Basically, the system is incredibly leveraged which makes it not especially resilient to unanticipated stress. That's why Peterffy is suggesting higher margin requirements on equity shorts since that's a clear source of undefined risk.
Peterffy - "System Dangerously Close to Collapse"
- Thread starter Option_Attack
- Start date
Ever hear of a buy stop order? Stock prices like trees don't grow to the sky.
No exaggeration - we had systemic counter party risk. DTCC clears the vast majority of equity & derivative trades, they resorted to involving Citadel to do blatant market manipulation at the expense of retail to cover their bets.
If DTCC goes bust than the market is toast, the music stopped on the 28th.
https://truthbits.blog/2021/02/18/i...in-naked-shorting-and-retail-shutdown-of-gme/
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Bunch of BS!!! Clearinghouses were supposed to stand between the buyers and sellers. WHERE were the clearinghouses??!! With them there, how could the system be "dangerously" close to the collapse? WHO were the ones leading to the collapse? The retail traders were all making money this time. When us retail traders were losing money, how come the system wasn't "dangerously" close to the collapse?? WHY wasn't the margins raised on the institutional short sellers in the first place like how IB always raised margins so readily on us? WHY was there no forced liquidation on those short sellers like how IB always used to do to us?
So when we retail traders were losing money, they just took our money and there was no "system at dangerously close to the collapse" and there was no restricted buying/selling on the market-makers' part? And now we retail traders for the very first time were making profit and all of sudden the "system was dangerously close to the collapse" and they had to restrict our buying/selling??!! And instead they just turned around and restricted our buying??!! Seriously???!! This has gotta be the biggest s*** that I have ever heard in my whole trading career.
Flaw in the system??!! What flaw??!! Retail traders winning against market makers/institutions the "Big Boy"??!! Cuz that's the only thing that happened. That must be the "flaw in the system". You must be paid big by IB to spread this kind of BS!
Isn't that the way the world works? There was systems risk. You change the rules to favor yourself. Ask the Hunt Brothers who tried to corner the silver market, back in the days. It should have been all expected.
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GME went from 4 to 400. Did go to the sky.
But not to be facetious, those stops wouldn't have worked on the gaps of which there were plenty.
In general there traders have little understanding of risk management, including sizing positions That is why you have all these clueless idiots selling weekly naked options. A few of them reside on ET.
Further your remark is misleading It went from 4 to 400 in 10 month period. Your remark would have relevance if you used a much shorter periods. As to gaps you have to take sometimes large percentages losses. The problem is that your position size was too large a percentage of your capital considering the risk.
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