that these posts result in an increase of people seeking out MORE information that could continually lead us in the right direction; I want our children to grow up in a system where it is not rigged against them. *I would like to thank the hundreds of fellow apes that have messaged me or commented with links and thoughts as we sweep the world for information. Apes together strong.*
|
||||
|
||||
I don't know how else to say this, but it is with great concern that I write this post.
|
||||
|
||||
There are elements here that go deeper into describing what danger the economy finds itself in (as if it wasn't evident already through all the countless DD already provided by this community).
|
||||
|
||||
I will attempt to provide you as many pieces of factual evidence possible and will make it known when my opinion on the matter is being presented. I will be creating links to some of my previous DD and others throughout the post. This is my attempt at connecting the dots in what I believe is one of the final connections of the story.
|
||||
|
||||
NOW GRAB THE COOLER OF BEERS AND GET BACK ON THE ROCKET BECAUSE WE'RE ABOUT TO GO DEEPER INTO SPACE 🚀👨🚀👩🚀🐱🚀🦧🦍
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Right from the top I will simplify the presentation of my findings for ease of understanding with the table of contents you see below.
|
||||
|
||||
1. CFTC & SEC --- You Can't Make Old Friends
|
||||
|
||||
2. Credit Suisse --- A Leaky Boat
|
||||
|
||||
3. Gary Gensler --- GG GLHF
|
||||
|
||||
4. LIBOR vs SOFR --- Global Financial Evolution
|
||||
|
||||
5. THE GREAT TRAP
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Section 1 --- CFTC & SEC --- You Can't Make Old Friends
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
As identified in "[Chaos Theory - Conflicts of Interest](https://www.reddit.com/r/Superstonk/comments/mpmnzt/chaos_theory_conflicts_of_interest/)", we were able to find out that the former chairman of the CFTC & SEC appear to be in one hell of a conflict of interest. *If you've read my last post, you can probably skim over this and head into Section 2.*
|
||||
|
||||
Former SEC Chairman Jay Clayton just took a job at Apollo Global Management in a newly created role of lead independent director on its board last month. We start digging here and find out that Tiger Global Management holds a 14.8% stake in; making them the largest shareholder of Apollo other than a private holdings company from Apollo themselves (BRH) (<https://fintel.io/so/us/apo>).
|
||||
|
||||
In relation to this, don't forget that Bill Hwang is an alumni of the Tigers and the [mess he's been involved in](https://www.bloomberg.com/news/features/2021-04-08/how-bill-hwang-of-archegos-capital-lost-20-billion-in-two-days) with Archegos. This as we know has resulted in a massive hit to Credit Suisse's books in the tune of billions (we still don't know the full extent of this).
|
||||
|
||||
We also found out that Apollo and Tiger so happen to be in the same building in New York (the Solow Building) and are doing [shady dealings + tax evasions](https://www.reddit.com/r/Superstonk/comments/mokvhk/chaos_theory_the_everything_connection/) down in the Cayman Islands and Bermuda; namely the [Ugland House](https://en.wikipedia.org/wiki/Ugland_House) (which was labelled by former president Obama as "the biggest tax scam in the world"). Even new SEC chairmain Gary Gensler has some thoughts on the matter: <https://www.youtube.com/watch?v=b_GcpsIyQFc&t=1259s> (*We also know that* [*the U.S. is losing $1 trillion annually to tax cheats*](https://www.reddit.com/r/Superstonk/comments/mqp2aj/the_us_is_losing_1_trillion_annually_to_tax/)*: courtesy of* [/u/vadoge](https://www.reddit.com/u/vadoge/)). REMEMBER CITADEL IS DOING THINGS DOWN HERE TOO DIRECTLY THROUGH VARIOUS ENTITES LIKE PALAFOX.
|
||||
|
||||
NOW we encounter our first conflict on interest here as we delve into Jay Clayton's new employer, Apollo Global Management. As it turns out the former CEO of Apollo stepped down JUST LAST MONTH because of his ties with Jeffery Epstein. Here's the story from a couple weeks ago ago.
|
||||
|
||||
[](https://preview.redd.it/j7jfsva7akt61.png?width=642&format=png&auto=webp&s=da0b6fd00c75f2ccd18a796ae131837cda111895)
|
||||
|
||||
https://www.theguardian.com/us-news/2021/mar/22/leon-black-quits-apollo-jeffrey-epstein-ties-inquiry
|
||||
|
||||
Wait so you're telling me that the former SEC chairman is working for a company that was connected with one of the most infamous criminals of all time? YUP. Well at least the old CEO isn't there anymore right?
|
||||
|
||||
[](https://preview.redd.it/t494wh2nakt61.png?width=726&format=png&auto=webp&s=5ba672225d6129f58c2e7a934286fa471e368705)
|
||||
|
||||
Yikes, almost like this shouldn't be allowed right?
|
||||
|
||||
Now lets take a step back about two weeks ago or so; recall [Mr. Heath Tarbert](https://en.wikipedia.org/wiki/Heath_Tarbert)? Who was the former chairmen of the CFTC (Commodity Futures Trading Commission). Last we heard he just got hired by our boy Ken Griffin as his Chief Legal Officer.
|
||||
|
||||
Turns out that Jay Clayton and Heath Tarbert (brought in during the Trump administration) know each other pretty well. In-fact Heath had this to say about his *friend* Jay Clayton.
|
||||
|
||||
> *"It has been an honor to serve alongside Jay Clayton. He is one of the smartest and most capable transactional attorneys in the country and an* *even better colleague and friend**. As leaders of the SEC and CFTC, we have* *worked together closely* *to harmonize our rules where appropriate and hold wrongdoers accountable."*
|
||||
|
||||
Directly from the CFTC site: <https://cftc.gov/PressRoom/PressReleases/8310-20>. So now we have two former chairman of the organizations meant to control Wall Street who are working for the very thing they were regulating. The same Wall Street they were "harmonizing rules" for --- oh and one of them is working at a Hedge Fund associated with a criminal. Great, totally not a problem.
|
||||
|
||||
MY OPINION: There's nothing from these two from continually working together even now; only a few months have passed since these two were last collaborating. This begins to lead us into an ordeal that starts to paint a picture of what may have happened in the last few years and how some hedge funds might have further screwed themselves with super cheap interest rates introduced during the pandemic on loans with these two formerly at the helm stoking the flames.
|
||||
|
||||
Wonder how Gary Gensler as the new SEC chairman will play into all this now? That will be covered soon.
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Section 2 --- Credit Suisse --- A Leaky Boat
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
NOW how does Credit Suisse (CS) find themselves in this mess? They just can't seem to keep themselves out of the news. More holes keep getting blown out in their ship that they're desperately trying to patch. We already mentioned the situation with Archegos, but something that hasn't been mentioned as much is their losses associated with Greensill Capital and their filing for insolvency on [March 8th, 2021](https://www.nytimes.com/2021/03/28/business/greensill-capital-collapse.html).
|
||||
|
||||
[](https://preview.redd.it/fdsh2w87lkt61.png?width=947&format=png&auto=webp&s=5113442e44ba4fa74a5762de80fb87b529d62ee5)
|
||||
|
||||
As a result of their bankruptcy, 50,000 people lost their jobs when it became evident that during courthouse hearing in Sydney, Australia - $4.6 billion was owed and no one was extending out a hand to loan anymore to Greensill (THIS IS A BIG PIECE OF THIS STORY, HOLD THIS THOUGHT FOR NOW BECAUSE THIS IS GOING TO GET CRAZY LATER ON).
|
||||
|
||||
As a result different parts of Greensill had to be liquidated as a means to recoup costs. One of the impacted was Greensill's tech partner Taulia. Guess who had plans to acquire them?
|
||||
|
||||
[](https://preview.redd.it/jhz33vbpmkt61.png?width=860&format=png&auto=webp&s=095679127038922ac1619d382f4745d6398fffd0)
|
||||
|
||||
what are they doing here???
|
||||
|
||||
YES APOLLO IS MEDDLING HERE. Now everything was going according to plan for Apollo, seems like they'd be able to get a pretty cheap cost of entry on Taulia who from their site:
|
||||
|
||||
> *"* *Taulia* *is a financial technology business that provides working capital management, electronic invoicing, supply chain finance, and dynamic discounting services. The company helps* *buyers and suppliers accelerate payments**, improve supply chain health, and* *unlock trapped cash. "*
|
||||
|
||||
But SURPRISE!
|
||||
|
||||
[](https://preview.redd.it/bakrkhoimkt61.png?width=962&format=png&auto=webp&s=fc2aefebb0a91ba9491a3f820cef0f5975c4b722)
|
||||
|
||||
https://www.reuters.com/article/us-britain-greensill-apollo-idUSKBN2B4233
|
||||
|
||||
YOINK. JPMorgan decides to play the uno reverse card and that they want Taulia on their side too. Oh and it turns out UniCredit + UBS Group want a piece of the action as well.
|
||||
|
||||
Don't forget who are the two major institutional owners of JPMorgan...
|
||||
|
||||
[](https://preview.redd.it/rbccdb5eqkt61.png?width=1245&format=png&auto=webp&s=074655ed2767fc33c72a139c6c2ff0e1eed43d08)
|
||||
|
||||
if it isn't our boys BlackRock, and Vanguard. Source: https://fintel.io/so/us/jpm
|
||||
|
||||
As a side note did I mention that UBS is the direct competitor of CreditSuisse in Switzerland and that the two are planning a merger? <https://www.fnlondon.com/articles/ubs-chair-axel-weber-says-a-merger-with-credit-suisse-could-take-years-20201207>
|
||||
|
||||
To add to all this, we now we also know that BlackRock is looking to [make a move on Credit Suisse](https://finance.yahoo.com/news/blackrock-blk-mulling-buy-credit-174205125.html) in the midst of this storm. This is in addition to their existing relationship with [Swiss Re](https://www.reddit.com/r/Superstonk/comments/mokvhk/chaos_theory_the_everything_connection/) (scroll down for more information in that thread to Section 5.)
|
||||
|
||||
MY OPINION: From researching around it seems that for one reason or another, consolidation of banks appears to be a focus headed into the near future. BlackRock is looking to somehow join the narrative and become further ingrained in the banking world. This becomes especially interesting considering how BlackRock is positioning themselves as the 'fourth branch of government'. I believe I explain this relationship a bit better in anticipation of what the future is going to bring (Section 4).
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
BONUS ROUND --- UK EDITION
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Just so our fellow apes in the UK don't feel left out of all the drama, none other than former Prime Minister David Cameron was heavily involved with Greensill, lobbying for the company.
|
||||
|
||||
Just some examples of what he's being called out for:
|
||||
|
||||
"
|
||||
|
||||
- He [texted Chancellor Rishi Sunak](https://www.bbc.co.uk/news/uk-politics-56681939), asking for the company to be included in a Covid-related government loan scheme
|
||||
|
||||
- He also contacted Treasury ministers Jesse Norman and John Glen about the company
|
||||
|
||||
- He met Health Secretary Matt Hancock - along with Lex Greensill - for a "private drink" in 2019 [to discuss a new payment scheme for NHS staff](https://www.bbc.co.uk/news/uk-56706619)
|
||||
|
||||
"
|
||||
|
||||
[](https://preview.redd.it/pfx79zobukt61.png?width=634&format=png&auto=webp&s=ec03360f53875e1112c7ae5bf03c7b4c7b34cf39)
|
||||
|
||||
IT NEVER ENDS DOES IT.
|
||||
|
||||
Now back to our friend GARY "GG" GENSLER and how this all potentially plays together.
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Section 3 --- Gary Gensler --- GG GLHF
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Now I'm not going to go into too much depth here about Gary himself; apes have done a TON of [research already](https://www.reddit.com/search/?q=gary%20gensler) in this regard. If you're not familiar with him, please have a read of other apes work and then come back.
|
||||
|
||||
[](https://preview.redd.it/ygmigp4eskt61.png?width=1262&format=png&auto=webp&s=b65c53abdfe30e9a5f6f761d9cc09f866154eefe)
|
||||
|
||||
For a short synopsis from ape [/u/AAces_Wild](https://www.reddit.com/u/AAces_Wild/) (I totally agree with their statement [here](https://www.reddit.com/r/Superstonk/comments/mq7nto/who_is_the_new_sec_chair_gary_gensler_my/)):
|
||||
|
||||
> *"Fellow apes, please warmly welcome Professor Gensler to the SEC. If there's anyone I would trust to wield the power as SEC chairman while closing loopholes, protecting investors, and policing the largest financial center in the world, it's Gary Gensler.*
|
||||
>
|
||||
> *Key Takeaways**: Gary has extensive expertise in the prosecution of big banks and has shown support for market transparency. Without hesitation, I believe he's the man for the job. Gary is good.*
|
||||
>
|
||||
> *As Gary likes to say: "Markets work best when there's a cop on the beat.""*
|
||||
|
||||
I would add to this that he also has a fairly deep background in crypt0-currencies which explain the recent movement of C0inBase and the currencies associated with it. Gary is very likely to implement new legislation that favors crypt0. He's also fairly knowledgeable about darkpools and their inner workings.
|
||||
|
||||
One of the major concerns that I have however is that Gary was involved with bringing the big banks to light back in 2008. To have him appear now and for such a short period of time (his contract is until June when it'll be renegotiated) raises a bit of a flag.
|
||||
|
||||
There is another point here that is of concern, but before we get into it...
|
||||
|
||||
DISCLAIMER DISCLAIMER DISCLAIMER DISCLAIMER DISCLAIMER
|
||||
|
||||
POLITICS ARE ALL SCREWED --- THIS ISN'T AN ARGUMENT OF LEFT VERSUS RIGHT. BOTH SIDES HAVE INVOLVEMENT WITH WALL STREET AND ACCEPTS BRIBES. REMEMBER APES ARE TOGETHER BECAUSE WE ARE FIGHTING A CLASS WAR REGARDLESS OF RELIGION, GEOGRAPHY, BELIEFS. WE WANT A BETTER LIFE FOR EACH OTHER.
|
||||
|
||||
Fellow ape [/u/justoneshyboy](https://www.reddit.com/u/justoneshyboy/), dug into all those who voted 'Nay' against the election of Gary Gensler as the new chairmain.
|
||||
|
||||
Here's what they [found](https://www.reddit.com/r/Superstonk/comments/mqps6r/are_these_donations_from_kenneth_griffin_to/):
|
||||
|
||||
[](https://preview.redd.it/jlg3u9td2lt61.png?width=699&format=png&auto=webp&s=1fa70a08ae2f1f66801057e866a5f3cb191098c3)
|
||||
|
||||
As it turns out, Kenny boy has donated to majority of the 'nay' sayers. Of course, this was bound to happen considering Gary was selected on behalf of the democrats. Where does this lead us to?
|
||||
|
||||
Well one of the major topics of focus come from this clip of GG himself; give this a quick watch for about 2 minutes:
|
||||
|
||||
[](https://preview.redd.it/4i2q1efa4lt61.png?width=977&format=png&auto=webp&s=d807532d35de00f69ef8b4a2713947fbd50bab54)
|
||||
|
||||
https://youtu.be/b_GcpsIyQFc?t=1425 from 2014
|
||||
|
||||
<https://youtu.be/b_GcpsIyQFc?t=1425>; a quote directly from Gary in the video:
|
||||
|
||||
> "Today the CFTC announced it's fifth settlement with a bank for pervasive rigging interest rates [...] these interest rates called the London Inter-Bank Offer Rate (LIBOR) is a critical reference rate for the U.S. economy. Student loans are sometimes tied to them, mortgages are tied to them, small business loans, and yes 70%; seven-zero of the international derivatives market, futures, swaps are tied to LIBOR"
|
||||
|
||||
REMEMBER THESE TWO THINGS MENTIONED IN ASSOCIATION WITH EACH OTHER:
|
||||
|
||||
- "PERVASIVE RIGGING INTEREST RATES"
|
||||
|
||||
- "London Inter-Bank Offer Rate (LIBOR)"
|
||||
|
||||
MY OPINION: Look at what's happening with the bond market in the last few days in [China](https://www.reddit.com/r/Superstonk/comments/mqcfxr/huarong_asset_mgmt_is_failing_i_think_this_is_the/?utm_medium=android_app&utm_source=share) and the [U.S.](https://www.reddit.com/r/Superstonk/comments/mrm243/jpmorgan_to_sell_13_billion_of_bonds_in_largest/) (more on this in [/u/Captain_Omar](https://www.reddit.com/u/Captain_Omar/) 's [post](https://www.reddit.com/r/Superstonk/comments/mrm243/jpmorgan_to_sell_13_billion_of_bonds_in_largest/)) --- With so much of the world's loan market tied up in this "LIBOR", why is it a big deal now? Well we know that the CFTC is the one establishing settlements for any rigging of game that may be taking place within interest rates.
|
||||
|
||||
Oh right, and the former chairman of the CFTC now works at Citadel was in charge of policing this for the last 4 years. In addition, what are the chances he's intertwined with the congress members who've received donations from Citadel do you think? Seems like this LIBOR thing might be a problem for certain parties?
|
||||
|
||||
Okay so something's up, what is LIBOR anyways? This leads us into Section 4.
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Section 4 --- LIBOR vs SOFR --- Global Financial Evolution
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
Take a breather here if you haven't already. This is a lot of information in digest and LIBOR (London Inter-Bank Offer Rate) is not a light topic. Thank you [/u/RegularJDOE1234](https://www.reddit.com/u/RegularJDOE1234/) & [/u/HCRDR](https://www.reddit.com/u/HCRDR/) on further research into this.
|
||||
|
||||
There is about $350 - 400 trillion (yes that is TRILLIONS with a T, about 4x the size of the global economy) tied up in it.
|
||||
|
||||
A short explanation of what LIBOR is:
|
||||
|
||||
> " Libor is an average interest rate calculated through submissions of interest rates by major banks across the world. "
|
||||
|
||||
IN 🦍 SPEAK, GRAB YOUR 🖍's IT'S TIME GO TO🏫🎒. Interest is something all of us have dealt with in one fashion or another. Credit card payments, mortgages, student loans. The concept is all the same. You borrow money from the bank, and they tell you that you'll be paying a fee monthly (known as the interest rate) on top of the money you've loaned out from them. On top of this you get told what your interest will be ahead of time (forward looking interest rate) so you know what to expect your bill to be.
|
||||
|
||||
Now the reason LIBOR is a problem is that it can easily be gamed and has been for quite some time. It also doesn't adjust for another crazy shit that might happen until the next payment period. If the economy crashes in that time frame and you're still paying a super low interest rate because of a contractual agreement, the banks lose BIG TIME. Directly from Wikipedia on the "[LIBOR Scandal](https://en.wikipedia.org/wiki/Libor_scandal)":
|
||||
|
||||
> *" The scandal arose when it was discovered that banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were.*[*[3]*](https://en.wikipedia.org/wiki/Libor_scandal#cite_note-3) *Libor underpins approximately $350 trillion in* [*derivatives*](https://en.wikipedia.org/wiki/Derivative_(finance))
|
||||
>
|
||||
> *The banks are supposed to submit the actual* [*interest rates*](https://en.wikipedia.org/wiki/Interest_rate) *they are paying, or would expect to pay, for borrowing from other banks. The Libor is supposed to be the total assessment of the health of the financial system because if the banks being polled feel confident about the state of things, they report a low number and if the member banks feel a low degree of confidence in the financial system, they report a higher interest rate number."*
|
||||
|
||||
REMEMBER THIS, the interest rate drops to low percentages when the market is confident or is looking to inject growth (like how it is now); the inverse happens when the market is fearful (higher rate = higher cost of borrowing money usually). This is like letting your buddy Good Guy Greg borrow 20 bucks versus your half-cousin twice removed, Scumbag Steve.
|
||||
|
||||
The banks here would deliberately rig the interest rates between each other in order to get massive loans to profit from (they basically are making themselves appear like Good Guy Greg to everyone around them, when in reality they're stealing your wallet out your back pocket). THE LIBOR SYSTEM IS WHAT ALLOWS FOR THIS TO HAPPEN. As it turns out, a lot of people are fed up with this and want see it changed for good reason as seen below...
|
||||
|
||||
WORTH NOTING:
|
||||
|
||||
LIBOR was a massive playing piece involved in the 2008 financial crises, this quote is directly from the congressional hearing on the matter:
|
||||
|
||||
> *"* *The LIBOR's self-reporting structure has created opportunities for individuals or institutions to manipulate or falsify data**. In the wake of the 2008 financial crisis, upon discovering a widespread culture of LIBOR manipulation built around industry relationships, U.S. and U.K. regulators settled with various banking institutions, including some of the world's largest banks such as Barclays,* *JP Morgan Chase**, Citigroup, and* *UBS* *over allegations that these institutions manipulated the* *LIBOR* *by* *pressuring their colleagues to report artificially low or artificially high interest rates in order to manufacture trading opportunities. "*
|
||||
|
||||
Talk about the timing of Gary Gensler coming back into the picture right? One of the few people in the SEC who directly dealt with this type of scenario before.
|
||||
|
||||
FEAR NOT, HERE COMES THE EVOLUTION OF THIS SYSTEM
|
||||
|
||||
Introducing SOFR (Secured Overnight Financing Rate)!!!!! This is a MASSIVE 200 trillion dollar transition that will take place over the next few years.
|
||||
|
||||
OH and it almost imploded the entire fucking market the first time it was attempted to be implemented back in 2019 <https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-in-money-markets-in-september-2019-20200227.htm>
|
||||
|
||||
[](https://preview.redd.it/1iys92uydlt61.png?width=847&format=png&auto=webp&s=b665c6a6ad3e31a2a17d00213b39aa8c9b41b61b)
|
||||
|
||||
And it looks like they just had a hearing on this evolution just YESTERDAY.
|
||||
|
||||
[](https://preview.redd.it/o95qmiuehlt61.png?width=1321&format=png&auto=webp&s=9ec410ff456ef126517f16496a1d5efef3a8289b)
|
||||
|
||||
https://www.youtube.com/watch?v=igmJ-SFvyRU two hours worth of content, watch at your own risk
|
||||
|
||||
I watched them talking about it live, I would be lying if I told you it was a thrilling piece of entertainment. Watch it if you're really curious and want to get a deeper understanding of what's at stake.
|
||||
|
||||
What this means is SOFR will change how interest rates are calculated.
|
||||
|
||||
Yet again in a very simple explanation: if Libor is "forward-looking" meaning you get an interest rate ahead of time (you know exactly what your payment will be) - SOFR is the inverse, meaning it's "backward-looking".
|
||||
|
||||
WHAT THIS MEANS IS THAT BANKS AND OTHER PARTICIPANTS WILL NOT KNOW WHAT THEIR MONTHLY PAYMENT FOR THEIR LOAN WILL BE(for example) UNTIL THE DAY OF PAYMENT (From reading I believe it's about 5 days prior, I could be wrong). THIS IMPLIES THAT THE RATE THEY WILL HAVE TO PAY FLUCTUATES ON A DAILY BASIS. THIS DAILY FLUCTUATION WILL BE BASED OFF THE [DAILY TRESURY YIELD RATE](https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield). This transition is expected to be completed by 2023, however no new contracts can be written under Libor as of... [MARCH 31ST, 2021.](https://www.reddit.com/r/GME/comments/mgb1m6/citadel_2019_but_still_leaves_the_bread_crumbs/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
|
||||
|
||||
To illustrate this point, the image below shows how much more "variable" (dynamic) the rate (in blue) will be, versus the fixed variant (in red) of it we see today.
|
||||
|
||||
[](https://preview.redd.it/6m5o0b3oflt61.png?width=809&format=png&auto=webp&s=6c270866374c63e568ae0f310b56dd660522e6f9)
|
||||
|
||||
This solves two things:
|
||||
|
||||
1. If the market fluctuates in the time that a loan was given, the banks will not be put into a vulnerable position nor profit from it. Think of this as a "we ride together, we die together" type of scenario. They'll be impacted as much as any of us should the market take a down turn or rise.
|
||||
|
||||
2. The rates can no longer be gamed as easily because they're no longer based off self-report data, but rather the rate of the daily treasury yield on the market.
|
||||
|
||||
Now here's the thing, we should've already started transitioning to this new system over quite some time. The fed wanted all the new loans being given out in the last year to be already implemented through SOFR, but instead the banks chose to STILL tie them to Libor. But wait a minute some of these are 3-year, 5-year loans; but Libor will only be around for another 2 years. Sounds like it can be another problem in the making and the banks don't want to face reality yet. Knowing this it's not surprising they posted such great earnings right? Easy to make the picture look pretty when it's full of shit.
|
||||
|
||||
Watch about 45 seconds of this clip for concerns coming straight from Grant Thornton UK on the matter.
|
||||
|
||||
<https://www.youtube.com/watch?v=HAf6Bk5szIk&t=1245s>
|
||||
|
||||
HERE'S THE REASON MANY ARE TERRIFIED AT WHAT THIS WILL MEAN FOR THE MARKET:
|
||||
|
||||
> *"I think it's fair to say that people like myself are getting a bit of an odd feeling in the gut about what is going on about some of these books - so to drive transparency there, the cyclical quarterly testing on impairments and cogence the data will be out in June, and I think the views we have are that some of the borrowers will fail." --- Grant Thornton UK Advisor [Source:* [*https://www.youtube.com/watch?v=HAf6Bk5szIk&t=1553s*](https://www.youtube.com/watch?v=HAf6Bk5szIk&t=1553s)*]*
|
||||
|
||||
LONG STORY SHORT; THEY'RE WORRIED THAT WHEN BANKS AND BUSINESSES ARE FORCED TO PAY THE ACTUAL RATES OF THE MARKET (and not their made up ones) BECAUSE OF THE LIBOR -> SOFR TRANSITION, THAT THEY WILL NOT HAVE THE CASH ON HAND TO MEET THE SOFR REQUIREMENTS AND RUN INTO SERIOUS FUCKING TROUBLE. THIS IS SIMILAR TO WHAT HAPPENED ALREADY IN 2019.
|
||||
|
||||
NOT ONLY THIS, THE PEOPLE WHO BORROWED MONEY WILL BE STRESS TESTED ON A REGULAR BASIS (think monthly/quarterly) TO SEE IF THEY ACTUALLY CAN SUPPORT A HIGHER INTEREST RATE SHOULD THE MARKET GO TO SHIT. Once again no new contracts can be written under Libor as of... [MARCH 31ST, 2021.](https://www.reddit.com/r/GME/comments/mgb1m6/citadel_2019_but_still_leaves_the_bread_crumbs/?utm_source=share&utm_medium=ios_app&utm_name=iossmf)
|
||||
|
||||
YOU WILL NOW SEE THE MARKET STARTING TO DELEVERAGE THEIR LOANS IN ORDER TO HAVE MORE CASH ON HANDS TO MEET THESE SOFR REQUIREMENTS AS QUICKLY AS POSSIBLE. THIS EXPLAINS WHY [JPMORGAN AND OTHERS ARE SELLING BONDS AFTER 'STELLAR' EARNINGS](https://www.bloomberg.com/news/articles/2021-04-15/jpmorgan-to-sell-13-billion-of-bonds-in-largest-bank-sale-ever) (once again still in a Libor system). This would also explain why BlackRock is the heaviest in cash they've ever been. The reintroduction of Gary Gensler during this timeframe, is a concerning one as he dealt with the 2008 crash once before which involved LIBOR.
|
||||
|
||||
EDIT: Bank of America just posted a 15 billion dollar sale of bonds couple of hours ago; the dominos are starting to fall <https://www.bloomberg.com/news/articles/2021-04-16/bofa-to-set-record-for-largest-bank-bond-sale-at-15-billion>
|
||||
|
||||
Now the question becomes, who's already caught in the web?
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
FINAL SECTION --- THE GREAT TRAP
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
My Opinion: I believe that many of the "bad" hedge funds, took on massive risks with expectations that the 7rump administration would get re-elected and prolong the need for transitioning to SOFR and others (involving the former SEC + CFTC chairmen). This would give them ample amount of time to make profits on the companies (and banks?) they bankrupt.
|
||||
|
||||
It appears to me that they didn't properly hedge their risk for any other outcome.
|
||||
|
||||
Now lets have a look at who might have abused the low interest rates fabricated by banks, and provided collateral with rehypothecated assets?
|
||||
|
||||
Well a good place to start looking is to see who's grown the most in the last year.
|
||||
|
||||
we have a pretty good starting point as we've seen in [/u/yosaso](https://www.reddit.com/u/yosaso/)'s post about the [war to control the DTCC](https://www.reddit.com/r/Superstonk/comments/mouj57/there_is_a_war_to_control_the_dtcc_and_gme_is_the/guoqi9g/?context=3): (I'm just renaming these teams for the sake of vulgarity, and adding some names)
|
||||
|
||||
> TEAM Good Guys
|
||||
>
|
||||
> JP Morgan, BOA, Morgan Stanley, State Street, Vanguard, BlackRock, Goldman Sachs
|
||||
>
|
||||
> TEAM Bad Guys
|
||||
>
|
||||
> Citadel, Virtu, Citi, Susquehanna, Melvin, Apollo
|
||||
>
|
||||
> TEAM UNKNOWN
|
||||
>
|
||||
> BNY Mellon - 2
|
||||
|
||||
Here are the good guys, seems like pretty stable growth since last year right roughly returning to where they were before
|
||||
|
||||
[](https://preview.redd.it/rjpdxjm84mt61.png?width=1407&format=png&auto=webp&s=99d1541144ccf2a82a72f3c6224c2960f564aee8)
|
||||
|
||||
NOW HERE ARE THE BAD GUYS. WHOA THEY JUST RIPPED OVER THE LAST YEAR.
|
||||
|
||||
[](https://preview.redd.it/oylkww7v4mt61.png?width=1401&format=png&auto=webp&s=999644f9899dac07da6f3bca164772eed745a0d0)
|
||||
|
||||
WOW WHAT GROWTH!
|
||||
|
||||
Growth over the last 4 quarters:
|
||||
|
||||
Good Guys:
|
||||
|
||||
| Company | Growth Since Q1 2020 |
|
||||
| --- | --- |
|
||||
| State Street | 42.8% |
|
||||
| Vanguard | 46.9% |
|
||||
| BlackRock | 53.3% |
|
||||
|
||||
Bad Guys:
|
||||
|
||||
| Company | Growth Since Q1 2020 |
|
||||
| --- | --- |
|
||||
| Apollo | 78.4% |
|
||||
| Melvin | 80.5% |
|
||||
| Susquehanna | 94.8% |
|
||||
|
||||
Now we plug in [/u/atobitt](https://www.reddit.com/u/atobitt/) 's ["Everything Short"](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/) thesis here. I believe Hedge Funds have been taking advantage of the low interest rates that are being gamed. They decide they're going to take this to a whole new extreme through rehypothecation and the repo market.
|
||||
|
||||
MY OPINION: THIS IS MONEY THEY'RE NEVER GOING TO BE ABLE TO PAY BACK. CITADEL AND FRIENDS ASPIRED TO REACH THE GRAND SIZE THAT THE LIKES OF BLACKROCK AND VANGUARD ARE THROUGH ANY MEANS NECESSARY. I BELIEVE THEY'VE TAKEN ON MASSIVE RISK AND ARE NOW BEING CLOSED IN ON BY THE DTCC + THE SEC WITH THE SOFR ADJUSTMENT.
|
||||
|
||||
THEY'VE PUT MULTIPLE BANKS AT HUGE RISK A BLOWING UP ON FAKE BONDS --- IT'S ONLY A MATTER OF TIME BEFORE SOFR DROPS THE BOMB ON THEM. I believe this is the reason why BlackRock and Co have been pushing for "max pain" each week; this is so that it makes it impossible to keep up with SOFR interest rate requirements.
|
||||
|
||||
------------------------------------------------------------------------------------------------------------------
|
||||
|
||||
As time progresses I believe we will see more evidence of multiple parties attempting to deleverage their positions before 2023. Coincidentally GameStop has just paid off all their debt that was due that exact year.
|
||||
|
||||
So this becomes a two pronged problem;
|
||||
|
||||
1. Assets are being rehypothecated which are being used as collateral
|
||||
|
||||
2. Banks are providing absurd interest rates off the old LIBOR system instead of SOFR; this has resulted in the taking on a position that will be extremely difficult to get out of.
|
||||
|
||||
As we can see they're fighting against these changes through politics, but it appears they've brought in Gary Gensler to kick some ass.
|
||||
|
||||
TLDR: DIAMOND HANDS APES. 💎✋
|
||||
|
||||
*NOT FINANCIAL ADVICE*
|
||||
@ -0,0 +1,171 @@
|
||||
All Shorts Must Cover. They're Entering The Danger Zone. The SI Report Loop Consistently Brings Us Ever Closer To The Squeeze.
|
||||
==============================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/n792mf/all_shorts_must_cover_theyre_entering_the_danger/) |
|
||||
|
||||
---
|
||||
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
This is your daily hit of hopium. In this case maybe a full rip of it since I see many people discouraged about 002 - but there is no need to worry. I want to show you that apes are winning and shorts are losing. You hold, you win. (But please note I am not a financial advisor. I don't want you guys bitching at me if you YOLO it on deep OTM options expiring within 24 hours).
|
||||
|
||||
It is my belief that we do not need ANY of the new rules for the MOASS to occur. These rules were created for the purpose of preventing future stocks from ever being in the same position that GameStop is in. Think of it as they're introducing rules to ensure that a January runup in another stock never occurs again post GameStop MOASS:
|
||||
|
||||
- The DTCC will no longer have a 'pool' of collateral. Now the members will be hurting more and its easier to hit a margin call. High volatility up = 1 hour margin call from 801.
|
||||
|
||||
- No more delaying FTDs. The DTCC will catch any attempt at this and shut it down. Volatility from FTDs can't be suppressed = 1 hour margin call is easier to push through.
|
||||
|
||||
- Positions will have much more visibility to the DTCC and risk always calculated. No more hiding from the margin calls during high volatility.
|
||||
|
||||
Again, all the bullets above are to prevent future stocks from squeezing. They never want this to happen again. Remember Tesla? It slow squeezed upward without any of these rules on a 15% SI. It's going to happen to GameStop eventually.
|
||||
|
||||
All I'm saying is don't get discouraged! Things can ignite literally any moment - and they will ignite, with or without the DTCC rules.
|
||||
|
||||
1\. The Price Floor Is Moving Towards The Danger Zone.
|
||||
|
||||
On January 25th, 2021, Melvin received a total cash injection of $2.75 Billion. The price spiked to $159.18. So they were cutting it pretty close at that point - or at least, it was preemptive because Shitadel and Point72 knew things would spike a little bit more and this was to avoid the inevitable call from Marge. On another note, they absolutely hate the price of $350, which is where we saw the January and March peaks.
|
||||
|
||||
So it's probably safe to assume that somewhere in the range of $160 and $350 is when our good friend Marge will give them a call. We can apply $160 here because that's around when Melvin got bailed out by his buddies, and them bleeding money over time could eventually make $160 the margin call price point. They can't continue this forever. And it shows. They are slowly but surely running out of time. How fast they are bleeding money? Eh, I don't know. I saw some linear predictions of the margin call price and that prediction could very well be true or very close to being accurate, but I'll leave it as a range for now instead of a "THIS IS THE PRICE TARGET WE'RE WAITING FOR!"
|
||||
|
||||
It's literally just a war of attrition while the apes have infinite supply of time as we approach and enter what I like to call the DANGER ZONE. Kenny G and his friends are on that highway right now and have been ever since January.
|
||||
|
||||
[](https://preview.redd.it/gbu7ar5tjsx61.png?width=1124&format=png&auto=webp&s=8e2738b89eddcb55aab7f9d9360a3ce887652c86)
|
||||
|
||||
Source: Ryan Cohen in Top Gun (1986)
|
||||
|
||||
You'll start to notice something wonderful when you look at the charts starting from January and ignore the trend downward but rather look at the trend upward. Your doubts should erase from your mind when you notice it.
|
||||
|
||||
GME did a very quick decay from the January spike, and then a very slow decay from the March spike. Felt like it was going down in price, and the shorties were winning, huh? So I'm just wondering - how would you have felt if this was the chart we saw instead? What if the price decayed really quick in March again and then settled around $120?
|
||||
|
||||
[](https://preview.redd.it/zmb1diuvjsx61.png?width=955&format=png&auto=webp&s=625d759f8a4f7102e8af99aeaea5be2ccca67675)
|
||||
|
||||
Hm. I'd feel completely different. Give me that sweet sweet hopium hit. It would have no longer felt like it was going down in price but continuing to rise in price. The slow bleed from around $220 to $160 sucked - though trusting in the DD certainly helped. Now, imagine that SAME squeeze pattern on top of the arrows I drew. Let the price decay quickly in your mind. See what's going on here?
|
||||
|
||||
I only needed to bust out one crayon 🖍️ from my mega 96-crayon pack for this chart. The price floor (blue line) is continuing to rise. Not only this, we're just now entering the DANGER ZONE!! (purple box). While it appears we are on a downtrend from looking at the decay in price from $220 to $160, GME is in fact going to higher and higher floors on these smaller and smaller bursts up. (FTD loop theory is right boys and girls, but I don't think it's been ironed out yet).
|
||||
|
||||
[](https://preview.redd.it/o8ucx63yjsx61.png?width=978&format=png&auto=webp&s=0ea68935473a0d36925d0a973a1a3260af0e5d1e)
|
||||
|
||||
GME Price Floor Rising Into The Danger Zone
|
||||
|
||||
Well well well. The price floor continues to rise in this dampening effect of price peaks and troughs. It's not going down! It's already going into the GODDAMN DANGER ZONE! They are growing weak at trying to suppress the price. Their efforts can't contain it forever.
|
||||
|
||||
Now keep in mind, this is not to say that it is over once we're in the purple box. It is to say that the longer we stay in the purple box, the closer and closer we get to the margin call price. I can hold out for it - can't you? It's almost time for you to pick out your favorite lambo model.
|
||||
|
||||
Anything can kick this over the edge and finally trigger the MOASS without 002 and 801. We're already stable at the price that GME spiked when Melvin received their cash injection. It's really just a matter of time at this point, because their attempts to kick the price back down are dampening.
|
||||
|
||||
[](https://preview.redd.it/cx44pdr0ksx61.png?width=637&format=png&auto=webp&s=31d909e3f26e0eb8fd94bbde97688fb20ba776eb)
|
||||
|
||||
The longer this drags out, the higher the price floor becomes, until it kicks off.
|
||||
|
||||
- GameStop could find over 100% of their float voted and initiate a price spike, possibly through a recall.
|
||||
|
||||
- The entire market could tip just one way out-of-favor of the shorts, causing their margin price to drop.
|
||||
|
||||
- A long whale gamma squeeze can spike us into margin call territory long enough for the natural margin call (non-801) to occur.
|
||||
|
||||
- GameStop can slowly bleed upward until the critical danger zone price is hit with no other catalysts.
|
||||
|
||||
- Or perhaps, another FTD loop spike pushes GME over the edge. Let's investigate this to try to iron out the missing pieces of the FTD loop theory.
|
||||
|
||||
2\. Hello FTD Loop - Or Should I Say SI Report Loop
|
||||
|
||||
This isn't T+21 or T+35 or anything. But I think it might finally paint the picture of why we have theories ranging from T+13 to T+21 to T+35, and everything in between. We definitely have a loopthat is occurring. And it's most likely due to something called [Short Interest Reporting](https://www.finra.org/filing-reporting/regulatory-filing-systems/short-interest) from FINRA.
|
||||
|
||||
Short interest?! That's two words we're all very familiar with. What exactly is this?
|
||||
|
||||
> FINRA requires firms to report short interest positions in all customer and proprietary accounts in all equity securities twice a month.
|
||||
|
||||
There's three columns on that link. What are they:
|
||||
|
||||
- Settlement Date: The date at which short interest positions must be determined.
|
||||
|
||||
- Due Date: The date at which the report of the SI from the settlement date is due by.
|
||||
|
||||
- Exchange Receipt Date: The date when FINRA finalizes the reports and delivers them.
|
||||
|
||||
Ah nice. So if you were a shortie in January and your SI% is well over 100% of the float, and the world thinks you haven't covered because of the high SI%, then you might want to drop that SI% number down! If you maintain a low SI% for a long time, then the world will believe the squeeze is done for and you can claim that you've covered your positions. In order to drop your SI% that will be reported on the Receipt Date, you'd want to hide your short position before EOD of the Settlement Date.
|
||||
|
||||
You risk causing a mini squeeze right here. AKA the "Fake Squeeze" of January. But you MUST try it to shake off the holders. Dump it all. Pretend you covered. Hope that the apes sell.
|
||||
|
||||
Here's a copy/paste of the dates for 2021. I'm going to only copy the ones through the start of June:
|
||||
|
||||
| Settlement Date | Due Date | Exchange Receipt Date |
|
||||
| --- | --- | --- |
|
||||
| January 15 | January 20 | January 27 |
|
||||
| January 29 | February 2 | February 9 |
|
||||
| February 12 | February 17 | February 24 |
|
||||
| February 26 | March 2 | March 9 |
|
||||
| March 15 | March 17 | March 24 |
|
||||
| March 31 | April 5 | April 12 |
|
||||
| April 15 | April 19 | April 26 |
|
||||
| April 30 | May 4 | May 11 |
|
||||
| May 14 | May 18 | May 25 |
|
||||
| May 28 | June 2 | June 9 |
|
||||
| June 15 | June 17 | June 24 |
|
||||
|
||||
You could look at the Receipt Dates and say, "Hey! We spiked/dipped there! January 27, February 24, March 9, March 24! So the next spike would be May 11!", but not necessarily. It's interesting how some spikes occurred on a few of the receipt dates. I mean, the price certainly could spike again on May 11, but that's probably going to be a coincidence once more. I'm more interested in the Settlement Date column.
|
||||
|
||||
Like I said earlier, it appears that they'll want to stuff away their shorts on days up to and including the settlement date. When this happens, we get volatility in the price due to the ITM CALL + OTM PUT tricks they've been using. The price spikes up, then crashes down. Or vice-versa. And this is consistently happening. Here's a few thoughts that I'm unsure of, but would like to propose:
|
||||
|
||||
- It's possible that a bunch of their shorts pour out after being hidden at critical dates, which result in massive ITM CALL and OTM PUT purchases prior to settlement dates, which consequently spikes/crashes the price in much larger movements. This could be why we're seeing smaller movements (February 12, April 15, April 30) because fewer shorts are popping out and we're waiting for a big pour out again.
|
||||
|
||||
- They like to waste money on flash-crashing the price, probably through exercising a bunch of PUT ammo, while simultaneously suppressing the SI% and moving FTDs out once more with ITM CALL and OTM PUTs (February 26, March 15, March 31). This bleeds them money when spikes occur, and thus makes the Danger Zone ever closer with a slowly incrementing price floor.
|
||||
|
||||
- The overlap of a bunch of their shorts pouring out and FTDs having to be reset occurs on these large movements (January 29, March 15, Some future date?)
|
||||
|
||||
- This is why we see discrepancies between T+21 and T+35 and dates in-between. It's not a cycle on those exact dates but rather any days before the settlement date.
|
||||
|
||||
To help visually, I plotted each settlement date on the lovely GameStop chart starting in January. You can see that prior to every single receipt date, some kind of volatility occurs. Even for February 12, I would argue that the spike/drop from February 5 to February 6 was one of these volatile movements, though ever slight of a movement like we're seeing now.
|
||||
|
||||
[](https://preview.redd.it/u2kbzue2ksx61.png?width=1344&format=png&auto=webp&s=7d7ca2c0862ec18f866e3905bed7ef64907bc769)
|
||||
|
||||
So, what does this mean? Well, it's not a date but more of a "watch for shit to go down close to or on these Settlement Dates (May 14, May 28, June 15, etc.)". The next few Settlement Dates could continue to be dampening with smaller and smaller volatile movements. But they could also be a repeat of the January, February, or March spikes due to the possibility that a ton of shorts and FTDs will need to be brushed under the rug once more.
|
||||
|
||||
- If GME spikes again due to this, they could attempt to flash crash the price once more.
|
||||
|
||||
- If GME spikes again due to this, and they are unable to flash crash the price, they'll be sitting higher in the DANGAH ZONE.
|
||||
|
||||
- Regardless, we can assume the price floor will continue to rise. Perhaps since we are at a critical point here of $160 and it has been dampening to an ever smaller volatile swings around $160 - that we will see a huge burst again just like January, February, and March in order to maintain that ever-increasing price floor.
|
||||
|
||||
It sounds like I'm covering my ass because I said it could spike significantly or not at all lol. But I think there's enough data points here to assume that volatility will always occur prior to the next SI Report Settlement Date. Whether or not it is a big jump depends entirely on the amount of shorts and FTDs they need to hide. When do those pour out? Is it a specific date? That's what I'd like to find out.
|
||||
|
||||
Personally I still believe April 16, 2021 caused something big that is coming. You don't just have all these banks + Shitadel working overtime day and night as of that date and not prior to it. If a big amount of shorts popped out of April 16 and they did not hide a lot of them prior to April 30 settlement, then the receipt date of those positions is May 11.
|
||||
|
||||
- Note: Receipt date of May 11 does not imply a price spike will occur. This implies that the next SI% report could cause a SI% spike if April 16 shorts popped out and were unable to be hidden by April 30.
|
||||
|
||||
- If the next SI% report date shows a spike in SI%, then its very possible that a portion of their hidden short position will be calculated into their risk, and the margin call price will go further down in the danger zone, making the tendies that much closer.
|
||||
|
||||
3\. Conclusion
|
||||
|
||||
We're reaching a critical point here, and its obvious that the shorters are going to lose. Apes will win. Don't get discouraged. Anyone telling you you're crazy might be right - that you're crazy just in a general sense - but you're not crazy for believing in GME.
|
||||
|
||||
[](https://preview.redd.it/nlz8u354ksx61.png?width=926&format=png&auto=webp&s=257bb41e794c88e225f0385a752f25d15f3788d0)
|
||||
|
||||
Blast off from here with some hopium / TLDR:
|
||||
|
||||
- Melvin received a $2.75B injection on the day GameStop spiked to $160. They have flash crashed the price from going above $350 every time. It's probably safe to assume they are entering the Kenny Loggin's DANGER ZONE as of this week which ranges from $160 to $350. This zone is where the margin call price theoretically lives.
|
||||
|
||||
- GME is already stabilizing around this $160 price point. Melvin, are you scared?
|
||||
|
||||
- The Danger Zone will continue to shift down while they bleed money attempting to suppress the price. The margin call is inevitable. All shorts must cover.
|
||||
|
||||
- We consistently see volatile movement at some point in the week or week before a SI Report Settlement Date. EVERY single date has had this occur. The next settlement date is May 14.
|
||||
|
||||
- This could be only a slight movement just like the past few Settlement Dates.
|
||||
|
||||
- This could be a big movement due to April 16 from an overlap of a large amount of shorts having to be suppressed and FTDs shifted out (but who knows).
|
||||
|
||||
- Every Settlement Date spike results in an ever higher price floor. The past few floors, starting Feb 26 through May 7 = $100, $120, $140, $150, $160. This brings us closer to, and into, the Danger Zone.
|
||||
|
||||
- The Settlement Date following April 16 was on April 30. If a bunch of shorts spilled out from April 16 and they are no longer able to suppress them, then the Receipt Date on May 11 can result in a spike of SI%. Note: not price spike. SI% spike.
|
||||
|
||||
- If the SI% spikes and they now have to include those shorts in their risk calculations, then that might shift the Danger Zone even lower and make the margin call price even closer.
|
||||
|
||||
Also note to not day trade. Imagine you make the wrong mistake and the volatile movement ends up being the MOASS. See ya.
|
||||
|
||||
The end feels so close. We'll see what the next few weeks bring. 😎
|
||||
@ -0,0 +1,251 @@
|
||||
Danger Zone Part 2 - Shorts are terrified of a $310+ close. Projected price movement for the next few months based on T+21, ever-increasing, and poking harder at the first domino just waiting for it to fall.
|
||||
===============================================================================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/Criand](https://www.reddit.com/user/Criand/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nwgzw7/danger_zone_part_2_shorts_are_terrified_of_a_310/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
0\. Preface
|
||||
|
||||
Welcome. WELCOME. More patterns. More dates (T+21 dates).
|
||||
|
||||
I'm not a financial advisor - I don't provide financial advice. Also, you must be pretty nuts to be listening to a Pomeranian.
|
||||
|
||||
I made a post before about the price entering the DANGER ZONE and thought it was above $160. Well, let's revisit that topic because of the interesting price movement we have been getting.
|
||||
|
||||
[](https://preview.redd.it/9qtq30dyyc471.png?width=1556&format=png&auto=webp&s=0b90f2fc1155023373ec3c79ab08a03cba9d1c01)
|
||||
|
||||
Somebody. PLEASE call Kenny. Marge? You there?
|
||||
|
||||
TLDR: Danger Zone part 2
|
||||
|
||||
- The price floor continues to rise each T+21 cycle.
|
||||
|
||||
- Price goes on a Crabby Move 🦀on normal T+21 dates - floor rises about $30 each time.
|
||||
|
||||
- Price goes on a Parabolic Move 🚀between T+21 dates where major options come into play (January 15, April 16, July 16) - floor rises about $80 each time.
|
||||
|
||||
- If the price pattern continues, we should see a $500 floor by January 2022.
|
||||
|
||||
- Shorts haven't covered. They post unrealized losses and unrealized gains to mess with you.
|
||||
|
||||
- Retail average base cost is (probably) around $156.57. This is most likely the shorter average short price.
|
||||
|
||||
- Shorts with an average price of $156.57 would experience 100% loss around $313.14. (Speculative based on data - the real cost could be around $350).
|
||||
|
||||
- Shorters are terrified of $300+, there's been a big battle here for a few days, hinting that small short positions are about to hit margin call territory (the Danger Zone).
|
||||
|
||||
- The current price momentum in this gamma is much stronger than the previous two gammas of January and March. They're trying desperately to not let it take off.
|
||||
|
||||
- The moment one shorter falls, the dominos fall.
|
||||
|
||||
- I like the stock. I also like you. 😉
|
||||
|
||||
1\. Ever-Rising Price Floor And Projection For The Next Few Cycles
|
||||
|
||||
I've been getting pinged a lot on the next T+21 dates and when the next possible parabolic move could be coming. You might say "Past performance is no guarantee of future results" and generally I would agree. But with T+21 consistently occurring and the parabolic moves so far looking like they were triggered by major option dates, I'd say it's a pretty good bet that past performance will guarantee future results.
|
||||
|
||||
- Every 21 trading days a price spike occurs. Upon each spike, the clock resets to 0, and you count up 21 trading days following. Note that you must ignore holidays.
|
||||
|
||||
- Major options dates appear to drive parabolic moves upward. "Major dates" are the only option dates which were available early last year for the 2021 trading year.
|
||||
|
||||
- January 15 --> February 24 - March 10; Parabolic Move
|
||||
|
||||
- April 16 --> May 25 - June 9; Parabolic Move (Maybe more movement to come)
|
||||
|
||||
- July 16 --> August 24 - September 8; Parabolic Move (Projected)
|
||||
|
||||
I will say, the only thing that could make this crap the bed is if [DTC-2021-009](https://www.reddit.com/r/Superstonk/comments/nvlykp/dtcc2021009_dropped_today_lets_get_some_eyes_on/) somehow affects T+21. Guess we'll have to see what happens on June 24th, the next T+21. I'm thinking it does not, since T+21 is most likely not caused by a DTC rule, and therefore the DTC can't mess with that timeframe.
|
||||
|
||||
On another note, [there is speculation that T+21 is not actually a thing](https://www.reddit.com/r/Superstonk/comments/nsady3/t21_is_not_actually_a_thing_counter_dd/). It could be due to other mechanics we don't fully understand (T+35 rule or Net Capital for example). That being said, we're consistently in this loop so far. So, for the sake of making it easy to understand the loop, I think it's safe to continue calling it T+21.
|
||||
|
||||
Without further ado, here you go! Projection of price movements with T+21 dates labeled for the next few months.
|
||||
|
||||
[](https://preview.redd.it/qjk1wao6tc471.png?width=1435&format=png&auto=webp&s=e0b15daee115b3bfa3bacce059dd64612aac6dc8)
|
||||
|
||||
Price Projection Based On Rising Floor Every T+21 Days And Major Option Expirations
|
||||
|
||||
It's a bit of a wild chart, so I'm sorry if it's cluttered. I've plotted with curvy lines the parabolic momentum that we see, and the crabby moves we get dependent on the different factors at play that cycle:
|
||||
|
||||
1. February 24 -> March 25: Parabolic Move 🚀 (January 15 options)
|
||||
|
||||
2. March 25 -> April 26: Crabby Move 🦀
|
||||
|
||||
3. April 26 -> May 25: Crabby Move 🦀
|
||||
|
||||
4. May 25 -> June 24: Parabolic Move 🚀 (April 16 options)
|
||||
|
||||
5. June 24 -> July 26: Crabby Move 🦀
|
||||
|
||||
6. July 26 -> August 24: Crabby Move 🦀
|
||||
|
||||
7. August 24 -> September 8: Parabolic Move 🚀 (July 16 options)
|
||||
|
||||
In the chart, there's blue boxes starting at the floor of the previous cycle and ending at the floor of the next cycle. I drew them very roughly, so the numbers on the graph aren't exact. Sorry. I'm moving a bit quick.
|
||||
|
||||
You'll see that the floor has continued to rise. Although I'm sure many have already seen that from the exponential floor posts! This is expanding on those posts and is a visualization to show that the floor rises every T+21 day cycle. So far, it looks like it rises at a very nice rate, even with the crabby cycles:
|
||||
|
||||
- Crabby Moves 🦀 increase the floor roughly $30 each time.
|
||||
|
||||
- Parabolic Moves 🚀 increase the floor roughly $80 each time.
|
||||
|
||||
If the patterns follow, we could see the following price floors. Note that between April 26 and May 25 that the price broke below the previous floor. That's ok and expected. They can short a hell of a lot more shares to try to pull the price down between these cycles, but the floor continues to rise upon each T+21 date, despite this trickery.
|
||||
|
||||
| T+21 Date | Price Floor (Roughly) | $ Increase From Previous | % Increase From Previous (Rounded) |
|
||||
| --- | --- | --- | --- |
|
||||
| February 24 | $45 | - | - |
|
||||
| March 25 | $116 | $71 | 157% |
|
||||
| April 26 | $148 | $32 | 28% |
|
||||
| May 25 | $182 | $34 | 23% |
|
||||
| June 24 | $259 | $77 | 42% |
|
||||
| July 26 (Projected) | $289 | $30 | 12% |
|
||||
| August 24 (Projected) | $318 | $29 | 10% |
|
||||
| September 8 (Projected) | $396 | $78 | 25% |
|
||||
|
||||
After September 8 I don't think we'll see another parabolic move for a while, since that would be due to the last "major option date" of 2021 (July 16 options). The next "major option date" would be for January 2022. But, if the pattern continues, then the price floor would be around $500 by January 2022. Ooftah. Think they could last that long?
|
||||
|
||||
2\. Short Position "Gains" And "Losses" Are Unrealized. They Averaged Up.
|
||||
|
||||
I want to bring your attention to another matter that has popped up a lot, and there's a lot of celebration around it. The articles about short sellers "losing" billions of dollars in short positions on meme stocks. Horray!!! Shorts are bleeding money! Right? I don't think so. They're bleeding, but not for this reason.
|
||||
|
||||
[](https://preview.redd.it/kofqhc17vc471.png?width=1214&format=png&auto=webp&s=f33807074f7ea49bb10549e9cc4172ea0c12a02e)
|
||||
|
||||
https://www.cnbc.com/video/2021/06/03/short-sellers-lose-almost-5-billion-in-one-day-on-meme-stocks.html#:~:text=CNBC's%20Kristina%20Partsinevelos%20reports%20on,investors%20push%20the%20names%20higher.
|
||||
|
||||
I've always thought these articles being posted were interesting.... almost as if they wanted to convey that the shorters "covered". (A few small shorters, like new retail shorters, might have covered. But not the big ones).
|
||||
|
||||
Hint hint. They haven't covered. They do not plan to cover. The margin call Thanos snap when they get liquidated will finally make them cover.
|
||||
|
||||
[](https://preview.redd.it/zykwvr337d471.png?width=866&format=png&auto=webp&s=6dbc94d107f4d096bface007717ca9fbb9fd4860)
|
||||
|
||||
https://www.reddit.com/r/wallstreetbets/comments/lawubt/hey_everyone_its_mark_cuban_jumping_on_to_do_an/
|
||||
|
||||
I always look back at the total PUT OI going on an absolute tear in January when they hid SI% and think to myself, "Damn. That's totally ~~not~~ normal."
|
||||
|
||||
Take a look at this. PUT OI spikes to 2e6 OI = 200m shares worth in PUTs. These PUTs were spread far and wide to many options expiring from February 5 all the way to January 2023. What in the hell? Totally normal hedge move, yup. Totally normal.
|
||||
|
||||
[](https://preview.redd.it/zc7xcrch7d471.png?width=399&format=png&auto=webp&s=6c28ec2b8a9f72f0b987c917a05784f1e68b9e5c)
|
||||
|
||||
CALL and PUT OI Comparison; Data from /u/yelyah2
|
||||
|
||||
They're not covering. They're hiding their shorts and trying everything they can to scare you off.
|
||||
|
||||
So in my eyes these articles are all bull. Especially this one from the start of March:
|
||||
|
||||
[](https://preview.redd.it/cpp93z94vc471.png?width=1124&format=png&auto=webp&s=369820614b757f66a48575a2b8cabdb233d9b410)
|
||||
|
||||
https://www.cnbc.com/2021/03/03/melvin-capital-posts-return-of-more-than-20percent-in-february-sources-say.html
|
||||
|
||||
I remember getting pinged about this article and being told that Melvin won, shorters exited, blah blah blah, that was the FUD back then.
|
||||
|
||||
How could they possibly gain 20% in February after getting obliterated in January? Well... they, and other shorters, must have averaged up their short position price. Anyone who took advantage of the GME peak price in January was able to have a fun time with gains.
|
||||
|
||||
[](https://preview.redd.it/jg8yflcpwc471.png?width=1435&format=png&auto=webp&s=ab99e5fe95799b7f65f76293d72366fee57e4591)
|
||||
|
||||
Short Position Unrealized Gains / Losses Based On Opening New Shorts
|
||||
|
||||
Their overall short position price went up, so they could post that they had returns/gains on that massive downward momentum in February. But these gains are all unrealized. They aren't covering, they're just digging a deeper hole because that's all they can do.
|
||||
|
||||
3\. Average Retail Buy Price; Average Short Position Price
|
||||
|
||||
It's an absolute WARZONE right now. The price is so desperately trying to go on a run upward.
|
||||
|
||||
Last week I was noticing [how similar this run was to February](https://www.reddit.com/r/Superstonk/comments/nqbera/things_are_shockingly_similar_to_the_february/), and I was predicting that we'd see [another Gamma Neutral spike](https://www.reddit.com/r/Superstonk/comments/nrwp82/gamma_bombs_all_over_the_market_today/) on June 4th. BUT IT SPIKED UP TWO DAYS EARLIER THAN EXPECTED ON JUNE 2nd. [Data courtesy of [/u/yelyah2](https://www.reddit.com/u/yelyah2/)]
|
||||
|
||||
That was a big, "Wait. What?" moment for me because it implied this gamma was ready to take off much sooner than the previous gamma run of February 24 - March 10. I should have noticed earlier at how much stronger this run was compared to the previous two gammas. Check out this comparison of the price hammers for January, March, and June gamma runs. Big shout out to [/u/sharp717](https://www.reddit.com/u/sharp717/) for identifying [the similarities to the January run as well](https://www.reddit.com/r/Superstonk/comments/nrud2r/price_action_is_shockingly_similar_to_not_only/).
|
||||
|
||||
[](https://preview.redd.it/eyb1v0rldd471.png?width=1434&format=png&auto=webp&s=6a3342786074385bc694fcae316d116af4160946)
|
||||
|
||||
Price Momentum Being Contained. January, March, and June Gamma Squeezes
|
||||
|
||||
There's huuuuge momentum that they have been trying to contain ever since May 25th. The price has been swinging up and down massively each day in this parabolic cycle🚀.
|
||||
|
||||
Have they succeeded with suppressing the gamma squeeze? I mean, time will tell. June 9th is when I expected it to either start to go parabolic or be flash crashed down. But it's a goddamn battlefield right now! And this parabolic run is much different and stronger than the previous one. I personally think this run isn't over with. Their attacks are weaker every time, and there's so much strength still in this parabolic cycle🚀.
|
||||
|
||||
There's so much ammunition being thrown because it truly is getting close to margin call territory, and they're most likely hurting even more in captial from January 15 and April 16 options expiring.
|
||||
|
||||
Did I say margin call territory? I mean - the DANGER ZONE. Marge, call Kenny. Please.
|
||||
|
||||
Some big brain apes discussed this Webull chart and the implications of it relating to their "Danger Zone price". It truly is a goldmine. With how popular Webull is it's probably safe to use this as a baseline for retail (and indirectly a baseline for shorters).
|
||||
|
||||
[](https://preview.redd.it/tyfsbj2cuc471.png?width=947&format=png&auto=webp&s=a8414ca7d6e6866e8d5ba420f79114065e6cc1e3)
|
||||
|
||||
Webull GME Statistics. Average share cost of $156.57
|
||||
|
||||
What is this telling us?
|
||||
|
||||
1. Each horizontal bar represents a cluster of cost basis for retail shares. For example you can see a huge cluster between $76.83 and $156.57. There's way more retail that own shares at that price point than anything above $302.56.
|
||||
|
||||
2. The red indicates that the shares owned above $302.56 (price point when this screenshot was captured) currently have unrealized losses. "They're in the red"
|
||||
|
||||
3. Likewise, the green indicates that the shares owned below $302.56 currently have unrealized gains. "They're in the green".
|
||||
|
||||
4. The blue price point of $156.57 is the average ownership price.
|
||||
|
||||
Seems fair. We can most likely assume that retail's average base cost is around $156.57. Most retail probably started buying in around December, because that's when the news of a GME short squeeze started to really take off. We can now indirectly say that this is also the average short position price.
|
||||
|
||||
GME was over 100% shorted in December:
|
||||
|
||||
- You have to have naked shorts to get over 100% in the first place.
|
||||
|
||||
- OBV implies that barely anyone is selling.
|
||||
|
||||
- This signifies a liquidity issue where synthetics are created, ever-increasing the SI%.
|
||||
|
||||
- Any retail buy was most likely a new short position that was opened or a swap between paper hands and diamond hands.
|
||||
|
||||
Our dear shorties might have an average short position of around $156.57. Give or take a little bit.
|
||||
|
||||
If you have a long position that you opened up at $156.57, and the price goes down to $78.28, you'll be down 50%. If it continues down to $39.14, you'll be down 75%.
|
||||
|
||||
If you have a short position that you opened up at $156.57, and the price goes up to $234.855, you'll be down 50% on margin. If it continues up to $313.14, you'll be down 100% on margin. BOOM. Marge starts calling.
|
||||
|
||||
Assumptions per a big brain ape who discussed this:
|
||||
|
||||
1. Generally the margin requirements on short positions is 100% cash value of the position
|
||||
|
||||
1. When you hit 100% loss, marge starts to call. Example of $156.57 short hitting $313.14. You need $156.57 posted to cover your margin requirement.
|
||||
|
||||
2. WeBull is a large enough broker to likely be considered a representative sample of all GME holders.
|
||||
|
||||
3. This is assuming the positions are unlevered - levering would reduce the margin call point.
|
||||
|
||||
4. This is assuming additional capital was not raised against the positions [Such as shill stock tickers pumped and dumped / Crypto / etc].
|
||||
|
||||
4\. Danger Zone Part 2
|
||||
|
||||
They dun goofed. Their FUD attack today (which we expected) was fruitless. All their tricks have been found out lmao.
|
||||
|
||||
Guess what, Ken? Here's my trick. It's crayons showing the goddamn Danger Zone you're entering and so desperately trying to stay out of.
|
||||
|
||||
The new and improved danger zone is based on the average short price of $156.57 which would trigger 100% losses at $313.14 assuming 100% margin requirements.
|
||||
|
||||
[Note: Speculative based on Webull data. This could very well be $350 or higher, but the battle at $300 signals that this is a very rough place for the shorters to be].
|
||||
|
||||
[](https://preview.redd.it/cquh2loutc471.png?width=1437&format=png&auto=webp&s=cefd9b0a8fd5e4287498468ad3388c1a845bcd4d)
|
||||
|
||||
Danger Zone Visualization
|
||||
|
||||
Is this why there's such a huge battle around $300 right now? And why the price is SEVERELY smacked down when it tries to reach above $350? It's probably because this danger zone is when small HedgeFunds / shorters begin to fall, and it's getting so close to closing in the zone.
|
||||
|
||||
When one of the small shorters fall, it becomes a domino effect. Not only would they initiate buy pressure from covering their short positions, but the banks which are connected to the shorters might get upper-cut just enough to [also send the banks defaulting with the ICC](https://www.reddit.com/r/Superstonk/comments/ngru15/the_flurry_of_rules_before_the_storm_dtc_icc_occ/).
|
||||
|
||||
This would then cascade to all the other shorters under that bank because their swaps with the bank for assets/liabilities to pump their balance sheets would get rug-pulled. Not just that... but everyone else on the brink of defaulting in the entire financial world connected to that bank would start to fall.
|
||||
|
||||
You've all seen the reverse repo market. Things are bad bad BAD in the market. The amount has already reached an all-time high above $500 Billion in a non-quarter end. This is abnormal because quarter-ends are usually the time when banks would take advantage of the repo market to adjust their balance sheets.
|
||||
|
||||
> Other than high levels immediately before a quarter-end, these levels of sustained reverse repo activity in excess of $300 Billion have not been seen since the Great Recession. - [Source](https://www.jdsupra.com/legalnews/repo-market-disruptions-in-reverse-6334085/)
|
||||
|
||||
Everyone in the repo market is terrified of the 2008 bomb that wasn't allowed to finish going off. They're most likely [colluding to prop each other up](https://www.reddit.com/r/Superstonk/comments/nneg7p/european_financial_news_is_reporting_that_hedge/) because of the absolute insanity that could follow. Not just in the stock market. But the repo market, the crypto market, the treasury market, every market potentially.
|
||||
|
||||
[](https://preview.redd.it/6fw8d1jild471.png?width=775&format=png&auto=webp&s=77e35c7d45e37fa81b0cc17e250dce5c13b4892b)
|
||||
|
||||
Possible Collusion In Repo Market
|
||||
|
||||
But hey, all it takes is that one.
|
||||
|
||||
GME has to close just high enough for everything, everything, to come crashing down.
|
||||
@ -0,0 +1,300 @@
|
||||
A House of Cards - Part 1
|
||||
=========================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mvk5dv/a_house_of_cards_part_1/) |
|
||||
|
||||
---
|
||||
|
||||
[God Tier DD 👨🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22God%20Tier%20DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)
|
||||
|
||||
TL;DR- The DTC has been taken over by big money. They transitioned from a manual to a computerized ledger system in the 80s, and it played a significant role in the 1987 market crash. In 2003, several issuers with the DTC wanted to remove their securities from the DTC's deposit account because the DTC's participants were naked short selling their securities. Turns out, they were right. The DTC and it's participants have created a market-sized naked short selling scheme. All of this is made possible by the DTC's enrollee- Cede & Co.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
I hit the image limit in this DD. Given this, and the fact that there's already SO MUCH info in this DD, I've decided to break it into AT LEAST 2 posts. So stay tuned.
|
||||
|
||||
Previous DD
|
||||
|
||||
[1\. Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/)
|
||||
|
||||
[2\. BlackRock Bagholders, INC.](https://www.reddit.com/r/GME/comments/m7o7iy/blackrock_bagholders_inc/)
|
||||
|
||||
[3\. The EVERYTHING Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)
|
||||
|
||||
[4\. Walkin' like a duck. Talkin' like a duck](https://www.reddit.com/r/Superstonk/comments/ml48ov/walkin_like_a_duck_talkin_like_a_duck/)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Holy SH*T!*
|
||||
|
||||
The events we are living through *RIGHT NOW* are the 50-year ripple effects of stock market evolution. From the birth of the DTC to the cesspool we currently find ourselves in, this DD will illustrate just how fragile the *House of Cards* has become.
|
||||
|
||||
We've been warned so many times... We've made the same mistakes *so. many. times.*
|
||||
|
||||
And we never seem to learn from them..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
In case you've been living under a rock for the past few months, the DTCC has been proposing a boat load of rule changes to help better-monitor their participants' exposure. If you don't already know, the DTCC stands for Depository Trust & Clearing Corporation and is broken into the following (primary) subsidiaries:
|
||||
|
||||
1. Depository Trust Company (DTC) - *centralized clearing agency that makes sure grandma gets her stonks and the broker receives grandma's tendies*
|
||||
|
||||
2. National Securities Clearing Corporation (NSCC) - *provides clearing, settlement, risk management, and central counterparty (CCP) services to its members for broker-to-broker trades*
|
||||
|
||||
3. Fixed Income Clearing Corporation (FICC) - *provides central counterparty (CCP) services to members that participate in the US government and mortgage-backed securities markets*
|
||||
|
||||
*Brief* *history* *lesson: I promise it's relevant (this* [*link*](https://www.dtcc.com/annuals/museum/index.html) *provides all the info that follows).*
|
||||
|
||||
The DTC was created in 1973. It stemmed from the need for a centralized clearing company. Trading during the 60s went through the roof and resulted in many brokers having to quit before the day was finished so they could manually record their mountain of transactions. All of this was done on paper and each share certificate was physically delivered. This obviously resulted in many failures to deliver (FTD) due to the risk of human error in record keeping. In 1974, the Continuous Net Settlement system was launched to clear and settle trades using a rudimentary internet platform.
|
||||
|
||||
In 1982, the DTC started using a [Book-Entry Only](https://www.investopedia.com/terms/b/bookentrysecurities.asp) (BEO) system to underwrite bonds. For the first time, there were no physical certificates that actually traded hands. Everything was now performed virtually through computers. Although this was advantageous for many reasons, it made it MUCH easier to commit a certain type of securities fraud- naked shorting.
|
||||
|
||||
One year later they adopted [NYSE Rule 387](https://www.finra.org/rules-guidance/rulebooks/retired-rules/rule-387) which meant most securities transactions had to be completed using this new BEO computer system. Needless to say, explosive growth took place for the next 5 years. Pretty soon, other securities started utilizing the BEO system. It paved the way for growth in mutual funds and government securities, and even allowed for same-day settlement. At the time, the BEO system was a tremendous achievement. However, we were destined to hit a brick wall after that much growth in such a short time.. By October 1987, that's exactly what happened.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
[*"A number of explanations have been offered as to the cause of the crash... Among these are computer trading, derivative securities, illiquidity, trade and budget deficits, and overvaluation.."*](https://historynewsnetwork.org/article/895)*.*
|
||||
|
||||
If you're wondering where the birthplace of High Frequency Trading (HFT) came from, look no further. The same machines that automated the exhaustively manual reconciliation process were also to blame for amplifying the fire sale of 1987.
|
||||
|
||||
[](https://preview.redd.it/3l08f1ud6bu61.png?width=810&format=png&auto=webp&s=2331f409fb4f60b3d62e475c58cf44211b4122a3)
|
||||
|
||||
https://historynewsnetwork.org/article/895
|
||||
|
||||
The last sentence indicates a much more pervasive issue was at play, here. The fact that we still have trouble explaining the calculus is even more alarming. The effects were so pervasive that it was dubbed the [1st global financial crisis](https://www.federalreservehistory.org/essays/stock-market-crash-of-1987)
|
||||
|
||||
Here's another great summary published by the [NY Times](https://www.nytimes.com/2012/10/19/business/a-computer-lesson-from-1987-still-unlearned-by-wall-street.html): *"..**to be fair to the computers.. [they were].. programmed by fallible people and trusted by people who did not understand the computer programs' limitations. As computers came in, human judgement went out."* Damned if that didn't give me goosiebumps... ____________________________________________________________________________________________________________
|
||||
|
||||
Here's an EXTREMELY relevant [explanation](https://historynewsnetwork.org/article/895) from [Bruce Bartlett](https://www.creators.com/author/bruce-bartlett) on the role of derivatives:
|
||||
|
||||
[](https://preview.redd.it/tu88v96vqau61.png?width=805&format=png&auto=webp&s=6e69760997379cb404163cfc6a11b411adbaa344)
|
||||
|
||||
Notice the last sentence? A major factor behind the crash was a disconnect between the price of stock and their corresponding derivatives. The value of any given stock should determine the derivative value of that stock. It shouldn't be the other way around. This is an important concept to remember as it will be referenced throughout the post.
|
||||
|
||||
In the off chance that the market DID tank, they hoped they could contain their losses with [portfolio insurance](https://www.investopedia.com/terms/p/portfolioinsurance.asp#:~:text=Portfolio%20insurance%20is%20a%20hedging,also%20refer%20to%20brokerage%20insurance)*.* Another [article from the NY times](https://www.nytimes.com/2012/10/19/business/a-computer-lesson-from-1987-still-unlearned-by-wall-street.html) explains this in better detail. ____________________________________________________________________________________________________________
|
||||
|
||||
[](https://preview.redd.it/rf6ocoe9abu61.png?width=629&format=png&auto=webp&s=e638c4479aceac77a003ae86fa1cfdd23f5406b8)
|
||||
|
||||
[](https://preview.redd.it/8igwi6mflbu61.png?width=612&format=png&auto=webp&s=853945852aea5a355266bf52b6f1fa573db1e29a)
|
||||
|
||||
[](https://preview.redd.it/fe78gr1qlbu61.png?width=608&format=png&auto=webp&s=4ec59987333e04cef07541229161b3ff30881444)
|
||||
|
||||
A major disconnect occurred when these futures contracts were used to intentionally tank the value of the underlying stock. In a perfect world, organic growth would lead to an increase in value of the company (underlying stock). They could do this by selling more products, creating new technologies, breaking into new markets, etc. This would trigger an organic change in the derivative's value because investors would be (hopefully) more optimistic about the longevity of the company. It could go either way, but the point is still the same. This is the type of investing that most of us are familiar with: investing for a better future.
|
||||
|
||||
I don't want to spend too much time on the crash of 1987. I just want to identify the factors that contributed to the crash and the role of the DTC as they transitioned from a manual to an automatic ledger system. The connection I really want to focus on is the ENORMOUS risk appetite these investors had. Think of how overconfident and greedy they must have been to put that much faith in a computer script.. either way, same problems still exist today.
|
||||
|
||||
Finally, the comment by Bruce Bartlett regarding the mismatched investment strategies between stocks and options is crucial in painting the picture of today's market.
|
||||
|
||||
Now, let's do a super brief walkthrough of the main parties within the DTC before opening this can of worms.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
I'm going to talk about three groups within the DTC- issuers, participants, and Cede & Co.
|
||||
|
||||
Issuers are companies that issue securities (stocks), while participants are the clearing houses, brokers, and other financial institutions that can utilize those securities. Cede & Co. is a subsidiary of the DTC which holds the share certificates.
|
||||
|
||||
Participants have MUCH more control over the securities that are deposited from the issuer. Even though the issuer created those shares, participants are in control when those shares hit the DTC's doorstep. The DTC transfers those shares to a holding account *(Cede & Co.)* and the participant just has to ask "*May I haff some pwetty pwease wiff sugar on top?"* ____________________________________________________________________________________________________________
|
||||
|
||||
Now, where's that can of worms?
|
||||
|
||||
Everything was relatively calm after the crash of 1987.... until we hit 2003..
|
||||
|
||||
**deep breath**
|
||||
|
||||
The DTC started receiving several requests from issuers to pull their securities from the DTC's depository. I don't think the DTC was prepared for this because they didn't have a written policy to address it, let alone an official rule. Here's the half-assed response from the DTC:
|
||||
|
||||
[](https://preview.redd.it/1ctpj263zdu61.png?width=788&format=png&auto=webp&s=6ff2e2d543f53a6ece6d95c334ed995fe67f9c8d)
|
||||
|
||||
https://www.sec.gov/rules/sro/34-47978.htm (section II)
|
||||
|
||||
Realizing this situation was heating up, the DTC proposed [SR-DTC-2003-02](https://www.sec.gov/rules/sro/34-47978.htm#P19_6635)..
|
||||
|
||||
[](https://preview.redd.it/io22id3n7eu61.png?width=774&format=png&auto=webp&s=424ef5b6a70d073c62a47f6a1b82cd739b527b88)
|
||||
|
||||
https://www.sec.gov/rules/sro/34-47978.htm#P19_6635
|
||||
|
||||
Honestly, they were better of WITHOUT the new proposal.
|
||||
|
||||
It became an even BIGGER deal when word got about the proposed rule change. Naturally, it triggered a TSUNAMI of comment letters against the DTC's proposal. There was obviously something going on to cause that level of concern. Why did *SO MANY* issuers want their deposits back?
|
||||
|
||||
...you ready for this sh*t?
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
As outlined in the DTC's opening remarks:
|
||||
|
||||
[](https://preview.redd.it/eq9q8mcubeu61.png?width=1028&format=png&auto=webp&s=eee6231336e398b0d53299a2a7639fdfd333af8c)
|
||||
|
||||
https://www.sec.gov/rules/sro/34-47978.htm#P19_6635
|
||||
|
||||
*OK... see footnote 4.....*
|
||||
|
||||
[](https://preview.redd.it/v884rfqwbeu61.png?width=1053&format=png&auto=webp&s=6fe5db76c9c6fd5e596bbe3c3c64bc6feb64fd97)
|
||||
|
||||
https://www.sec.gov/rules/sro/34-47978.htm#P19_6635
|
||||
|
||||
UHHHHHHH WHAT!??! Yeah! I'd be pretty pissed, too! Have my shares deposited in a clearing company to take advantage of their computerized trades just to get kicked to the curb with NO WAY of getting my securities back... AND THEN find out that the big-d*ck "participants" at your fancy DTC party are literally short selling my shares without me knowing....?!
|
||||
|
||||
....This sound familiar, anyone??? IDK about y'all, but this "trust us with your shares" BS is starting to sound like a major con.
|
||||
|
||||
The DTC asked for feedback from all issuers and participants to gather a consensus before making a decision. All together, the DTC received 89 comment letters (a pretty big response). 47 of those letters opposed the rule change, while 35 were in favor.
|
||||
|
||||
*To save space, I'm going to use smaller screenshots. Here are just a few of the opposition comments..*
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
[](https://preview.redd.it/ds068omndeu61.png?width=894&format=png&auto=webp&s=7958cbf3fde10e1bbb81c6adeb87f2bfc5dc8fde)
|
||||
|
||||
https://www.sec.gov/rules/sro/dtc200302/srdtc200302-89.pdf
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
And another:
|
||||
|
||||
[](https://preview.redd.it/953v7l47feu61.png?width=884&format=png&auto=webp&s=83c2d1998b3c111da7cb31b183b83c62abbe353b)
|
||||
|
||||
https://www.sec.gov/rules/sro/dtc200302/rsrondeau052003.txt
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
AAAAAAAAAAND another:
|
||||
|
||||
[](https://preview.redd.it/pkifz41sqeu61.png?width=804&format=png&auto=webp&s=733a219050239012a2b6b29c1985bdbd1df60303)
|
||||
|
||||
https://www.sec.gov/rules/sro/dtc200302/msondow040403.txt
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*Here are a few in favor**..*
|
||||
|
||||
*All of the comments I checked were participants and classified as market makers and other major financial institutions... go f*cking figure.*
|
||||
|
||||
[](https://preview.redd.it/myk7675zseu61.png?width=617&format=png&auto=webp&s=94c622511fc3392bacca6f1c34375920612bc9bb)
|
||||
|
||||
https://www.sec.gov/rules/sro/dtc200302/srdtc200302-82.pdf
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Two
|
||||
|
||||
[](https://preview.redd.it/ouwx18qmteu61.png?width=692&format=png&auto=webp&s=39dcaabcc228e60ba5e472353285aa330c13ea0a)
|
||||
|
||||
https://www.sec.gov/rules/sro/dtc200302/srdtc200302-81.pdf
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Three
|
||||
|
||||
[](https://preview.redd.it/xpzt606pueu61.png?width=600&format=png&auto=webp&s=79685c694f661b9c7d03093a8908eebe6cad421e)
|
||||
|
||||
https://www.sec.gov/rules/sro/dtc200302/rbcdain042303.pdf
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Here's the [full list](https://www.sec.gov/rules/sro/dtc200302.shtml) if you wanna dig on your own.
|
||||
|
||||
...I realize there are advantages to "paperless" securities transfers... However... It is EXACTLY what Michael Sondow said in his comment letter above.. *We simply cannot trust the DTC to protect our interests when we don't have physical control of our assets***.**
|
||||
|
||||
Several other participants, including Edward Jones, Ameritrade, Citibank, and Prudential overwhelmingly favored this proposal.. How can someone NOT acknowledge that the absence of physical shares only makes it easier for these people to manipulate the market....?
|
||||
|
||||
This rule change would allow these 'participants' to continue doing this because it's extremely profitable to sell shares that don't exist, or have not been collateralized. Furthermore, it's a win-win for them because it forces issuers to keep their deposits in the holding account of the DTC...
|
||||
|
||||
Ever heard of the [fractional reserve banking system](https://www.investopedia.com/terms/f/fractionalreservebanking.asp#:~:text=Fractional%20reserve%20banking%20is%20a,by%20freeing%20capital%20for%20lending)?? Sounds A LOT like what the stock market has just become.
|
||||
|
||||
Want proof of market manipulation? Let's fact-check the claims from the opposition letters above. *I'm only reporting a few for the time period we discussed (2003ish). This is just to validate their claims that some sketchy sh*t is going on.*
|
||||
|
||||
1. [UBS Securities](https://files.brokercheck.finra.org/firm/firm_7654.pdf) (formerly UBS Warburg):
|
||||
|
||||
1. pg 559; SHORT SALE VIOLATION; 3/30/1999
|
||||
|
||||
2. pg 535; OVER REPORTING OF SHORT INTEREST POSITIONS; 5/1/1999 - 12/31/1999
|
||||
|
||||
3. PG 533; FAILURE TO REPORT SHORT SALE INDICATORS;INCORRECTLY REPORTING LONG SALE TRANSACTIONS AS SHORT SALES; 7/2/2002
|
||||
|
||||
2. [Merrill Lynch](https://files.brokercheck.finra.org/firm/firm_16139.pdf) (Professional Clearing Corp.):
|
||||
|
||||
1. pg 158; VIOLATION OF SHORT INTEREST REPORTING; 12/17/2001
|
||||
|
||||
3. [RBC](https://files.brokercheck.finra.org/firm/firm_31194.pdf) (Royal Bank of Canada):
|
||||
|
||||
1. pg 550; FAILURE TO REPORT SHORT SALE TRANSACTIONS WITH INDICATOR; 9/28/1999
|
||||
|
||||
2. pg 507; SHORT SALE VIOLATION; 11/21/1999
|
||||
|
||||
3. pg 426; FAILURE TO REPORT SHORT SALE MODIFIER; 1/21/2003
|
||||
|
||||
Ironically, I picked these 3 because they were the first going down the line.. I'm not sure how to be any more objective about this.. Their entire FINRA report is littered with short sale violations. Before anyone asks "how do you know they aren't ALL like that?" The answer is- I checked. If you get caught for a short sale violation, chances are you will ALWAYS get caught for short sale violations. Why? Because it's more profitable to do it and get caught, than it is to fix the problem.
|
||||
|
||||
Wanna know the 2nd worst part?
|
||||
|
||||
Several comment letters asked the DTC to investigate the claims of naked shorting BEFORE coming to a decision on the proposal.. I never saw a document where they followed up on those requests.....
|
||||
|
||||
NOW, wanna know the WORST part?
|
||||
|
||||
[](https://preview.redd.it/q6jk7as8rfu61.png?width=1057&format=png&auto=webp&s=c66aac021818993e6c23bb7fe96382de8cc9fe7e)
|
||||
|
||||
https://www.sec.gov/rules/sro/34-47978.htm#P99_35478
|
||||
|
||||
The DTC passed that rule change....
|
||||
|
||||
They not only prevented the issuers from removing their deposits, they also turned a 'blind-eye' to their participants manipulative short selling, even when there's public evidence of them doing so...
|
||||
|
||||
....Those companies were being attacked with shares THEY put in the DTC, by institutions they can't even identify...
|
||||
|
||||
___________________________________________________________________________________________________________
|
||||
|
||||
..Let's take a quick breath and recap:
|
||||
|
||||
The DTC started using a computerized ledger and was very successful through the 80's. This evolved into trading systems that were also computerized, but not as sophisticated as they hoped.. They played a major part in the 1987 crash, along with severely desynchronized derivatives trading.
|
||||
|
||||
In 2003, the DTC denied issuers the right to withdraw their deposits because those securities were in the control of participants, instead. When issuer A deposits stock into the DTC and participant B shorts those shares into the market, that's a form of [rehypothecation](https://www.investopedia.com/terms/r/rehypothecation.asp#:~:text=Rehypothecation%20is%20a%20practice%20whereby,or%20a%20rebate%20on%20fees). This is what so many issuers were trying to express in their comment letters. In addition, it hurts their company by driving down it's value. They felt robbed because the DTC was blatantly allowing it's participants to do this, and refused to give them back their shares..
|
||||
|
||||
It was critically important for me to paint that background.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
..now then....
|
||||
|
||||
Remember when I mentioned the DTC's enrollee- Cede & Co.?
|
||||
|
||||
[](https://preview.redd.it/97z3b2k9pju61.png?width=283&format=png&auto=webp&s=67ad209f338a0ccebfaee09cd43944730ac35279)
|
||||
|
||||
https://www.sec.gov/rules/sro/34-47978.htm#P19_6635 (section II)
|
||||
|
||||
I'll admit it: I didn't think they were that relevant. I focused so much on the DTC that I didn't think to check into their enrollee...
|
||||
|
||||
..Wish I did....
|
||||
|
||||
[](https://preview.redd.it/oqpj59jypju61.png?width=830&format=png&auto=webp&s=a7de5c100699c85132b531b501b79a8bafcdfa18)
|
||||
|
||||
https://www.americanbanker.com/news/you-dont-really-own-your-securities-can-blockchains-fix-that
|
||||
|
||||
That's right.... Cede & Co. hold a "master certificate" in their vault, which NEVER leaves. Instead, they issue an *IOU* for that master certificate..
|
||||
|
||||
Didn't we JUST finish talking about why this is such a major flaw in our system..? And that was almost 20 years ago...
|
||||
|
||||
Here comes the mind f*ck
|
||||
|
||||
[](https://preview.redd.it/o4xemx63rju61.png?width=1117&format=png&auto=webp&s=26f60bceb160cefcd95b0d55d2b375f4058981e2)
|
||||
|
||||
https://smithonstocks.com/part-8-illegal-naked-shorting-series-who-or-what-is-cede-and-what-role-does-cede-play-in-the-trading-of-stocks/
|
||||
|
||||
[](https://preview.redd.it/1yfr9x0arju61.png?width=1109&format=png&auto=webp&s=066cac93b0c8fb05e617c81e9fc63eeacb847d4f)
|
||||
|
||||
https://smithonstocks.com/part-8-illegal-naked-shorting-series-who-or-what-is-cede-and-what-role-does-cede-play-in-the-trading-of-stocks/
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Now.....
|
||||
|
||||
You wanna know the BEST part???
|
||||
|
||||
*I found a list of all the DTC* [*participants*](https://www.dtcc.com/-/media/Files/Downloads/client-center/DTC/alpha.pdf) *that are responsible for this mess..*
|
||||
|
||||
I've got your name, number, and I'm coming for you- *ALL OF YOU*
|
||||
|
||||
*to be continued.*
|
||||
|
||||
DIAMOND.F*CKING.HANDS
|
||||
@ -0,0 +1,324 @@
|
||||
House of Cards - Part 2
|
||||
=======================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nlwaxv/house_of_cards_part_2/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
*Prerequisite DD:*
|
||||
|
||||
1. [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/)
|
||||
|
||||
2. [The EVERYTHING Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)
|
||||
|
||||
3. [The House of Cards -- Part 1](https://www.reddit.com/r/Superstonk/comments/mvk5dv/a_house_of_cards_part_1/)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
TL;DR- No freaking way I can do that.
|
||||
|
||||
____________________________________________________________________________________________________________________
|
||||
|
||||
1. Pilot
|
||||
|
||||
I wasn't looking into GameStop when all of this began. Most of my time was spent researching the pandemic's impact on the economy. I'm talking about the economic steam engine that employs people and puts food on their tables. Especially the small businesses that were executively steamrolled by COVID lockdowns. It was scary how fast they had to close their doors.
|
||||
|
||||
I spent a lot of time looking at companies like GameStop. Brick-n-mortar businesses were basically running out of bricks to sh*t. Frankly, GameStop looked a lot like the next Blockbuster and it just seemed like a matter of time before they went under. Had DFV not done his homework, it's possible we wouldn't have a rocket to HODL or a story to TODL.
|
||||
|
||||
Whoever has/had a short position with GameStop was probably thinking the same thing. The number of shares that can be freely traded on a daily basis is referred to as "the float". GameStop has 70,000,000 shares outstanding, but 50,000,000 shares represented "the float". With a small float like this, a [short position of 20% becomes significant](https://bullishbears.com/vw-short-squeeze/). Heck, Volkswagen got squozed with just a [12.8%](https://bullishbears.com/vw-short-squeeze/) short position. So let's use little numbers to walk through an example of how this works.
|
||||
|
||||
Assume VW has 100 shares outstanding. If 12.8% of the company has been sold short, then 12.8 shares (let's just say 13) must be available to purchase at a later date (assuming VW doesn't go bankrupt). However, VW had a float of 45% which meant there was no real strain to cover that 12.8% short position at any moment. However, when Porsche announced they wanted to increase their position in VW, they invested HEAVILY.
|
||||
|
||||
*"The kicker was that Porsche owned 43% of VW shares, 32% in options, and the government owned 20.2%.... In plain terms, it meant that the actual available float went from 45% down to 1% of outstanding shares" (bullishbears.com/vw-short-squeeze/).*
|
||||
|
||||
Let's revisit our scenario. With 100 shares outstanding and 13 shares sold short, what happens if only 1 share was available to cover instead of 45?
|
||||
|
||||
Well..... THIS:
|
||||
|
||||
[](https://preview.redd.it/c1n24ypq5k171.jpg?width=348&format=pjpg&auto=webp&s=2401d50c3ec1197e08564be1ffbd643558e52b6a)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
GameStop is/was the victim of price suppression through short selling. I discussed this topic with [Dr. T](https://www.youtube.com/watch?v=fGVY2Kco8ng) and [Carl Hagberg](https://www.youtube.com/watch?v=KHnpPfWdf78) in [our AMAs.](https://www.youtube.com/watch?v=KHnpPfWdf78) Every transaction has two sides- a buy and a sell. Short selling artificially increases the *supply* of shares and causes the price to decline. When this happens, the price can only increase if *demand* exceeds the increase in supply.
|
||||
|
||||
I started looking closely at GameStop after confirming their reported short position of [140%](https://www.reuters.com/article/us-retail-trading-congress-shorting/short-selling-under-spotlight-in-gamestop-hearing-idUSKBN2AJ026). It's important for me explain this why this is so much different than the VW example...
|
||||
|
||||
140% of GameStop's FLOAT was sold short. There were 50,000,000 shares in that float, so 140% of this was equal to the 70,000,000 shares the company has outstanding. This means AT LEAST 100% of their outstanding shares has been sold short. Now compare that to VW where the short position was only 12.8%... Simply put, it is mathematically impossible to cover more than 100% of a company's outstanding stock.
|
||||
|
||||
The *peak* of the VW squeeze was reached when the demand for shares became surpassed by the supply of those shares. Here, demand represents 12.8% of their stock which must be available to close the short position. With only 1% of shares available, this guaranteed a squeeze until the number of shares available to trade could satisfy the remaining short interest.
|
||||
|
||||
When a company has a short position with more than 100% of total shares outstanding, the preceding argument is thrown out the window. Supply cannot surpass demand because the company can only issue 100% of itself at any given time. Therefore, the additional 40% could only be explained by multiple people claiming ownership of the same share... Surely this is a mistake.. right? I thought this level of short selling was impossible..
|
||||
|
||||
..Until I saw the number of short selling violations issued by FINRA..
|
||||
|
||||
As we go through these FINRA reports, there are a few things to keep in mind:
|
||||
|
||||
1. FINRA is not a part of the government. FINRA is a non-profit entity with [regulatory powers set by congress](https://www.finra.org/about). This makes FINRA the largest self-regulatory organization (SRO) in the United States. The SEC is responsible for setting rules which protect individual investors; FINRA is responsible for overseeing most of the brokers (collectively referred to as members) in the US. As an SRO, FINRA sets the rules by which their members must comply- they are not directly regulated by the SEC
|
||||
|
||||
2. FINRA investigates cases at their own pace. When looking at the "*Date Initiated"* on their reports, it is not synonymous with "*date of occurrence".* Many times, FINRA will not say when a problem occurred, just resolved. It can be YEARS after the initial occurrence. The [DTC participant report](https://www.dtcc.com/-/media/Files/Downloads/client-center/DTC/alpha.pdf) is littered with cases that were initiated in 2019 but occurred in 2015, etc. Many of the violations occurring today will take years to discover
|
||||
|
||||
3. FINRA can issue a violation for each occurrence using a 1:1 format. When it comes to violations like short selling, however, these "occurrences" can last months or even years. When this happens, FINRA issues a violation for multiple occurrences using a 1:MANY format. I discussed this event in [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/) where one violation represented FOUR YEARS of market f*ckery. What's sh*tty is that FINRA doesn't tell you which violations are which. You have to read each line and see if they mention a date range of occurrence within each record. If they don't, you must assume it was for one event... BRUTAL
|
||||
|
||||
4. FINRA's investment portfolio is held by the same entities they are issuing violations to... Let that sink in for a minute
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
2. State your case...
|
||||
|
||||
Can you think of a reason why short sellers would want to understate their short positions? Put yourself in their situation and imagine you're running a hedge fund...
|
||||
|
||||
You operate in a self-regulated (SRO) environment and your records are basically private. If the SEC asks you to justify suspicious behavior, you really don't have to provide it. The worst that could happen is a slap on the wrist. I wrote about this EXACT same thing in [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/). They received a cease-and-desist order from the SEC on 12/10/2018 for failing to submit complete and accurate records. This 'occurred' from November 2012 through April 2016 and contained deficient information for over 80,000,000 trades. Their punishment... $3,500,000... So why even bother keeping an honest ledger?
|
||||
|
||||
Now, suppose you short a bunch of shares into the market. When you report this to FINRA, they require you to mark the transaction with a short sale indicator. In doing so, FINRA builds a paper trail to your short selling activity.
|
||||
|
||||
However... if you omit this indicator, FINRA can't distinguish that transaction from a long sale. Who else would there be to hold you accountable for covering your position? This is especially true for self-clearing organizations like Citadel because there are less parties involved to hold you accountable with recordkeeping. If FINRA thinks you physically owned those shares and sold them (long sale), they have no reason to revisit that transaction in the future... You could literally pocket the cash and dump the commitment to cover.
|
||||
|
||||
Another very important advantage is that it allows short sellers to artificially increase the supply of shares while understating the outstanding short interest on that security. The supply of shares being sold will drive down the price, while the short interest on the stock remains the same.
|
||||
|
||||
So.. aside from paying a fine, how could you possibly lose by "forgetting" to mark that trade with a short sale indicator? It would seem the system almost incentivizes this type of behavior.
|
||||
|
||||
I combed through the [DTC participant report](https://www.dtcc.com/-/media/Files/Downloads/client-center/DTC/alpha.pdf) and found enough dirt to fill the empty chasm that is Ken Griffin's soul. Take a guess at what their most common short selling violation is.. I'm going to assume you said "FAILING TO PROPERLY MARK A SHORT SALE TRANSACTION".
|
||||
|
||||
For the record, I just want to say I called this in March when I wrote [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/). Citadel has one of the highest concentrations of short selling violations in their FINRA report. At the time, I didn't fully understand the consequences of this violation... After seeing how many participants received the same penalty, it finally made sense.
|
||||
|
||||
There are roughly 240 participant account names on the DTC's list. Sh*t you not, I looked at every short selling violation that was published on [Brokercheck.finra.org](https://brokercheck.finra.org/). To be fair, I eliminated participants with only 1 or 2 violations related to short selling. There were PLENTY of bigger fish to fry.
|
||||
|
||||
I literally picked the first participant at the top of the list and found three violations for short selling.
|
||||
|
||||
*cracks knuckles*
|
||||
|
||||
[ABN AMRO Clearing Chicago LLC](https://files.brokercheck.finra.org/firm/firm_14020.pdf) (AACC) is the 3rd largest bank in the Netherlands. They got popped for three short selling violations, one of which included a failure-to-deliver. In total, they have 78 violations from FINRA. Several of these are severe compared to their violations for short selling. However, the short selling violations revealed a MUCH bigger story:
|
||||
|
||||
[](https://preview.redd.it/3t5ylyfz5k171.jpg?width=1055&format=pjpg&auto=webp&s=f961999d09eeee7fbe42364700cbc727869f9e3f)
|
||||
|
||||
So... ABN AMRO submitted an inaccurate short interest position to the NYSE and FINRA and lacked the proper supervisory systems to comply with... practically everything...
|
||||
|
||||
In 2014, AMRO forked over $95,000 to settle this and didn't even say they were sorry.
|
||||
|
||||
In these situations, it's easy to think *"meh, could have been a fluke event"*. So I took a closer look and found violations by the same participants which made it much harder to argue their case of sheer negligence. Here are a couple for AMRO:
|
||||
|
||||
[](https://preview.redd.it/vir299076k171.jpg?width=1079&format=pjpg&auto=webp&s=e17e6ceff040a4be0113c1bc4e435f29fb5ce0a6)
|
||||
|
||||
ABN AMRO got slapped with a $1,000,000 fine for understating capital requirements, failing to maintain accurate books, and failing to supervise employees. If you mess up once or twice but end up fixing the problem- GREAT. When your primary business is to clear trades and you fail THIS bad, there is a much bigger problem going on. It gets hard to defend this as an accident when every stage of the trade recording process is fundamentally flawed. The following screenshot came from the same violation:
|
||||
|
||||
[](https://preview.redd.it/mnpm2gz96k171.jpg?width=733&format=pjpg&auto=webp&s=7e5c66293566b7ca2329f20bcdb634c35395943f)
|
||||
|
||||
[Warehouse receipts](https://www.investopedia.com/terms/w/warehousereceipt.asp#:~:text=A%20warehouse%20receipt%20is%20used,well%20as%20provide%20inventory%20management.) are like the receipts you get after buying lumber online. You can print these out and take them to Home-Depot, where you exchange them for the ACTUAL lumber in the store. Instead of trading the actual goods, you can trade a warehouse receipt instead... so yeah... since this ONE record allowed AMRO to meet their customer's margin requirement, it seems EXTREMELY suspicious that they didn't appropriately remove it once they were withdrawn.
|
||||
|
||||
Do I think this was an accident? F*ck no. Because FINRA reported them 8 years later for doing the SAME F*CKING THING:
|
||||
|
||||
[](https://preview.redd.it/sv0v5igw6k171.jpg?width=1071&format=pjpg&auto=webp&s=02f17082135c702fad6bbc064073ae031151cee7)
|
||||
|
||||
Once again, AMRO got caught understating their margin requirements. Last time, they used the value of withdrawn warehouse receipts to meet their margin requirements. Here, they're using securities which weren't eligible for margin to meet their margin requirements..
|
||||
|
||||
You can paint apple orange, but it's still an apple..
|
||||
|
||||
The bullsh*t I read about in these reports doesn't really shock me anymore. It's actually the opposite.. You begin to *expect* bigger fines as they set higher benchmarks for misconduct. When I find a case like AMRO, I'll usually put more time into it because certain citations represent puzzle pieces. Once you find enough pieces, you can see the bigger picture. So believe me when I say I was genuinely shocked by the [detail report](https://www.finra.org/sites/default/files/fda_documents/2016049875801%20ABN%20AMRO%20Clearing%20Chicago%20LLC%20CRD%2014020%20AWC%20va%20%282019-1572740384682%29.pdf) on this case...
|
||||
|
||||
[](https://preview.redd.it/4lgyti547k171.jpg?width=844&format=pjpg&auto=webp&s=633a928d28caef8cc6719873532aef60f271cefb)
|
||||
|
||||
This has been going on for 8 F*CKING YEARS!?
|
||||
|
||||
Without a doubt, this is a great example of a violation where the misconduct supposedly *ended* in 2015 but took another 4 years for FINRA to publish the d*mn report. If my math is correct, the 8 year "relevant period" plus the 4 years FINRA spent... I don't know... reviewing?... yields a total of 12 years. In other words, from the time this problem started to the time it was publicized by FINRA, the kids in 1st grade had graduated high school...
|
||||
|
||||
Does anyone else think these self-regulatory organizations (SROs) are doing a terrible job self-regulating...? How we can trust these situations are appropriately monitored if it takes 12 years for a sh*t blossom to bloom?
|
||||
|
||||
...OH! I almost forgot... After understating their margin requirements in 22 accounts for over 8 years, ABN AMRO paid a $150,000 fine to settle the dust...
|
||||
|
||||
____________________________________________________________________________________________________
|
||||
|
||||
I know that was a sh*t load of information so let me summarize it for you:
|
||||
|
||||
One of the most common citations occurs when a firm "accidently" marks a short sale as long, or misreports short interest positions to FINRA. When a short sale occurs, that transaction should be marked with a short sale indicator. Despite this, many participants do it to avoid the borrow requirements set by Regulation SHO. If they mark a short sale as long, they are not required to locate a borrow because FINRA doesn't know it's a short sale.
|
||||
|
||||
This is why so many of these FINRA violations include a statement about the broker failing to locate a borrow along with the failure to mark a short sale indicator on the transaction. It literally means the broker was naked short selling a stock and telling FINRA they physically owned that share..
|
||||
|
||||
Suddenly, a "small" violation had much bigger implications. The number of short shares that have been excluded from the short interest calculation is directly related to these violations... and there are HUNDREDS of them. Who knows how many companies have under reported short interest positions..
|
||||
|
||||
To be clear, I did NOT choose them based on the amount of 'dirt' they had. AMRO's violations were like grains of sand on a beach and It's going to take A LOT of dirt to fill the bottomless pit that is Ken Griffin's soul. Frankly, ABN AMRO wouldn't get us there with 10,000 FINRA violations. So without further ado, let's get dirty..
|
||||
|
||||
____________________________________________________________________________________________________
|
||||
|
||||
2. Call em' out...
|
||||
|
||||
When FINRA publishes one of their reports, the granular details like numbers and dates are often left out. This makes it impossible to determine how systematic a particular issue might be.
|
||||
|
||||
For example, if you know that *"XYZ failed to comply with FINRA's short interest reporting requirements"* your only conclusion is that the violation occurred. However, if you know that *"XYZ failed to comply with FINRA's short interest reporting requirements on 15,000 transactions during 2020"* you can start investigating the magnitude of that violation. If XYZ only completed 100,000 transactions in 2020, it means 15% of their transactions failed to meet requirements. This represents a major systematic risk to XYZ and the parties it conducts business with.
|
||||
|
||||
I spent some time analyzing [Apex Clearing Corporation](https://files.brokercheck.finra.org/firm/firm_13071.pdf) after I left ABN AMRO. Apex is 8th on the list and the 2nd participant I found with an evident short selling problem.
|
||||
|
||||
In 2019, FINRA initiated a case against Apex for doing the same sh*t as ABN AMRO. However, the magnitude of this violation really put things into perspective: I got a small taste of how f*cked this house of cards truly is..
|
||||
|
||||
[](https://preview.redd.it/u1b4zh6m7k171.jpg?width=1076&format=pjpg&auto=webp&s=0f14f5fa49e73dad79ff605464fc1c64fa73f5bd)
|
||||
|
||||
This is practically a template of the first ABN AMRO violation we discussed. To see the difference, we need to look at their [letter of Acceptance, Waiver and Consent](https://www.finra.org/sites/default/files/fda_documents/2016049448301%20Apex%20Clearing%20Corporation%20CRD%2013071%20AWC%20va%20%282019-1573777189509%29.pdf) (AWC)..
|
||||
|
||||
[](https://preview.redd.it/zaiywobp7k171.jpg?width=938&format=pjpg&auto=webp&s=7fe2d2323e757efcdedf2ab22aa1ff34e10d7d55)
|
||||
|
||||
Let's break this down step-by-step...
|
||||
|
||||
Apex had an issue for 47 months where certain customers recorded their short positions in an account which was NOT being sent to FINRA. It only takes a few wrinkles on the brain to realize this is a problem. The sample data tells us just how bad that problem is..
|
||||
|
||||
When you see the term "*settlement days",* think "[T+2](https://www.schwab.com/resource-center/insights/content/stock-settlement-why-you-need-to-understand-t2-timeline#:~:text=the%20seller's%20account.-,When%20does%20settlement%20occur%3F,would%20typically%20settle%20on%20Wednesday.)". Apex follows the T+2 settlement period for both [cash accounts and margin accounts](https://www.apexclearing.com/wp-content/uploads/2020/01/Apex-Customer-Information-Brochure-2019.pdf) which means the trade *should* clear 2 days after the original trade date. When you buy stock on a Monday, it should settle by Wednesday.
|
||||
|
||||
Ok.. quick maff...
|
||||
|
||||
There are roughly [252 trading days](https://therobusttrader.com/how-many-trading-days-are-there-in-a-year/) in one year after removing weekends and holidays. Throughout the 47 month "review period", we can safely assume that Apex had roughly 987 ((252/ 12) * 47) settlement dates...
|
||||
|
||||
In other words: 256 misstated reports over 47 months is more than 1 misstatement / week for nearly 4 years. Tell me again how this is *trivial?*
|
||||
|
||||
The wording of the "sample settlement" section is a bit ambiguous... It doesn't clarify if those were the only 2 settlement dates they sampled, or if they were the only settlement dates with reportable issues. Honestly, I would be shocked if it was the latter because auditors don't examine every record, but I can't be certain...
|
||||
|
||||
Anyway... FINRA discovered 256 short interest positions, consisting of 481,195 shares, were *incorrectly* excluded from their short interest report. In addition, they understated the share count by 879,321 in 130 separate short interest positions. Together, this makes 1,360,516 shares that were excluded from the short interest calculation. When you realize nearly 1.5 million 'excluded' shares were discovered in just 2 settlement periods and there were almost 1,000 dates to choose from, it seriously dilates the imagination...
|
||||
|
||||
Once again... FINRA wiped the slate clean for just $140,000...
|
||||
|
||||
I want to talk about one last thing before we jump to the next section. Did you happen to notice the different account types that Apex discussed in their [letter of Acceptance, Waiver and Consent](https://www.finra.org/sites/default/files/fda_documents/2016049448301%20Apex%20Clearing%20Corporation%20CRD%2013071%20AWC%20va%20%282019-1573777189509%29.pdf) ? They specifically instructed their customers to book short positions into a TYPE 1 (CASH) account, or TYPE 5 (SHORT MARGIN) account. A short margin account is just a margin account that holds short positions. The margin requirement for short positions are more strict than regular margin accounts, so I can see the advantage in separating them.
|
||||
|
||||
In the [AMA with Wes Christian](https://www.youtube.com/watch?v=2rJujnpKiqM) *(starting at 7:30)*, he specifically discussed how a broker-dealer's margin account is used to locate shares for short sellers. However, the margin account contains shares that were previously pledged to another party. Given the lack of oversight in securities lending, the problem keeps compounding each time a new borrower claims ownership of that share.
|
||||
|
||||
Now think back to the situation with Apex..
|
||||
|
||||
They asked their customers to book short positions to a short-margin account or a cash account. The user agreement with a margin account allows Apex to continue lending those securities at any time. As discussed with Dr. T and Carl Hagberg, the broker collects interest for lending your margin shares and doesn't pay you anything in return. When multiple locates are authorized for the same share, the broker collects multiple lending fees on the same share.
|
||||
|
||||
In contrast, the cash account falls under the protection of [SEA 15c3-3](https://www.finra.org/sites/default/files/SEA.Rule_.15c3-3.pdf) and consists of shares that have not been leveraged- or lent- like the margin-short account. According to Wes *(starting at 8:30)*, these shares are segregated and cannot be touched. The broker cannot encumber-or restrict- them in any way. However, according to Wes, this is currently happening. He also explained how Canada has legalized this and currently allows broker-dealers to short sell your cash account shares against you.
|
||||
|
||||
____________________________________________________________________________________________________
|
||||
|
||||
Alright.... I'll stop beating the dead horse regarding short sale indicators & inaccurate submissions of short interest positions. Given the volume of citations we haven't discussed, I'll summarize some of my findings, below.
|
||||
|
||||
Keep in mind these are ONLY for "FAILURE TO REPORT SHORT INTEREST POSITIONS" or "FAILURE TO INDICATE A SHORT SALE MODIFIER". If the violations contain additional information, it's because that citation actually listed additional information. It does NOT represent an all-inclusive list of short selling violations for these participants.
|
||||
|
||||
...You wanted to know how systematic this problem is, so here you go... *(EACH BROKER-DEALER NAME IS HYPERLINKED TO THEIR FINRA REPORT)*
|
||||
|
||||
1. [Barclays](https://files.brokercheck.finra.org/firm/firm_19714.pdf) | Disclosure 36 -- "SUBMITTED 86 SHORT INTEREST POSITIONS TOTALING 41,100,154 SHARES WHEN THE ACTUAL SHORT INTEREST POSITION WAS 44,535,151 SHARES.. FAILED TO REPORT 8 SHORT INTEREST POSITIONS TOTALING 1,110,420 SHARES"
|
||||
|
||||
a. $10,000 FINE
|
||||
|
||||
2\. [Barclays](https://files.brokercheck.finra.org/firm/firm_19714.pdf) | Disclosure 54 -- "SUBMITTED AN INACCURATE SHORT INTEREST POSITION TO FINRA AND FAILED TO REPORT ITS SHORT INTEREST POSITIONS IN 835 POSITIONS TOTALING 87,562,328 SHARES"
|
||||
|
||||
a. $155,000 FINE
|
||||
|
||||
3\. [BMO Capital Markets Corp](https://files.brokercheck.finra.org/firm/firm_16686.pdf) | Disclosure 23 -- "SUBMITTED SHORT INTEREST POSITIONS TO FINRA THAT WERE INCORRECT AND FAILED TO REPORT TO FINRA ITS SHORT INTEREST POSITIONS TOTALING OVER 72 MILLION SHARES FOR 11 MONTHS"
|
||||
|
||||
a. $90,000 FINE
|
||||
|
||||
4\. [BNP Paribas Securities Corp](https://files.brokercheck.finra.org/firm/firm_15794.pdf) | Disclosure 53 -- "FAILED TO REPORT TO FINRA ITS SHORT INTEREST IN 2,509 POSITIONS TOTALING 6,051,974 SHARES"
|
||||
|
||||
a. $30,000 FINE
|
||||
|
||||
5\. [BNP Paribas Securities Corp](https://files.brokercheck.finra.org/firm/firm_15794.pdf) | Disclosure 9 -- "ON 35 OCCASIONS OVER A FOUR-MONTH PERIOD, A HEDGE FUND SUBMITTED SALE ORDERS MARKED "LONG" TO BNP FOR CLEARING. FOR EACH OF THOSE "LONG" SALES, ON THE MORNING OF SETTLEMENT, THE HEDGE FUND DID NOT HAVE THE SHARES IN IT'S BNP ACCOUNT TO COVER THE SALE ORDER. IN ADDITION, BNP WAS ROUTINELY NOTIFIED THAT THE HEDGE FUND WOULD NOT BE ABLE TO COVER. NEVERTHELESS, WHEN EACH SETTLEMENT DATE ARRIVED AND THE HEDGE FUND WAS UNABLE TO COVER, BNP LOANED THE SHARES TO THE HEDGE FUND. IN TOTAL, BNP LOANED MORE THAN 8,000,000 SHARES TO COVER THESE PURPORTED "LONG" SALES"
|
||||
|
||||
a. $250,000 FINE
|
||||
|
||||
6\. [Cantor Fitzgerald & Co](https://files.brokercheck.finra.org/firm/firm_134.pdf) | Disclosure 1 - (literally came out on 5/6/2021) -- "THE FIRM SUBMITTED INACCURATE SHORT INTEREST POSITIONS TO FINRA. THE FIRM OVERREPORTED NEARLY [55,000,000 SHORT SHARES](https://www.finra.org/sites/default/files/fda_documents/2018059464001%20Cantor%20Fitzgerald%20%26%20Co.%20CRD%20134%20AWC%20va.pdf) WHICH WERE CUSTODIED WITH AND ALREADY REPORTED BY ITS CLEARING FIRM, WITH WHICH CANTOR MAINTAINS A FULLY DISCLOSED CLEARING AGREEMENT"
|
||||
|
||||
a. $250,000 FINE
|
||||
|
||||
7\. [Cantor Fitzgerald & Co](https://files.brokercheck.finra.org/firm/firm_134.pdf) | Disclosure 31 - "...THE FIRM EXECUTED NUMEROUS SHORT SALE ORDERS AND FAILED TO PROPERLY MARK THE ORDERS AS SHORT... THE FIRM, ON NUMEROUS OCCASIONS, ACCEPTED SHORT SALE ORDERS IN AN EQUITY SECURITY FROM ANOTHER PERSON, OR EFFECTED A SHORT SALE FROM ITS OWN ACCOUNT WITHOUT BORROWING THE SECURITY..."
|
||||
|
||||
a. $53,500 FINE
|
||||
|
||||
8\. [Cantor Fitzgerald & Co](https://files.brokercheck.finra.org/firm/firm_134.pdf) | Disclosure 33 - "...EXECUTED SHORT SALE ORDERS AND FAILED TO PROPERLY MARK THE ORDERS AS SHORT. THE FIRM HAD FAIL-TO-DELIVER POSITIONS AT A REGISTERED CLEARING AGENCY IN THRESHOLD SECURITIES FOR 13 CONSECUTIVE SETTLEMENT DAYS... FAILED TO IMMEDIATELY CLOSE OUT FTD POSITIONS... ACCEPTED SHORT SALE ORDERS FROM ANOTHER PERSON, OR EFFECTED A SHORT SALE FROM ITS OWN ACCOUNT, WITHOUT BORROWING THE SECURITY OR HAVING REASONABLE GROUNDS TO BELIEVE THAT THE SECURITY COULD BE BORROWED..."
|
||||
|
||||
a. $125,000 FINE
|
||||
|
||||
9\. [Canaccord Genuity Corp](https://files.brokercheck.finra.org/firm/firm_1020.pdf) | Disclosure 17 - "THE FIRM EXECUTED SALE TRANSACTIONS AND FAILED TO REPORT EACH OF THESE TRANSACTIONS TO THE FINRA/NASDAQ TRADE REPORTING FACILITY AS SHORT"
|
||||
|
||||
a. $57,500 FINE
|
||||
|
||||
10\. [Canaccord Genuity Corp](https://files.brokercheck.finra.org/firm/firm_1020.pdf) | Disclosure 20 - "THE FIRM EXECUTED SHORT SALE ORDERS AND FAILED TO PROPERLY MARK THE ORDERS AS SHORT"
|
||||
|
||||
a. $27,500 FINE
|
||||
|
||||
11\. [Canaccord Genuity Corp](https://files.brokercheck.finra.org/firm/firm_1020.pdf) | Disclosure 31 - "...SUBMITTED TO NASD MONTHLY SHORT INTEREST POSITION REPORTS THAT WERE INACCURATE"
|
||||
|
||||
a. $85,000 FINE
|
||||
|
||||
12\. Citadel Securities LLC | [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/) -- LITERALLY ALL I TALK ABOUT IN THAT POST. GO READ IT
|
||||
|
||||
13\. [Citigroup Global Markets](https://files.brokercheck.finra.org/firm/firm_7059.pdf) | Disclosure 10 -- "THE FIRMS TRADING PLATFORM FAILED TO RECOGNIZE THAT THE FIRM WAS SELLING SHORT WHEN IT WAS ACTING AS THE CONTRA PARTY TO A CUSTOMER TRADE. AS A RESULT, THE FIRM ERRONEOUSLY REPORTED SHORT SALES TO A FINRA TRADE REPORTING FACILITY AS LONG SALES... EFFECTING SHORT SALES FROM ITS OWN ACCOUNT WITHOUT BORROWING THE SECURITY..."
|
||||
|
||||
a. $225,000 FINE
|
||||
|
||||
14\. [Citigroup Global Markets](https://files.brokercheck.finra.org/firm/firm_7059.pdf) | Disclosure 59 -- "...THE FIRM RECORDED 203,653 SHORT SALE EXECUTIONS ON ITS BOOKS AND RECORDS AS LONG SALES, SUBMITTED INACCURATE ORDER ORIGINATION CODES AND ACCOUNT TYPE CODES TO THE AUDIT TRAIL SYSTEM FOR APPROXIMATELY 2,775,338 ORDERS... "
|
||||
|
||||
a. $300,000 FINE
|
||||
|
||||
15\. [Citigroup Global Markets](https://files.brokercheck.finra.org/firm/firm_7059.pdf) | Disclosure 76 -- "...FAILED TO PROPERLY MARK APPROXIMATELY 9,717,875 SALE ORDERS AS SHORT SALES... FINDINGS ALSO ESTIMATED THAT THE FIRM ENTERED 55 MILLION ORDERS INTO THE NASDAQ MARKET CENTER THAT IT FAILED TO CORRECTLY INDICATE AS SHORT SALES..."
|
||||
|
||||
a. $2,250,000 FINE
|
||||
|
||||
16\. [Cowen and Company LLC](https://files.brokercheck.finra.org/firm/firm_7616.pdf) | Several Disclosures -- almost every other disclosure is for failing to mark a sale with the appropriate indicator, including short AND long sale indicators
|
||||
|
||||
17\. [Credit Suisse Securities LLC](https://files.brokercheck.finra.org/firm/firm_816.pdf) | Disclosure 34 -- "NEW ORDER REPORTS WERE INACCURATELY ENTERED INTO ORDER AUDIT TRAIL SYSTEM (OATS) AS LONG SALES BUT WERE TRADE REPORTED WITH A SHORT SALE INDICATOR"
|
||||
|
||||
a. $50,000 FINE
|
||||
|
||||
18\. [Credit Suisse Securities LLC](https://files.brokercheck.finra.org/firm/firm_816.pdf) | Disclosure 95 -- "BETWEEN SEPTEMBER 2006 AND JUNE 2008, CREDIT SUISSE FAILED TO SUBMIT ACCURATE PERIODIC REPORTS WITH RESPECT TO SHORT POSITIONS..."
|
||||
|
||||
a. $40,000 FINE
|
||||
|
||||
19\. [Deutsche Bank Securities INC.](https://files.brokercheck.finra.org/firm/firm_2525.pdf) | Disclosure 50 -- "THE FIRM FAILED TO REPORT SHORT INTEREST POSITIONS IN DUALLY-LISTED SECURITIES"
|
||||
|
||||
a. $200,000 FINE
|
||||
|
||||
20\. [Deutsche Bank Securities INC.](https://files.brokercheck.finra.org/firm/firm_2525.pdf) | Disclosure 52 -- "THE FIRM... EXPERIENCED MULTIPLE PROBLEMS WITH ITS BLUE SHEET SYSTEM THAT CAUSED IT TO SUBMIT INACCURATE BLUE SHEETS TO THE SEC AND FINRA... INCORRECTLY REPORTED LONG ON ITS BLUE SHEET TRANSACTIONS WHEN CERTAIN TRANSACTIONS SHOULD HAVE BEEN MARKED SHORT"
|
||||
|
||||
a. $6,000,000 FINE (SEVERAL OTHER ISSUES REPORTED IN ADDITION TO SHORTS)
|
||||
|
||||
21\. [Deutsche Bank Securities INC.](https://files.brokercheck.finra.org/firm/firm_2525.pdf) | Disclosure 58 -- "BETWEEN JANUARY 2005 AND CONTINUING THROUGH NOVEMBER 2015, THE FIRM IMPROPERLY INCLUDED THE AGGREGATION OF NET POSITIONS IN CERTAIN SECURITIES OF A NON-US BROKER AFFILIATE... IN ADDITION... DURING THE PERIOD BETWEEN APRIL 2004 AND SEPTEMBER 2012, THE FIRM INAPPROPRIATELY REPORTED CERTAIN SHORT INTEREST POSITIONS ON A NET, INSTEAD OF GROSS, BASIS.."
|
||||
|
||||
a. $1,400,000 FINE
|
||||
|
||||
22\. [Goldman Sachs & Co. LLC](https://files.brokercheck.finra.org/firm/firm_361.pdf) | Disclosure 32 -- "THE FIRM REPORTED SHORT SALE TRANSACTIONS TO FINRA TRADE REPORTING FACILITY WITHOUT THE REQUIRED SHORT SALE MODIFIER"
|
||||
|
||||
a. $260,000 FINE (SEVERAL OTHER ISSUES REPORTED IN ADDITION TO SHORTS)
|
||||
|
||||
23\. [Goldman Sachs & Co. LLC](https://files.brokercheck.finra.org/firm/firm_361.pdf) | Disclosure 54 -- "FAILED TO ACCURATELY APPEND THE SHORT SALE INDICATOR TO FINRA/NASDAQ TRADE REPORTING FACILITY REPORTS... INACCURATELY MARKED SELL TRANSACTIONS ON ITS TRADING LEDGER"
|
||||
|
||||
a. $55,000 FINE
|
||||
|
||||
24\. [Goldman Sachs & Co. LLC](https://files.brokercheck.finra.org/firm/firm_361.pdf) | Disclosure 63 -- "...SUBMITTED TO FINRA AND THE SEC BLUE SHEETS THAT INACCURATELY REPORTED CERTAIN SHORT SALE TRANSACTIONS AS LONG SALE TRANSACTIONS WITH RESPECT TO THE FIRM SIDE OF CUSTOMER FACILITATION TRADES... THE FIRM REPORTED SHORT SALES AS LONG SALES ON ITS BLUE SHEETS WHEN THE TRADING DESK USED A PARTICULAR MIDDLE OFFICE SYSTEM..."
|
||||
|
||||
a. $1,000,000 FINE
|
||||
|
||||
25\. [Goldman Sachs & Co. LLC](https://files.brokercheck.finra.org/firm/firm_361.pdf) | Disclosure 150 -- "GOLDMAN SACHS & CO. FAILED TO REPORT SHORT INTEREST POSITIONS FOR FOREIGN SECURITIES AND NUMEROUS SHARES ONE MONTH... THE FIRM REPORTED SHORT INTEREST POSITIONS IN SECURITIES TOTALING SEVERAL MILLION SHARES EACH TIME WHEN THE ACTUAL SHORT INTEREST POSITIONS IN THE SECURITIES WERE ZERO SHARES... ACCEPTING A SHORT SALE ORDER IN AN EQUITY SECURITY FROM ANOTHER PERSON, OR EFFECTED A SHORT SALE FROM ITS OWN ACCOUNT, WITHOUT BORROWING THE SECURITY OR BELIEVING THE SECURITY COULD BE BORROWED ON THE DATE OF DELIVERY..."
|
||||
|
||||
a. $120,000 FINE
|
||||
|
||||
26\. [Goldman Sachs & Co. LLC](https://files.brokercheck.finra.org/firm/firm_361.pdf) | Disclosure 167 -- "...THE FIRM FAILED TO REPORT TO THE NMC THE CORRECT SYMBOL INDICATING THAT THE TRANSACTION WAS A SHORT SALE FOR TRANSACTIONS IN REPORTABLE SECURITIES..."
|
||||
|
||||
a. $600,000 FINE (SEVERAL OTHER ISSUES REPORTED IN ADDITION TO SHORTS)
|
||||
|
||||
27\. [HSBC Securities (USA) INC.](https://files.brokercheck.finra.org/firm/firm_19585.pdf) | Disclosure 26 -- "FIRM EXECUTED SHORT SALE TRANSACTIONS AND FAILED TO MARK THEM AS SHORT... HSBC SECURITIES HAD A FAIL-TO-DELIVER SECURITY FOR 13 CONSECUTIVE SETTLEMENT DAYS AND FAILED TO IMMEDIATELY CLOSE OUT THE FTD POSITION... THE FIRM CONTINUED TO HAVE A FTD IN THE SECURITY AT A CLEARING AGENCY ON 79 ADDITIONAL SETTLEMENT DAYS..."
|
||||
|
||||
a. $65,000 FINE
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
I'm going to stop at 'H' because I'm tired of writing. Hopefully, you all understand the point so far. We're only 8 letters into the alphabet and have successfully buried Ken to his waist.
|
||||
|
||||
The system that is used to mark the proper transaction type (sell, buy, short sell, short sell exempt, etc.) is obviously broken... There, I said it.. the system is INDUBITABLY, UNDOUBTEDLY, INEVITABLY F*CKED..
|
||||
|
||||
Regardless of the cause- fraud or negligence- there are too many firms failing to accomplish a seemingly simple task. The consequences of which are creating far more shares than we can imagine. It's a gigantic domino effect. If you fail to properly mark 1,000,000 short shares and a year goes by without catching the problem, it's already too late. They're like the f*cking replicators from Stargate..
|
||||
|
||||
In each of the examples listed above, the short interest on the stock was understated by the number of shares excluded... and that was just a handful..
|
||||
|
||||
Knowing this, how can someone look at the evidence and say it's *trivial....?*
|
||||
|
||||
No one really knows HOW systematic this issue is because it is so deeply incorporated in the market that it has BECOME the system itself. Therefore, there is obviously something much deeper going on, here.. How does one argue against the severity of these problems after reading this? There are FAR too many things that don't make sense and FAR too many people turning a blind eye..
|
||||
|
||||
The only conclusion I keep coming back to is that the people with money know what's going on and are desperately trying to keep it under wraps..
|
||||
|
||||
..So.... In an effort to prove this, I looked for violations that showed their desperation to protect this f*cked up system.
|
||||
|
||||
..Buckle up..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
*HOUSE OF CARDS - PART 3 (I'm uploading it now; will link ASAP)*
|
||||
@ -0,0 +1,140 @@
|
||||
House of Cards - Part 3
|
||||
=======================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nlwqyv/house_of_cards_part_3/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
*Prerequisite DD:*
|
||||
|
||||
1. [Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/)
|
||||
|
||||
2. [The EVERYTHING Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)
|
||||
|
||||
3. [The House of Cards -- Part 1](https://www.reddit.com/r/Superstonk/comments/mvk5dv/a_house_of_cards_part_1/)
|
||||
|
||||
4. [The House of Cards - Part 2](https://www.reddit.com/r/Superstonk/comments/nlwaxv/house_of_cards_part_2/)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
TL;DR- No freaking way I can do that.
|
||||
|
||||
_____________________________________________________________________________________________________________________
|
||||
|
||||
Continuing from HOC Part II...
|
||||
|
||||
4. Slimy...
|
||||
|
||||
If you watched the [AMA with Wes Christian](https://www.youtube.com/watch?v=2rJujnpKiqM), he talks about the number of occurrences where the actual short interest is severely understated based on the data his firm obtained for legal proceedings. According to his numbers, in most cases the short interest is 50% - 150% MORE than what is reported by the SEC *(starting at 14:30).*
|
||||
|
||||
The objective isn't to address the issue: it's to keep the issue hidden. Firms that underreport their short interest are gaming the system by taking advantage of how the short interest calculation is done. When the SEC relies on reports that broker-dealers provide, and FINRA takes YEARS to reveal the lies within those reports, the broker-dealer can lie without immediately facing the consequences. It allows these firms to operate in a high-risk environment without exposing just HOW big their risk-appetite is.
|
||||
|
||||
Another example that Wes mentioned was [Merrill Lynch](https://www.sec.gov/news/pressrelease/2016-128.html). Merrill was fined [$415,000,000](https://files.brokercheck.finra.org/firm/firm_16139.pdf) *(violation 3)* in 2016 for using securities held in their customer's accounts to cover their own trades. Check out this screenshot I took from that case:
|
||||
|
||||
[](https://preview.redd.it/v9625j8wek171.jpg?width=1115&format=pjpg&auto=webp&s=85d43bc351fbda75e347bd33a1a550b67dda970e)
|
||||
|
||||
Remember when we mentioned [SEA 15c3-3](https://www.finra.org/sites/default/files/SEA.Rule_.15c3-3.pdf) in the case with Apex? They were asking customers to book short positions to either a cash account or a short margin account. [SEA 15c3-3](https://www.finra.org/sites/default/files/SEA.Rule_.15c3-3.pdf) protects those customers from allowing brokers to lend out the securities within their cash accounts...
|
||||
|
||||
Well Merrill Lynch knocked that one right out of the f*cking park...
|
||||
|
||||
[](https://preview.redd.it/s3zok5wyek171.jpg?width=1129&format=pjpg&auto=webp&s=815e5344912234ceba846dc0d45c8b8b488b82c4)
|
||||
|
||||
Merrill made it seem like the required deposit in their customer reserve account was much lower than it truly was. They wouldn't have been able to use that cash if it reduced the amount below the minimum capital requirement, so they found a way to fudge the numbers. In doing so, they managed to prevent a CODE RED while reaping the benefits of a high-risk 'opportunity'. Should Merrill have filed bankruptcy during that time, those customers would have been completely blindsided.
|
||||
|
||||
In the case of short selling, the *true* exposure of short interest is unknown... and I'm not just talking about the short sale indicator. When a firm fails to deliver securities that were sold short, there's a pretty good indication that they've exposed themselves to a bit of a problem.. Now imagine a case where the FTDs start piling up and they STILL continue to short sell that same security.. think I'm joking?
|
||||
|
||||
Check out the [Royal Bank of Canada](https://files.brokercheck.finra.org/firm/firm_31194.pdf):
|
||||
|
||||
[](https://preview.redd.it/u6yl6tj2fk171.png?width=812&format=png&auto=webp&s=1e44cc507247db1e28c00a213f90054b9abdaa6a)
|
||||
|
||||
Again... I was pretty shocked at that one. However, nothing rang-the-bell quite like this one from [Goldman Sachs](https://files.brokercheck.finra.org/firm/firm_361.pdf):
|
||||
|
||||
[](https://preview.redd.it/5f408er6fk171.png?width=1031&format=png&auto=webp&s=38b9ad83d2a07360af5b5cd99d834a8771b66c93)
|
||||
|
||||
Goldman had 68 occasions in 4 months where they didn't close a failure-to-deliver... In 45 occasions, they CONTINUED to accept customer short sale orders in securities which it had an active failure-to-deliver...
|
||||
|
||||
When a firm is really starting to sweat, they pull certain tricks out of their ass to quell the situation. Again, this is nothing but smoke and mirrors because that's all they can really do. Just as Merrill Lynch artificially lowered their customer reserve deposit, other firms make it look like they cover their short positions.
|
||||
|
||||
One of the ways they do this is by short selling a SH*T load of shares right before a buy-in... Since we're talking about Goldman Sachs, this seems like a great time to showcase their experience with this..
|
||||
|
||||
[](https://preview.redd.it/zhf1hr1afk171.png?width=1049&format=png&auto=webp&s=f704c3722ae287480057ce3e01c561a28b77cf4c)
|
||||
|
||||
I promise... It really is as dumb as it sounds...
|
||||
|
||||
So the perception here is when Goldman's client has a FTD and they find out a buy-in is coming, the required buy-in would obviously be too extreme for the client to handle.. So they begin to buy those shares while simultaneously shorting AT LEAST the same amount they were required to purchase...
|
||||
|
||||
Have you ever failed to repay a loan so you went to another bank and got a loan to cover the first one? Well that's exactly what this is... I know what you're probably thinking... "didn't that just kick the can down the road?". The answer is YES: it didn't actually solve anything..
|
||||
|
||||
There's still one more citation that Goldman received which truly represents the pinnacle of *no-sh*ts-given.* After I cover this, I don't know how anyone could argue the systematic risks that exist within the securities lending business.. Check it out:
|
||||
|
||||
[](https://preview.redd.it/0md200bdfk171.png?width=940&format=png&auto=webp&s=cf5e8310fbcbd73699e3593b2ab5dab418055ab0)
|
||||
|
||||
For 5 years, Goldman relied on a team of 10-12 individuals to locate shares to be used by its clients for short selling. This group was known as the "demand team". Naturally, as the number of requests coming in the door started to increase, it became difficult for the team to properly document all of them. The volume peaked at 20,000 requests PER DAY, but the number of individuals that handled this job stayed the same.
|
||||
|
||||
Obviously, this became too much for them to handle so they opted out of the manual process and found another solution- the F3 key....
|
||||
|
||||
Yes- the F3 key... This button activated an autofill system which completed 98% of Goldman's orders to locate shares
|
||||
|
||||
[](https://preview.redd.it/exqzge3gfk171.png?width=964&format=png&auto=webp&s=ed9c8b740974dad01db69460332c56df81a8d768)
|
||||
|
||||
The problem with Goldman's autofill system was that it used the number of shares available to borrow at the beginning of that day, which had already been accounted for. After using the auto-locate feature, the demand team didn't even verify the accuracy of the autofill feature or document which method was used to locate the shares for each order... and this happened for 5 years..
|
||||
|
||||
Just goes to show how dedicated firms like Goldman Sachs truly are to the smallest of details, you know? Great f*cking work, guys.
|
||||
|
||||
By the way, I have to show one of Goldman's short sale indicator violations... It's too good to pass up.
|
||||
|
||||
[](https://preview.redd.it/5iuhlkcjfk171.png?width=1082&format=png&auto=webp&s=f4e2fa1f106e78b9d282b60c3cee9944e919ea82)
|
||||
|
||||
At some point, you just have to laugh at these ass clowns... I mean seriously... one violation for a 4 year period involving over 380,000,000 short interest positions... they have plenty of other short interest violations, I just laughed at how the magnitude of this one was summarized by FINRA with 10 lines and roughly 4 minutes... whoever wrote that one must have been late for lunch..
|
||||
|
||||
The last thing I'd like to note here is the way in which short sellers use options to "cover" their positions. Wes gave a great overview of this in the AMA *(starting at 6:25)*. Basically, one group will buy puts and another group buys calls. This creates a synthetic share that is only provided if the option is activated. Regardless, short sellers will use that synthetic share to cover their short position and the regulators actually accept it...
|
||||
|
||||
However, as Wes points out, most of those options expire without being activated which means the share is never delivered. This expiration can be set months down the road and allows the short seller to keep kicking the can.
|
||||
|
||||
I doubt I need to say this, but we all remember the wild options activity that was happening shortly after GameStop spiked in January. [u/HeyItsPixel](https://www.reddit.com/u/HeyItsPixel/) was one of the first to point this out. While a lot of that activity was on the retail front, I suspect a lot of it was done by short sellers to cover those positions.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
5. Hedgies are f*cked...
|
||||
|
||||
I'm officially +20 pages deep and there's still so much I'd like to say. It's best saved for another time and another post, I suppose. So I guess I'll wrap all of this up with some of the best news I can possibly provide...
|
||||
|
||||
It all started with a [73 page PDF](https://www.sec.gov/comments/s7-08-08/s70808-318.pdf) that was published in 2005 by a silverback named John D. Finnerty.
|
||||
|
||||
John was a Professor of Finance at Fordham University when he published *"short selling, death spiral convertibles, and the profitability of stock manipulation"*. The document is loaded with sh*t that's incredibly relevant today, especially when it comes to naked short selling. He dives into the exact formula that short sellers use, which is far beyond what my wrinkled brain can interpret, alone...
|
||||
|
||||
..However, when firms are naked shorting a company with the goal of bankrupting them, they leave footprints which are only explained by this event. The proof is in the pudding, so to speak..
|
||||
|
||||
[](https://preview.redd.it/ax7u0r4wfk171.jpg?width=1072&format=pjpg&auto=webp&s=1828755bfe49c47ca178d960f91dfd21d8b0d680)
|
||||
|
||||
Any of this sound familiar??
|
||||
|
||||
*"The manipulator can not drive the share price close to zero unless he can naked short an extraordinary number of shares...* *this form of manipulation would result in... unusually heavy trading volume, and unusually large and persistent fails to deliver at the NSCC".*
|
||||
|
||||
Anyone else remember the volume in GME during the run-up in January? The total volume traded between 1/31/2021 and 2/5/2021 was 1,508,793,439 shares, or an average daily trade volume of 88,752,555 shares. On 1/22/2021, the volume reached 197,157,946... that's roughly 3x the number of shares that exist..
|
||||
|
||||
if this doesn't sound like unusual volume then I'm not sure what is. Furthermore, the FTD report on GameStop was through the roof during this time:
|
||||
|
||||
[](https://preview.redd.it/brz98nbzfk171.jpg?width=1625&format=pjpg&auto=webp&s=83ae877853acd2ec65fa73f57216f00b708a7eab)
|
||||
|
||||
[](https://preview.redd.it/zlla3ak0gk171.jpg?width=1038&format=pjpg&auto=webp&s=c5d4a1331f8c9d97b5338cc55a37310a95c9559b)
|
||||
|
||||
Notice the statement where the manipulator will be relieved of its obligation to cover IF the firm's shares are cancelled in bankruptcy? Did you happen to see footnotes 65 & 66 in the first screenshot of his PDF? It references a company that he used for his analysis...
|
||||
|
||||
[](https://preview.redd.it/zdp3at43gk171.jpg?width=997&format=pjpg&auto=webp&s=8508c9d0c869544f0ccd3a15477abfd64d38897c)
|
||||
|
||||
Charter Communications had a whopping 241.8% short float in 2005... The ONLY way the manipulator could have escaped this was by bankrupting the company and relieving the obligation to repurchase those shares...
|
||||
|
||||
Guess what happened to Charter? They filed for [bankruptcy](https://abcnews.go.com/Business/story?id=7189668&page=1) in 2009...
|
||||
|
||||
However, unlike John's example where naked short sellers were driving down the price without opposition, GameStop had extremely high demand from retail investors to counter this activity. As I have discussed with Dr. T and Carl Hagberg, the run-up in volume during January and February was largely conducted by naked short sellers in an attempt to suppress the share price. As I have shown in the example with Goldman Sachs, firms will short sell during a buy-in for the same exact reason. To stabilize the price, you must stabilize supply and demand.
|
||||
|
||||
...You know what Charter didn't have?
|
||||
|
||||
AN ARMY OF APES TO HODL THE STONK
|
||||
|
||||
DIAMOND. F*CKING. HANDS
|
||||
@ -0,0 +1,20 @@
|
||||
A House of Cards parts I, II, & III in PDF
|
||||
==========================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/nm83eb/a_house_of_cards_parts_i_ii_iii_in_pdf/) |
|
||||
|
||||
---
|
||||
|
||||
[News 📰 | Media 📱](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22News%20%F0%9F%93%B0%20%7C%20Media%20%F0%9F%93%B1%22&restrict_sr=1)
|
||||
|
||||
<https://pdfhost.io/v/lRQ4HqpG0_House_of_Cards_Atobitt.pdf>
|
||||
|
||||
BIIIIIIGGGG shoutout to [u/Softlykile2](https://www.reddit.com/u/Softlykile2/) for providing the link and [u/jupitair](https://www.reddit.com/u/jupitair/) for the post. Go forth and share across all of the interwebs. Let every boomer-ape absorb this information through a traditional & newspapery medium.
|
||||
|
||||
---
|
||||
|
||||
**Alternative PDF Location in case PDFHost is Down posted by [u/Meticulous-](https://www.reddit.com/user/Meticulous-/)**
|
||||
|
||||
[House-of-Cards-by-atobitt.pdf](https://github.com/verymeticulous/wikAPEdia/files/6721578/House-of-Cards-by-atobitt.pdf)
|
||||
@ -0,0 +1,144 @@
|
||||
The naked shorting scam revealed: lending of market maker privileges, the married put trade and why inflicting max pain will bleed them dry
|
||||
===========================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/broccaaa](https://www.reddit.com/user/broccaaa/) | [Reddit](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/) |
|
||||
|
||||
---
|
||||
|
||||
[DD 📊](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%20%F0%9F%93%8A%22&restrict_sr=1)
|
||||
|
||||
UPDATE-4: As soon as someone looked we found millions of naked shorts hidden deep in the call options. The activity is continuing and appears to ramp up as the next FTD cycle approaches. The weird call interest appears to clearly correlate with rising price action and 'closing' of reported FTD volumes. <https://www.reddit.com/r/GME/comments/mhv22h/the_si_is_fake_i_found_44000000_million_shorts/?utm_medium=android_app&utm_source=share>
|
||||
|
||||
UPDATE-3: I think I put too much emphasis on the max pain theory. Options from naked short trades expiring could hurt the short hedges but the real time bomb is in the FTDs piling up. Take a look at <https://iamnotafinancialadvisor.com/discord/DD/og/GMEv13.pdf> for the description and DD pdf
|
||||
|
||||
UPDATE-2: A new post that investigates how the scam could work with updated rules in 2021 is now online: [The naked shorting scam update: selling nude like its 2021](https://www.reddit.com/r/GME/comments/mh6lnz/the_naked_shorting_scam_update_selling_nude_like/)
|
||||
|
||||
UPDATE: This post was removed because the paper was hosted on an unfortunate website. This has now been corrected. I also want to point out that the sources used here are old, some rules have since changed. But read this and think if another version of this scam might be possible in 2021. Would funds be tempted to use such a scam for easy profits? Would desperate players be willing to break the law to hide short behaviour? I'll leave the answer up to you.
|
||||
|
||||
TLDR: Naked short selling privileges could be being illegally lent to short hedge funds by market makers. The married put trade and the even sneakier reverse conversion modification of the trade are described. These types of trade explain:
|
||||
|
||||
- how short interest has been manipulated in official reporting numbers
|
||||
|
||||
- how naked short selling has become so widespread
|
||||
|
||||
- why borrow fees can still be so ridiculously low
|
||||
|
||||
- that the vast majority of options (both puts and calls) might be due to naked short selling
|
||||
|
||||
- how short shares are 'washed' and able to be dumped on the market even during SSR
|
||||
|
||||
- why such a large number of way out of the money calls have been seen recently (actually part of a naked short trick, not long whales or gamma ramps)
|
||||
|
||||
Looking at open put interest *naked shorts sold might be at least 150-200%* of float!
|
||||
|
||||
With patience key options used for the manipulation will expire and the house of cards will collapse. Every time we hit max pain the shorts' pain increases. HODL!!
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
*Note: this is not financial advice. I am not a cat. I read some papers and made some interpretations. Any number of these could be flawed and wrong. Make your own mind up.*
|
||||
|
||||
Introduction
|
||||
|
||||
One of the big questions surrounding GME has been about the reported short interest (SI) since Jan: *How is it possible that reported SI is so low when all other evidence suggests that SI is astronomical in GME?*
|
||||
|
||||
Another question we all have is: *Why the fuck is the borrow rate so low when there are no shares available to borrow?!*
|
||||
|
||||
Here I will try to answer these questions and how they relate to GME and the options market.
|
||||
|
||||
While looking into naked short selling I discovered a few great resources that I will use here. The main one can be found here: [2007.10.09-J-Welborn-Married-Puts-and-Reverse-Conversions.pdf](https://wetransfer.com/downloads/d2c6318f7953ae019390eddfd65b213820210330221314/51f103)
|
||||
|
||||
Here's a little bit of background from the paper:
|
||||
|
||||
>"failures-to-deliver" (FTDs) are, in effect, phantom shares that circulate in the stock market as real shares; just as counterfeit currency destroys the value of a currency, phantom shares deflate the price of a company's shares. FTDs are generated using a variety of mechanisms. One is through abuse of the options market maker exception, which allows options market makers to short shares they have neither borrowed nor located in order to hedge. Abusive short sellers or hedge funds are illegally "renting" the options market maker exception to obtain phantom shares which can be sold into the market.
|
||||
|
||||
These phantom shares have flooded the GME market. In January reported SI was 140% meaning without any doubt massive naked shorting was happening in GME. Now we see that institutions own anywhere from 130-200% of available float once again showing that naked shorting is rife. Finally if we look at retail ownership of GME it could easily be 100%+ of free float. Estimates are difficult but many other great DDs suggest huge retail ownership.
|
||||
|
||||
Here is a quote from a [letter](https://www.sec.gov/rules/proposed/s72303/sonecon010504.txt) former Undersecretary of Commerce Robert Shapiro forwarded to the SEC based on his own research into naked short selling:
|
||||
|
||||
>When the number of uncovered short sales in a stock exceeds its public float-or even the total number of shares issued or outstanding--the only plausible explanation is a concerted and illegal effort by short sellers to flood the marketplace with counterfeit or fictitious shares, in order to artificially drive down the stock's price and increase the value of the shorts. Massive naked short sales turn the equity market into a form of monopoly pricing for the firms that fall victim to such sales, in which the short seller sets the price at a level guaranteed to provide a quasi-monopoly return. These actions, in effect, destroy the integrity of the market system for firms targeted by naked short sellers and create a direct transfer of wealth from existing shareholders to the illegal short sellers. The firms targeted for such manipulation are generally smaller, younger public firms - the type of company which has generated many of the techno logical and organizational innovations that have contributed so much to the increases in business investment and productivity of recent years. As relatively small and young companies with much fewer shares in their public floats than their older and larger counterparts, their individual decline or destruction also generally attracts little public attention.
|
||||
|
||||
Fuck these fraudulent fucks who sell phantom shares to put companies out of business. This time they have fucked with the wrong company because GME HAS A FUCKING SHIT-TON OF GLOBAL ATTENTION!
|
||||
|
||||
The shorts have never been faced with a horde of artistic apes who only know how to HODL, buy the dip and 💎🙌 till moon.
|
||||
|
||||
How a hedge fund can fake SI numbers and sell naked
|
||||
|
||||
One of the perks of being a market maker (MM) is that you don't need to play by the normal rules of FTDs and selling short. In the process of making markets, which requires hedging positions, market makers theoretically may need to sell stock they temporarily do not have. For this reason, Regulation SHO allowed market makers, "...[an] exception from the uniform ''locate'' requirement, as Rule 203(b)(2)(iii), for short sales executed by market makers, as defined in Section 3(a)(38) of the Exchange Act, including specialists and options market makers, but *only in connection with bonafide market making activities*."
|
||||
|
||||
Although only MMs should have the ability to sell stock naked *it is possible to loan their privileges' to other hedgefunds to play short*. This image is taken from the linked paper and gives an example of naked selling for Overstock shares using a *married put* trade:
|
||||
|
||||
[Example of a married put for Overstock shares](https://preview.redd.it/lycx3rdas6q61.png?width=896&format=png&auto=webp&s=2043c8d6476829cc9aed81583e9402377412a563)
|
||||
|
||||
This could be, *and almost certainly is*, being done with GME shares to hide SI and avoid massive borrowing fees.
|
||||
|
||||
The option market maker obtains a market neutral position. Selling puts, alone, would create a net long position. Thus, in theory, the option market maker's naked short sale hedges against downward price moves. The option market maker receives a premium for the puts. In the example above, most of the $5 is the fee the market maker charges for "renting" his naked short sale privileges.
|
||||
|
||||
After the married put is executed, the short seller then sells the "shares" into the market. Every time the short seller sells a share, his net short position increases due to the decreasing long position in the GME stock. The end result is that he is long puts on GME, which is equivalent to being short.
|
||||
|
||||
So it is possible to short sell using MM privileges with an options trick and avoid massive borrowing fees for hard to borrow stock. THIS IS ILLEGAL AND CLEAR MANIPULATION OF THE MM RULES!
|
||||
|
||||
In a 2003 SEC Interpretive Release, the Commission expressed concern about "*the manipulative sale of securities underlying a married put as part of a scheme to drive the market price down and later profit by purchasing the securities at a depressed price*." With increased scrutiny on married puts, anecdotal evidence suggests that they are being masked within market neutral trades known as reverse conversions.
|
||||
|
||||
How to hide your illegal married put: the *reverse conversion***!**
|
||||
|
||||
Here is another example of naked selling for Overstock shares, now using a reverse conversion trade:
|
||||
|
||||
[Example of a reverse conversion version of the married put for Overstock shares](https://preview.redd.it/m7s0acsds6q61.png?width=899&format=png&auto=webp&s=2438f735745da62bd977b1ffa445d6ffdce4b062)
|
||||
|
||||
The addition of the the call sales masks the trade and attempts to hide it's illegality. However, a key point from the paper states that:
|
||||
|
||||
>Regulation SHO stocks with large, unsettled trades often exhibit a similar characteristic: *"short selling" hedge funds with significant put holdings in 13F filings*
|
||||
|
||||
Now to take a look at Puts in GME using some other great ape DD.
|
||||
|
||||
Options trading in GME
|
||||
|
||||
We see a MASSIVE amount of PUTs sold for GME expiring on April 16: <https://www.reddit.com/r/GME/comments/mfw3u4/huge_number_of_puts_expiring_april_16_382k_open/>
|
||||
|
||||
That is a possible 70% of hidden short interest that will expires in the options in a couple of weeks!!
|
||||
|
||||
Many of the PUT trades are likely to be the hedge funds' short positions from married puts. If they can expire worthless the hedge funds lose their bet and the MMs are left with a massive shit-ton of short sold IOUs to deal with.
|
||||
|
||||
If we look into all the put option interest for future months we might see the full scale of the married put naked shorting scam.
|
||||
|
||||
[u/Cuttingwater_](https://www.reddit.com/u/Cuttingwater_/) took a look for me and found that if you tally up all puts <25$ (which just seem like write offs and would never be used) purchased for all available options dates, we are looking at > 150% of the float. That could be at least 150% of float sold naked! This number could be significantly higher as some options traded as part of the scam might have already expired.
|
||||
|
||||
208% if you include all puts OTM
|
||||
|
||||
In the case of the reverse conversion scam an extra call option is involved. For this version of the hidden naked short, the short hedgies are actually left with a way out of the money call. MAYBE THIS IS WHY WE SAW SUCH HIGH OPEN INTEREST FOR 800c CALLS IN RECENT WEEKS!!!
|
||||
|
||||
Every week we end around max pain we inflict more damage on the shorts: <https://www.reddit.com/r/GME/comments/mejp0k/the_concept_of_max_pain_and_why_this_is_probably/>
|
||||
|
||||
Potentially the vast majority of options (both puts and calls) in GME could have been created as part of a naked shorting privilege scam. Therefore the longer we inflict max pain on the GME options, and the more patiently we HODL the more chance we have to ensure these fraudulent fucks are left with nothing.
|
||||
|
||||
All the recent DTCC filings suggest that they are covering their ass and looking into this bullshit before it explodes in their faces. Recent filings also mention that their aware of and ready to deal with option trading shenanigans by the MMs: <https://www.reddit.com/r/GME/comments/mecfwi/too_ape_didnt_read_sec_filings_part_two_fuck/>
|
||||
|
||||
Conclusion
|
||||
|
||||
GME short interest is likely hidden in the options using manipulative trades that illegally allow hedge funds to borrow market maker privileges and avoid paying large borrow fees. Every week that we allow options contracts to finish out of the money the illegal naked short trades become more unsustainable. DTCC filings show that they are scrambling to avoid holding the bag. A larger hand (or whale flipper?) seems to almost always set us down perfectly around the max pain each Friday to drain the shorts...
|
||||
|
||||
A storm is brewing around GME. I'm just gonna keep HODLin' and buyin' that dip.
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
​
|
||||
|
||||
Edit 1: What if the Dark Pools are largely being used for the married put trades. To sell naked shares directly to the shorts along with their puts!!!
|
||||
|
||||
Edit 2: [u/Cuttingwater_](https://www.reddit.com/u/Cuttingwater_/) helped look into the options and found this:
|
||||
|
||||
>[@broccaaa](https://www.reddit.com/user/broccaaa) if you tally up all puts <25$ (which just seem like write offs and would never be used) purchased for all available options dates, we are looking at > 150% of the float\
|
||||
>\
|
||||
>208% if you include all puts OTM
|
||||
|
||||
I will add this to the main text. Could suggest that at least 150% is naked short sold. Other options as part of the scam could've already expired meaning this is a lower bound.
|
||||
|
||||
Edit 3: This also explains why SSR doesn't do much!! When MMs sell short to hedgies it 'washes' the short tag away. The hedges just have 'normal' phantom shares to dump at will!
|
||||
|
||||
Edit 4: *This post does not point to any specific dates for a squeeze*. Options expiring hurts the shorts and drains their resources. The naked short IOUs still need to be paid but sit on the MM books. Any catalyst, gamestop related, DTCC related, or market related, could set things in motion.
|
||||
|
||||
Edit 5: This analysis makes so much sense to me but it is based on papers from more than 10 years ago! I know some rules have changed since then but don't you think another version of this loophole will have been found by these greedy fucks when this method has been profitable for so long?
|
||||
|
||||
Edit 6: The examples I give were for Overstock shares. The shorts fought for years to hide their naked fraudulent asses but they embarrassed themselves by filing evidence of their crimes by accident! <https://www.reddit.com/r/GME/comments/mexlpn/accidentally_released_and_incredibly_embarrassing/?utm_medium=android_app&utm_source=share>
|
||||
@ -0,0 +1,208 @@
|
||||
The naked shorting scam update: selling nude like its 2021
|
||||
==========================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/broccaaa](https://www.reddit.com/user/broccaaa/) | [Reddit](https://www.reddit.com/r/GME/comments/mh6lnz/the_naked_shorting_scam_update_selling_nude_like/) |
|
||||
|
||||
---
|
||||
|
||||
[DD 📊](https://www.reddit.com/r/GME/search?q=flair_name%3A%22DD%20%F0%9F%93%8A%22&restrict_sr=1)
|
||||
|
||||
This post is an update to the one I posted yesterday on [r/GME](https://www.reddit.com/r/GME/) and [r/Wallstreetbetsnew](https://www.reddit.com/r/Wallstreetbetsnew/). I hope to address some of the minor criticisms that were raised and use updated references for interested apes to look into.
|
||||
|
||||
TLDR: This post updates the possibility of a naked shorting scam with massive hidden FTDs and short interest in 2021. By looking at SEC rules and academic papers I show that rule changes do not stop the potential abuses of naked short selling in a material way. Rather they slightly modify how it could be done and optimized. The changes also make the scheme less sustainable on the short side and over time pressure might "coil the spring" and lead to an [unprecedented FTD squeeze](https://iamnotafinancialadvisor.com/Current-DD/).
|
||||
|
||||
With current rules:
|
||||
|
||||
1. Synthetic shares can still be sold to hedge funds as part of a married put trade (or reverse conversion)
|
||||
|
||||
2. The borrowed privileges now only relate to the "bona-fide" market makers exemption from locate requirements
|
||||
|
||||
3. Rather than being able to flood the market with synthetics and let them build up indefinitely, once a security is on the threshold list market makers are forced to cover (after a certain time period)
|
||||
|
||||
If mass naked shorting and married put trades were being carried out in GME this could explain:
|
||||
|
||||
- the "BUG" bids as being part of "bone-fide" requirements to be "regularly and continuously placing quotations [..] on both the bid and ask side of the market"
|
||||
|
||||
- short interest manipulation
|
||||
|
||||
- how naked short selling has become so widespread
|
||||
|
||||
- why borrow fees can still be so ridiculously low (low demand for located shares to borrow)
|
||||
|
||||
- that the vast majority of options (both puts and calls) might be due to naked short selling
|
||||
|
||||
- how short shares are 'washed' and able to be dumped on the market even during SSR
|
||||
|
||||
- why such a large number of way out of the money calls have been seen recently (actually part of a naked short trick, not long whales or gamma ramps)
|
||||
|
||||
- the vast number of trades in OTC / Dark Pools as part of married put trades
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
*Note: this is not financial advice. I am not a cat. I read some papers and made some interpretations. Any number of these could be flawed and wrong. Make your own mind up.*
|
||||
|
||||
Introduction
|
||||
|
||||
The [post I wrote yesterday](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/) was based on an economics paper looking at naked short practices that abused options market maker privileges. The paper was written in 2007 and took Overstock shares as an example of of a stock with massive short share fuckery. Here is a great [Rolling Stone article](https://www.rollingstone.com/politics/politics-news/accidentally-released-and-incredibly-embarrassing-documents-show-how-goldman-et-al-engaged-in-naked-short-selling-244035/) showing court documents confirming the illegal short seller activity in Overstock. Despite the clear similarities with GME in 2021certain SEC rules have changed since the paper was written.
|
||||
|
||||
*Which short selling rules have changed and could a modified version of the scam be happening in 2021?*
|
||||
|
||||
With some help from other apes in the comments and a little extra research I'd like to clarify this and provide some thoughts on what might be going on today.
|
||||
|
||||
SEC rules on short selling and the changes made up until 2006 ( amendments to Regulation SHO under the Securities Exchange Act of 1934 )
|
||||
|
||||
Regulation SHO, which became fully effective on January 3, 2005, set forth a regulatory framework governing short sales. One of the goals of this was to target potentially abusive "naked" short selling practices in certain equity securities. Additional regulation was put in place to limit the selling of securities without first finding a valid share to borrow. The 2005 implementation failed miserably.
|
||||
|
||||
A [fantastic letter](https://www.sec.gov/rules/proposed/s72303/sonecon010504.txt) was written in December 2003 by former Undersecretary of Commerce Robert Shapiro and forwarded to the SEC. In the letter Shapiro detailed findings from his own research and his doubts that the proposed changes in the SEC rules would have any material impact on the abusive practices:
|
||||
|
||||
> In my judgment, the proposed regulations would not significantly reduce short sale abuses. To have a genuine impact on the efficiency and competitiveness of the equity markets, the regulations should provide much stronger disincentives for naked short sales. The integrity of the capital markets demands much stricter regulation than those currently proposed, much greater industry compliance than has occurred of late, and much tighter enforcement than has been seen thus far.
|
||||
|
||||
The [SEC allowed for two exceptions in their ruling](https://www.sec.gov/rules/final/2008/34-58775.pdf), the second of which was highlighted as the source of abuse in my previous post:
|
||||
|
||||
> As adopted in August 2004, Rule 203(b)(3) of Regulation SHO included two exceptions to the mandatory close-out requirement. The first was the "grandfather" provision, which excepted fails to deliver established prior to a security becoming a threshold security. *The second was the "options market maker exception," which excepted any fail to deliver in a threshold security resulting from short sales effected by a registered options market maker to establish or maintain a hedge on options positions that were created before the underlying security became a threshold security.*
|
||||
|
||||
Note that Rule 203(b)(3) of Regulation SHO relates to the close out requirements when large FTDs pile up. The exception that was in place up until 2008 allowed option market makers to completely ignore the closing of their position even in the presence of huge FTDs!!
|
||||
|
||||
The Commission noted that it would look for evidence for whether the options market maker exception for closing FTDs was operating significantly differently from their original expectations. Just a few years later the SEC realized their rules we're still being abused and started updating them again (also from [here](https://www.sec.gov/rules/final/2008/34-58775.pdf)):
|
||||
|
||||
> To the extent that fails to deliver might be part of manipulative "naked" short selling, which could be used as a tool to drive down a company's stock price, such fails to deliver may undermine the confidence of investors. These investors, in turn, may be reluctant to commit capital to an issuer they believe to be subject to such manipulative conduct. In addition, issuers may believe that they have suffered unwarranted reputational damage due to investors' negative perceptions regarding fails to deliver in the issuer's security. Unwarranted reputational damage caused by fails to deliver might have an adverse impact on the security's price...
|
||||
>
|
||||
> ...With respect to the options market maker exception [...] we *reproposed amendments to eliminate the exception*. In addition, the Commission sought comment on two alternative proposals that would require options market maker fails to deliver to be closed out within specific time-frames...
|
||||
>
|
||||
> ...[to achieve] our goal of further reducing fails to deliver and addressing potentially abusive "naked" short selling, we believe that *we must eliminate Regulation SHO's options market maker exception*.
|
||||
|
||||
So after making new rules, then amending those rules, then looking at how well they worked, they realized the initial problem was not fixed.
|
||||
|
||||
Talk about taking your time to fix an issue that you acknowledge should be illegal and is highly detrimental to the market.
|
||||
|
||||
Updated SEC rules for short selling in 2008
|
||||
|
||||
A detailed and fairly easy to read description of the updated SEC rules in 2008 can be found [here](https://www.sec.gov/rules/final/2008/34-58775.pdf). It also has background info on previous rules.
|
||||
|
||||
Prior to updating the rules on options market maker FTD exceptions the SEC sought comment letters from interested parties:
|
||||
|
||||
> One commenter stated that it believes that the current options market maker exception "*harms investors and issuers, hinders the formation of capital, and is fatally flawed as written*" and that it should be eliminated. Another commenter stated that the options market maker exception "is a *well known tool of manipulators* *and must be removed to ensure a level playing field for public companies and their shareholders*." One commenter that supported the amendments noted that "*options market makers should factor the cost of borrowing stock and selling short into the price of the put options being sold*." Commenters also stated that 13 consecutive settlement days was more than sufficient to close out a fail to deliver relating to an options position.
|
||||
|
||||
On the other side of the debate:
|
||||
|
||||
> Commenters who opposed the proposed amendments generally criticized the impact of elimination on options market making risk, quote depths, spread widths, and market liquidity in threshold securities and securities that might become threshold securities. Among other things, they stated that the options market maker exception is integral to the options market maker's ability to make markets and manage risk and that, without the exception, making continuous markets would be very difficult, particularly in longer-dated options. One commenter suggested that "*withdrawing or greatly reducing the exception would cause varying losses of liquidity in over 20% of listed options and their underlying stocks*."
|
||||
|
||||
Of course it would decrease liquidity if your ABILITY TO PRINT SYNTHETIC STOCKS AT WILL WERE REDUCED!!!
|
||||
|
||||
The other comments basically say that market makers would have a hard time guaranteeing that they make guaranteed profits. There is a balance here as market making serves a purpose, but this topic is about the reduction of widespread strategic FTD short selling that endangers the market.
|
||||
|
||||
After considering comments and data on FTDs the SEC stated that:
|
||||
|
||||
> We believe that it is *appropriate to eliminate Regulation SHO's options market maker exception* because substantial levels of fails to deliver continue to persist in threshold securities and it appears that a significant number of these fails to deliver are as a result of the options market maker exception.
|
||||
|
||||
So the market maker exception for closing out FTDs was eliminated. Problem solved, right?
|
||||
|
||||
Rules changed, problem fixed. WRONG!
|
||||
|
||||
The elimination of the options market maker exception for closing out FTDs did help to reduce the number of FTDs in threshold securities (reference [here](https://www.sciencedirect.com/science/article/abs/pii/S1386418112000171)). However market makers have additional privileges when it comes to naked short selling...
|
||||
|
||||
The "bona-fide" market making exception of locating shares before you sell them!!!
|
||||
|
||||
> Rule 203(b)(1) provides that "[a] broker or dealer may not accept a short sale order in an equity security from another person, or effect a short sale in an equity security for its own account, unless the broker or dealer has: (i) Borrowed the security, or entered into a bona-fide arrangement to borrow the security; or (ii) Reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due; and (iii) Documented compliance with this paragraph (b)(1)." This is known as the "locate" requirement. *Rule 203(b)(2)(iii) excepts market makers engaged in bona-fide market making activities from the locate requirement*.
|
||||
|
||||
So "bona-fide" market makers are exempt from locating any shares before selling them. They don't even need to bother pretending they have a "*reasonable grounds to believe that the security can be borrowed*". They want to sell shares they don't have, no problem! As long as they're "bona-fide".
|
||||
|
||||
This means that "bona-fide" market makers can short sell stock with complete exception as part of their business. The privilege they lost in 2008 simply means that they cannot continue to hang onto the FTDs indefinitely with no intention of covering any more.
|
||||
|
||||
Furthermore we continue to have evidence of:
|
||||
|
||||
- [Additional naked short selling when it suits funds around earnings calls (2016)](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2867383),
|
||||
|
||||
- [Continued short selling, fails-to-deliver, and abnormal returns (2016)](https://www.sciencedirect.com/science/article/abs/pii/S092753981630055X)
|
||||
|
||||
Did you really think they would give up the free money scheme *that* easily??
|
||||
|
||||
What is a "bona-fide" market maker
|
||||
|
||||
Seems like people don't really know. The SEC tried to clarify ([page 30](https://www.sec.gov/rules/final/2008/34-58775.pdf)) things as follows:
|
||||
|
||||
> The term "market maker" includes any specialist permitted to act as a dealer, any dealer acting in the capacity of a block positioner, and any dealer who, with respect to a security, holds itself out (by entering quotations in an inter-dealer quotation system or otherwise) as being willing to buy and sell such security for its own account on a regular or continuous basis.
|
||||
>
|
||||
> Moreover, as the Commission has stated previously, a market maker engaged in bona-fide market making is a "broker-dealer that deals on a regular basis with other broker-dealers, actively buying and selling the subject security as *well as regularly and continuously placing quotations in a quotation medium on both the bid and ask side of the market*."
|
||||
|
||||
Well that wasn't very fucking helpful. So they act as a dealer and deal with other dealers while actively buying and selling a security. Looks like a pretty low bar to be allowed to print synthetic shares outside of the normal rules.
|
||||
|
||||
Even [experts in the field](https://www.mmlawus.com/newsitem/pdf/joic-04-2017-0019_8757744610889.pdf) have a hard time understanding the definition:
|
||||
|
||||
> While there is still a lot of room for additional SEC guidance on what constitutes bona-fide market making, the SEC has provided some details on the specific type of trading that would not fall within the Regulation SHO exceptions applying to bona-fide market making activities. However, there is still a large gap between the type of activity that most likely falls within the exception and the concrete examples analyzed by the SEC.
|
||||
|
||||
WHY ARE ALL THE RULES AND DEFINITIONS SO UNCLEAR?!??
|
||||
|
||||
It must be by design. Who would think "reasonable grounds to believe that the security can be borrowed" provides clear guidance? Why is a "bona-fide" market maker so hard to describe yet they have exceptional privileges?
|
||||
|
||||
Some speculation. Let's look at the quote:
|
||||
|
||||
> as well as *regularly and continuously placing quotations* in a quotation medium *on both the bid and ask side* of the market
|
||||
|
||||
COULD THIS BE PART OF THE BUGS WE ARE SEEING WHERE THE BONE-FIDE PLAYERS NEED TO REVEAL THEIR POSITIONS?!?!
|
||||
|
||||
The naked shorting scam updated for 2021
|
||||
|
||||
We've seen that in the years since the method I described [yesterday](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/) was being used circa 2007 some rules have changed to reduce options market maker privileges. This is a summary of the changes:
|
||||
|
||||
- As of 2008 market maker exception for closing out FTDs was eliminated
|
||||
|
||||
- In 2021 "bona-fide" market makers are still exempt from locate requirements, allowing them to naked short sell their shares
|
||||
|
||||
How does this impact the scheme described previously?
|
||||
|
||||
1. Synthetic shares can still be sold to hedge funds as part of a married put trade (or reverse conversion)
|
||||
|
||||
2. The borrowed privileges now only relate to the "bona-fide" market makers exemption from locate requirements
|
||||
|
||||
3. Rather than being able to flood the market with synthetics and let them build up indefinitely, once a security is on the threshold list market makers are forced to cover
|
||||
|
||||
So the new rules do not change the potential scheme in any material way. There is now more risk on the market makers but if they can manage their FTDs they can keep trying to roll them over as before. Does this sound [familiar](https://iamnotafinancialadvisor.com/discord/DD/og/GMEv13.pdf)?
|
||||
|
||||
[](https://preview.redd.it/v5zkyg2x4dq61.png?width=1419&format=png&auto=webp&s=c0c48d441bb8cc46f497775a757dcb5e0c321c0c)
|
||||
|
||||
The FTD squeeze theory from https://iamnotafinancialadvisor.com/Current-DD/
|
||||
|
||||
If a market maker were to manage their FTD deliverables using the above method, or something similar, then in effect they have side stepped the new rules and can delay delivering shares as before.
|
||||
|
||||
The difference with GME is that they NEVER prepared for a situation with this much attention and so many hungry apes. I implore you to read the [full PDF thesis about the FTD squeeze](https://iamnotafinancialadvisor.com/discord/DD/og/GMEv13.pdf). Probably the best overview we have of GME and very much backs up how much rocket fuel is being pumped in as "the springs coil tighter".
|
||||
|
||||
Conclusion
|
||||
|
||||
Previous updates to SEC rules were shown to be insufficient at reducing unwarranted naked short selling. The rule updates in 2008 eliminated the exemption that allowed market makers to never close FTDs for securities with high FTDs. Today "bona-fide" market makers still have a key privilege that lets them sell synthetic shares without the locate requirement. Naked short selling.
|
||||
|
||||
These changes do not eliminate the potential for naked shorting schemes being run by "bona-fide" market makers or in coordination with short hedge funds using the married put options play. If these methods were being widely used it would help to explain:
|
||||
|
||||
- how short interest has been manipulated in official reporting numbers
|
||||
|
||||
- how naked short selling has become so widespread
|
||||
|
||||
- why borrow fees can still be so ridiculously low (low demand for shorts that have been located)
|
||||
|
||||
- that the vast majority of options (both puts and calls) might be due to naked short selling
|
||||
|
||||
- how short shares are 'washed' and able to be dumped on the market even during SSR
|
||||
|
||||
- why such a large number of way out of the money calls have been seen recently (actually part of a naked short trick, not long whales or gamma ramps)
|
||||
|
||||
- the vast number of trades in OTC / Dark Pools as part of married put trades
|
||||
|
||||
- the "BUG" bids as being part of "bone-fide" requirements to be "regularly and continuously placing quotations [..] on both the bid and ask side of the market"
|
||||
|
||||
This is one possible way in which the short interest is being hidden and the short shares being continuously sold, even when very hard to borrow on official channels. The rule changes do not prohibit such schemes, they would just need small modifications.
|
||||
|
||||
As the pressure builds it won't take much for the spring to sprung. Nothing has changed. I HODL!!
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
Some references and further reading:
|
||||
|
||||
- [The 'Phantom Shares' Menace (2008)](https://web.archive.org/web/20190623164454/http://rgmcom.com/articles/PhantomShares.pdf)
|
||||
|
||||
- [What is a Regulation SHO bona-fide market maker? (2017)](https://web.archive.org/web/20190623164454/http://rgmcom.com/articles/PhantomShares.pdf)
|
||||
|
||||
- [(Naked) Short Selling Around Earnings Announcement (2016)](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2867383)
|
||||
|
||||
- [Three Essays on Naked Short Selling and Fails-to-Deliver (2013)](https://search.proquest.com/openview/b7759a0d7c621f67d82668197d99c379/1?pq-origsite=gscholar&cbl=18750&diss=y)
|
||||
@ -0,0 +1,326 @@
|
||||
The naked shorting scam in numbers: AI detection of 140M hidden FTDs, up to 400M naked shorts in married puts and massive dark pool activity by Shitadel and the shorts
|
||||
=======================================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/broccaaa](https://www.reddit.com/user/broccaaa/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mvdgf5/the_naked_shorting_scam_in_numbers_ai_detection/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
This could be it. This could be the whole scam.
|
||||
|
||||
TLDR: HODL. Simple as that. HODL and the shorts have no way to escape. They just writhe around in desperation as FTDs escalate, their options expire and New DTCC rulings approach. To support this belief I:
|
||||
|
||||
- Built an AI to detect Deep ITM calls used to create naked shares. *140M naked shares* produced this way since Jan. Deep ITM call covering appears to be their *last resort of illegal desperation*. It's so easy to spot.
|
||||
|
||||
- Investigated married put naked shorting. At the Jan mini-squeeze put open interest went wild and aligns with *the creation of millions of naked shares with married put trades*. Put volumes appear to be sustained at higher levels to keep rolling over FTDs. *Up to 400M naked shares created in total*.
|
||||
|
||||
- Looked through all 13F filings for funds with large GME positions (long/short). We have a clear idea of who is on which side of this battle and what a true idiot short position looks like (hint: Melvin).
|
||||
|
||||
- Gathered all Dark Pool trading data from FINRA and show massive changes in trade behaviour since Jan. Huge increases in shares traded, but each trade is of few shares. And the key players? Known short funds. Supportive evidence for *naked short trades and suppression of retail buy pressure*.
|
||||
|
||||
I encourage you to read the post and take a look at the data so you can understand it for yourself. Correct me if I'm wrong somewhere. My suggestions? HODL with patience. Take a break from ticker watching. Take a walk outside. The shorts cannot escape 🚀🚀🚀🚀🚀
|
||||
|
||||
*Note: this is not financial advice. I am not a cat. I read gathered some data, made some figures and tried to understand them. Any number of my interpretations could be flawed and wrong. Do your own research, make your own mind up.*
|
||||
|
||||
Introduction
|
||||
|
||||
In this post I build an AI to detect suspicious Deep ITM Calls volumes used to hide FTDs. Take a look at historical options data to show recent fuckery in the options consistent with naked shorting tricks. And then compare these trends with Dark Pool trading volumes by known short funds.
|
||||
|
||||
The post will be broken down into three section:
|
||||
|
||||
1. An AI to detect Deep ITM calls used to hide FTDs
|
||||
|
||||
2. A recap of the major short funds and their recent positions
|
||||
|
||||
3. A recap of naked short selling and the married put
|
||||
|
||||
4. Options fuckery consistent with naked shorting and the married put
|
||||
|
||||
5. Dark Pool matters
|
||||
|
||||
6. Conclusions
|
||||
|
||||
The motivation for the work was to try and test a number of predictions I made in my [first post on the naked shorting scam and the married put trade](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/).
|
||||
|
||||
These are the main ideas I wanted to test or at least find additional data to support or disprove them:
|
||||
|
||||
- short interest is manipulated through naked shorting
|
||||
|
||||
- the vast majority of options (both puts and calls) might be due to naked short selling
|
||||
|
||||
- short shares are 'washed' and able to be dumped on the market even during SSR
|
||||
|
||||
- the large number of way out of the money calls seen recently are actually part of a naked short trick
|
||||
|
||||
- increased trades in OTC / Dark Pools are due to naked shorting and price manipulation
|
||||
|
||||
I've gathered a lot of data to better understand these questions. I believed that some of the data is now conclusive. Other areas more supportive. But the big message is that shorts have no way out and never had a chance to cover 🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
|
||||
An AI to detect Deep ITM calls used to hide FTDs
|
||||
|
||||
When a share is sold without being owned or borrowed (located) it is sold naked, a "naked short". This can happen as part of normal market activity by market makers and I've described [this process and how it can be abused in a previous post](https://www.reddit.com/r/GME/comments/mh6lnz/the_naked_shorting_scam_update_selling_nude_like/). When this occurs the SEC has clear guidelines on how long the seller has to find a share and deliver it to the buyer. If a share is not located in time it must be reported as a Fail to Deliver (FTD). Funds that have FTDs outstanding are required to resolve the position within a given timeframe and are restricted from sell short until then. I won't go into all the details on this but point you towards [the God Tier DD](https://iamnotafinancialadvisor.com/GME/) that covers this.
|
||||
|
||||
One way that a naked short seller can 'resolve' their FTDs without actually covering is through options fuckery. Deep in-the-money (ITM) calls can be bought and exercised immediately to acquire the shares and close the FTDs. [The SEC published a paper on this ILLEAGAL practice](https://www.sec.gov/about/offices/ocie/options-trading-risk-alert.pdf).
|
||||
|
||||
[Other great DD has been posted showing when Deep ITM volumes have been used to cover FTDs](https://www.reddit.com/r/GME/comments/mhv22h/the_si_is_fake_i_found_44000000_million_shorts/).
|
||||
|
||||
I wanted to train a machine learning algorithm (often called an AI) that could automatically identify this illegal fuckery and point us towards what exactly has been going on with GME this last year and particularly since Jan 2021. I won't go into the full details here. Maybe I'll write a technical post if people are interested. Here are the basic details.
|
||||
|
||||
- End of day options data for all strike prices between Jan 1st 2020 and April 6th 2021 was collected
|
||||
|
||||
- I manually labelled more than 10,000 rows of data from mid-Jan to mid-Feb for suspicious volumes likely due to FTD hiding
|
||||
|
||||
- Labelled data was used to train different classifiers (AIs) reserving 30% of the data for testing
|
||||
|
||||
- The best classifier (BalancedBagging-Adaboost) has an accuracy score of 91%
|
||||
|
||||
- I used the model to identify all Deep ITM call options fuckery in the last year
|
||||
|
||||
THE AI FOUND EVIDENCE FOR MORE THEN 140 MILLION FTDs BEING HIDDEN SINCE JANUARY!!!
|
||||
|
||||
[](https://preview.redd.it/4g8izd9godu61.png?width=4500&format=png&auto=webp&s=be0dc2f3937cb050458b23c7f46b79ffd10f0f3a)
|
||||
|
||||
AI detection of option volumes used to hide FTDs and FTD values since January.
|
||||
|
||||
The above figure shows all the suspicious Deep ITM call volumes since January as coloured bars. The colour scheme shows the different strike prices that were used for the trade. FTDs as % of float are drawn on top in the blue line.
|
||||
|
||||
As FTDs were spiking and the situation became more and more unsustainable for the shorts towards the end of Jan ILLEAGAL Deep ITM options purchasing was used to naked short and cover FTDs. Smaller increases in Deep ITM volumes also occurred just before FTD spikes at the end of Feb and mid-Feb.
|
||||
|
||||
On Jan 27th 25 MILLION shares were magically acquired using this trick. 140 MILLION in total since Jan 1st.
|
||||
|
||||
[](https://preview.redd.it/30b6h4qopdu61.png?width=1800&format=png&auto=webp&s=ccafaf7bca99b134b09931bd5a60f11428c190ec)
|
||||
|
||||
Running total of suspicious call volumes since Jan 1st. 140 million as of April 6th.
|
||||
|
||||
[](https://preview.redd.it/m0pd5pwwpdu61.png?width=4500&format=png&auto=webp&s=1cefe0ef8b62b0ca853322c3e4c8b57205e5b641)
|
||||
|
||||
AI detection of option volumes used to hide FTDs and GME price since January.
|
||||
|
||||
Here we see that suspicious Deep ITM call volumes often precede big price increases. This suggests that this illegal trick is used as a last resort. It's so easy to see even by eye when looking at the options chains. When shorts get desperate they go to the deep calls.
|
||||
|
||||
[](https://preview.redd.it/3tk1ye2jqdu61.png?width=4500&format=png&auto=webp&s=d77b931096e9f42d111565bf550c5639070b6bca)
|
||||
|
||||
AI detection of option volumes used to hide FTDs and Short Interest (SI%) since January.
|
||||
|
||||
We see that Short Interest (SI%) decreased massively after all of the suspicious call option activity in late Jan. As well as getting the FTDs under control the suspicious Deep ITM call volumes might have been used to close legitimately borrowed shares to hide the true SI%.
|
||||
|
||||
With all the hype and attention the shorts knew they were completely fucked if they couldn't get everyone to believe it was over. But as we've seen after the lows of Feb this ride is far from over.
|
||||
|
||||
[](https://preview.redd.it/8mfwrbx6tdu61.png?width=4500&format=png&auto=webp&s=ebd2e26293f59af8d438169bead8b5f46a426d51)
|
||||
|
||||
AI detection of option volumes used to hide FTDs and Short Interest (SI%) since April 2020.
|
||||
|
||||
Finally, if we look back over the past year very few suspicious Deep ITM call volumes were occurring. This changed in January 2021 as the FTDs started to get out of control and a huge amount of hype followed the price rises. This again makes me believe that the suspicious Deep ITM call volumes are a sign of desperation from the shorts.
|
||||
|
||||
Speculation alert: Deep ITM calls are bought in times of desperation by the shorts when FTDs, price and/or SI% are getting out of control. At the end of Jan more than 100 million naked short shares were created this way to hide FTDs, hammer down price and hide SI%. Through Feb and up until April another 40 million naked short shares were created this way when the shorts began to lose control of their hidden positions.
|
||||
|
||||
A recap of the major short funds and their recent positions
|
||||
|
||||
[](https://preview.redd.it/l0cx2nq85eu61.jpg?width=850&format=pjpg&auto=webp&s=18900ca805bc55c1372d3d2a39d098c4c6d4a803)
|
||||
|
||||
> Regulation SHO stocks with large, unsettled trades often exhibit a similar characteristic: *"short selling" hedge funds with significant put holdings in 13F filings*.
|
||||
>
|
||||
> MARRIED PUTS, REVERSE CONVERSIONS AND ABUSE OF THE OPTIONS MARKET MAKER EXCEPTION ON THE CHICAGO STOCK EXCHANGE
|
||||
>
|
||||
> John W Welborn, EconomistThe Haverford Group October 9, 2007
|
||||
|
||||
In my earlier post [The naked shorting scam revealed](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/) one thing that struck me was coming across the above quote. So I've gone though all the latest 13F filings that contain GME on [whalewisdom.com](https://whalewisdom.com/) to get a clearer picture of the enemy. Note: the last 13F filings were made on December 31st 2020.
|
||||
|
||||
First a reminder of the known biggest GME shorting losers:
|
||||
|
||||
- [Melvin Capital suffered a 49% loss in the 1st-quarter](https://markets.businessinsider.com/news/stocks/melvin-capital-gamestop-losses-49-first-quarter-decline-reddit-trading-2021-4-1030292729)
|
||||
|
||||
- [Hedge Fund Maplelane lost 45% on Gamestop](https://www.bloomberg.com/news/articles/2021-04-09/hedge-fund-maplelane-is-clawing-way-back-from-gamestop-losses)
|
||||
|
||||
So what does a massive short GME position look like in 13F filings?
|
||||
|
||||
[](https://preview.redd.it/cv9fzhxq6eu61.png?width=1810&format=png&auto=webp&s=833bc3e0760af8047ed58f5375aaaadac19951a0)
|
||||
|
||||
GME positions from 13F filings for the biggest known losers in GME shorting
|
||||
|
||||
That's a lot of puts without any GME shares or calls! *Melvin had 6 million shares in puts* and *Maplelane close to 2 million*. Depending on where you look on whalewisdom Maplelane either has no calls or about 500k shares in calls but never any real shares. For now let's assume Maplelane is all in on puts.
|
||||
|
||||
[](https://preview.redd.it/rkj5le8t7eu61.png?width=1856&format=png&auto=webp&s=9b4fc0fcdc4c95204e5394846bef3eeedfa71b81)
|
||||
|
||||
Melvin hasn't held any GME shares since 2015.
|
||||
|
||||
[](https://preview.redd.it/q71rz0hx7eu61.png?width=1845&format=png&auto=webp&s=75007fcc44dc48023aab5c5b4cd86c0301dda672)
|
||||
|
||||
Maplelane hasn't held any GME shares since 2014.
|
||||
|
||||
So big short losers have:
|
||||
|
||||
- No shares in GME
|
||||
|
||||
- Large put positions in 13F filings (either exclusively puts or the majority of their position)
|
||||
|
||||
What do other funds report for their GME positions?
|
||||
|
||||
[](https://preview.redd.it/506p312y8eu61.png?width=5350&format=png&auto=webp&s=98c7bad44cb276a92b8d9c87d7765e0327b72806)
|
||||
|
||||
All funds with at least 300k in either shares, calls or puts. Short positions are on the left and long positions on the right chart.
|
||||
|
||||
Here we see many of the known offenders. A bunch of short funds with majority puts and sometimes a smaller number of call options. Melvin takes the biggest idiot prize with 6 million shares in puts and nothing else. Here are the main offenders based on their end of 2020 filings:
|
||||
|
||||
- Melvin capital management lp
|
||||
|
||||
- Susquehanna international group llp
|
||||
|
||||
- Ubs group ag
|
||||
|
||||
- Group one trading l.p.
|
||||
|
||||
- Citadel advisors llc
|
||||
|
||||
- Hap trading llc
|
||||
|
||||
- Citigroup inc
|
||||
|
||||
- Wolverine trading llc
|
||||
|
||||
- Maplelane capital llc
|
||||
|
||||
- Jane street group llc
|
||||
|
||||
*Wolverine trading llc* had an almost identical position to *Maplelane capital llc* who reported massive losses. *Ubs group ag* is an interesting one with almost 4 million shares in puts and nothing else. Is UBS a final boss?? *Hap trading llc* & *Citigroup inc* each had almost 2 million shares in puts and not much else. *Group one trading l.p.*, *Shitadel advisors llc*, *Susquehanna international group llp* & *Jane street group llc* feature prominently too.
|
||||
|
||||
Let me remind you of the earlier quote:
|
||||
|
||||
> Regulation SHO stocks with large, unsettled trades often exhibit a similar characteristic: "short selling" hedge funds with significant put holdings in 13F filings.
|
||||
|
||||
Many of these funds exhibit this characteristic and around the end of December and early Jan SI% and FTDs were through the roof. This looks like fuckery.
|
||||
|
||||
Next 13F filing updates should arrive by May 17th. This will be big.
|
||||
|
||||
Speculation alert: Any fund holding predominantly or exclusively a put position is short and likely engaged in illegal married-put naked shorting. The biggest know idiots Melvin and Maplelane have positions that look similar to other large funds (Wolverine, UBS etc.) suggesting we may have a clearer idea of who is up against us. And facing bankruptcy.
|
||||
|
||||
A recap of naked short selling and the married put
|
||||
|
||||
The reason that large put positions in 13F filings is suspicious is because those puts are likely to be the by-product of naked shorting. For a detailed description of how options trading can be used to sell naked shares you can [take a look at this post](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/) and [the follow-up post](https://www.reddit.com/r/GME/comments/mh6lnz/the_naked_shorting_scam_update_selling_nude_like/). Here is a brief description:
|
||||
|
||||
> Being a 'bone-fide' market maker grants you special privileges. One big privilege is to sell shares without needing to fulfil the 'locate' requirement. In other words, 'bone-fide' market makers are allowed to naked short sell, but they must find the shares after a certain amount of time.
|
||||
>
|
||||
> What is a 'bone-fide' market maker? No one really know. The SEC did a shitty job defining it so many brokers can likely pretend they deserve the title.
|
||||
>
|
||||
> How can the 'bone-fide' market maker privileges be abused? Well...
|
||||
>
|
||||
> If a hedge-fund wants to short sell but no shares are available to borrow, or they're too expensive, the hedge-fund can go to their 'bone-fide' market maker friend and follow this simple *'married put'* recipe:
|
||||
>
|
||||
> 1 Buy puts from the market maker covering the number of desired shares.
|
||||
>
|
||||
> 2 Buy shares from the market maker at the same time. The 'bone-fide' market maker can sell the shares naked as he remains net neutral on the trade.
|
||||
>
|
||||
> 3 Make the 'bone-fide' market maker happy by paying a tasty premium for the puts.
|
||||
>
|
||||
> 4 Dump the bought shares on the market to suppress prices and remain net short on the puts!
|
||||
>
|
||||
> For an extra spicy recipe that is harder to detect add the following step before step 4:
|
||||
>
|
||||
> 3b Sell way way out of the money call options equal to the bought shares that you never expect to be worth anything (800c calls anyone?) to the 'bone-fide' market maker for a small premium. The trade now looks like an innocent [reverse conversion](https://www.investopedia.com/terms/r/reverseconversion.asp).
|
||||
|
||||
Options fuckery consistent with naked shorting and the married put
|
||||
|
||||
So, if massive naked short selling via the married put trade has been used to cover up FTDs and SI% since Jan we should see some anomalies in the options chain. Let's take a look.
|
||||
|
||||
[](https://preview.redd.it/is3e6vn3heu61.png?width=4500&format=png&auto=webp&s=3ced765a93d48245b0a8b9a6d2394280b42289e5)
|
||||
|
||||
Total open interest for puts & calls as well as FTDs & SI% since Jan 2020.
|
||||
|
||||
HOLY FUCK THATS A MASSIVE JUMP IN OPEN PUT INTEREST!! And it's been sustained since the end of Jan. for the last year open interest in puts and calls remained very similar. At the end of Jan put open interest increased by more than 300% and completely disconnected from call interest. Immediately after this change FTDs and SI% dropped massively.
|
||||
|
||||
[](https://preview.redd.it/cdh81j9yheu61.png?width=3808&format=png&auto=webp&s=dc589f91495376dc303dbbff8cdec756fa62f712)
|
||||
|
||||
Cumulative open interest for puts & calls since Jan 2020.
|
||||
|
||||
If we look at the cumulative open interest over time we see the number of newly opened put contracts has remained steady throughout Feb and into early April. The rate at which these contracts are being bought is far greater than anything seen in 2020.
|
||||
|
||||
Speculation alert: The huge jump in open put interest could've provided up to 150 MILLION naked short shares to fight the January price spike and hide FTDs and SI%. When combined with certain brokers restricting retail buying, media FUD, January paper hands etc. their ploy appeared quite successful. Since pushing the price back to 40$ in Feb the constant and significant opening of new put contracts has been used to roll over the FTDs and do their best to keep their naked asses covered. Since Jan up to 400 MILLION naked short shares could've been used to hide FTDs and manipulate the price.
|
||||
|
||||
Dark Pool matters
|
||||
|
||||
Previously I speculated that Dark Pools could be used to facilitate the naked shorting trades. This hypothesis can be supported with data by looking at the [OTC data made available by FINRA](https://otctransparency.finra.org/otctransparency/OtcDownload).
|
||||
|
||||
Getting this data was a pain in the ass but I now have all Dark Pool volume data for GME since Nov 2020. This includes [Alternative Trading System (ATS)](https://www.investopedia.com/terms/a/alternative-trading-system.asp) and [Over-the-Counter (OTC)](https://www.investopedia.com/terms/o/otc.asp) volume data.
|
||||
|
||||
[](https://preview.redd.it/ulkgw6e0qhu61.png?width=3076&format=png&auto=webp&s=6447fbe7e5e730f9d90d0525d7db539fff3f4b97)
|
||||
|
||||
Dark Pool trade data for OTC and ATS trade pool.
|
||||
|
||||
Dark Pool activity ramped up massively at the start of Jan, particularly in the OTC pool. Towards the end of Jan as prices spiked during the mini-squeeze the total number of trades more than quadrupled and the average trade size dropped to around 50 shares per trade, remaining there ever since.
|
||||
|
||||
Re-routing of order flow anyone? Short ladder attacks in small share batches anyone?
|
||||
|
||||
If OTC trading was being used to suppress retail buy pressure we'd probably expect to find the worst of all the brokers **Robinhood** involved in the trading pool.
|
||||
|
||||
[](https://preview.redd.it/83iw1c15rhu61.png?width=3600&format=png&auto=webp&s=d7db9804c36d863a17be7d7bc8d0ce9f6a1c1586)
|
||||
|
||||
Total shares trades by firm for OTC and ATS pools since Jan. Note: using Log10 scale for comparison. Citadel actually traded 400M shares OTC!!!
|
||||
|
||||
Well what a surprise. Citadel trading 400M dark pool shares. Robinhood trading 2 million shares on OTC. The average trade size was ≈1 share which is fucking weird. Interactive Brokers only traded 9559 shares OTC but they made 9559 trades. Exactly 1 share per trade. Fucking weird.
|
||||
|
||||
Looking at the OTC market participant names, does anything look familiar? Oh yeah! Some of our short funds with massive puts in 13F filings also love to trade OTC!!
|
||||
|
||||
- CITADEL SECURITIES LLC
|
||||
|
||||
- JANE STREET CAPITAL, LLC
|
||||
|
||||
- UBS SECURITIES LLC
|
||||
|
||||
- WOLVERINE SECURITIES, LLC,
|
||||
|
||||
And the [worst offenders for Robinhood payment for order flow (PFOF)](https://www.washingtonpost.com/business/2021/01/29/robinhood-citadel-gamestop-reddit/):
|
||||
|
||||
- CITADEL SECURITIES LLC
|
||||
|
||||
- VIRTU AMERICAS LLC
|
||||
|
||||
- G1 EXECUTION SERVICES, LLC
|
||||
|
||||
- JANE STREET CAPITAL, LLC
|
||||
|
||||
- TWO SIGMA SECURITIES, LLC
|
||||
|
||||
TWO SIGMA SECURITIES, LLC is an interesting one. As well as benefiting from PFOF they are also a known short. They don't show up in the 13F filings but they were [reported to take a big hit from short positions in Gamestop](https://www.ft.com/content/1ed2b0de-ea10-4a50-8f33-9f0a1cd38be9).
|
||||
|
||||
COMHAR CAPITAL MARKETS, LLC is a [UK investment firm](https://www.comharcapital.co.uk/). What are they doing trading 14 million GME shares OTC?!? I'm calling bullshit and suggesting this firm can be added to the short fund list.
|
||||
|
||||
COWEN AND COMPANY have 100k shares in puts from 13F but didn't show up in the earlier list as I set a minimum of 300k shares to be included. Another short hedge.
|
||||
|
||||
LEK SECURITIES CORPORATION don't have any obvious short positions in GME or news reports of losses. However they were [slapped by the SEC for large scale market manipulation in the recent past](https://finance.yahoo.com/news/sec-obtains-final-judgments-against-200100044.html).
|
||||
|
||||
Speculation alert: OTC trades have seen massive volume and order size changes since early January. Many of the participants are known short funds. Changes in OTC trading align with evidence of manipulative naked short selling (Deep ITM calls and married-puts). OTC trading has been used to create millions of naked short shares and reroute retail orders to suppress buying pressure.
|
||||
|
||||
Conclusions
|
||||
|
||||
Hedgies are fucked. Just look at the amount of effort they've had to put into keeping a lid on this thing!!! *When they lose control of the FTDs they lose control of the price*. Millions of illegal naked short shares created in a desperate effort to make retail go away. But guess what??
|
||||
|
||||
[](https://preview.redd.it/zz5eu179biu61.gif?format=mp4&s=4b1aca79969f4d3653b39582fb94e9a3de4dfc8b)
|
||||
|
||||
Speculation alert: Here are my thoughts for what's happened with GME in 2021:
|
||||
|
||||
- FTDs and SI% were getting out of control in early Jan
|
||||
|
||||
- As prices increased and more hype came to GME the shorts got more and more desperate
|
||||
|
||||
- Dark Pool OTC volumes went through the roof and Deep ITM call volumes were used to create naked shares ahead of the end of Jan price spike
|
||||
|
||||
- When prices really started to move from Jan 25th - 29th more than 100 million shares were created with Deep ITM call and married-put naked shorting and used to hammer down price and hide SI%
|
||||
|
||||
- A coordinated blocking of buy orders on key retail brokers and media induced FUD helped the shorts knock down the price and scare off some of the FOMO paper hand gang.
|
||||
|
||||
- [Something happened to the short share borrow fees](https://www.reddit.com/r/Superstonk/comments/mma7eh/analysis_deep_dive_looking_at_historical_si_ftd/) that completely disconnect from normal pricing.
|
||||
|
||||
- From Feb onwards average trade size on OTC decreased to around 50 shares per trade. That's a 70%+ drop in trade size. Retail orders were funnelled through Dark Pools to control buying pressure and 'short ladder attacks' used to control price.
|
||||
|
||||
- ETFs were used to hide more and more FTDs from the apes. I have data on ETFs but its such a pain to analyse (70+ funds, all different GME allocations, rebalancing over time etc..).
|
||||
|
||||
- DFV doubled down. RC tweeted an ice-cream cone. Deep ITM calls increased. FTDs remerged and on Feb 25th prices started flying again.
|
||||
|
||||
- All this time FTDs and prices have been manipulated with tricky options trades. Up to 200 million naked short shares could've been made from Feb through to April 6th using married put trades.
|
||||
|
||||
- But the apes are still here. Millions of short fund options have expired. FTDs are shown to get uncontrollable over time. An [unprecedented FTD squeeze](https://iamnotafinancialadvisor.com/GME/) will come. New DTCC rules, a stronger SEC, GME annual meeting and share recall. So many catalysts. Shorts are fucked.
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
@ -0,0 +1,194 @@
|
||||
The naked shorting scam in numbers part deux: Up to date FTD, ETF, SI, Options & Dark Pool Data. GME is the shorted to shit unicorn that can never happen again.
|
||||
================================================================================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/broccaaa](https://www.reddit.com/user/broccaaa/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/o14ccz/the_naked_shorting_scam_in_numbers_part_deux_up/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
Introduction
|
||||
|
||||
Since my last major post a lot's happened with our favourite stonk. Top DD apes like [u/criand](https://www.reddit.com/u/criand/) and [u/HomeDepotHank69](https://www.reddit.com/u/HomeDepotHank69/) have dug into how the FTD cycle impacts price down the road. [u/RocketApes](https://www.reddit.com/u/RocketApes/) managed to build a model to predict GME price movements. And we saw another big price movement up to the edge of $350.
|
||||
|
||||
The purpose of this post is to update a lot of the figures I've shared previously while adding a few more observations. I'll give brief descriptions of what each figure is showing but I'll not go into deep speculation here. Instead I'll possibly work on a follow up theory post in the coming days but already make all the data in this post available to the community.
|
||||
|
||||
My previous posts went into a lot more speculation and can be referenced if you're interested in going deeper in a particular area:
|
||||
|
||||
1. [The naked shorting scam revealed: lending of market maker privileges, the married put trade and why inflicting max pain will bleed them dry](https://www.reddit.com/r/GME/comments/mgj0j1/the_naked_shorting_scam_revealed_lending_of/)
|
||||
|
||||
2. [The naked shorting scam update: selling nude like its 2021](https://www.reddit.com/r/GME/comments/mh6lnz/the_naked_shorting_scam_update_selling_nude_like/?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
3. [The naked shorting scam in numbers: AI detection of 140M hidden FTDs, up to 400M naked shorts in married puts and massive dark pool activity by Shitadel and the shorts](https://www.reddit.com/r/Superstonk/comments/mvdgf5/the_naked_shorting_scam_in_numbers_ai_detection/?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
4. [The naked shorting scam using ETFs: mass shifting of FTDs from GME to 20+ ETFs & 27+ billion dollars still owed in remaining SI](https://www.reddit.com/r/Superstonk/comments/n1vgbb/the_naked_shorting_scam_using_etfs_mass_shifting/)
|
||||
|
||||
5. [All New 13F filings: data visualised for all major fund position changes and the new short players in GME](https://www.reddit.com/r/Superstonk/comments/nev6po/all_new_13f_filings_data_visualised_for_all_major/?utm_source=share&utm_medium=web2x&context=3)
|
||||
|
||||
6. [Analysis deep dive: looking at historical SI% + FTD data and modelling share borrow fees since Jan](https://www.reddit.com/r/Superstonk/comments/mma7eh/analysis_deep_dive_looking_at_historical_si_ftd/)
|
||||
|
||||
Now to get into the data and see what the fuck has been going on with reported stonk numbers in the last weeks.
|
||||
|
||||
*Note: this is not financial advice. I am not a cat. I gathered some data, made some figures and tried to understand them. Any number of my interpretations could be flawed and wrong. Do your own research, make your own mind up.*
|
||||
|
||||
Understanding the Cycle: Fails to deliver (FTDs) in GME and linked ETFs
|
||||
|
||||
A lot of great posts in recent weeks have looked at T-21, T-35 and more recently net capital requirement cycles. Other apes have pointed out that price often moves upward just before short interest (SI) reporting cycles to manipulate down their numbers.
|
||||
|
||||
Although elements to all these theories are now close to proven there remain some outstanding questions. Why are the cycles apparently so clean without many overlapping cycles? What is the exact trigger for the shorts' FTD countdowns?
|
||||
|
||||
I don't have the answer to these but I'll put out a bunch of data that might help the other wrinkly apes improve their theories. In later sections I also try to understand what is linking the different 'meme' stock price movements in 2021.
|
||||
|
||||
[](https://preview.redd.it/vd301zksol571.png?width=4500&format=png&auto=webp&s=fc0e1e050248189449d35e7cb5f498a39bb694d3)
|
||||
|
||||
Total FTDs for GME and selected ETFs in 2021 with GME close price overlaid.
|
||||
|
||||
Fails in GME dropped off after the January mini-squeeze but were transferred over to GME containing ETFs from February onwards. IWM and XRT are the most popular ETFs to naked short and fail on. In mid-May IWM, the *iShares Russell 2000 ETF*, had a massive 4 million share spike in FTDs. GME price began to rise steadily shortly after.
|
||||
|
||||
[](https://preview.redd.it/12jl7hzuol571.png?width=4500&format=png&auto=webp&s=d2cde3c0a6237ea464cb419c6664b5b9fba393ce)
|
||||
|
||||
Total FTDs for GME and all ETFs combined in 2021 with GME close price overlaid.
|
||||
|
||||
Although I only selected the top 19 GME containing ETFs for most of the analyses (first figure), when I grouped all GME containing ETFs together (more than 70 of them) we see that the pattern of FTDs in 2021 is very similar. This means that the selected 19 ETFs contain almost all of the interesting FTD info.
|
||||
|
||||
[](https://preview.redd.it/wb6gjdhzll571.png?width=4500&format=png&auto=webp&s=cdf92de9dbaebbd1542211b936f8ade353235cc9)
|
||||
|
||||
Total FTDs for GME and selected ETFs in since Jan 2020 with GME close price overlaid.
|
||||
|
||||
Looking back on GME and ETF FTDs since Jan 2020 we see that the recent large spike in IWM FTDs is actually relatively small compared to some of the FTD spikes seen in 2020. On 3 separate occasions in 2020 IWM FTDs spiked to over 8 million shares.
|
||||
|
||||
The link between GME and other 'meme' stocks
|
||||
|
||||
So it's clear to anyone that's been watching GME and the 'movie stock' for a while that they move together in a way that would not make sense in a free market.
|
||||
|
||||
Here's a figure I put together covering up to the end of May 2021. Clear correlation and fuckery between these 3 stocks.
|
||||
|
||||
[](https://preview.redd.it/0oeky4jf5m571.jpg?width=2414&format=pjpg&auto=webp&s=3fb2229a8e39b33b8e9cd7475ab6c2febb67b7c7)
|
||||
|
||||
2021 price movements for GME and 2 other well known 'meme' stocks
|
||||
|
||||
Since I made this figure the movie stock has diverged from the GME trend. But why? Here are some figures to compare and some basic speculation.
|
||||
|
||||
Value of fails for meme stocks: GME, movie and headphone stocks
|
||||
|
||||
These plots take a look at total fail values for meme stocks and associated ETFs. It's important to plot these in fail value rather than total failed shares because each stock has a different free float and share price.
|
||||
|
||||
[](https://preview.redd.it/jf8ckih0pl571.png?width=4500&format=png&auto=webp&s=18d9d3ad79f57ed2b9e9c91523f37a255abee1d1)
|
||||
|
||||
Total Value of FTD fails for GME and selected ETFs in 2021 with GME close price overlaid.
|
||||
|
||||
[](https://preview.redd.it/36ip4ow4pl571.png?width=4500&format=png&auto=webp&s=c64a8b6b2019578e71414cddd1c7cb0e722b2dff)
|
||||
|
||||
Total Value of FTD fails for movie-stock and selected ETFs in 2021 with close price overlaid.
|
||||
|
||||
[](https://preview.redd.it/lkyluj83pl571.png?width=4500&format=png&auto=webp&s=966ade7d1862e23bfe7c7f65c95a40de19812295)
|
||||
|
||||
Total Value of FTD fails for headphone-stock and selected ETFs in 2021 with close price overlaid.
|
||||
|
||||
What do we notice? Well the value of fails for movie-stock and headphone-stock has always been relatively small with just a single day in January with large $100+ million dollar for each of these. GME has larger fail values in Jan across multiple days but has then dropped off in following months.
|
||||
|
||||
GME also has large fails across a bunch of ETFs but with most of the fail values occurring in IWM. *The movie-stock and headphone-stock only have fails for IWM*.
|
||||
|
||||
What links these different meme-stocks is their inclusion in the same *iShares Russell 2000 ETF - IWM.* IWM has been shorted to shit since Covid came around. It must've seemed like an obvious choice to short a bunch of vulnerable companies all at the same time. Fails are massive for IWM with up to 5-10% of total ETF shares failing on certain days in the last year.
|
||||
|
||||
Reported Short Interest for meme stocks: GME, movie and headphone stocks
|
||||
|
||||
Now we've looked at FTDs in these meme stocks let's take a look at reported short interest. This number is prone to manipulation and is reported by the very people that benefit from manipulating the number down. That being said let's see how the 'official' numbers compare.
|
||||
|
||||
[](https://preview.redd.it/pcnirq7lpl571.png?width=4500&format=png&auto=webp&s=fe4db101d80512e6893f3556bf013cbaea7581bb)
|
||||
|
||||
Total value of reported SI for GME and selected ETFs.
|
||||
|
||||
[](https://preview.redd.it/ww7elprnql571.png?width=4500&format=png&auto=webp&s=8f655b223c2d571cf593e298c7819b1d40780daf)
|
||||
|
||||
Total value of reported SI for movie-stock and selected ETFs.
|
||||
|
||||
[](https://preview.redd.it/a7w7eufpql571.png?width=4500&format=png&auto=webp&s=bb7e5662c999646ea6ac02d539ebf6de29a6b9c6)
|
||||
|
||||
Total value of reported SI for headphone-stock and selected ETFs.
|
||||
|
||||
Movie-stock SI value owed is almost exclusively coming from IWM. Since the recent run up the reported SI for the movie-stock has also increased to a similar value owed for current GME reported SI value.
|
||||
|
||||
For the headphone-stock the vast amount of reported SI value is coming from the IWM and XOP ETFs.
|
||||
|
||||
The value of GME reported OI is also dominated by the huge open short position in IWM but also with relatively large short positions in XRT and VTI.
|
||||
|
||||
So the IWM open short position is insane. Current value owed by reported IWM shorts is $30 billion when total IWM net assets are just $68 billion. That's 44% of all assets in the ETF that have been short sold with a borrow. This doesn't even include the huge number of FTDs and naked short selling for IWM in the last year.
|
||||
|
||||
Open Options Interest for meme stocks: GME and movie stocks
|
||||
|
||||
One of the weirdest things that happened after the end of Jan mini-squeeze is that open put interest in GME spiked to some pretty insane levels. [I previously suggested that this could be due to options fuckery to hide short positions](https://www.reddit.com/r/Superstonk/comments/mvdgf5/the_naked_shorting_scam_in_numbers_ai_detection/).
|
||||
|
||||
At the end of Jan 1.5 million new put contracts were opened in just a couple of days. These contracts cover 150 million shares. Most were in junk strike prices (e.g. $0.50) that were never likely to be reached again. Recently other DD apes like [u/Leenixus](https://www.reddit.com/user/Leenixus/) have [reported finding more weird put option activity](https://www.reddit.com/r/Superstonk/comments/nxgcu5/i_taut_i_taw_a_married_put_i_did_i_did_see/).
|
||||
|
||||
Here I'll compare open option interest for GME and the movie-stock. Headphone-stock does not have options as far as I can tell. Data was obtained from [marketchameleon.com](https://marketchameleon.com/) .
|
||||
|
||||
[](https://preview.redd.it/za8mj3bexl571.png?width=4032&format=png&auto=webp&s=3d0dd92c078bf8fba10cb2c4e542788a7d098610)
|
||||
|
||||
Total open interest for puts & calls for GME since Jan 2020.
|
||||
|
||||
[](https://preview.redd.it/ozvo22ffxl571.png?width=4032&format=png&auto=webp&s=aea9d6aa5a6fcb77a45467dc49add853196c7e8e)
|
||||
|
||||
Total open interest for puts & calls for GME since Jan 2020.
|
||||
|
||||
So a massive spike in GME open put interest in January that disconnected from all previous levels. A large number of puts expired in April and 410k more will expire on July 16th. Despite prices dropping down to $40 in Feb and many options expiry dates coming and going, open put interest for GME still sits at around 1 million contracts. For GME only approx. 300k put contracts were reported in 13Fs despite 1.5 million being held. *Who holds the puts? Family offices?? Shells??*
|
||||
|
||||
For the movie-stock the picture is quite different. Puts and call open interest never really diverged. The recent major run up has increased the number of open put contracts but it's still in line with the number of calls. Even at this high of 2 million open contracts it is important to remember that the movie-stock free float is approx. 10-times larger than for GME. So even with this recent bump in open interest, options fuckery is much less obvious and even if it were occurring the magnitude is 10% or less than what we've seen in GME.
|
||||
|
||||
Meme Stock Summary
|
||||
|
||||
Many of the weird indicators for GME do not show up as clearly in other meme-stocks. The most obvious similarity between them is that all 3 of the main meme stocks are part of the IWM ETF which has been shorted to shit this last year. GME is about to move out of the IWM Russell 2000 ETF and this could explode the shorts FTD juggling.
|
||||
|
||||
Why is the movie-stock moving more than GME recently? I don't really know. My guess would be that it's got extra hype at the moment but the naked short indicators are just not there. They never have been. In 2020 the max movie-stock reported SI was about 20% while GME was at the reporting limit of 140% for months. Why would they manipulate movie-stock reporting when they were so careless to report GME SI% of 140%??
|
||||
|
||||
In terms of options fuckery I just don't see it as clearly for movie-stock as for GME. There is nothing particularly out of the ordinary in the open interest. I've also not seen anyone identify deep ITM calls or married puts for the movie-stock when it's been so easy for GME and found independently over many different dates.
|
||||
|
||||
I wish the movie-stock apes all the best but worry that they might just be riding the hype. For GME on the other hand I believe that the hole has been getting deeper and deeper since the known minimum SI% of 140% reported in Jan before the major fuckery even began.
|
||||
|
||||
Dark Pool Trading in 'Squeeze Stocks'
|
||||
|
||||
In the past I reported some weird behaviour in OTC trading in GME. I took anther look and extended the analysis to 73 stocks that appear to have squeezed in 2021. This list of stocks was taken from the work of [u/BurnieSlander](https://www.reddit.com/user/BurnieSlander/) and [his post on squeeze stocks](https://www.reddit.com/r/Superstonk/comments/nzajpv/the_matrix_is_everywhere_a_quant_dd/).
|
||||
|
||||
I selected 73 stocks that have sustained a 200% growth since Jan. I then compared how these stocks have been trading compared to 9600 other stocks that trade OTC.
|
||||
|
||||
*Important note: Each stock has a different number of shares outstanding and share price. To compare these stocks I first normalised each of them by subtracting their mean value for the window and dividing by the standard deviation.*
|
||||
|
||||
The following plots show relative differences in OTC trading based on each shares' normalised values.
|
||||
|
||||
[](https://preview.redd.it/4ilrlxa7ul571.png?width=4500&format=png&auto=webp&s=ed29834cb0cbe1ad488e59e687438ef10df52d02)
|
||||
|
||||
Normalised OCT trading volumes for 'Squeeze' stocks and other typical stocks.
|
||||
|
||||
Through January and early Feb the squeeze stocks saw a spike in OTC trading volume on average compared to a typical stock. The total shares traded OTC were not substantially different to other stocks before or after the January period.
|
||||
|
||||
[](https://preview.redd.it/g5emeccotl571.png?width=4500&format=png&auto=webp&s=76d9229b8cdfffef0e2286f523c19e3998dc74a5)
|
||||
|
||||
Normalised OCT trading volumes for 'Squeeze' stocks and other typical stocks.
|
||||
|
||||
When we look at average shares per trade the picture is different. Note that because the data is normalised we are just looking at the relative changes over time for the squeeze stock and typical stock groups.
|
||||
|
||||
Typical stocks have not seen any major change in the average OTC trade size. The value is flat over time. For the squeeze stocks we see a dramatic shift. Particularly from January onwards, the number of shares per trade seen OTC dropped dramatically. This means smaller and smaller batches are traded OTC compared to their historical norm.
|
||||
|
||||
Some of this could be because of retail taking part in more trades and PFOF issues but I can't believe that retail is driving this consistently across 73 different stocks. Why would order size OTC drop in recent months? Could it be wash sales or 'short ladder attacks' to manipulate prices? Wrinkle apes needed for this!
|
||||
|
||||
TLDR; / Conclusion
|
||||
|
||||
Go take a look at the figures! I tried to explain as clearly as I could. The best way to understand is to look at the figures yourself. That being said here are some highlights:
|
||||
|
||||
- Huge FTDs and SI% in the IWM ETF appear to link GME and other meme stonks
|
||||
|
||||
- A recent spike in IWM FTDs may have helped to drive the recent run up in meme-stocks
|
||||
|
||||
- IWM is the iShares Russell 2000 ETF. GME will move out of this soon. How will the shorts adapt their FTD juggling? Will it even be possible for them??
|
||||
|
||||
- GME continues to have huge open put interest and observed options fuckery. Many more puts expiring on July 16.
|
||||
|
||||
- Movie stock does not have any obvious options fuckery as far as I can see. If it's there then the scale is probably no more than 10% compared to GME.
|
||||
|
||||
- OTC data is weird and consistent across more than 70 different stocks that have maintained 200%+ gains since January. Why are average OTC trade sizes so small for these 70 stocks? Could this be wash sales to manipulate prices down? Something else??
|
||||
|
||||
I've been zen with GME for months now and full YOLO. I wanted to get a 200+ million vote count announced but what we got changes nothing. Evidence of mass fuckery with GME for months. Price movements that make the fuckery undeniable. Huge GME fails and SI hidden in options and ETFs that will eventually unravel. A great team of execs now at Gamestop leading the turn around. In short, I like the stock.
|
||||
|
||||
🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀🚀
|
||||
@ -0,0 +1,320 @@
|
||||
Walkin' like a duck. Talkin' like a duck
|
||||
========================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [uatobitt](https://www.reddit.com/user/atobitt/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/ml48ov/walkin_like_a_duck_talkin_like_a_duck/) |
|
||||
|
||||
---
|
||||
|
||||
[Serious DD 👨🔬🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Serious%20DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%F0%9F%94%AC%22&restrict_sr=1)
|
||||
|
||||
TL;DR - I have prepared a case which strongly indicates that Citadel Securities, along with it's "affiliates" are committing securities fraud. On March 26th 2021, FINRA released a new citation against Citadel Securities for nearly 2 years worth of securities violations. The only reason Citadel HASN'T been busted for fraud is because they hide behind the veil of 'unintentional' behavior. However, this post illustrates how Citadel's actions flag ALL 3 corners of the fraud triangle- *pressure, motivation, and opportunity.* It's time for these people to be held accountable.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Trying something new this time.
|
||||
|
||||
I recorded a video walkthrough of this DD with [u/isitabuy](https://www.reddit.com/u/isitabuy/), prior to dropping the DD.
|
||||
|
||||
If you wanna watch that, [click here](https://youtu.be/13G02Gn64u4)
|
||||
|
||||
Prerequisite DD
|
||||
|
||||
[1\. Citadel Has No Clothes](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/)
|
||||
|
||||
[2\. BlackRock Bagholders, INC.](https://www.reddit.com/r/GME/comments/m7o7iy/blackrock_bagholders_inc/)
|
||||
|
||||
[3\. The EVERYTHING Short](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
My fellow apes,
|
||||
|
||||
Many of you are wondering how these posts about Citadel relate to GameStop. Perhaps I've lost sight on explaining this connection, so let me clear this up before diving into MORE sh*t on them.
|
||||
|
||||
As [u/dontfightthevol](https://www.reddit.com/u/dontfightthevol/) pointed out: you just never know what a company's short position is because they aren't required to disclose it. And unfortunately, she's right.
|
||||
|
||||
What we can do, however, is expose the sh*t surrounding them. The fraud triangle WORKS because people act maliciously when they have the pressure, incentive, and opportunity to commit it. PERIOD. This means if it walks and talks like a duck, it's most likely a f*cking duck.
|
||||
|
||||
I hope I've done a good job revealing the evidence of their ever-tightening noose. To name a few big ones:
|
||||
|
||||
1. the FINRA violations for naked shorting, failing to post a short sale indicator on transactions, withholding large customer orders to lower the market price, FLASH crashes
|
||||
|
||||
2. the growth of rehypothecated assets for both treasury & equity securities (especially in 2020)
|
||||
|
||||
3. the growth in liabilities as their PROMISES to repay keeps getting bigger and bigger (especially in 2020)
|
||||
|
||||
4. FINRA's concern regarding the lack of preventative measures within their system to detect these issues
|
||||
|
||||
5. the number of times they've been documented for 'accidently' removing logic to detect these issues
|
||||
|
||||
Everything fits within ALL corners of the fraud triangle. Citadel commits violations just to make a few million, knowing their fines are essentially just a small tax. Now that their exposure to shorted stocks and bonds is increasing, the PRESSURE to commit these actions is even higher.
|
||||
|
||||
For far too long, people with money have been draining the wealth out of the global economy. Everything around us becomes more expensive and the power to do anything about it, decreases. We are forced to think about pinching-pennies just to make ends-meet, while there are people benefitting from ALL of this injustice- the ultra-wealthy.
|
||||
|
||||
This aggregation of wealth has been going on behind the scenes for centuries. Slowly and gradually like a frog sitting in a pot of boiling water. Debt has been designed to be carried for life.
|
||||
|
||||
Their confidence and greed reached a level SO HIGH that it should have been impossible for them to fail on their bet against GameStop. The ONLY thing that could blow their victory was if we all started listening to one another.. and most importantly- learning.
|
||||
|
||||
And learn, we did...
|
||||
|
||||
We sat down at the World Series of Poker, called their bluff, and won.
|
||||
|
||||
GameStop is the lynchpin; GameStop opens the flood gates; GameStop is our checkmate.
|
||||
|
||||
GameStop exposes them to a LIMITLESS and IMMEDIATE transfer of wealth back to the 99%. This situation is dangerous because those who put their vote into GameStop are finally able to take back control.
|
||||
|
||||
GameStop is our hedge against the funds ____________________________________________________________________________________________________________
|
||||
|
||||
Hopefully that's been cleared up and we can get back to the point of this post.
|
||||
|
||||
Now.... This sh*t just KEEPS COMING!
|
||||
|
||||
To me, this is further evidence of their desperate actions within a rigged market. After [calling out Citadel](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/) for shorting US treasuries, I recently found out they've been slapped with ANOTHER [FINRA violation](https://www.finra.org/sites/default/files/fda_documents/2019061038301%20Citadel%20Securities%20LLC%20CRD%20116797%20AWC%20jlg.pdf) on 3/25/2021 for US treasury securities..
|
||||
|
||||
yeah....seriously..
|
||||
|
||||
BTW, this wasn't even something I was searching for.. I literally walked Cory (the host) through my investigative process and uncovered it in our first [live interview](https://www.youtube.com/watch?v=AaalT8rn9lc) *(this link is for the short version; I uncovered it in the long version which wasn't posted).*
|
||||
|
||||
Anyway, these violations occurred between July 2017 and October 2019 while the Fed's tapering program was kicking off. It's extremely hard to be conclusive about the little details when you can only see a portion of the puzzle, so I usually start these DDs by finding WIDE holes that scream for attention- this violation is one of those holes. Citadel Securities has been [slapped 58 times](https://www.reddit.com/r/GME/comments/m4c0p4/citadel_has_no_clothes/) for regulatory violations and those are JUST within the stock market. To me, the reason why THIS violation is so monumental is because it represents their FIRST treasuries violation ([first page](https://www.finra.org/sites/default/files/fda_documents/2019061038301%20Citadel%20Securities%20LLC%20CRD%20116797%20AWC%20jlg.pdf) under background). FINRA issued them a $275,000 fine along with a censure order, meaning they really disprove of Citadel's actions, here. ____________________________________________________________________________________________________________
|
||||
|
||||
I'm going to show you pieces of the disclosure event and gently massage it into your smooth brains.
|
||||
|
||||
[](https://preview.redd.it/fcbti40lsgr61.png?width=598&format=png&auto=webp&s=4bbdef79a6952eb2922fc3414cdb9547317cd29b)
|
||||
|
||||
[](https://preview.redd.it/49ovd6zlsgr61.png?width=597&format=png&auto=webp&s=123db57e0e0b60b0d5e4b48639691f309b90f775)
|
||||
|
||||
1. Incorrectly reporting internal transfers as treasury transactions
|
||||
|
||||
2. Failing to append the "No Remuneration" indicator to TRACE reports for certain transactions between affiliates
|
||||
|
||||
3. Failing to include the correct contra-party type in its TRACE reports for certain affiliates
|
||||
|
||||
To me, the biggest red flag in this comes from the very last sentence: *"IN ALL CASES, THE INCORRECT TRACE REPORTS INVOLVED INTERNAL POSITION TRANSFERS OR TRANSACTIONS WITH AFFILIATES AND DID NOT INVOLVE TRANSACTIONS WITH CLIENTS"**.* I'll touch back on the rest of the violation, shortly.
|
||||
|
||||
Now, lemme take you to school.
|
||||
|
||||
I'll walk you through these indicators and then discuss how they relate to Citadel's situation.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
What are related party transactions and why do they matter?
|
||||
|
||||
The codification (official accounting bible from FASB) explains related party disclosures under ASC 850. I'd love to have a subscription to this, but it's about $1,200 a year. So here's a [link](https://dart.deloitte.com/USDART/home/codification/broad-transactions/asc850) from Deloitte that gives a decent overview of ASC 850-10.
|
||||
|
||||
A typical related party transaction occurs just like a normal transaction, but the parties involved have a connection, somehow. They can be:
|
||||
|
||||
1. *A parent entity and its subsidiaries*
|
||||
|
||||
2. *Subsidiaries of a common parent*
|
||||
|
||||
3. *An entity and trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of the entity's management*
|
||||
|
||||
4. *An entity and its principal owners, management, or members of their immediate families*
|
||||
|
||||
5. *Affiliates.*
|
||||
|
||||
Transactions can be any of the following:
|
||||
|
||||
1. *Sales, purchases, and transfers of real and personal property*
|
||||
|
||||
2. *Services received or furnished, such as accounting, management, engineering, and legal services*
|
||||
|
||||
3. *Use of property and equipment by lease or otherwise*
|
||||
|
||||
4. *Borrowings, lendings, and guarantees*
|
||||
|
||||
5. *Maintenance of compensating bank balances for the benefit of a related party*
|
||||
|
||||
6. *Intra-entity billings based on allocations of common costs*
|
||||
|
||||
7. *Filings of consolidated tax returns.*
|
||||
|
||||
When you have related parties, or affiliated parties, the biggest concern is that a relationship materially affects the way that business is conducted. For example, you should disclose situations where subsidiaries are conducting transactions with the parent entity. Or if the subsidiary is wholly owned, which means you're doing business with yourself, at least in practice. The failure to disclose this information may materially mislead investors.
|
||||
|
||||
For example, party A (affiliate) may be selling products / services to party B (also an affiliate) at a rate that differs significantly from the open market. For example, Party A sells treasuries to Party B at an amount that's much lower ($990) than fair market ($1,000). This would allow Party B to sell those securities back into the market at the normal market rate ($1,000), and record a bigger profit ($10) because their cost is much lower ($990). Party A then offsets the expense ($10) back to yet ANOTHER company, and removes it from their books. Hedge funds and offshore funds are perfect for burying these transactions because they don't report financial statements like public companies.
|
||||
|
||||
Likewise, Party A may need to remove something from their balance sheet (bad loans, etc.) and simply use Party B as a dumpster. This is EXACTLY what [Enron](https://www.journalofaccountancy.com/issues/2002/apr/theriseandfallofenron.html) did with their special purpose entities (REMEMBER THAT TERM), or SPEs. When Enron had to incur huge losses, they simply shifted those losses to shell companies and left the "good" stuff on their books.
|
||||
|
||||
Queue violation # 1
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
[](https://preview.redd.it/y4nqv3nwsgr61.png?width=934&format=png&auto=webp&s=5b82bb5a74d510e5d0489c9cfe32c7e856c55289)
|
||||
|
||||
Ok.... when you send transactions to the TRACE system, they ask you to prove they are legitimate. If they are legitimate, and occur with an affiliate, FINRA needs to know that.. This is to prevent frauds like Enron from happening again.
|
||||
|
||||
For sake of argument, let's just ignore the part where they "unintentionally" removed logic and then "intentionally" reinserted it..... because that would make this DD too damn easy.
|
||||
|
||||
Breaking this down:
|
||||
|
||||
1. Citadel OVER reported 452,451 securities transactions which represents only 14% of total REPORTED transactions to TRACE. This means that Citadel reported 3,231,792 treasury transactions, and 1 transaction doesn't necessarily mean 1 treasury... could be thousands
|
||||
|
||||
2. They were not required to report 14% of those because they SHOULD have been flagged as internal transfers and not treasury transactions
|
||||
|
||||
Now we begin to uncover the corners of the fraud triangle *(pressure, incentive, opportunity)*. Citadel was obviously compliant for 86% of their treasury reports, so WHY would they feel the need to "unintentionally" OVER-report 14%....
|
||||
|
||||
Hey Citadel... why you WALKIN' like a duck?
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
How did FINRA find out these were actually internal transfers? Probably the same way I did- by looking for clues. Check out Citadel Securities "Related Party Disclosures" from 2020 (same as in 2019, I checked).
|
||||
|
||||
[](https://preview.redd.it/mbo5ina2tgr61.png?width=862&format=png&auto=webp&s=a447438353463706035d9c7a377135e502da2e0b)
|
||||
|
||||
CSHC..... Who are you, REALLY???
|
||||
|
||||
Ladies and Gentlemen,
|
||||
|
||||
Presenting [Citadel Securities Institutional, LLC](https://sec.report/Document/0001649718-21-000001/CSIN_StmtFinCndtn2020.pdf)!!!
|
||||
|
||||
[](https://preview.redd.it/g5z47qe3tgr61.png?width=919&format=png&auto=webp&s=848a3a19b8a58431cb062e4693b8e56d868f912f)
|
||||
|
||||
Think it's the same company?
|
||||
|
||||
[Nope..](https://sec.report/Document/0001616344-21-000004/CDRG_StmtFinCndtn2020.pdf)
|
||||
|
||||
[](https://preview.redd.it/4wcm9m94tgr61.png?width=814&format=png&auto=webp&s=b0b3d452794547d5df6382723a8da98dfe571aa3)
|
||||
|
||||
Citadel Securities INSTITUTIONAL is a completely different company in the books. These guys are AFFILIATED to one another, but exist separately as [SPECIAL PURPOSE ENTITIES](https://www.investopedia.com/terms/s/spv.asp), or SPEs..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Let's walk through this again..
|
||||
|
||||
Citadel SECURITIES lists [CSHC US LLC ("CSHC") as an affiliate](https://sec.report/Document/0001616344-21-000004/CDRG_StmtFinCndtn2020.pdf) (PG 2), and the sole MEMBER of the company....
|
||||
|
||||
[](https://preview.redd.it/n5ykf829tgr61.png?width=862&format=png&auto=webp&s=3ef1a464413629ee22759e0d1528e1e2a4406550)
|
||||
|
||||
Citadel Securities INSTITUTIONAL ("CSHC") lists [CSHC US LLC ("CSUH") as an affiliate](https://sec.report/Document/0001649718-21-000001/CSIN_StmtFinCndtn2020.pdf) (also PG 2), and ALSO as the sole MEMBER of the company....
|
||||
|
||||
[](https://preview.redd.it/ynqzaew9tgr61.png?width=961&format=png&auto=webp&s=26807d8e726d1c3ccb6fb9af734fe890e5ef000a)
|
||||
|
||||
CSHC US LLC ("CSUH")???? Who the hell is this?
|
||||
|
||||
Had to go back to a financial disclosure in 2016 to dig up this lil' jewel....
|
||||
|
||||
[](https://preview.redd.it/fx0r57obtgr61.png?width=1185&format=png&auto=webp&s=0256f01be3951e02f6decbc40b1200a79e575dbe)
|
||||
|
||||
CLP Holdings Three LLC ("CLP3")........
|
||||
|
||||
WTF....
|
||||
|
||||
On January 1, 2016 "CLP3" merged into ("CSUH")....
|
||||
|
||||
So WHO is [CLP Holdings Three LLC](https://www.sec.gov/rules/sro/box/2015/34-74267.pdf) ?!?!?!?!?
|
||||
|
||||
[](https://preview.redd.it/ggcw60wetgr61.png?width=650&format=png&auto=webp&s=af20238b93bc4cd513c841c6cf939a9df924ff70)
|
||||
|
||||
....found this from 2015 (bottom paragraph, PG 2)...
|
||||
|
||||
1. Citadel Parent Owns 100% of CLP Holdings Three LLC, which became "CSUH" in 2016
|
||||
|
||||
2. CSHC US LLC ("CSUH") is the ONLY member of CSHC US LLC ("CSHC")
|
||||
|
||||
3. CSHC US LLC ("CSHC") is ALSO managed by Citadel Parent.....
|
||||
|
||||
So basically......
|
||||
|
||||
...Citadel, is Citadel, is Citadel, is Citadel....
|
||||
|
||||
No wonder why FINRA was pissed. It *LOOKS LIKE* Citadel took treasuries from Citadel Securities and transferred them to Citadel Securities Institutional, but reported them as sales transactions to TRACE......
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
[Queue violation # 2](https://www.finra.org/sites/default/files/fda_documents/2019061038301%20Citadel%20Securities%20LLC%20CRD%20116797%20AWC%20jlg.pdf)
|
||||
|
||||
[](https://preview.redd.it/zedlmj1ltgr61.png?width=802&format=png&auto=webp&s=28a1318da187c5aea37d339e157acfb75a022cef)
|
||||
|
||||
Again, let's ignore the part where they pretended to "discover" the issue in June 2019 prior to being contacted. Let's also ignore the lack of "necessary" logic to determine which transactions are which.
|
||||
|
||||
They do this in almost every f*cking violation they get...
|
||||
|
||||
Now what is [remuneration](https://www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-15-47.pdf)?
|
||||
|
||||
Basically, it's a type of compensation. In the case of Citadel Securities, it's the price adjustment that is passed to Citadel Securities Institutional when a treasury is sold / lent.
|
||||
|
||||
A normal market transaction might sell a treasury security for $1,000. In this case, the $1,000 is entirely represented by the bond's value.
|
||||
|
||||
An affiliated market transaction might sell a treasury security for $990, with $10 in remuneration for a total of ($1,000). In this case, the bond is ONLY worth $990, but the $10 in remuneration makes it APPEAR like a $1,000 bond..
|
||||
|
||||
FINRA asks for companies to disclose this because it can be heavily abused, obviously...
|
||||
|
||||
This is what happened to Citadel Securities. There were 45,638 instances between July 2017 and October 2019 where Citadel Securities did NOT appropriately indicate this....
|
||||
|
||||
If you fail to indicate this, and ALSO report internal transfers as normal transactions, it REALLY starts to look like you're covering your tracks....
|
||||
|
||||
Citadel...... Why you TALKIN' like a duck?
|
||||
|
||||
[Queue Violation #3.](https://www.finra.org/sites/default/files/fda_documents/2019061038301%20Citadel%20Securities%20LLC%20CRD%20116797%20AWC%20jlg.pdf)
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
[](https://preview.redd.it/ur98wqavtgr61.png?width=703&format=png&auto=webp&s=0ea8d3c64afc1f06fa3f700dc04b9132f24ce7ee)
|
||||
|
||||
Call this the smoking gun.....
|
||||
|
||||
Really.... it doesn't get much more obvious than this....
|
||||
|
||||
Citadel Securities gets busted pushing transactions into the TRACE system when they were really just internal transfers between SPEs....
|
||||
|
||||
They're then cited for failing to indicate a No Remuneration transaction with affiliated parties....
|
||||
|
||||
And finally, they "misclassified" the nature of the contra party in 11,989 transactions, saying they were customers instead of their own... you guessed it.... SPEs..
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Want more? Check out this disclosure from Citadel Securities....
|
||||
|
||||
[](https://preview.redd.it/q7imuxb3ugr61.png?width=636&format=png&auto=webp&s=fe9f5f5163eaf4daffc32eefbf41fc28a0b8cc89)
|
||||
|
||||
Citadel Securities Institutional (CSIN) provided execution services to Citadel Securities under a cost-plus agreement..
|
||||
|
||||
huh.... [cost-plus](https://www.investopedia.com/terms/c/cost-plus-contract.asp)..... sounds a lot like a remuneration agreement.... because it is.
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
Let's bring this all together, shall we?
|
||||
|
||||
1. Citadel Securities sells treasuries to "affiliate" parties, such as Citadel Securities Institutional
|
||||
|
||||
2. Citadel Securities marks (most) of their transactions with a 'No-Remuneration' indicator after selling the security to the "affiliate" party.
|
||||
|
||||
3. To FINRA, this complies with TRACE because it looks like a typical transaction without a markup / markdown on the price of the treasury
|
||||
|
||||
4. At the end of the month, Citadel Securities reimburses Citadel Securities Institutional for the cost of their treasury purchases, plus an little more in profit for their services
|
||||
|
||||
5. Citadel Securities records the commission revenue from Citadel Securities Institutional once the treasuries are finally sold to the outside party
|
||||
|
||||
Did you catch the loophole?
|
||||
|
||||
Citadel Securities is able to remain compliance with FINRA because they pay for the services (markup / markdown) provided by Citadel Securities Institutional AFTER the transactions are cleared through this system... they just disguise them as "service fees".
|
||||
|
||||
Instead of paying DURING the transaction, by remuneration, they simply leave it off the books and hide it on their financial statements....
|
||||
|
||||
____________________________________________________________________________________________________________
|
||||
|
||||
If you're wondering where the SEC is in all of this mess, listen up.
|
||||
|
||||
THE SEC AND FINRA ARE BOTH REGULATORY AGENCIES FOR FINANCIAL INSTITUTIONS.
|
||||
|
||||
I am now 100% convinced that the SEC has given the responsibility of investigating fraud to FINRA, while the SEC 'works' on creating the legislation to stop these acts...
|
||||
|
||||
However, it appears the SEC and FINRA are working as totally separate agencies while the SEC is supposed to be overseeing FINRA.... I'm convinced the money flows directly to the SEC from FINRA fines and the SEC is at risk of losing that revenue if they actually start cracking down on these pigs.
|
||||
|
||||
I am presenting a genuine case, here.
|
||||
|
||||
If you're wondering where the auditor (PWC) is in all of this, they just have to verify the statements are FAIRLY PRESENTED. THEY DON'T HAVE TO SAY ANYTHING ELSE! All audit firms are now in the business of consulting, like Arthur Andersen did with Enron. They all sit in a room and discuss the best way to present this sh*t without looking like a giant fraud.
|
||||
|
||||
You want to see how bad the situation has become? Check out this [10K](https://www.sec.gov/ix?doc=/Archives/edgar/data/0001820727/000110465921046086/tm218735d1_10k.htm) (PG 4) from one of Citadel's recent 13G/A filings on 2/16/2021. Keep in mind, this is an acquisition company that *specializes* in purchasing companies that are headed for bankruptcy...
|
||||
|
||||
[](https://preview.redd.it/3as170q7ugr61.png?width=1871&format=png&auto=webp&s=3ba5b3f536def5931ff633895a79bc2f3440f50d)
|
||||
|
||||
MUDRICK CAPITAL ACQUISITION CORPORATION II
|
||||
|
||||
This is so much more than speculation..... Citadel is a *duck*.
|
||||
|
||||
DIAMOND.F*CKING.HANDS
|
||||
|
||||
*This is not financial advice*
|
||||
@ -0,0 +1,3 @@
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/atobitt](https://www.reddit.com/user/atobitt/) | [YouTube - Is it a buy](https://www.youtube.com/watch?v=13G02Gn64u4) |
|
||||
@ -0,0 +1,273 @@
|
||||
Why are we trading sideways? Why is the borrow rate so low? When will we moon? The Theory of EVERYTHING GME
|
||||
===========================================================================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/c-digs](https://www.reddit.com/user/c-digs/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/mkvgew/why_are_we_trading_sideways_why_is_the_borrow/) |
|
||||
|
||||
---
|
||||
|
||||
[HODL 💎🙌](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22HODL%20%F0%9F%92%8E%F0%9F%99%8C%22&restrict_sr=1)
|
||||
|
||||
Over the last few weeks, there have been some anomalies which have been bugging all of us.
|
||||
|
||||
1. We've been trading sideways for a while now within a narrow range
|
||||
|
||||
2. The borrow rate on such a volatile stock is ridiculously low
|
||||
|
||||
3. The volume has seemingly dried up
|
||||
|
||||
4. Yet it does not appear that shorts have covered
|
||||
|
||||
5. SEC seems to be sitting idle on their hands
|
||||
|
||||
6. WE see the deep ITM calls and FTDs, so DTC and OCC MUST also see these since their systems are clearing these trades
|
||||
|
||||
I think the answer is actually really simple: there is no single Long Whale.
|
||||
|
||||
DTC, OCC, and SEC are collectively the Long Whale bending the rules to keep the price stable...for now.
|
||||
|
||||
On JAN28, they saw what happened and saw the systemic risk that GME shorts would pose so they allowed RH and Citadel to bend the rules. Otherwise, it would have impacted all DTC and OCC members.
|
||||
|
||||
In response, DTC issues SR-DTC-2021-004 and OCC issues SR-OCC-2021-003 and SR-OCC-2021-004 which firewall members from defaulting members and allow orderly liquidation of defaulting members.
|
||||
|
||||
([If you want more insight into SR-DTC-2021-004, SR-DTC-2021-005, SR-OCC-2021-801, and SR-OCC-2021-004, see my post here](https://www.reddit.com/r/Superstonk/comments/mkju4s/srdtc2021004_and_srocc2021801_for_apes/)).
|
||||
|
||||
Why We're Trading Sideways
|
||||
|
||||
In astrophysics, there are points in space known as [Lagrange Points](https://en.wikipedia.org/wiki/Lagrange_point) which provide orbital stability in multi-body systems.
|
||||
|
||||
Contrary to the popular notion that Citadel is using a short ladder to stabilize the price, I believe that DTC and OCC members who are not exposed to GME short positions are working together to stabilize the price within a narrow, neutral range. The reason is not because of "max pain", the reason is to wait for the firewalls (see the link above) to be in place. In other words, all parties are trying to keep GME (and perhaps other shorts) in "monetary Lagrange Points".
|
||||
|
||||
Price volatility can easily cause this to launch before DTC and OCC members are ready. They know that retail is largely tapped out (obvious by lack of volume) unless sudden volatility draws in more retail buyers that will move the price faster than they can control.
|
||||
|
||||
So who is stabilizing the price? The non-defaulting members of DTC and OCC collectively to protect their assets from defaulting members. Shorts are buying the deep ITM calls or dark pools to carry their FTDs. Non-defaulting members are laddering up and down to maintain the price stasis.
|
||||
|
||||
I do not believe the shorts on their own have enough capital/tools to stabilize the price like this (as we saw with the chain reaction in JAN and FEB).
|
||||
|
||||
APR14 EDIT: [The SEC filing for the Apex merger reveals an interesting lawsuit that confirms some of this](https://www.reddit.com/r/Superstonk/comments/mq4gfi/sec_filing_merger_with_brokarage_detailing/) ( [u/jamiegirl21](https://www.reddit.com/u/jamiegirl21/) )
|
||||
|
||||
[](https://preview.redd.it/0hkqx11ha5t61.png?width=909&format=png&auto=webp&s=dec1e70d8e6d2c25baed28104ce460f487500368)
|
||||
|
||||
"Apex, along with over 30 other brokerages...including...Citadel and DTCC engaged in a coordinated conspiracy"
|
||||
|
||||
Why Is the Borrow Rate So Low?
|
||||
|
||||
The borrow rate is a function of risk for an institutional holder. If you want to borrow 100,000 shares from Interactive Brokers (IB) and they are only showing 125,000 shares to borrow, should the fee be high? Only if IB thinks that they won't be able to locate those borrowed shares to complete transactions. We are now operating with extremely low volume so the risk of not being able to locate a share to fulfill a transaction and having to purchase at a premium on the open market is extremely low right now due to the low volume and volatility. The fee is low because those shares are just sitting there with no one transacting them and no risk of IB not being able to fulfill a transaction.
|
||||
|
||||
[](https://preview.redd.it/pn563jl11ds61.png?width=1144&format=png&auto=webp&s=c578a0262171d9a3c002ced98f8366b2ffec60bb)
|
||||
|
||||
One has to wonder why Interactive Brokers has been keeping the fee so low since 2021JAN28...Hmmmmm. Almost like everyone had an "OH SHIT" moment.
|
||||
|
||||
For reference, here is the volume leading up to the JAN28 compared to the last 3 days:
|
||||
|
||||
| JAN22 | 197,000,000 | APR06 | 6,000,000 |
|
||||
| --- | --- | --- | --- |
|
||||
| JAN25 | 177,000,000 | APR07 | 4,770,000 |
|
||||
| JAN26 | 178,000,000 | APR08 | 10,000,000 |
|
||||
|
||||
No volume (no transactions), no risk; shares are just stationary sitting there.
|
||||
|
||||
Based on the FEB24-25, MAR10, and MAR25 blips, it seems we need at least 50,000,000 volume to see any significant action.
|
||||
|
||||
Why Is There No Volume?
|
||||
|
||||
Retail is out of the picture at this point. Retail has already put a lot of their liquid capital into GME. Reddit confirmation bias would have you think that everyone is buying tons of shares. But the reality is that to buy just 10 shares requires $1600-$1700 right now and we can plainly see the paltry volume since MAR16. The price stasis and news cycle has suppressed new retail from jumping in. The MSM is not being manipulated by Citadel or GME shorts; they are being manipulated by all of DTC, OCC, and SEC in order to prevent retail from creating volatility.
|
||||
|
||||
Why haven't institutions bought like mad? They are largely part of DTC and OCC or their trades are cleared by DTC and OCC members so they have "agreed" (perhaps "decided" is a better word) to hold the current price stasis until DTC and OCC can be protected from the GME short fallout by DTC-004 (already in effect) and OCC-003 and OCC-004. Without SR-DTC-2021-004 and SR-OCC-2021-004/003 in place, shorts reach into everyone else's cookie jar to pay for the default.
|
||||
|
||||
OCC-004 also has another important blocker: the recruitment of non-Clearing Members as auction bidders; this process is likely already underway right now. (Rich guys are going to get short HF assets at discount). Keep in mind: BlackRock is *not* an OCC member, but the second proposed change in OCC-004 will allow non-Clearing Members to participate in a member suspension asset auction.
|
||||
|
||||
Why Is the SEC Sitting By?
|
||||
|
||||
SEC knows what's [going](https://www.sec.gov/news/closedmeetings/2021/ssamtg032521.htm) [on](https://www.sec.gov/news/closedmeetings/2021/ssamtg040821.htm). The SR's themself are DTC and OCC communicating the architecture of the squeeze in broad daylight.
|
||||
|
||||
DTC and OCC clear every transaction on the market. They are smarter than us. If we can figure out what's going on with the deep ITM calls, FTDs, and other shenanigans, the DTC, OCC, and SEC sure as hell know what's going on *because they architected it*.
|
||||
|
||||
SEC is allowing DTC and OCC to firewall non-defaulting members from the defaulting GME shorts via DTC-004, OCC-003, and OCC-004.
|
||||
|
||||
Everyone has agreed that the GME shorts are going to default.
|
||||
|
||||
How Can No One See What GME Shorts Are Doing?
|
||||
|
||||
They can. In fact, they are probably working with GME shorts to maintain this price stasis with the tacit understanding that they will be wiped out in a default, but in order to protect the DTC and OCC, they will work together in exchange for perhaps leniency or more likely total lack of punishment and perhaps a legal shield from the DOJ in exchange.
|
||||
|
||||
So the Launch Is Still On?
|
||||
|
||||
It is all but a given; why else would they react so quickly with DTC-004, OCC-003, and OCC-004 which define the procedure for recovery and wind down and liquidation of a defaulting member?
|
||||
|
||||
Wen Moon?
|
||||
|
||||
SR-OCC-2021-003 was filed on 2021FEB24 and has a 45 day window from filing in which it can be put into effect if there is no objection (any time in that 45 day window). However, it can be extended another 90 days if the SEC has objections or further comments.
|
||||
|
||||
SR-OCC-2021-004 was filed on 2021MAR31 and has a 45 day window from filing in which it can be put into effect if there is no objection (any time in that 45 day window). However, it can be extended another 90 days if the SEC has objections or further comments.
|
||||
|
||||
My take is that these are calendar days because [the SEC has a very specific definition for business days](https://www.sec.gov/rules/final/2011/34-64251.pdf) and would use that term explicitly.
|
||||
|
||||
IMPORTANT EDIT 4/6/2021 7 PM: SEC has pushed back OCC-003: <https://www.sec.gov/rules/sro/occ/2021/34-91483.pdf> Pushed to May 31st max. Who bumped it out? SIG: <https://www.reddit.com/r/Superstonk/comments/mlolh7/occ801_advance_notice_of_occ003_pushed_out_to_may/gtnvq56?utm_source=share&utm_medium=web2x&context=3>.
|
||||
|
||||
Won't Citadel and GME Shorts Keep Kicking the Can?
|
||||
|
||||
They won't be able to. Citadel and GME shorts are not stabilizing the price; DTC, OCC, and non-member institutional shareholders are "coordinating" to stabilize the price right now. Once DTC and OCC members are protected, volume explodes, the borrow rates will go up, margin calls will trigger, and the squeeze is on.
|
||||
|
||||
Can't DTC and OCC Keep Doing This Forever?
|
||||
|
||||
DTC and OCC members likely want to resolve this as much as we do. Everyone knows the GME shorts are going to default. That's why DTC-004, OCC-004, OCC-003 were created. They have already accepted these defaults as a result of the impending scramble to cover, but they are bending the rules at the moment to set up their firewalls.
|
||||
|
||||
[](https://preview.redd.it/3qaxkmy9vjr61.png?width=585&format=png&auto=webp&s=05acdd8c9ad545e354b87357c633cb2fabdd610d)
|
||||
|
||||
SR-OCC-2021-004 Page 2: "Following the suspension of any Clearing Member, OCC would...ensure that the Clearing Member's suspension is managed in an orderly fashion."
|
||||
|
||||
[](https://preview.redd.it/myto818ovjr61.png?width=591&format=png&auto=webp&s=7374eeb971106751cb3cb63ab393fc1e9effb369)
|
||||
|
||||
SR-OCC-2021-004 Page 4: "on-boarding of...non-Clearing Members as potential bidders in future auctions of suspended Clearing Member's remaining portfolio"
|
||||
|
||||
Look at that last image right there. Does that not look like a shark feeding frenzy to you? Rich investors are about to get short HF assets at a discount.
|
||||
|
||||
What Can Citadel and GME Shorts Do?
|
||||
|
||||
They can delay OCC-003 (additional 90 days) and OCC-004 (additional 90 days). Why would they do this? To secure their own assets. I would offer [the Citadel hiring of Heath Tabert](https://www.bloomberg.com/news/articles/2021-04-01/citadel-securities-hires-ex-cftc-chairman-tarbert-as-legal-chief) as the vehicle by which they will delay; his job is to get the SEC to delay enactment or negotiate the wind down as favorably as possible for Citadel shareholders and leadership.
|
||||
|
||||
[](https://preview.redd.it/b96sjpiirtr61.png?width=737&format=png&auto=webp&s=38703e6ec9aab68f82af46df5b90adbb2903e453)
|
||||
|
||||
OCC-003 45 days from filing (2021FEB24) and another 90 days if further information is requested (page 26)
|
||||
|
||||
[](https://preview.redd.it/8gsokjew9fr61.png?width=739&format=png&auto=webp&s=95bd214f01c1bfb04485ab28807082eadcade646)
|
||||
|
||||
OCC-004 45 days from filing (2021MAR31) and another 90 days if further information is requested (page 12)
|
||||
|
||||
My sense is that it is more likely that GME shorts are collaborating with DTC, OCC, and SEC to avoid punishment. DTC, OCC, and SEC are allowing them to play their FTD game to keep the price stable.
|
||||
|
||||
Why Doesn't The SEC Just Make OCC-003 and OCC-004 Effective?
|
||||
|
||||
[](https://preview.redd.it/ddoqu01u6gr61.png?width=720&format=png&auto=webp&s=c41359bc5c94979d64f8d31aa071d0aeecc702e6)
|
||||
|
||||
Both DTC and OCC are Self Regulatory Organizations which is why the SEC doesn't "punish" them per se
|
||||
|
||||
DTC and OCC are SROs (Self Regulatory Organizations). Read those images above carefully. DTC and OCC make their own rules, approve it on their own schedule. They only need to show the SEC and let SEC comment or request further information. SEC does not "approve" the rules; they can only "not object" and let the organizations implement their own rules.
|
||||
|
||||
The organizations themselves will make OCC-003 and OCC-004 effective when they are ready. It does not have to be at 45 days or 60 days; they can enact it at any time within that period as long as SEC does not object. Once SEC is on board, they can wait to implement the rule changes when the timing is right.
|
||||
|
||||
Why are they not effective yet? I think there is still closed-door negotiations between the members themselves. The short HFs have no more negotiating power after this starts so they need to get everything sorted now. The non-defaulting members are working to recruit and qualify "non-Clearing Members" to bid on the assets during the liquidation:
|
||||
|
||||
[](https://preview.redd.it/koyu5kor5kr61.png?width=592&format=png&auto=webp&s=d527ddad7c1c4bd93894ce11ff50350eae4547e6)
|
||||
|
||||
SR-OCC-2021-004 Page 5: This is what is probably happening right now and when this is ready, 003 and 004 will be finalized and approved to start the process.
|
||||
|
||||
Fidelity. BlackRock. Other GME longs? They're not OCC clearing members. Guess who's going to be feeding at the table on these discount assets?
|
||||
|
||||
Does This Change My Strategy?
|
||||
|
||||
*No. Buy and hold shares.*
|
||||
|
||||
What you can take away from this is that we will not see significant price movement up or down for the foreseeable future until OCC-004 and OCC-003 are in place; you are literally fighting against all of Wall Street, even the GME long institutions. There is literally no point buying deep OTM options until there is a whiff of OCC-004 and OCC-003 getting close to implementation. We will keep trading sideways, borrow rate will be inexplicably low, volume will be absent, etc. until DTC and OCC members are protected and they let off the brakes; Citadel and GME shorts are not and have not been in control. DTC, OCC, and all non-defaulting members have been preparing for the default of GME shorts.
|
||||
|
||||
Shift your mindset from "*Citadel is shorting the market*" or "*It's a battle between Short HF and Long Whales!*" to "*DTC, OCC, SEC, and the shorts are preparing for the squeeze*"
|
||||
|
||||
If you believe that BlackRock is working with RC on this, they have agreed that they are going to wait to announce the CEO change not because they are waiting for Sherman but because they are holding price stasis until they are get access to the shorts' assets.
|
||||
|
||||
FAQ (My $0.02)
|
||||
|
||||
Q: Does this mean DTC/OCC/SEC can cap the price?
|
||||
|
||||
I do not think that they have a mechanism to cap the price. I think they have a model of the squeeze and have some approximations of the max share price we will hit, but I do not think they have a way to actually control the price once it squeezes.
|
||||
|
||||
[](https://preview.redd.it/6sn9v3xxujr61.png?width=598&format=png&auto=webp&s=8609004e0f74850c0e97f143b4e6214887ef96f6)
|
||||
|
||||
SR-DTC-2021-004 page 12: My guess is that they have already simulated the squeeze with a variety of parameters including starting date, price, tranches of buying, etc. Everything is being scheduled and planned according to a model that yields the best outcome that they can reasonably predict.
|
||||
|
||||
The current mechanism of price control is really simple:
|
||||
|
||||
1. No one buy, no one sell unless absolutely necessary.
|
||||
|
||||
2. Keep borrow rates low to sustain downward pressure via shorting.
|
||||
|
||||
When we squeeze, they let those two go and there is no way to control it; the upwards pressure is going to be immense. There will be fits and starts because of sell limits and paper hands.
|
||||
|
||||
Q: Do you believe in $10m/$1m/$100K/share?
|
||||
|
||||
It is not out of the realm of possibility that some shares will exchange at astronomical prices, but it will be a mathematical outlier. There's a non-zero chance, but it's a very, very small one. By human nature, many people are going to sell before it hits that level. Remember: Reddit is not the universe of GME holders; this group is the most diamond hand of apes around. But there are a lot of people who bought into GME who are not here on Reddit and even the ones that are on Reddit have their own designs on when the risk is intolerable.
|
||||
|
||||
Q: What about that dip yesterday morning?
|
||||
|
||||
Coordinated to counter the good news on Q1 preliminary results. We ended up right in our zone.
|
||||
|
||||
Q: What about that dip to $120 ahead of Q4 earnings?
|
||||
|
||||
You see a pattern?
|
||||
|
||||
Q: Why $180-$200?
|
||||
|
||||
I don't think this is a fixed position; it can move. Main thing is they are watching options and limits to prevent any significant movement one way or the other; it's not about "max pain", it's about "most neutral". There is some basis in psychology. At $75, for example, there will be more buying pressure. At $300, there will be more selling pressure. They may have even "tested" other price points for stability and found this to be a sweet spot...for now. It's not a science; they are also experimenting and observing.
|
||||
|
||||
There will be some price movement up/down because it seems like they are still "playing by the rules" and occasionally need to buy/sell shares on the market as part of their operational strategy. Why? Because they also want to avoid lawsuits; I believe everything is being carefully done to avoid lawsuits with the slimmest of legality as cover.
|
||||
|
||||
Q: Why doesn't GME just do X?
|
||||
|
||||
I think SEC and BR are working with GME board to keep this orderly. Everyone is treading lightly right now to prevent this from breaking away into an uncontrollable squeeze. Even DFV has to resort to communicating with cryptic memes and tweets under threat of severe legal ramifications.
|
||||
|
||||
I think that any major announcement will be presaged by a dip (earnings report, Q1 results). Some big triggers are going to be held off entirely until 004 and 003 are in place.
|
||||
|
||||
Q: This sounds illegal AF! Isn't this collusion to fix prices?
|
||||
|
||||
Is it illegal? Or are they just bending the rules? They are fixing the price by...not buying or selling in any significant volume. Is there a rule that they have to set a reasonable borrow rate? TBH, I don't mind. We get our squeeze and market doesn't self-destruct requiring years of stimulus and pain to recover.
|
||||
|
||||
All of the activity they are engaging in now has a razor thin veneer of legality to mitigate possible lawsuits in the future. So they can't "break" the rules, they can just look the other way or bend the rules. Thus they still need to buy occasionally on the open market and price will move because at the end of the day, all parties want to avoid a mess in the aftermath.
|
||||
|
||||
Q: This is too fantastical; why would they cooperate?
|
||||
|
||||
1. You are Short HF; you know you are done for. What do you want? Some legal cover from lawsuits, time to hide your assets, some slim chance to survive. Your leverage is that you can put your hands in the cookie jar *right now* if you start covering because you can access OCC member contributions before you are liquidated, but you are going to get your ass sued without any legal cover.
|
||||
|
||||
2. You are a non-defaulting member. What do you want? Short HF's tendies at a discount and you don't want Short HF to touch your member contributions to shared funds for their mistake. What good is it for non-defaulting DTC and OCC members if GME goes up, but *Citadel and GME shorts use your funds to pay for the default?* You also don't want the entire market to crash and your portfolio go into the red.
|
||||
|
||||
3. You are the SEC. What do you want? This whole event to be over. You also have a directive to avoid system shock and tremendous systemic market risk at this moment so you need this thing to wind down in a somewhat controlled manner without breaking rules resulting in lawsuits.
|
||||
|
||||
Q: Aren't you assuming way too much coordination and collaboration? No way they work together.
|
||||
|
||||
Their legal and regulatory teams are already working together, coordinating, and collaborating on a regular basis. Look at the member list of DTC and OCC:
|
||||
|
||||
- DTC: <https://www.dtcc.com/-/media/Files/Downloads/client-center/DTC/alpha.pdf>
|
||||
|
||||
- OCC: <https://www.theocc.com/Company-Information/Member-Directory>
|
||||
|
||||
Citadel, Robinhood, Interactive Brokers, Vanguard, JPM, Goldman Sachs, et al. Their teams are already coordinating on the regulatory changes and already in contact with the SEC. It's not like they need secret meetings to do all this; they already have an official mechanism for it in the context of their normal day-to-day business.
|
||||
|
||||
What about non-members like BlackRock, Fidelity, and other brokers? End of the day, they are all part of the same ecosystem since they rely on DTC and OCC for clearing of their trades; they are all in constant communication.
|
||||
|
||||
Q: How would this even be possible?
|
||||
|
||||
To be honest, I have no idea of the specifics of the mechanism, but I can take a wild ass guess. Since all securities and options trades are cleared by DTC and OCC, they can simply use existing tools to restrict or perhaps deter the inflow of orders. [The DTC fee schedule may have an answer](https://www.dtcc.com/-/media/Files/Downloads/legal/fee-guides/dtcfeeguide.pdf). The recent focus on "dark pools" may also provide an answer. Large institutional holders can lend their shares for shorting and can set their own fees on short borrow rate; perhaps the low rate is also a function of the low volume because the low volume means the shares are just sitting there, not being transacted. But the gist of it is that they don't have to break rules to do this; they have to creatively use existing tools to restrict volume. If Citadel can get RH to disable the "Buy" button, than clearing members definitely have tools to restrict order flow by perhaps simply increasing cost of certain types or sizes of orders and transactions.
|
||||
|
||||
Q: What about X as a catalyst?
|
||||
|
||||
They may time the finalization of OCC-004 and OCC-003 with a catalyst, but a catalyst is no longer necessary. You have to realize: they are basically holding the price down by 1) not buying, 2) not selling, 3) suppressing interest rates. Once they stop doing these, the squeeze will immediately start without any additional catalyst necessary because the price is being held stable right now artificially.
|
||||
|
||||
The true catalyst is not going to be seen by the public; it will be when they have bidders lined up for the asset auction and everyone has crossed their "t's" and dotted their "i's".
|
||||
|
||||
Q: What about NSCC-801?
|
||||
|
||||
I think that the GME short situation has been very fluid and volatile. I think that *at one point*, they may have wanted to try to force the squeeze via margin call or increased liquidity thresholds to get it over with. When it was in the $20's or $40's or when they thought that the shorts were just a wee-bit short, they may have thought that having the tools to margin call the shorts would end this thing.
|
||||
|
||||
Once they observed how bad the situation was, the whole game plan changed to focus on mitigating fallout. Changes like NSCC-801 that could trigger the squeeze may be counter productive without getting the firewalls in place first for the fallout. It's like trying to pop a zit then realizing its actually advanced melanoma. Once you realize it's melanoma, you need to treat that very differently than if it was just a big zit.
|
||||
|
||||
Q: Why doesn't some rich foreigner just buy millions?
|
||||
|
||||
They go through brokers. Also, the rich foreigners will work with the non-defaulting members to buy defaulting member assets at a discount at auction. See my screenshot above from SR-OCC-2021-004 page 5.
|
||||
|
||||
Q: So...we getting paid, right?
|
||||
|
||||
Yes. Without a doubt, the squeeze is being "scheduled". But there is ONE nagging issue in the back of my head and it is tucked into SR-DTC-2021-004 page 9. They changed this:
|
||||
|
||||
> As the owner of the securities, DTC has an obligation to its Participants to distribute principal, interest, dividend payments and other distributions received for those securities. No alternative provider is available.
|
||||
|
||||
To:
|
||||
|
||||
> As the owner of the securities `on the issuer's books and records`, DTC has an obligation to its Participants to distribute principal, interest, dividend payments and other distributions received for those securities. No alternative provider is available.
|
||||
|
||||
The interesting questions are 1) what are the securities which are *not* "on the issuer's books and records", 2) who is holding those securities?, 3) what happens to those shareholders? Are these the counterfeit shares? The naked shorts? Is this an escape hatch for the shorts? Or a hammer that inflicts more pain on the shorts?
|
||||
|
||||
If You Made It This Far...
|
||||
|
||||
[Follow along as we recap and dive one layer deeper into SR-OCC-2021-004](https://www.reddit.com/r/Superstonk/comments/mnpzu5/srocc2021004_why_this_proposed_rule_change_is/) and decipher [one of DFV's cryptic, recent tweets](https://twitter.com/TheRoaringKitty/status/1380196363774918657).
|
||||
|
||||
The recent post by [u/yosaso](https://www.reddit.com/u/yosaso/) also examines the dynamics of the sides that are seemingly at play here: [There is a WAR to control the DTCC and GME is the BATTLEGROUND](https://www.reddit.com/r/Superstonk/comments/mouj57/there_is_a_war_to_control_the_dtcc_and_gme_is_the/); really good research into the players and motivations of the players involved.
|
||||
@ -0,0 +1,288 @@
|
||||
Why We're STILL Trading Sideways and Why We Haven't Launched
|
||||
============================================================
|
||||
|
||||
| Author | Source |
|
||||
| :-------------: |:-------------:|
|
||||
| [u/c-digs](https://www.reddit.com/user/c-digs/)| [Reddit](https://www.reddit.com/r/Superstonk/comments/mu9xed/why_were_still_trading_sideways_and_why_we_havent/) |
|
||||
|
||||
---
|
||||
|
||||
[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)
|
||||
|
||||
We've made it through an exciting weekend of suspense only to end up with yet another day of sideways trading. I'd like to examine why I think we have not yet launched based on the bits and pieces that we know.
|
||||
|
||||
In this post, I'll be rehashing some of my earlier posts for folks who haven't read them and also examining my earlier thoughts in the context of the information we've come across over the last two weeks.
|
||||
|
||||
One of my favorite topics in science is black holes. [Black holes had been theorized to exist soon after Einstein's theory of General Relativity](https://en.wikipedia.org/wiki/Black_hole#General_relativity). [Until 2019, the existence of black holes was known, but never actually seen](https://www.nasa.gov/mission_pages/chandra/news/black-hole-image-makes-history). So how did we know where to look? Even though we can't actually see the black hole and even though it may be millions of light years away, we can observe how bodies of mass interact with it, how it affects the space around it, the energy that is dissipated from the black hole, and other signatures of its existence.
|
||||
|
||||
The GME MOASS is like a black hole in more ways than one. We can only speculate on what is happening based on how the different entities in this system are interacting. Let's revisit my earlier post with some new data points.
|
||||
|
||||
Who Are the Entities Circling this Black Hole?
|
||||
|
||||
On APR13, [u/jamiegirl21](https://www.reddit.com/u/jamiegirl21/) posted [this S-4 filing](https://www.sec.gov/Archives/edgar/data/0001834518/000119312521109685/d121216ds4.htm) for [a merger with Apex Clearing](https://www.reddit.com/r/Superstonk/comments/mq4gfi/sec_filing_merger_with_brokarage_detailing/).
|
||||
|
||||
Check out page 84:
|
||||
|
||||
[](https://preview.redd.it/g3p76sl7n6u61.png?width=906&format=png&auto=webp&s=61d82b61305ceeb4bf9e4568b447c0887782e787)
|
||||
|
||||
"Apex, along with over 30 other brokerages...including...Citadel and DTCC engaged in a coordinated conspiracy..."
|
||||
|
||||
While this is *alleged* at the moment, what is clear is that some law firm(s) believes that there is a case against multiple entities -- including the DTCC -- for conspiring to shut down the JAN28 squeeze.
|
||||
|
||||
Set aside the idea that Citadel or the GME shorts alone can suppress the price of GME; if that were the case, we would not have even had the JAN and FEB spikes in the first place since Citadel and the shorts alone could have stopped it.
|
||||
|
||||
As I have mentioned in my previous posts, rather than thinking of the situation as "*Citadel is shorting the market*" or "*It's a battle between Short HF and Long Whales!*" to "*DTC, OCC, SEC,* *and* *the shorts are preparing for the squeeze*".
|
||||
|
||||
Literally every major entity in global banking is entangled in this through the DTCC. Even the non-DTCC members are entangled as they use DTCC members for clearing their trades.
|
||||
|
||||
- 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 | ✔ | ✔ |
|
||||
|
||||
How Are They Preparing?
|
||||
|
||||
The fallout from this squeeze is that there are multiple DTCC members who are going to fail and default (we'll see some possible evidence of this in a moment). When this happens, the DTCC or corresponding subsidiary (hereafter just referred to as DTCC) will step in to manage the default through Recovery and Wind Down Procedures which are documented in their member agreements.
|
||||
|
||||
During the squeeze, the DTCC will intervene and provide immediate liquidity when a member defaults. In turn, DTCC will use the assets of the defaulting members as collateral for that liquidity (which itself may originate outside of DTCC). Those assets from the defaulting member will then be auctioned off to recover those loans.
|
||||
|
||||
[](https://preview.redd.it/6lr1elrbn6u61.png?width=532&format=png&auto=webp&s=4c44a3b19bee31d50d2ea5e97963da4d377f2272)
|
||||
|
||||
SR-OCC-2021-004 page 4: "OCC is proposing...to clarify and further facilitate the process of on-boarding Clearing Members and non-Clearing Members as potential bidders in future auctions of a suspended Clearing Member's remaining portfolio"
|
||||
|
||||
[](https://preview.redd.it/jwcjavojn6u61.png?width=651&format=png&auto=webp&s=5e6b2d668b9106566a5442677b6d7c8338ab48dc)
|
||||
|
||||
SR-DTC-2021-004 page 11: "...to address losses arising out of the default of a DTC Participant...[t]he proposed rule change would add a sentence...DTC may, in extreme circumstances, borrow net credits from Participants secured by collateral of the defaulting Participant"
|
||||
|
||||
If you are interested in diving deeper into this, [check out my earlier post on the topic](https://www.reddit.com/r/Superstonk/comments/mnpzu5/srocc2021004_why_this_proposed_rule_change_is/).
|
||||
|
||||
But let's talk about why this is interesting.
|
||||
|
||||
There are generally three views on what is about to happen:
|
||||
|
||||
1. The entire system and the banks are going to go belly up because of the scenario described in the [Everything Short DD](https://www.reddit.com/r/GME/comments/mgucv2/the_everything_short/) so these additional billions are to buffer them from collapse
|
||||
|
||||
2. The banks are reacting to increased liquidity requirements stemming from last year and the expiration of SLR
|
||||
|
||||
3. A few entities are probably going to collapse due to overexposed positions and other entities are moving into position to profit from that collapse
|
||||
|
||||
My sense is that #1 is a bit too extreme. Having gone through 2001 and 2008, I have learned one lesson: the rich will not allow themselves and this system that props them up to fail because they are dependent on this system to support their bottom lines and lifestyles. What alternative do they have? The Yuan? The Euro? The GBP? The Yen? The Ruble? Crypto? What are you going to do with that Doge or Bitcoin if you can't convert it to an actual currency? How are you going to buy your lattes from Starbucks with Doge? There is no alternative.
|
||||
|
||||
That said, we are at a nexus of multiple blows potentially impacting these financial institutions and GME is just one possible primer that sets off the chain reaction.
|
||||
|
||||
I think it is most likely a combination of #2 and #3. What if:
|
||||
|
||||
1. You are a non-defaulting member
|
||||
|
||||
2. And You know that there are going to be member defaults
|
||||
|
||||
3. And you know that that there will be an auction for their assets at a market discount
|
||||
|
||||
How would you prepare for this? Perhaps you'd want to have cash on hand to meet liquidity requirements and emerge from any collapse flush with assets? How might you go about this?
|
||||
|
||||
- [What if you're Goldman Sachs? Wouldn't it be nice to have an extra $10.6B cash on hand?](https://www.bloomberg.com/news/articles/2021-03-27/goldman-sold-10-5-billion-of-stocks-in-block-trade-spree)
|
||||
|
||||
- [What if you're JP Morgan? How does $13B of cash sound?](https://finance.yahoo.com/news/jpmorgan-sell-13-billion-bonds-184602000.html)
|
||||
|
||||
- [What if you're Bank of America? Why not add $15B to your warchest?](https://www.bloomberg.com/news/articles/2021-04-16/bofa-to-set-record-for-largest-bank-bond-sale-at-15-billion)
|
||||
|
||||
- [What if you're Morgan Stanley? How about loading up on $5B?](https://www.cnbc.com/2021/04/06/morgan-stanley-dumped-5-billion-in-archegos-stocks-before-fire-sale.html)
|
||||
|
||||
Then there's [the curious case of the increased short volume of BlackRock's IXG ETF which is a basket of finance and banking stocks](https://www.reddit.com/r/GME/comments/mr6pz6/world_war_whale_explanation_of_95_short_volume/).
|
||||
|
||||
What is important is to understand the difference between short interest and short volume. [Squeezemetrics' white paper does a great job of explaining this](https://squeezemetrics.com/monitor/download/pdf/short_is_long.pdf):
|
||||
|
||||
[](https://preview.redd.it/vrpqxaonn6u61.png?width=656&format=png&auto=webp&s=0f573ab8d8ebf5a1aa5fb31f70ceda5f4240e769)
|
||||
|
||||
"Thus short volume is actually representative of investor buying volume"
|
||||
|
||||
The purpose of a Market Maker is to provide liquidity. Say you want to buy a bunch of IXG. Rather than waiting precisely for a seller of the same exact block size to enter a sell order that mirrors your buy order, they create the short (an "IOU") and hand you the shares and then close the IOU when they can round up the shares.
|
||||
|
||||
Thus this increase in short volume indicates demand for IXG which the Market Maker is fulfilling using a short which they will balance by buying shares.
|
||||
|
||||
[u/choompop](https://www.reddit.com/u/choompop/) highlights something interesting about IXG:
|
||||
|
||||
> Berkshire Hathaway, JPMorgan Chase & Co, Bank of America, AIA Group, Wells Fargo, Citigroup HSBC Holdings, Royal Bank of Canada, Morgan Stanley, Commonwealth Bank of America
|
||||
>
|
||||
> *Twist:* The 2nd largest institutional owner of JPMorgan is Black Rock Inc. with 192 million shares. The 3rd largest institutional owner of Bank of America is Black Rock Inc. with 509 million shares.
|
||||
|
||||
You might be thinking of the DD highlighting that Warren Buffett dumped many bank stocks over the last year, but keep in mind that he also notoriously dumped airline stocks near their lows at the outset of the pandemic.
|
||||
|
||||
How Do They Know There Will Be a Default and Who Will Default?
|
||||
|
||||
How can we know which of those two scenarios above is more likely? No one can say with certainty what will happen except for a few very privileged insiders. Everything I've hypothesized can get blown away tomorrow. But we can consider some of the evidence that we *can* observe and see where it leads us.
|
||||
|
||||
Tucked into SR-DTC-2021-004 is an interesting bit of text on page 12:
|
||||
|
||||
[](https://preview.redd.it/indix74rn6u61.png?width=676&format=png&auto=webp&s=7d0ed8ed4d943a3dd7d4db349d4e89221808fed4)
|
||||
|
||||
SR-DTC-2021-004 page 12: "in light of observations from simulation of Participant defaults" and "multi-member closeout simulation exercise"
|
||||
|
||||
They have an existing model that they can use to simulate market conditions and it is possible that they have already simulated the squeeze and the aftermath. My assumption is that they also have some idea of the probabilities of which of their member entities are going to fail, when they will fail, how they will fail, and how much liquidity they need to contain these defaults.
|
||||
|
||||
This proposed change would "*shift the timing of management's review of the Corridor Indicators and related metrics from annually to biennially*". What are these Corridor Indicators?
|
||||
|
||||
[](https://preview.redd.it/a1yz0estn6u61.png?width=753&format=png&auto=webp&s=b89ca4fe5a4dba1ae41fb57f8db5a109ea8578f1)
|
||||
|
||||
SR-DTC-2021-004 page 12: "Corridor Indicators include, for example, the effectiveness and speed of DTC's efforts to liquidate Collateral securities...due to any Participant Default"
|
||||
|
||||
The key indicator called out as an example is *how quickly DTC can liquidate a defaulting member's collateral assets.* *We* don't know who will default, but I think that DTCC members have an idea. Think about that.
|
||||
|
||||
SR-DTC-2021-004 was filed on 2021MAR29 and effective immediately. They have long been planning for the defaults that will occur as a result of the squeeze.
|
||||
|
||||
Of course, models can be wrong. I have read in Michael Lewis' *Panic* that the financial models involved in the 2008 collapse didn't account for the fact that real estate value could go down and the effect of that downturn on over-leveraged positions.
|
||||
|
||||
What Does This Have To Do With Trading Sideways?
|
||||
|
||||
Two weeks ago, I posted [Why are we trading sideways? Why is the borrow rate so low? When will we moon?](https://www.reddit.com/r/Superstonk/comments/mkvgew/why_are_we_trading_sideways_why_is_the_borrow/) because I was puzzled why we seemed to be stuck in a monetary [Lagrange Point](https://en.wikipedia.org/wiki/Lagrange_point) and I stated then:
|
||||
|
||||
> What you can take away from this is that we will not see significant price movement up or down for the foreseeable future until OCC-004 and OCC-003 are in place; you are literally fighting against all of Wall Street, even the GME long institutions. There is literally no point buying deep OTM options until there is a whiff of OCC-004 and OCC-003 getting close to implementation. We will keep trading sideways, borrow rate will be inexplicably low, volume will be absent, etc. until DTC and OCC members are protected and they let off the brakes; Citadel and GME shorts are not and have not been in control. DTC, OCC, and all non-defaulting members have been preparing for the default of GME shorts.
|
||||
|
||||
Since that time, we've had the drop to $140 and then more or less back into a stasis point. Millions in options will have expired OTM.
|
||||
|
||||
I had pointed out the timing and coordination of the two prior drops and now we have a third set of data points to consider:
|
||||
|
||||
1. The dip to $120 coordinated with the Q4 earnings and an almost immediate return to stasis
|
||||
|
||||
2. The dip to $160 coordinated with the positive Q1 preliminary results and an almost immediate return to stasis
|
||||
|
||||
3. And now the slow dip to $140 possibly coordinated with: 1) Melvin's Q1 results, 2) Sherman being denied his shares and being replaced, 3) the early discharge of their long term debt, and 4) DFV's options being exercised.
|
||||
|
||||
Now it appears we're back to sitting in a new Lagrange Point and trading sideways again.
|
||||
|
||||
[](https://preview.redd.it/vh5cer8dp6u61.png?width=1633&format=png&auto=webp&s=0ab005f0648da980401c786b4d9a06fecf3039d9)
|
||||
|
||||
Is this a Long Whale inflicting "max pain"? Or simply multiple parties conspiring to establish "max stability"; to keep us in this Lagrange Point while waiting for all of the firewalls to be in place and positioning to profit from this event before we ignite the boosters?
|
||||
|
||||
As I've stated before, I think that the variety of tools that we see at play are all part of the arsenal being deployed by multiple parties coordinating to keep this strapped down until the non-defaulting members are firewalled. The deep ITM calls, the dark pool trades, all of it is plainly visible to DTCC and the SEC yet no action is being taken.
|
||||
|
||||
[DFV's tweet on APR08 is very interesting (turn on audio)](https://twitter.com/TheRoaringKitty/status/1380196363774918657):
|
||||
|
||||
> Why is this happening to me?"
|
||||
>
|
||||
> "It's OK bud, it's just from the medicine, OK"
|
||||
>
|
||||
> "Is this going to be forever?"
|
||||
>
|
||||
> "No, it won't be forever"
|
||||
|
||||
Are these SRs "the medicine" that we're waiting for "forever"?
|
||||
|
||||
I think if we look at the actions over the last few weeks -- for example, the additional liquidity acquired in recent weeks by some of the major entities like Goldman Sachs and JP Morgan -- it seems exceedingly plausible that everyone wanted time to prepare for this event, especially because of the expiration of SLR and the approaching date of the SEC memo that goes into effect on APR22 converging in one window.
|
||||
|
||||
What About the Share Recall or [INSERT CATALYST]?
|
||||
|
||||
My conjecture has always been that we will be waiting for SR-OCC-2021-003 and SR-OCC-2021-004 *as long as possible* because these two codify key changes to the OCC member agreement to contain the fallout of the defaulting members.
|
||||
|
||||
In particular, SR-OCC-2021-004 has a very curious proposed change on page 5:
|
||||
|
||||
[](https://preview.redd.it/qm5jztiqp6u61.png?width=524&format=png&auto=webp&s=cd14cbf5b6642620e09959f55dd995c3666b4679)
|
||||
|
||||
SR-OCC-2021-004 page 5: "OCC proposes to eliminate the pre-qualification requirements related to non-Clearing Member's trading experience"
|
||||
|
||||
Which basically blows the auction process wide open and allows [a much broader array of bidders to the auction](https://www.reddit.com/r/GME/comments/mit0eu/the_everything_shortcontinued_citadel_spacs_and/). Remember: Fidelity and BlackRock are NOT members of OCC but now they get a streamlined path to the auction.
|
||||
|
||||
I think that in an *ideal world*, BR and Cohen want to wait until SR-OCC-2021-004 is codified to launch and in fact, perhaps thought that everything could have been finalized by now and they would be able to ignite this launch sequence. SIG threw a wrench into this by objecting to SR-OCC-2021-003, thereby pushing out its finalization which would have been APR10 (45 calendar days from FEB24) setting us up potentially for this week if 004 had also been finalized but now could go out to MAY31.
|
||||
|
||||
We are now running into the issue of the calendar and the shareholder meeting since some number of shares will likely have to be recalled in the next few days.
|
||||
|
||||
What Will BlackRock and GME Longs Do?
|
||||
|
||||
This is where it gets interesting.
|
||||
|
||||
[Here's Larry Fink, CEO of BlackRock on CNBC talking about Reddit and GameStop](https://youtu.be/yEgo08b19E8?t=207):
|
||||
|
||||
[](https://preview.redd.it/imiyzrdvp6u61.png?width=911&format=png&auto=webp&s=e37b48653042d099e0e5d7c8cc5108b72ea3bdb1)
|
||||
|
||||
"...reddit and gamestop and what does that mean with our clients either..."
|
||||
|
||||
BlackRock knows what's going on at the highest levels.
|
||||
|
||||
I have a hunch that the [early payoff of GME's long term debt](https://investor.gamestop.com/news-releases/news-release-details/gamestop-announces-voluntary-early-redemption-senior-notes-0) may not have been the initial plan because perhaps they were going to use the share recalls to trigger the squeeze. But I think that there's a chance that we may see BR and other institutional longs choose to not recall their shares OR wait until the last possible moment to execute the recall because it's too early to launch.
|
||||
|
||||
With the delay in SR-OCC-2021-003, this may have forced them to put another tool into play: the crypto-dividend by taking a page out of the Overstock playbook. Thus they prepared this play at the cost of $216M so that they have another tool to be able to initiate the squeeze if they do not recall their shares.
|
||||
|
||||
I think that GME board will delay action as long as possible because the conditions are simply not favorable at the moment. They were even less favorable in JAN, but it is possible that at that time, no one quite knew the full depth of the situation otherwise the same shenanigans going on now would have happened in JAN and FEB. Prior to JAN28, the assumption may have been that a few small HFs would fail. After JAN28, it was clear that the stakes were much, much higher and I have an idea why we've been trading sideways since MAR16.
|
||||
|
||||
What Happened on March 16 and Why Have We Traded Sideways Since?
|
||||
|
||||
[SR-DTC-2021-003](https://www.sec.gov/rules/sro/dtc/2021/34-91336.pdf) on MAR16:
|
||||
|
||||
[](https://preview.redd.it/g8vmwv64q6u61.png?width=695&format=png&auto=webp&s=7feae2d390ae84a43dbe9b3a9af01ad6de03e3b5)
|
||||
|
||||
SR-DTC-2021-003 was effective immediately on MAR16
|
||||
|
||||
The key change is that DTC Participants were required to reconcile and confirm their records of their positions with the DTC's records of their positions on a monthly basis prior to SR-DTC-2021-003. After SR-DTC-2021-003? The Participants have to reconcile and confirm their positions on a daily basis.
|
||||
|
||||
So let's look at the data:
|
||||
|
||||
| *Date* | *Open* | *High* | *Low* | *Close* |
|
||||
| --- | --- | --- | --- | --- |
|
||||
| MAR15 | 277 | 283 | 206 | 220 |
|
||||
| MAR16 | 203 | 220 | 172 | 208 |
|
||||
|
||||
And we have since then largely been in that sideways zone with a few days of movement since.
|
||||
|
||||
This allowed all parties to see the deck that they are working with because previously, Citadel could try to "clean things up" before the monthly reconciliation. Prior to SR-DTC-2021-003, this was to occur "*No later than the 10th business day after* *the last Friday of the month*" (page 5). You might be thinking now "what's the last Friday of January"?
|
||||
|
||||
[](https://preview.redd.it/v4qq5taaq6u61.png?width=302&format=png&auto=webp&s=b85418a5fd90612ae4801a8665af9eb50255ec08)
|
||||
|
||||
January 29th was the last Friday. Could the squeeze on the 28th been a result of Citadel starting to reconcile their positions with the DTC?
|
||||
|
||||
So the JAN28 event may have been caused by Citadel starting the process of reconciling their positions to submit and confirm with the DTC. After JAN28, all parties had a sense of the magnitude of this event but probably could not get enough transparency to make the right decisions.
|
||||
|
||||
Why wouldn't Citadel just continue to "fudge" their books? There's something interesting on page 12 and 13 of SR-DTC-2021-003 which gets referenced again in SR-DTC-2021-004 which is filed 13 days later. Here is the text of the existing member agreement on page 12:
|
||||
|
||||
[](https://preview.redd.it/226il9qiq6u61.png?width=688&format=png&auto=webp&s=f9d0fd8e92d8861338401996d378f4a5b8d8e43c)
|
||||
|
||||
SR-DTC-2021-003 page 12: the original text which gets replaced.
|
||||
|
||||
And the text that replaces it on page 13:
|
||||
|
||||
[](https://preview.redd.it/abdhb4akq6u61.png?width=686&format=png&auto=webp&s=790adbd675869ed2f580316e307009121fa38333)
|
||||
|
||||
SR-DTC-2021-003 page 13: note the underlined text which was added.
|
||||
|
||||
Now let's look at a piece of text in SR-DTC-2021-004 on page 9:
|
||||
|
||||
[](https://preview.redd.it/6trdmuzqq6u61.png?width=732&format=png&auto=webp&s=b0420af2fad7640d602aae71f62f479b8870b0bc)
|
||||
|
||||
SR-DTC-2021-004 page 9: notice the addition of the text "on the issuer's books and records"
|
||||
|
||||
In other words, DTC is highlighting that it will only release dividends, interest, other distributions, and *redemption* for any securities it has on record. 003 and 004 fit together to clarify that DTC will not make payments for anything that is not reconciled with their systems.
|
||||
|
||||
TL;DR. So...What Ape Do?
|
||||
|
||||
Same as always: HODL.
|
||||
|
||||
My conjecture is that in an ideal world, SR-OCC-2021-004 is the key piece to get into place to re-define the liquidation of failing members. But we may now be pushing up against the calendar and RC, GME, and BR may be forced to play their cards rather than wait. Or I could be wrong and everything gets blown open tomorrow.
|
||||
|
||||
While I do not buy into much of the technical analysis around this stock, there is something very interesting if you look at the charts *and volume* leading into the spike at the end of February and where we are now.
|
||||
|
||||
[](https://preview.redd.it/e9xlew2ar6u61.png?width=1629&format=png&auto=webp&s=dc07760b1ece57492622e604f0c6a1b28bf2a248)
|
||||
|
||||
Look at the pattern leading into the February spike and the pattern we're in right now over the past week.
|
||||
|
||||
I think we are getting really close to another big price move. It may or may not be the squeeze, but we see a repeat of almost the exact same price movement *and volume* as the last time we moved out of a stasis.
|
||||
|
||||
Like a black hole, we cannot actually see it because even light does not escape, but we can observe how the mass bodies around it interact and how it distorts the space that it occupies. The squeeze is there. The best that we can do is to observe how the major players are positioning and preparing.
|
||||
Reference in New Issue
Block a user