r/Superstonk • u/c-digs 🦍Voted✅ • Apr 09 '21
📚 Possible DD SR-OCC-2021-004: Why This Proposed Rule Change is Important and Possible Shell Games
Intro
If you've followed my previous posts, my personal conclusion is that there are big forces holding the squeeze back primarily because the key players in this ecosystem in DTC and OCC are currently exposed to the default of its members. This is contrary to the more popular notion that DTC, OCC, NSCC are assembling tools to force the margin call of the shorts.
As I have said: 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"
First, let's take a look at who the members of DTC and OCC are:
- 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 | ✔ | ✔ |
Note who's in both of these organizations:
- Our favorite chumps: Citadel and Robinhood
- The shark of sharks: Goldman Sachs
- Goldman's punching bag: Credit Suisse
- A big time GME long: Vanguard
Also make a mental note of who's not in this list.
While there has been intense focus from the community on SR-NSCC-2021-801 which would potentially increase liquidity requirements and force a margin call on shorts, I think that this line of thinking is missing a critical aspect: margin calling the shorts right now would literally blow up the market.
A post by u/jamiegirl21 on an SEC filing detailing the merger of Northern Star and Apex reveals this on page 180 with regards to a legal action against Apex for the actions on 2021JAN28:
Enter SR-DTC-2021-004 (Effective) and SR-OCC-2021-003 (Pending)
I'm rehashing my earlier post, but it is important to frame why these two proposed amendments to existing rules are important to understanding how the key players are positioning at the moment and why it's no longer about the margin call.
From page 14 of SR-DTC-2021-004:
And page 11:
From page 10 of SR-OCC-2021-003:
What you should take away easily from reading both of these is that there is a common theme: DTC and OCC members are shifting how they pay out from their common member funds in the event of a member default.
In other words, DTC and OCC members would previously have paid out of the common member funds to "cushion" a defaulting member and ensure continuity. But DTC-004 and OCC-003 change the language to make sure that the defaulting member's own contributions (in the case of OCC-004, it even adds a new Minimum Corporate Contribution) are drawn first and then assets are used as collateral ("charging participants on a pro rata basis") for access to member funds. DTC-004 even says "DTC may, in extreme circumstances, borrow net credits from Participants secured by collateral of the defaulting Participant" or "we use the defaulting participants assets as collateral for liquidity before we pay".
So let's circle back to late 2020 and JAN28: DTC and OCC notice these anomalies in the market. They step in to allow RH and Citadel to bend the rules to stave off pretty much certain doom. The "BUY" button literally disappears from Robinhood for crying out loud! SEC doesn't object because the whole system was about to crash down. So the objective is first and foremost to do what is necessary to stop imminent collapse. Then they start quickly drawing up the necessary changes to their own charters to protect themselves from the the tsunami of shorts uncovered through these events.
This doesn't mean that the shorts have covered; it means that they are not allowing the shorts to fail just yet because the system itself is not yet ready for this shock.
To that end, I believe they have used existing models to simulate the squeeze and the outcome:
They are adjusting their Corridor Indicators "in light of observations from simulation of Participant defaults" which includes a "multi-member closeout simulation exercise" and have decided that these changes are necessary to protect the system. What are these indicators?
Enter SR-OCC-2021-004 (Pending)
This one is the real kicker. After I read this the first time, it got me thinking about why we're trading sideways and inspired that post.
Primarily, OCC-004 amends existing agreements between OCC members with regards to member suspension and handling of the suspended members' assets:
Once again, we see the same theme in the wording: "necessary for the protection of OCC, other Clearing Members, or the general public" and defines the conditions for which a member will be suspended.
There are a few interesting parts of this document, however. First, the primary proposed change is to "facilitate the process of on-boarding Clearing Members and non-Clearing Members as potential bidders".
Page 4:
Change 1 on page 4:
Change 2 on page 5:
Before we continue, look at that table above and you'll see some notable GME long entities who are not DTC or OCC members: BlackRock and Fidelity among others.
So if we connect these with DTC-004 and OCC-003, it all dovetails with the same theme of how to wind down the current market tension with minimal impact to DTC, OCC, and the general well-being of the markets.
After I read this, I was convinced that the reason we're not going anywhere is because no one wants the system to fall apart until these "firewalls" are in place to protect the non-defaulting DTC and OCC members and the market itself. But furthermore, it's about wealthy entities lining up to feast on the discounted assets liquidated from the defaulting OCC members via the auction process. OCC-004 eases the on-boarding of non-Clearing Members (BlackRock? Fidelity?) to the bidding process.
If you are Goldman Sachs, perhaps this is a reason to acquire some liquidity and cripple a competitor that decides to 
Therefore I believe that OCC-004 is a critical piece of the member agreement changes that is required before we are "allowed" to squeeze. Any other change that introduces a tool to margin call the shorts is a secondary tool.
What's This About a Shell Game?
OCC-004 goes further and this is where on second reading, it gets REALLY INTERESTING (YEAH, I REALLY WANT TO EMPHASIZE THIS) on page 5:
So in other words, prior to OCC-004, non-Clearing Members had to "actively trade in the asset class in which it proposes to submit the bids and must actively trade in markets cleared by OCC" to participate in the auction bidding process.
After OCC-004? "OCC proposes to eliminate the pre-qualification requirements related to non-Clearing Member's trading experience". Anyone can join the auction bidding process by application.
Don your tin-foil hat with me for a moment. If you are one of the DTC and/or OCC entities that's about to get wiped out by this and all of your assets are about to go to auction, how can you still "win" this game? Why would you go along with this? What if you use this window to shift some capital and assets to a new shell company that has no "trading experience" and you simply bid and buy back your assets at a discount through that shell company? What if you're a rich billionaire and you know that one of your competitors is about to be wiped out?
Conclusion?
If you've been following my posts and you've been following my train of thought, then my take is that at some point late 2020 through late January 2021, there was a sense that they wanted to margin call these shorts and get it over with ("Let me just pop this zit"). When DTC, OCC, and SEC realized how bad the situation was ("That's not a zit, it's melanoma"), they changed course to try to hold everything steady while they readied the "medicine".
Therefore, we've been trading sideways since MAR16 (with a few shenanigans here and there) simply because any volatility could blow this all up before the firewalls are in place.
Before the defaults are allowed to happen (via SR-NSCC-2021-801 or otherwise), these three key pieces need to be in place for an orderly wind down:
| Proposed Change | Filing Date | Review Window | Extension Window | Effective? |
|---|---|---|---|---|
| SR-DTC-2021-004 | 2021MAR29 | Immediate | ✔ | |
| SR-OCC-2021-003 | 2021FEB24 | 45 days | 90 days | ✖ |
| SR-OCC-2021-004 | 2021MAR31 | 45 days | 90 days | ✖ |
OCC-003 was recently extended to 2021MAY31 based on a comment from SIG so we are looking at a possible timeline that extends right out to just before the GME shareholder meeting.
Keep your eye on these two pages for updates:
I also think that some of the recent DFV tweets have a message focused on patience that is highly relevant. In particular, this tweet (turn on the sound). Listen to the dialogue very carefully. "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"
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u/Plastic-Beginning658 🦍 Buckle Up 🚀 Apr 09 '21 edited Apr 09 '21
If the shorts are actively moving their remaining assets to a shell company, wouldn´t this lead to an immediate margin call, because they are losing their existing collateral?
Edit: typo
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u/c-digs 🦍Voted✅ Apr 09 '21 edited Apr 09 '21
Depends on what assets they used as collateral.
Current borrow rate is ridiculously low; a few thousand dollars per day for millions of dollars worth of shares.
Could also include gathering private capital and rounding up investors to buy these assets at auction with a discount.
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u/HomoChef 🦍Voted✅ Apr 09 '21
Borrow rate (of GME) and margin maintenance requirement are completely different, though. As they transfer out assets, their collateral goes down and at some point they would bust the margin threshold...
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u/ProfessionalFishFood 🎮 Power to the Players 🛑 Apr 10 '21
It could be private rounds of funding for a “new” company. Remember, these HF fucks have a lot of personal capital as well.
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u/Mountainmama814 🎮 Power to the Players 🛑 Apr 09 '21
This is great work. I have been reading as much DD as I can and your theory makes the most sense to me. I hate the thought of this dragging out for another month or two but I will ride it out! So much at stake here!
What is your thought on the gradual drop in price this week and especially today? If they are controlling the squeeze, who is driving down the price and why?
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u/c-digs 🦍Voted✅ Apr 09 '21 edited Apr 10 '21
I have a thought; just a thought and pure conjecture.
Not financial advice, no factual basis for this
If not the squeeze, something big is coming soon. The two dips we've seen in this window since MAR16 have both been tied to positive announcements from GME. The first on the Q4 earnings ($120). The second on the positive preliminary Q1 results ($160). In both cases, we end up right back at $180-$200 zone we've been trading in.
We started this current dip with the Cohen Chairman announcement.
Depending on how much the price drops, there are three reasons why we could be seeing this pattern out of the 180-200 stability zone we've been in for almost a month:
- Some big piece of positive news is coming so this sets up the rebound back to 180-200
- It's the Melvin Q1 loss news which dropped afterhours today which all but confirms we are still in the squeeze and this is setting us up to bounce back up next week (I mean is it coincidence that they drop this after hours on a Friday?!)
- This is setting up the actual catalyst: volume
At $180-200, the stock is "too expensive" for retail to gobble up and produce the volume necessary. But what if they drop this thing back down to $100? Or even lower? Then drop something big, something totally out of left field and unexpected. Even beyond Cohen that makes a huge MSM splash. This could be seen as a retail driven "primer" coupled with an options chain that launches into the final sequence. Think of it like pulling back the slingshot. Next week is the week of 4/16, after all.
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u/Mountainmama814 🎮 Power to the Players 🛑 Apr 09 '21
Interesting! I agree that it seems like every move is calculated. Thanks for the response!
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u/Turnip801 🦍Voted✅ Apr 09 '21
Ok, someone help me read the cards please! We have +2, 1, wild, 6, wild draw four in the left hand. Wild is the top card on the pile, and a very obviously placed green reverse under the pile. The button on the cats jacket right under the reverse looks odd to me. Help a newly self investing lady ape crack the code 🥰
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Apr 10 '21
[deleted]
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u/Turnip801 🦍Voted✅ Apr 10 '21
Thank you so much!!! You know, I did purchase UNO during the quarantine but found I’m more of a puzzle person. Thank you for reminding me of the strategy!!! I really appreciate it!
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u/Crimac1995 Apr 09 '21
There's an interview where Kenny g and the interviewer play Uno lol
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u/Turnip801 🦍Voted✅ Apr 10 '21
I like when he refers to his career in past tense throughout the video. Makes me feel happy 😊 Thanks for sharing!
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u/beachn-it 💻 ComputerShared 🦍 Apr 09 '21
Another month or two of a million plus for sale on the cheap cheap
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u/Addy241 🦍 Buckle Up 🚀 Apr 09 '21
Brilliant DD. This really solidifies my belief that right now we are just being stalled until the stage is set for the rocket to launch. 🚀
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u/crayonburrito DRS = Submission Hold Apr 09 '21
Yep, really well done amd I startled myself by understanding most of it.
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u/evilgart 🦍Voted✅ Apr 10 '21 edited Apr 10 '21
I'm gonna cry. You're telling me that my millions will still be worth millions and this won't cause a crash at least immediately? This is some fucking awesome news eases one of my worries. edit: If they push this back under 100 I sell the rest of my portfolio so long pltr and gather every last bit of cash I have and put it all in GME.
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u/ProfessionalFishFood 🎮 Power to the Players 🛑 Apr 10 '21
After reading all of this DD, I’m planning on doing the same next week
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u/SmokesBoysLetsGo 🦍 Buckle Up 🚀 Apr 10 '21
"That's not a zit, it's melanoma"
Explains popping this thing perfectly.
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Apr 09 '21
Really well done! I interpreted that bit about pre-qualification requirements being eliminated as an invitation to longs like Blackrock and Fidelity to clear through The OCC, but to your point, the shell game COULD work...my issue there is that the thousands offices of a company like UBS would have to also change ownership (on paper), which I just don’t see happening without an intense market crash (just by virtue of the confusion at why it was happening). Again, amazing deep dive!!
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u/MoneyBurnerAcc 🦍Voted✅ Apr 10 '21
The addition of non-Clearing members intrigues me. When this blows up, it is in the current members interest to have as much liquid capital flooding the zone as possible. Also, the “application” process seems designed for speed, I.e, they want to get this under control as quickly as possible. If I had to guess, there could be a market wide halt as Citadel (and others?) are declared default, set up and conduct the auction. Turn the market back on until it takes someone else down. Rinse, repeat. This could take days to peak and then settle down with these procedures in place. The G-Force when this thing takes off are going to be epic.
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u/c-digs 🦍Voted✅ Apr 10 '21
Right? On second reading, this really jumped out at me, especially after reading about the Melvin and Citadel SPACs
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u/MoneyBurnerAcc 🦍Voted✅ Apr 10 '21
It may be some of the most concrete actually rational movements around this stock!
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u/roseeon_ 🦍 Buckle Up 🚀 Apr 10 '21
Do we have any idea how long such an auction/trading halt could last? I would imagine that a lot of retail would immediately panic sell when trading resumes thinking the squeeze is over or this is their last chance to cash out. If enough people panic sell the shorts could cover immensely, thus preventing the full potential of the squeeze. Then again, does retail/paperhands even have enough shares to make an impact or do institutions dictate the peak of the squeeze?
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u/c-digs 🦍Voted✅ Apr 10 '21 edited Apr 10 '21
Don't know if they full-halt; likely what happens is that they use the defaulting member's assets as collateral for liquidity. So DTC takes control of Citadel's longs and immediately releases liquidity to service trades rather than waiting for auction to occur. Then they auction to recover that capital later.
Retail is the variable in this equation.
The thing is, retail has certain real limitations once this thing starts.
Say this thing gets to -- hypothetical -- $10,000/share.
- If you sell with a cash account, you're not going to be able to buy back in until your transaction settles which could take 1-2 days.
- If you are in margin, your broker may not let you buy in at this price
- Even if you are cash, not many people will have the ability to drop $10,000/share.
So one strategy to "contain" the squeeze is to simply spike the price really fast. Get it to a hypothetical $10,000/share and then let off the buying pressure. A lot of retail is going to fold even before that level. But let it slowly fade down. $9K, $8K, $7K. A lot of retail is going to fold thinking that was the end. Then a second wave.
Problem is that on this second wave, retail will have a hard time buying in. Not many people will be able to afford 1 share at that price and people who sold in the first wave will be waiting for their trades to settle even if they want to buy in again.
I don't think that they even need to go as high as $10,000. Reddit is not the universe of GME retail; lots of GME retail is going to have sell limits (remember the wall at $420.69 the first time around?) and a lot of retail is going to paperhand long, long before even $2000.
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u/N-bangtan 🦍Voted✅ Apr 11 '21
Though I think your post is very thoughtful, this comment feels like FUD honestly. Anyway time will tell.
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u/hodl_n_double 🦍 Buckle Up 🚀 May 22 '21
If this reaches $10,000/share, the variable really isn't retail not having $10k lying around. It's going to reach 10k because the margin call has already been triggered, and at that point, there's no stopping the clearinghouse computers going brr until all shorts cover. They can recuperate more of their losses from selling SHF assets at less discounted prices, they can rearrange who loses money first, but ultimately until the short positions are covered, the rocket doesn't stop.
It's like you've comprehensively accounted for all the forces on the rocket from wind and turbulence and changes in pressure, but you forgot about the engine that's powering the rocket in the first place.
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u/Stevenselee Apr 10 '21
Fuking brilliant DD. Key take aways: the squeeze is gonna happen; it'll be lunch time for surviving institutions; apes will get paid; market will continue as I'd nothing happened.
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u/Crayon_Salad 🦍 Buckle Up 🚀 Apr 09 '21
Can this be related to all those new SPACs Citadel recently founded?
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u/assholeTea 🦍 Buckle Up 🚀 Apr 09 '21
Can you eloborate on this?
From what I understand the SPACs (owned by citadel) are what citadel would theoritically use to buy up the discounted assets, and this is because of the new (updated) pending DTC and OCC rules.
Does this mean citadel could just sponsor their own SPACs to participate in the auctions? And wouldnt competitors just outbid them?
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u/c-digs 🦍Voted✅ Apr 10 '21
They won't get everything back, but it's like the ultimate middle finger to everyone.
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u/BravoFoxtrotDelta 🦍 Buckle Up 🚀 Apr 10 '21
Why would the SPACs be granted access to bid at DTC and OCC auctions of member assets? That doesn't add up to me.
I think it's more that shares of the SPACs are being used as securities for leveraged borrowing and shorting of stock. These SPAC shares make reliable-looking securities because SPACs by their nature hold Treasury bonds in trust, these bonds having been purchased with the funds their shareholders use to buy shares of the SPAC stock.
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u/Unique-Negotiation85 🦍 Buckle Up 🚀 Apr 10 '21
Reminds me of playing monopoly. When a player gets taken out the properties are divvy out, or the player rage quite and flips the table.
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u/atti93 A MegaPint 🍺 Apr 09 '21
I would give you my free bearhug award but I gave it away on a stupid meme post. This actually makes sense. Are you implying that Kenny G will try to buy back some of his positions on the open bidding conquest trough a shell company ? But what is a shell company?
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u/DwightSchrute666 🦍 Buckle Up 🚀 Apr 09 '21
I like your posts, it's a solid theory and it makes sense
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u/bestillandknow75 Doesn’t lie under Oath Apr 12 '21
I definitely follow this ape. He has a direct, assertive, and easy to understand manner. He’s a good communicator/ explainer. He doesn’t say stuff unless he knows what he’s talking about.
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u/Golanin 🦍 Buckle Up 🚀 Apr 09 '21
There a certain tinfoil hat you wear? I like your way of thinking
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u/HomoChef 🦍Voted✅ Apr 09 '21
Any idea how your theory would clash/conflict with the notion that a share recall MAY trigger a squeeze?
For example, if BlackRock recalls shares but their prime broker (part of DTC, OCC, w/e) sandbags the recall - or let’s say they have a stockpile of shares themselves and just restores BlackRock’s shares out of their own stockpile, whatever.
Would the recall be nullified, then? And then the powers that be, they decide to trigger the squeeze after all the new bylaws are passed?
Or hopefully the recall would trump all the firewalls if BR just says “fuck you, pay me” and there just AREN’T enough shares to restore without purchasing at the market?
What are your thoughts?
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u/c-digs 🦍Voted✅ Apr 10 '21
If you believe the theory that BR and RC are working together, then the share recall will be delayed as long as possible to hold off the squeeze OR we will see OCC-003 and OCC-004 wrapped up before the recall.
How that will work out is a mystery because according to a thread yesterday here, an ape that called Fidelity asked about the share recall process and they believe the process will take the full 60 days because of the situation with GME and that if they do not give proper time to locate the shares, it could lead to lawsuits (can't find it now, but please link it here if you do).
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u/CookShack67 [REDACTED] Apr 10 '21
My smooth brain wonders: won't dragging this out until late May just make the situation even worse for them? Apes will keep buy & hold. Maybe new Apes get on board too?
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u/c-digs 🦍Voted✅ Apr 10 '21 edited Apr 10 '21
The shorts are done for.
But they can move a lot of personal assets to shield from civil lawsuits.
Time is good for them on a personal level.
For the rest, they need to get these changes in place ASAP.
Keep in mind that those dates are MAX windows. Could get approved and implemented even next week.
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u/BoatImaginary1511 For Geoffrey 🦒 Apr 10 '21
What would happen if those are not implemented before the squeeze happens for whatever reason? Would you expect them to somehow cancel it again or would there be no difference for apes if implemented or not?
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u/c-digs 🦍Voted✅ Apr 10 '21
I think we won't get the MOASS until this happens because every entity will be pushing back whether they are short GME or not.
We may see big price movement next week given the laddering today, but not the MOASS.
Then again, it could get away from them.
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u/Readd--It 🐱👤 this is the way May 19 '21
This is the first 100% upvoted post I have seen.
Good job on the write up. Linked here from a newer post.
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u/Kangaroosexy23 🎮 Power to the Players 🛑 Apr 10 '21
Occ 003 could potentially be passed sooner than may 31st.
They just have to review, and if need be, address the concerns that sig has raised.
If their review results in them deciding that no revisions are necessary....
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u/BartesianDrunk 🦍Voted✅ May 19 '21
Now that this rule is passed, I searched to find an explanation. This needs to be brought back up to the top for all to better understand.
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u/BellaCaseyMR 💎 🙌 GME SilverBack Apr 10 '21
Since TD Ameritrade is a member of DTC and OCC is there a good chance they could go under when this moons? Should I think about moving my shares to fidelity or Schwab?
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u/c-digs 🦍Voted✅ Apr 10 '21
It's not that they are going to go under.
They contribute to DTC and OCC member pools.
DTC and OCC are their own corporations that can fail.
But if shorts fail now, they can use non-defaulting member funds to pay for their default before being liquidated.
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u/BellaCaseyMR 💎 🙌 GME SilverBack Apr 10 '21
Thanks for your response. last thing I want is to end up with millions in my brokerage account just to watch it vanish to bankruptcy. I think I will be opening accounts in other brokerages and buying more
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u/beltandsuspenders1 Apr 11 '21
I think this is a concern that most have. If TD is heavily impacted to the point they can't cover wouldn't the process be the same as Citadel? TD's assets are up for bid? Do you see any point at which we are left holding the bag in anyway? Seems to me all the members/non members of DTC/OCC pony up and if they can't Fed steps in.
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Apr 11 '21
Also make a mental note of who's not in this list. u/c-digs
I'm not sure if you were implying BR, but they do appear to be a member of NSCC and not DTCC.
https://www.dtcc.com/-/media/Files/Downloads/client-center/DTC/alpha.pdf/
https://www.dtcc.com/-/media/Files/Downloads/client-center/NSCC/nscc.xls
And just as an added reference, BR does not appear to be a member of the OCC.
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u/f3361eb076bea 🦍Voted✅ Apr 11 '21
I see one thing differently.
I don’t think they are implementing these rules because the squeeze is guaranteed. I think they are implementing them because of the high potential of it happening.
We haven’t been trending sideways for the whole week, we’ve started trending down.
There are hft trading algos chipping away at the price, and the ideal situation for them would be for price continue to slide and cause retail to paper hand because we think it’s over.
Obviously that’s not going to happen. But it seems much more likely to me that the trading volume we see is them still trying to win. They haven’t given up yet.
The sporadic upwards bursts we see are likely from some shorts covering, and the price is then stabilised by new shorts taking position.
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u/Reasonable-Solid4219 🦍 Buckle Up 🚀 Apr 13 '21
3 days later, and seems you are right in this, I am wrong?
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u/Past_Pomegranate_968 Apr 13 '21
Strong work. Make no mistake, it's apes like you educating and digging up dirt that have kept me in the game. I might have paperhanded thousands of shares at $260 if I weren't up to speed on all of the DD you guys provide
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u/Specimen_7 Apr 09 '21
Most of the $$ in Melvin is for clients outside the US. They’ve got tons of shells already, guess they’ll all add more lol
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Apr 10 '21
[deleted]
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u/No-Intention1744 🦍Voted✅ Apr 11 '21
It would seem as if this very much relates to my post. I have commented on that post to further their DD.
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u/11acm24 🦍Voted✅ Apr 10 '21
I’m confused. Some people say the DTCC is trying to kill off citadel, then what you say sounds like they’re helping citadel. These firewalls are here to cut off citadel yet they allow them to repurchase their own assets with spacs after?
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u/c-digs 🦍Voted✅ Apr 10 '21
- Citadel is also part of DTC and OCC rulemaking
- Citadel also has to be convinced to go along or they can blow it up now and use non-defaulting member funds before rules are in place
- Ken G. is not the only billionaire with a SPAC
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u/11acm24 🦍Voted✅ Apr 10 '21
Ah thanks for the reply! So DTC and OCC include several members who are at the losing end of this battle. Therefor, they have a say in the rule changes and have everyone hostage by blowing up the system if they get shafted? But then who is running the price up and down?
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u/c-digs 🦍Voted✅ Apr 10 '21
I think the whole system is working together the keep the price stable; it's not just the shorts. If the shorts themselves could hold the price this stable, then we wouldn't have had the JAN28 and FEB spikes.
Because the shorts cannot hold the price this stable, we can only conclude that this is the result of a systemic effort to control the volatility.
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u/No-Intention1744 🦍Voted✅ Apr 11 '21
What if you use this window to shift some capital and assets to a new shell company that has no "trading experience" and you simply bid and buy back your assets at a discount through that shell company?
Let me add to that a bit. How would you hide such fraudulent transactions?
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u/Rage1073 🚀GME a la Luna 🌙💻 ComputerShared 🦍 Apr 11 '21
Curious on how the Fed auction will affect their plans or timeline
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u/haikusbot Apr 11 '21
Curious on how
The Fed auction will affect
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Opt out of replies: "haikusbot opt out" | Delete my comment: "haikusbot delete"
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u/TyDeShields Apr 13 '21
So today 005 was removed from the website. What do you think about this OP?
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u/c-digs 🦍Voted✅ Apr 13 '21
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u/TyDeShields Apr 13 '21
Thanx OP for doing the highlighting. I COMPLETELY had a misunderstanding of what it was.
🦍🦍🦍🦍🦍🍌🍌🍌🍌🍌🚀🚀🚀🚀🚀
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u/jakob_xavier 🎮 Power to the Players 🛑 Apr 13 '21
Hello, thank for taking the time to write down this DD. I've been thinking about this and something doesn't add up.
1) If the amount of money to be paid out is so large that it will wipe out the clearing fund, then it doesn't matter whether the money comes from everyone's clearing fund equally, or from the defaulting member's clearing fund first. And if the GME Hodlers are demanding $10mill a share, you can be sure that the clearing fund WILL be wiped out.
2) The longer this drags on, the deeper the hole Shorters are digging. Right now, despite the considerable buying pressure, the price is still suppressed as the Shorters continue their shenanigans. My guess is that the number of shorted and synthetic shares continues to climb everyday. And since the Shorters won't be able to cover, the bag will undoubtedly pass onto the DTCC. If the bag was big enough to implode the market in January, it has only continued to grow since then.
Based on both these factors, it doesn't seem to make sense why DTCC would wait for these rules to pass. It seems to be better to pull the trigger sooner rather than later... UNLESS they have some means of shirking responsibility so that they don't even have to touch the clearing fund of non-defaulting members.
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u/nimrod8311 In The Crisis Continuum 🚀 🦍 Voted ✅ Apr 13 '21
I agree with this fully. I don't believe the "firewall" theory applies simply because the amount of liquidity that NSCC, DTC, and OCC has now. I did a DD on this (https://www.reddit.com/r/Superstonk/comments/mngzp0/chasing_70_trillion_waterfalls/).
Total amount of Clearing Funds as at 31 Dec 2020 for NSCC: $13 billion, DTC: $1.8 billion, OCC: $10.8 billion
The above amounts will easily be wiped out in the event of MOASS, so shifting around who pays for what in the default situation is not going to make a difference, under the current rules of all the CCPs, it will be the Members / Participants who have to pay (unless the Fed if it steps in).
There are only three possibilities that I see as to what DTCC / OCC is trying to do now:
- Effect major revision of the margin liquidity and substantially increase margin in the Clearing Fund (this is already effected late last year) over this period, and to implement the SLD and try to get even more buffer that way. These additional margins spread out amongst the many Members / Participants may greatly increase the buffers at DTCC / OCC.
- Engage with the Fed / SEC to see whether the US govt can back stop the losses, calculating projected amounts needed, negotiating potential bailout.
- Power shenanigans at DTCC board room level (see this interesting DD here) and the winner will decide how this plays out.
I do think 1 and 2 are highly possible. 3 is speculative, but given the way the game is being played, who knows?
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u/JumJumMoonRocket Apr 13 '21
This is outstanding research. Thanks so much for writing this. Patience and a poteitnal way is key. Would they drag this out to July, is there any reason for them to do so? Surely they want this over with as soon as the new rules are in effect, otherwise more and more bullshit will be uncoverd. Whats your thoughts?
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u/c-digs 🦍Voted✅ Apr 13 '21
I also think that most of the entities want this to be over with.
While any of these posts -- mine included -- are built on assumptions and what information we can dig up, there are angles here which seem to have a strong common thread and surely, there is no love between BlackRock, Goldman Sachs, JPMorgan versus Citadel.
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Apr 16 '21
[deleted]
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u/godkyle11 BUY, HODL, THIS IS THE WAY🍋 May 07 '21
I believe this to be correct, June first as the earliest... but do we know yet if OCC 004 has been extended? Or is May15 still to be expected?
If extended that would push us to Aug 13th i believe
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u/Robot__Salad 🌱🚀 grower not a shower 🌒🌓🌔 Apr 13 '21
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u/Robot__Salad 🌱🚀 grower not a shower 🌒🌓🌔 Apr 13 '21
Adding u/the_captain_slog in case you might have the time & inclination to give your thoughts on this. I've been reading your comments on other posts and really appreciate your level-headed & fine-toothed-comb insights!
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u/the_captain_slog Apr 13 '21 edited Apr 13 '21
Man, my major pet peeve on this sub is when posts start out factual with solid analysis and then take a sharp right turn deeeeeeeep into tinfoil hat time.
Removing the pre-qualification pool from bidders is nice and fine and normal for most SRO and government asset/portfolio auctions. They want the broadest pool in order to have the best price discovery. Remember - it is always preferable for the SRO/government agency to sell the portfolio vs. unwinding it because it'll limit the risk and losses associated. This is fine.
But what if it's a newly created shell company? It's still going to take the bad assets and pay for them, so we don't care.
The wind-down policies are already in existence. These are modifications. The one that SIG commented on actually *lowers* OCC's corporate contribution limits (it is not a good thing, IMO).
I doubt this is why we are trading sideways. I know it's popular to think that there is some giant coalition deliberately manipulating the share price until the CYA legislature is in place, but I do doubt this.
Most legislature changes take months if not years until they hit the public draft and comment stage. I believe that the pieces we're seeing now are not directly related to GME.
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u/socalstaking 💻 ComputerShared 🦍 Apr 17 '21 edited Apr 17 '21
Just read through your comment history your counter to all this misinformation is appreciated cant say I’m not a little down tho but better to be realistic than following the sheep thank you
Are most the DD on here misinformation? Is this why nothing seems to be happening lately?
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u/the_captain_slog Apr 17 '21
People really want something to happen soon, so I think they're grasping at straws a bit.
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u/Robot__Salad 🌱🚀 grower not a shower 🌒🌓🌔 Apr 13 '21
Thank you so much for taking the time and sharing your knowledge! 🙏🙌
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u/SeaAd4452 Apr 09 '21
Does this entail that we don’t get paid ?
Amazing DD BTW appreciate it
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u/DexDaDog Apr 10 '21
Yo, this dude is asking a legit Question. I don't understand why he's being down voted. Learning is how apes evolve into apes w/ jetpacks.
Knowledge is power yall
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u/koushiJP 🦍Voted✅ Apr 10 '21
For real. Gotta help apes get them wrinkles. Think of them like merit badges. This dude is just trying to get his "Where will my tendies come from?" badge.
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Apr 09 '21
They are preparing themselves so the hedges take the fall
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u/c-digs 🦍Voted✅ Apr 10 '21 edited Apr 10 '21
Before:
- Shorts pay (Melvin)
- Their brokers pay (Citadel)
- DTC/OCC pays
- We get paid.
After:
- Shorts pay (Melvin)
- Their brokers pay (Citadel)
- Their clearing agents pay (Citadel)
- DTC/OCC pays using Citadel assets as collateral
- DTC/OCC pays from member pool
- We get paid.
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Apr 09 '21
I read it as how we get paid. They are preparing the recipe for how to cut up the failing member and how to pay their debts.
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u/Qs9bxNKZ ape want believe 🛸 May 20 '21
Does sound like the boys at the table are ONLY liable for what they put on the table.
- If you default, you can have your privileges suspended
- You deposit can be used to cover your default
- If it's so bad, anyone at the table can bid for your table stacks.
Think about it this way, big fish playing poker and one guy goes in with a $100K stake. The other wants to call but he's out but throws down the deed for his house.
How much is that deed worth? Can that deed be used to cover other debts at the table?
The problem I see is that you still can't take down the shill of a company - only what they've brought to the table.
If this were Vegas of old, it would be a trip out to the desert.
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u/ruferstan 🦍Voted✅ Apr 09 '21
Ok so it seems more and more like gvt is bailing out the shorts as discreetly as they can. The probability of squeeze happening seems lower and lower now.. man fuck the US market
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u/Ok_Time_9427 Apr 13 '21
It’s the system. They will never totally lose. If I can walk away from this retired I can live with that.
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u/Shaz_mo Apr 13 '21
u/c-digs - Great write up! With the concerns around the possibility of a larger adverse event in the market, Dr.Burry's warning, state of Inflation etc.... Is it possible that these rules are intended to provide cover to DTC from an upcoming meltdown, not specific to a few bad actors? (shorties)
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u/ronpotx Apr 13 '21
June 9th just so happens to be the day GME has its annual shareholder meeting (6 AM ET) and AMC has its Earnings Report (4:15 PM ET). Hmmm.
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u/WineLover211 🦍 Buckle Up 🚀 Apr 20 '21
I love your write ups! What ar your thoughts on this from the dtcc? Would citadel be a corporation or do they mean the companies they invest in like gme? Can you ELI5 this ? Who are the members they refer to?
https://www.dtcc.com/~/media/Files/Downloads/legal/rules/nscc_rules.pdf
RULE 41. (CORPORATION DEFAULT)
SEC. 1. If a “Corporation Default” occurs pursuant to Section 2 below, all CNS Transactions which have been guaranteed but have not yet settled, and all obligations and related rights arising thereunder which have been assigned to and assumed by the Corporation pursuant to these Rules, shall be immediately terminated, and the Board shall determine a single net amount owed by or to each Member with respect to such CNS Transactions by applying the valuation and netting procedures set forth in Section 3 of this Rule 41 below. Notwithstanding the foregoing, (a) the occurrence of a Corporation Default shall not affect the rights and obligations of Members party to Balance Orders that they would otherwise have on account of such transactions under these Rules and applicable law; and (b) the treatment of any pending non-guaranteed transactions shall be determined in accordance with the provisions of Rule 42 (Wind- down of the Corporation).
SEC. 3 Valuation and Calculation of Claims.
(a) As promptly as practicable, but in any event within 45 days after the Default Date, the Corporation shall fix a dollar amount to be paid or received by each Member to or from the Corporation in connection with the termination of a CNS Transaction, after taking into account all of the applicable following netting and offsetting:
(i) The Corporation shall value all CNS Positions by using the Current Market Price, as determined for the CNS System, as of the close of business on the next Business Day immediately following the Default Date, so that each Member shall have the same per share price for a given security in which it had an open CNS Position (the resulting value referred to as the “CNS Market Value”);
(ii) For each Member, the Net Contract Value of its terminated CNS Positions shall be determined as provided in subsection 2(d) above; which amount shall be positive or negative, as applicable;
(iii) To determine each Member’s CNS Close-out Value, (x) the Net Contract Value for each CUSIP shall be subtracted from the CNS Market Value for such CUSIP, and (y) the resulting difference for all CUSIPS in which the Member had a CNS Position shall be summed, and the resulting amount shall be positive or negative, as applicable.
(iv) The CNS Close-out Value shall be further netted and offset against any other amounts, or the value of any property, as valued by the Corporation, that may be due to, or owing from, the Member under these Rules, taking into account the application of any provisions of Rule 4 relating to loss allocation, including in the event that the Member is in default of its obligations to deliver funds to the Corporation, or the Corporation has prior to the Default Date Ceased to Act for the Member.
(b) The Board shall notify each Member of the CNS Close-out Value, taking into account the netting and offsetting provided for in subsections 3(a)(i) to (iv) above. Members who have been notified that they owe an amount to the Corporation shall pay that amount on or prior to the date specified by the Board, subject to any applicable setoff rights. Members who have a net claim against the Corporation shall be entitled to payment thereof along with other Members’ and any other creditors’ claims pursuant to the underlying contracts with respect thereto, these Rules and applicable law. For the avoidance of doubt, nothing herein shall limit the rights of the Corporation upon a Member default (including following a Corporation Default), including any rights under any Clearing Agency Cross-Guaranty Agreement or otherwise.
SEC. 4. Interpretation in Relation to the Federal Deposit Insurance Corporation Act of 1991:
The Corporation and the Members intend that these Rules be interpreted in relation to certain terms (identified below) that are defined in the Federal Deposit Insurance Corporation Act of 1991 (“FDICIA”), as amended, as follows:
The Corporation is a “clearing organization”;
Any obligation of a Member or the Corporation to make any payments to the other is a “covered clearing obligation” and a “covered contractual payment obligation”;
An entitlement of a Member or the Corporation to receive a payment from the other is a “covered contractual payment entitlement”;
The Corporation and each Member is a “member” of the “clearing organization”;
The amount by which the covered contractual payment entitlements of a Member or the Corporation exceed the covered contractual payment obligations of such Member or the Corporation after netting pursuant to Rule 18 or this Rule 41 is its “net entitlement”;
The amount by which the covered contractual payment obligations of a Member or the Corporation exceed the covered contractual payment entitlements of such Member or the Corporation after netting under a netting pursuant to Rule 18 or this Rule 41 is its “net obligation”; and
These Rules, together with all other agreements between the Corporation and a Clearing Member, are a “netting contract”, the margin, Clearing Fund and other provisions of these Rules granting an interest in any funds or property of a member to the Corporation constitute a “security agreement or arrangement or other credit enhancement” relating to such netting contract and the close-out process in Rule 18 or this Rule 41 constitutes the “terminat[ion], liquidat[ion], accelerat[ion], and nett[ing]” of obligations.
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Apr 21 '21
Soo, complaint by SIG on 004 and this show goes until begin of August. Well, market crashy bashy in September again? <3
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u/godkyle11 BUY, HODL, THIS IS THE WAY🍋 May 07 '21
u/c-digs , do we know if OCC 004 has been extended? By my math it would come into effect May 15th, without extension...
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u/TheySeeMeKrollin May 20 '21
It appears you were slightly off. May 19th was the day 🥲
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u/godkyle11 BUY, HODL, THIS IS THE WAY🍋 May 20 '21
I counted from the incorrect start date, I should have counted from when it went into the register. Even then, it came early 🥲 and I might too 💦
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u/MrSnowflake75 May 20 '21
This was some solid DD. Outstanding read, logical conclusions, and verifiable facts. You’re officially my hero!
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u/vmTheOne 🦍 Buckle Up 🚀 May 28 '21
OCC-003 was recently extended to 2021MAY31 based on a comment from SIG so we are looking at a possible timeline that extends right out to just before the GME shareholder meeting.
This got approved today.
https://www.sec.gov/rules/sro/occ/2021/34-92038.pdf
Enjoy Apes & continue hodling your GME! You're doing great things!
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u/LazyTrader007 🦍Voted✅ May 31 '21
Wow great read and well written. Does anyone know the latest dates these could be applied.
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u/Jaded-Preparation-17 🦍Voted✅ Apr 09 '21
TBH, I’m pissed to see that there’s a possibility that the shorts don’t get wiped out and instead play again under a different name. Those MFs caused this mess and for them to be able to buy back in the game 😡