You made some interesting and valid points about the DTCC. But you are confused on the short interest topic, the short interest is on the float, not in the total shares issued.. and Plotkin was long puts, not short stock. So the pain and burden to cover was on some market maker side.
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Peterffy - "System Dangerously Close to Collapse"
- Thread starter Option_Attack
- Start date
You made some interesting and valid points about the DTCC. But you are confused on the short interest topic, the short interest is on the float, not in the total shares issued.. and Plotkin was long puts, not short stock. So the pain and burden to cover was on some market maker side.
now what the USA has to watch is China playing the USA stocks in a big way...giving 1000's of people Chinese money to join in such flock exercises...they will do anything to destabilise USA. Remember this is a war...the GME experiment was an eye opener and other sinister powers will glady want to see a huge USA fall in any aspect of markets. Remember universal acceptance of RMB is what China wants and it will exploit until it succeeds.
That can be easily resolved if this ever becomes a problem. No accepting of customers from PRC for ALL brokerages or MM's in the USA. There you go, problem solved!
You made some interesting and valid points about the DTCC. But you are confused on the short interest topic, the short interest is on the float, not in the total shares issued.. and Plotkin was long puts, not short stock. So the pain and burden to cover was on some market maker side.
No Melvin Capital was short on stock too. It was shorting the stock when it was just $4 a share and claimed to have closed all of its short positions when the stock was trading at $99. If it was really long in puts, that shouldn't have been a problem in terms of the "system risk" because they would've become totally worthless when the price soared. And he would have no incentive to exercise these puts because he could've shorted shares at much higher price in the market.
Granted that for some companies, there might be a big difference between total shares issued and public float and it might make more sense to cap the total number of shares available to be shorted to be 100% of the float and it would've been still more prudent to require shorters to put in more margin for shorting in the first place especially when short interest has reached extreme levels like in these "meme" stock cases where they are extremely vulnerable to potential short squeezes as what we have seen.
Regardless of all, it is still disgusting that the clearinghouse's failure and refusal to be the "settler of the last resort" between all parties of a transaction and instead just chose to pass the buck aka "risk" to the brokerages which directly led to the restricted buying of publicly traded companies which is a direct disruption of an orderly market was not examined at all by the Congress who just chose to pound on the scapegoats of the brokers. For all the fees that we pay on every single transaction to the clearinghouse, what DTCC did or more accurately failed to do was appalling and unacceptable. All DTCC does right now is just back-office recordkeeping and financial settlement but if all the brokers have to pay to be basically the "settler of the last resort" of their own trades at the end anyway, and all the recordkeeping are automated nowadays anyway there is no need for DTCC's existence especially when they are doing more harm than good in ensuring an orderly market.
I read that Citadel is recommending to go from T+2 on clearing to T+1, and the Robinhood CEO is recommending immediate clearing. I'll post the link if I find the article.
Somebody should propose for the elimination of clearinghouses. Clearinghouses existed at a time when brokerages were severely underfunded so the clearinghouses being better capitalized was and at least was willing to go in between the two parties in a transaction to put in its own money to settle all accounts in case one or both of the parties are not able to complete the transaction financially and the recordkeeping process was extremely tedious with everything on paper. Like I said before, nowadays everything is paperless and automatic so there is no need for a separate gigantic entity to just record some transactions. And when push comes to shovel, DTCC is not willing to put up not 1 cent of their own money to settle anything and instead forced all the member brokerages to put up more money and that has directly caused the complete breakdown of an otherwise orderly market which is precisely what clearinghouses are there to do to prevent. The fact that the clearinghouse DTCC was not there to do precisely what it was supposed to do really questions the reason for its existence and the justification for the fees that it collects from all participants of the market.
The fact that this is not examined at all by Congress is even more troubling.
Somebody should propose for the elimination of clearinghouses. Clearinghouses existed at a time when brokerages were severely underfunded so the clearinghouses being better capitalized was and at least was willing to go in between the two parties in a transaction to put in its own money to settle all accounts in case one or both of the parties are not able to complete the transaction financially and the recordkeeping process was extremely tedious with everything on paper. Like I said before, nowadays everything is paperless and automatic so there is no need for a separate gigantic entity to just record some transactions. And when push comes to shovel, DTCC is not willing to put up not 1 cent of their own money to settle anything and instead forced all the member brokerages to put up more money and that has directly caused the complete breakdown of an otherwise orderly market which is precisely what clearinghouses are there to do to prevent. The fact that the clearinghouse DTCC was not there to do precisely what it was supposed to do really questions the reason for its existence and the justification for the fees that it collects from all participants of the market.
The fact that this is not examined at all by Congress is even more troubling.
so who should the counter party be ? You fail to understand how risk works and the complexities that exist with Corp actions, derivatives, stock loan, rights offerings, etc.
so who should the counter party be ? You fail to understand how risk works and the complexities that exist with Corp actions, derivatives, stock loan, rights offerings, etc.
Counter-party can be anybody on the exchange. Why does it have to be so complicated when everything is automatic nowadays? LOL Counterparty is just somebody that's on the other side of the transaction, counter party!! Everything else is just processing. The clearinghouse is not bearing any risk anyway; they are forcing brokerages to come up with the extra money so if the s*** hits the fan, it's the brokerages' money that's going to pay for everything. WHERE was the clearinghouse when it was supposed to be "in between all parties of a transaction"?
You are exaggerating the complexity of things just to justify the existence of something that was borne out of time that is long past.
Counter-party can be anybody on the exchange. Why does it have to be so complicated when everything is automatic nowadays? LOL Counterparty is just somebody that's on the other side of the transaction, counter party!! Everything else is just processing. The clearinghouse is not bearing any risk anyway; they are forcing brokerages to come up with the extra money so if the s*** hits the fan, it's the brokerages' money that's going to pay for everything. WHERE was the clearinghouse when it was supposed to be "in between all parties of a transaction"?
You are exaggerating the complexity of things just to justify the existence of something that was borne out of time that is long past.
Don’t think I am at all. Wish I was but with corporate actions, derivatives and risk management it is far more complex than simply saying the counter party can pay.