NSCC-2021-010
This will be a big thread. And more will be added (369pg legal doc so bear with me)
Initial brief is this tho: NSCC wants to protect the market from crash in the event of Fire Sales resulting from HF forced buybacks from shorts! may know MOASS is imminent (1/x)
This will be a big thread. And more will be added (369pg legal doc so bear with me)
Initial brief is this tho: NSCC wants to protect the market from crash in the event of Fire Sales resulting from HF forced buybacks from shorts! may know MOASS is imminent (1/x)
The deets. The NSCC is looking to add new membership group and allow what’s called SFTs (Securities Financing Transactions) - these would essentially allow more liquidity (loans collateralized against securities) for groups that get in bad shape. Ie: forced to buyback (2/x)
(3/x) We know when HFS are owing so many shares back to us that typically in a MOASS margin call, they would have to liquidate their long positions potentially causing a “fire sale” (selling off mass shares - could crash some stocks).
(4/x) To prevent this an in-trouble HF could “lend” (long or short term) their long positions to the SLT members in exchange for cash (ONLY CASH) allowing them to access capital to buy back shares (in the example of AMC Shorts) WITHOUT all the long positions being sold for loss…
(5/x) … which if sold for loss would cause much of the market to lose equity and cause a potential crash (crash is relative, I don’t mean a 2008 level crash).
See next part for an example of what this looks like:
See next part for an example of what this looks like:
(6/x) EXAMPLE 1. PRE SLTs
- AMC MOASS HAPPENS
- HFs need to cover
- HFs sell billions worth of Long Positions in TESLA, MSFT AMZN
- TESLA, MSFT, AMZN all begin to crash, as does SNP500 and many indexes.
- Market gets scared and people all start to sell.
- APES WIN MARKET LOSES
- AMC MOASS HAPPENS
- HFs need to cover
- HFs sell billions worth of Long Positions in TESLA, MSFT AMZN
- TESLA, MSFT, AMZN all begin to crash, as does SNP500 and many indexes.
- Market gets scared and people all start to sell.
- APES WIN MARKET LOSES
(7/x) EXAMPLE 2 - with SLTs
- AMC MOASS HAPPENS
- HFS go to SLTs and park their Long Shares in trade for cash (they owe interest)
- Market shares are not sold and the market stays stable.
- APES WIN, MARKET WINS, BAD HFs lose billions but don’t go bankrupt.
To me this is WIN WIN
- AMC MOASS HAPPENS
- HFS go to SLTs and park their Long Shares in trade for cash (they owe interest)
- Market shares are not sold and the market stays stable.
- APES WIN, MARKET WINS, BAD HFs lose billions but don’t go bankrupt.
To me this is WIN WIN
(8/x) I'm not saying this read is 100% correct. There's likely to be many loopholes written into this filing, that we find and have to address. But we do have the ability to comment while still in comment period and DEMAND that these loopholes are closed.
I will update finding
I will update finding
(9/x) UPDATE: an interesting mechanism of this process is that it may allow or encourage SFTs to be used to alleviate the current risk (leveraged) valuations of certain institutions [BAD if we want them failing]. The SFTs facility could give them additional liquidity and allow
(10x) allow them more capital (money) to continue to SHORT the stocks we love. I think this is a bad thing personally. It would allow them to in essence double leverage themselves on the backs of already hedged positions (if using longs to support short sales) without having
(11/x) to cover the current leveraged positions (IE: Short AMC)
It could give them another opportunity to continue to short, and until they have covered all current shorts and FTDs I think this is a rediculous risk.
NOW REMEMBER WE CAN COMMENT AND DEMAND CHANGES. See (12/x +)
It could give them another opportunity to continue to short, and until they have covered all current shorts and FTDs I think this is a rediculous risk.
NOW REMEMBER WE CAN COMMENT AND DEMAND CHANGES. See (12/x +)
(12/x) It is now more imperative than ever that we comment on this filing and demand that in the current market conditions this rule cannot be broad and unlimited in its use. It cannot be used to maintain over leveraged positions at retail expense. If used for an intended …
(13/x) purpose of limiting global market Fire Sales and supporting stability than that’s perfect! However if used to give more tools for bullying or manipulation of stock prices, than this is unacceptable. The rule was developed in 2018/2019 by the board, but 2021 is a new
(13/x) environmental evolution and this rule needs to be supportive of the needs of the current market. In 2018/19 nobody envisioned or it encapsulated the rule to include the influx of the retail stakeholder group. So protections must be put in place.
All of this is my OP
All of this is my OP
If you feel that this rule or any parts of it are aweful and do not support market strength and transparency then YOU SHOULD SHARE YOUR THOUGHTS.
Linked tweet below shows how you can comment.
Also tweet to: @FSCDems @FINRA @SECGov @POTUS @RepMaxineWaters @SpeakerPelosi
Linked tweet below shows how you can comment.
Also tweet to: @FSCDems @FINRA @SECGov @POTUS @RepMaxineWaters @SpeakerPelosi
LINK TO FULL FILING:
dtcc.com
dtcc.com
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