So from what I've read, the SEC changed some deposit and leaning rules with something called DTC-005 and if any of the naked short rumors are true this could be a big deal. Anyone else hear about this or am I way too far down the rabbit hole?
Just a couple cursory looks seem to make it sound like the SEC is trying cinch things up so that you can’t have an over 100% short on a company among other things, likely to prevent another GME scenario among others I expect.
If hedge funds want to make stupid bets, they should win stupid prizes, is all I’m saying.
"Go down, kick ass, and set yourselves up as gods, that's our Prime Directive!"
So from what I've read, the SEC changed some deposit and leaning rules with something called DTC-005 and if any of the naked short rumors are true this could be a big deal. Anyone else hear about this or am I way too far down the rabbit hole?
Reddit threads were up and the WSB people were losing their shit about it, because along with the new rule, the DTCC published 70 pages of emails from retail investors yelling at them about shorts. Interestingly some posters were noting that actually this new "rule" doesn't really do anything but make the securities write down what they're already doing, and it's suspected it took so long to get out the updated rule because the DTCC was doing a long legal review to figure out how to not openly admit that they were(are?) allowing unlimited rehypothecation on securities.
I don't know what rehypothecation is really, but a quick google seems to imply that in this context, the funds are writing themselves IOU after IOU on already borrowed stocks to continue shorting?
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KoopahTroopahThe koopas, the troopas.Philadelphia, PARegistered Userregular
edited June 2021
Ahoy hoy. Not a lot of action has been happening since the shareholder's meeting. Couple new rules were enacted by the DTCC, but I don't think they will affect GME as much as future situations. They seem more like prevent it from happening again instead of control the ones that are currently shorted.
White Square move marks one of first closures of fund hit by surges in so-called meme stocks. A London-based hedge fund that suffered losses betting against US retailer GameStop during the first meme stock rally in January is shutting its doors.
White Square Capital, run by former Paulson & Co trader Florian Kronawitter, told investors that it would shut its main fund and return capital this month after a review of its business model, according to people familiar with the fund and a letter to investors.
White Square, which at its peak managed about $440m in assets, had bet against GameStop, say people familiar with its positioning, and suffered double-digit per cent losses in January.
One of those new DTCC rules supposedly changes it so that liquidity checks on firms are carried out by a computer multiple times per trading day, and if discrepancies are found, the firm has an hour to cover the difference. Also, now margin calls can be made during the trading day. WSB was of course freaking out about it destroying the hedge funds, which I highly doubt will happen, as its not like either DTCC or the SEC was enforcing rules on them in the first place, and I doubt that will suddenly change now. But these rules do signal that the DTCC is either giving in to retail pressure, or actually worried about all the phantom shorts out there.
But I can't help but wonder if this White Square closure has something to do with the above mentioned rule taking effect this week (on Thursday I think?)
One of those new DTCC rules supposedly changes it so that liquidity checks on firms are carried out by a computer multiple times per trading day, and if discrepancies are found, the firm has an hour to cover the difference. Also, now margin calls can be made during the trading day. WSB was of course freaking out about it destroying the hedge funds, which I highly doubt will happen, as its not like either DTCC or the SEC was enforcing rules on them in the first place, and I doubt that will suddenly change now. But these rules do signal that the DTCC is either giving in to retail pressure, or actually worried about all the phantom shorts out there.
But I can't help but wonder if this White Square closure has something to do with the above mentioned rule taking effect this week (on Thursday I think?)
Possibly, but more likely they figure they can't get back in the black by the end of the year, so it's easier to shut down and start a new fund to get some returns they can slurp their 20% incentive fee from.
Shut up, Mr. Burton! You were not brought upon this world to get it!
Wouldn't multiple checks and margin calls throughout the day vastly impact retail day traders? I can't imagine it'd do much to someone working with hundreds of millions of dollars unless they were already maxing their margin.
not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
Wouldn't multiple checks and margin calls throughout the day vastly impact retail day traders? I can't imagine it'd do much to someone working with hundreds of millions of dollars unless they were already maxing their margin.
No. Most retail should not be buying on margin and even if they are they're unlikely to have significant changes in their position such that a margin call in the middle of the day screws them over compared to a margin call at the end of the day. Most day traders that do have margin are likely on a system that already has multiple checks. Robin Hood isn't going to wait until the end of the day in order to close your position. They will close your position as soon as you're net negative on their books.
Hedges are far more likely to be in situations where their margin would be pushed in the middle of the day. And far more likely to be systematically exploiting the lack of checks
I don't think that fine is related to GME/AMC at all. All stuff from before that time period, isn't it?
Correct, these are in response to Robinhood being bad software and not doing due diligence for enabling options trading. A young dude committed suicide because Robinhood said he was $700k in the hole when one leg of his spreads was exercised, but the damage wasn't nearly that bad when the other leg went through.
Speaking of which. It is tempting to joke that Robinhood is a Dogecoin brokerage, but it isn’t. Economically, Robinhood is an options brokerage. Robinhood’s main business is convincing people to trade options, and then having options market makers pay to take the other side of those trades. In the first quarter, $197.9 million of Robinhood’s revenue came from payment for options order flow, representing 38% of its total revenue; stocks and crypto were 26% and 17% respectively.
At the end of the quarter, Robinhood customers owned $65 billion of stocks, $11.6 billion of cryptocurrency, and $2 billion of options.[2] You can divide.[3] Robinhood extracted about 0.2% of the value of its customers’ stock portfolios for itself, as trading revenues, in the first quarter of 2021. That is, you know, higher than Vanguard charges (remember, that 0.2% is for one quarter), but Robinhood’s customers are having a lot more fun, fine. Again, Robinhood is a bet that people want to pay up (sort of) for fun investing. Robinhood extracted about 1.2% of the value of its customers’ crypto portfolios for itself, from trading revenues, that quarter. That doesn’t seem wildly out of line for crypto.[4]
Robinhood extracted 9.5% of the value of its customers’ options portfolio for itself in the first quarter, $197.9 million of revenue on $2 billion of assets. That’s a lot! That’s some combination of (1) people may not own a ton of options, but they trade them a lot; you get more volume from options traders than you do from boring stock investors, and (2) spreads are high and it is lucrative to trade against retail options traders, so market makers are delighted to pay Robinhood large amounts of money for the privilege. On average, if you have $1,000 worth of options in your Robinhood account, and you’re an average Robinhood options trader, by the end of the year Robinhood will have made … $380? … on your options trades? Presumably that money comes from somewhere.
But presumably it also buys something. If your model is that Robinhood is the brokerage of fun investing, then options offer even more fun than stocks, so it makes sense that they’re Robinhood’s most lucrative business. (With Dogecoin, also fun, coming up fast.) Incidentally that is not quite the model that Robinhood pitches. From the customer-and-shareholder letter at the front of the S-1:
We’re proud to serve this next generation of investors, and it’s painful to see them lambasted in the news reports. Anecdotes of people winning (and losing) large amounts of money garner more attention than the more pedestrian truths — the majority of our customers prefer to buy and hold.
Fine sure yes most customers buy and hold, but most of the money comes from customers YOLOing options.
(Emphasis mine)
The Robinhood S-1 filing is just full of interesting bits. Matt Levine covers some of the more salient ones.
Also I'm now amused at the timing of the Finra settlement.
AresProphet on
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KoopahTroopahThe koopas, the troopas.Philadelphia, PARegistered Userregular
edited July 2021
Robinhood's actions makes me so mad, they shouldn't be allowed to be a service.
That seems like fairly dishonest framing to me. To be clear, Robinhood isn't taking 9.5% of its customers' options portfolio value. In fact, they're not taking any of it. Rather, they're selling their customers' data (what trades their customers have engaged in, in real time). "The money comes from somewhere," yes - not from their users but from the people who want to bet against them.
Facebook makes something like $150 in revenue per US user per year. That article's argument would say that you're $150 poorer if you used Facebook last year. It's just not the case.
That seems like fairly dishonest framing to me. To be clear, Robinhood isn't taking 9.5% of its customers' options portfolio value. In fact, they're not taking any of it. Rather, they're selling their customers' data (what trades their customers have engaged in, in real time). "The money comes from somewhere," yes - not from their users but from the people who want to bet against them.
Facebook makes something like $150 in revenue per US user per year. That article's argument would say that you're $150 poorer if you used Facebook last year. It's just not the case.
I mean, I don't know, I don't see at all as comparable. Facebook has me as the product, and sure, at that point they are comparable. That being said though, the other side is betting they can either sell me something or convince me of something. With Robinhood, the other side is at BEST trying to fulfil and order, and often could be betting against me. Maybe I misunderstood the bits there, it doesn't paint Robinhood as bad per se, just.... the whole practice as questionable.
They steer people towards options which are riskier/gambling, which feeds the dopamine cycle and keeps people doing it while the market makers get an easy view of all the players’ cards and can bet accordingly
Robinhood’s customers are the market makers, not retail investors
A lot of financial due diligence is bullshit-able if you're willing to just lie, which is probably what a lot of teenage RobinHood users are doing to get access to options. I really think the big difference is now it's in a slick app instead of ugly complicated software designed by hardcore financial people.
I don't think revenue divided by currently held value is a great measure, especially for options. It seems like RH makes its revenue on a transactional basis and options are generally shorter term & smaller $ value investments. I'd rather see revenue/value of options trades or revenue per options trade.
That seems like fairly dishonest framing to me. To be clear, Robinhood isn't taking 9.5% of its customers' options portfolio value. In fact, they're not taking any of it. Rather, they're selling their customers' data (what trades their customers have engaged in, in real time). "The money comes from somewhere," yes - not from their users but from the people who want to bet against them.
Facebook makes something like $150 in revenue per US user per year. That article's argument would say that you're $150 poorer if you used Facebook last year. It's just not the case.
So… kind of yes… but really no.
People are taking those counter party bets, and paying for the privilege, because they pay off. They aren’t paying for front runner information because it fails. Now it’s possible that they’re taking from third parties that otherwise would have made those counter party bets/long term trades but… well that is less likely and it’s still theft.
And Facebook is a tax* which causes all prices to be more expensive and these prices predominantly for things that are advertised on Facebook. So if you used Facebook is highly likely you paid $150 in extra costs relating to products…
*there are some exceptions but not going to type up a treatise on my phone
A lot of financial due diligence is bullshit-able if you're willing to just lie, which is probably what a lot of teenage RobinHood users are doing to get access to options. I really think the big difference is now it's in a slick app instead of ugly complicated software designed by hardcore financial people.
There's really nothing you can do if people are willing to lie about their knowledge & experience though
They steer people towards options which are riskier/gambling, which feeds the dopamine cycle and keeps people doing it while the market makers get an easy view of all the players’ cards and can bet accordingly
Robinhood’s customers are the market makers, not retail investors
as the saying goes, if you're using a free service you aren't the customer, you're the product
They steer people towards options which are riskier/gambling, which feeds the dopamine cycle and keeps people doing it while the market makers get an easy view of all the players’ cards and can bet accordingly
Robinhood’s customers are the market makers, not retail investors
as the saying goes, if you're using a free service you aren't the customer, you're the product
But enough about how I’m just chaff/fodder for the players who are actually good at Apex Legends…
First they came for the Muslims, and we said NOT TODAY, MOTHERFUCKER!
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KoopahTroopahThe koopas, the troopas.Philadelphia, PARegistered Userregular
edited August 2021
Afternoon all. Back to respawn the thread just to keep it updated. A whole lot of nothing has been happening since July. Just the constant bleed out from the news of GME completing their offering for cash. All the way down from $220 to ~$150. Well, yesterday GME saw a little glimpse of support again to go from ~$150 to about $160, and today it's currently sitting at a daily high of $197.46. Volume has been steadily dwindling since July, beating all time low records since 2017-2018 of <1m total shares traded for the stock, and today it's finally getting some action again.
Again, no news from GME to justify this move. No news articles either to verify the +$30. Reddit investors haven't changed their minds in the slightest despite some news reports saying "they are getting bored", and have some theories that involve hedge funds utilizing Futures Swaps to kick the can with a set of dates that match the previous run ups. Today's run may verify some of those, so we'll see where it ends.
Hedge fund Melvin Capital required a $2.75 billion lifeline when it had to close out its short position in GameStop at a huge loss in January. read more
Anybody who bought GameStop shares at $482.95 on Jan. 28 and then sold them since would have lost money.
GameStop shares are currently at $183.28, around 1,275% higher than they were a year ago.
You love to see it
I thought buying in at $100 was already having missed the boat; anyone who bought in at $482.95 was divorced from reality
Meanwhile retail and sane institutions gutted the shorts
SummaryJudgment on
Some days Blue wonders why anyone ever bothered making numbers so small; other days she supposes even infinity needs to start somewhere.
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OrcaAlso known as EspressosaurusWrexRegistered Userregular
Hedge fund Melvin Capital required a $2.75 billion lifeline when it had to close out its short position in GameStop at a huge loss in January. read more
Anybody who bought GameStop shares at $482.95 on Jan. 28 and then sold them since would have lost money.
GameStop shares are currently at $183.28, around 1,275% higher than they were a year ago.
You love to see it
I thought buying in at $100 was already having missed the boat; anyone who bought in at $482.95 was divorced from reality
Meanwhile retail and sane institutions gutted the shorts
Retail investors took a bath too. I don't know to what degree, but lots of people were undoubtedly left holding the bag. Was it more than the hedge funds? Good question.
I expect it was just rich assholes transferring money to other rich assholes, plus some retail investors who scored the jackpot and a bunch more who lost it.
I've got a friend who was playing volatility games when it was in the $400 range, and she got out after losing money (hopefully not too much, but eh, she can afford the hit). Given the wallstreetbets reddit I doubt she was the only one who won/lost while it was up there.
Me, I think the price now is still nutty. But at least they've used that stock price to get a bunch of cash to reformulate what Gamestock is/does/means long term.
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KoopahTroopahThe koopas, the troopas.Philadelphia, PARegistered Userregular
I don't think it's a slam dunk that many were hoping, but as far as I'm concerned this report confirms some very important things for me.
One, most short sellers very likely did not close out their positions. On the volume from the numbers/graphs they provide, it is just completely nuts to consider that all shorts have closed, so there goes that media narrative.
Two, if the amount of unique accounts holding GME jumped from 10k to 900k in January... it's very likely some millions now. If you conservatively say each account holds 10-15 shares of GME, then that's the float of outstanding shares right there. I've seen screens of accounts owning hundreds if not thousands of shares.
Three, out of ~100 (if I recall from the report) "memestocks", GME is the only reported one in January with crazy outstanding Short Interest. So other stocks promoted since then as the 'next GME' are likely just pump and dumps, including AMC, KOSS, BB, NOK, CLOV, etc... List goes on.
Four, of the short volume that they did show from January, they specifically leave out Market Makers. Which is interesting because I imagine Citadel falls into that category, as a few others could as well. So... yeah, data seems incomplete.
And five, SEC confirms in the report that some short sellers have sold short the 'bucket stocks' that we have gone over before like XRT and others in order to get passed the short sell restriction on GME. Pretty much confirming earlier research and theories by some Redditors earlier in the saga.
So a lot of interesting things being said and confirmed, without specifically saying "no corruption", "no naked short selling", "all shorts have closed all positions", etc... It's like reading the Comey report, except not as damning.
Posts
Having dug around the cesspool that is WSB, a lot of people think these are being heavily shorted
There are multiple stocks that are up 2x in the last few days for no obvious reason so :question:
If hedge funds want to make stupid bets, they should win stupid prizes, is all I’m saying.
Reddit threads were up and the WSB people were losing their shit about it, because along with the new rule, the DTCC published 70 pages of emails from retail investors yelling at them about shorts. Interestingly some posters were noting that actually this new "rule" doesn't really do anything but make the securities write down what they're already doing, and it's suspected it took so long to get out the updated rule because the DTCC was doing a long legal review to figure out how to not openly admit that they were(are?) allowing unlimited rehypothecation on securities.
I don't know what rehypothecation is really, but a quick google seems to imply that in this context, the funds are writing themselves IOU after IOU on already borrowed stocks to continue shorting?
Well, this morning GS reported that they have completed their ATM offering they announced on June 9th of 5m shares for about $1.126B. The stock has been on a slow bleed from over $300 since the 9th to about $200 yesterday, due to the offering news and no direct announcements in the meeting itself. As soon as the news hit the web, the stock bounced over $20.
So with an additional $1B+ on the balance sheet, I'm curious to see how the stock reacts this week. There's also this report that is making rounds.
So yeah, very curious to see this week's action.
Twitch: KoopahTroopah - Steam: Koopah
But I can't help but wonder if this White Square closure has something to do with the above mentioned rule taking effect this week (on Thursday I think?)
Possibly, but more likely they figure they can't get back in the black by the end of the year, so it's easier to shut down and start a new fund to get some returns they can slurp their 20% incentive fee from.
No. Most retail should not be buying on margin and even if they are they're unlikely to have significant changes in their position such that a margin call in the middle of the day screws them over compared to a margin call at the end of the day. Most day traders that do have margin are likely on a system that already has multiple checks. Robin Hood isn't going to wait until the end of the day in order to close your position. They will close your position as soon as you're net negative on their books.
Hedges are far more likely to be in situations where their margin would be pushed in the middle of the day. And far more likely to be systematically exploiting the lack of checks
https://www.ft.com/content/397bdbe9-f257-4ca6-b600-1756804517b6
Edit: Whoops, missed the link in the earlier message on this page.
Probably not big enough, but.
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Correct, these are in response to Robinhood being bad software and not doing due diligence for enabling options trading. A young dude committed suicide because Robinhood said he was $700k in the hole when one leg of his spreads was exercised, but the damage wasn't nearly that bad when the other leg went through.
https://www.bloomberg.com/opinion/articles/2021-07-02/robinhood-ipo-filing-is-a-lesson-in-meme-finance
(Emphasis mine)
The Robinhood S-1 filing is just full of interesting bits. Matt Levine covers some of the more salient ones.
Also I'm now amused at the timing of the Finra settlement.
Twitch: KoopahTroopah - Steam: Koopah
Facebook makes something like $150 in revenue per US user per year. That article's argument would say that you're $150 poorer if you used Facebook last year. It's just not the case.
I mean, I don't know, I don't see at all as comparable. Facebook has me as the product, and sure, at that point they are comparable. That being said though, the other side is betting they can either sell me something or convince me of something. With Robinhood, the other side is at BEST trying to fulfil and order, and often could be betting against me. Maybe I misunderstood the bits there, it doesn't paint Robinhood as bad per se, just.... the whole practice as questionable.
Robinhood’s customers are the market makers, not retail investors
So… kind of yes… but really no.
People are taking those counter party bets, and paying for the privilege, because they pay off. They aren’t paying for front runner information because it fails. Now it’s possible that they’re taking from third parties that otherwise would have made those counter party bets/long term trades but… well that is less likely and it’s still theft.
And Facebook is a tax* which causes all prices to be more expensive and these prices predominantly for things that are advertised on Facebook. So if you used Facebook is highly likely you paid $150 in extra costs relating to products…
*there are some exceptions but not going to type up a treatise on my phone
There's really nothing you can do if people are willing to lie about their knowledge & experience though
as the saying goes, if you're using a free service you aren't the customer, you're the product
But enough about how I’m just chaff/fodder for the players who are actually good at Apex Legends…
Again, no news from GME to justify this move. No news articles either to verify the +$30. Reddit investors haven't changed their minds in the slightest despite some news reports saying "they are getting bored", and have some theories that involve hedge funds utilizing Futures Swaps to kick the can with a set of dates that match the previous run ups. Today's run may verify some of those, so we'll see where it ends.
Edit - It just broke $200. $201.97 daily high.
Twitch: KoopahTroopah - Steam: Koopah
Twitch: KoopahTroopah - Steam: Koopah
Twitch: KoopahTroopah - Steam: Koopah
$210.290
https://www.reuters.com/business/why-did-sec-release-report-gamestop-2021-10-18/
You love to see it
I thought buying in at $100 was already having missed the boat; anyone who bought in at $482.95 was divorced from reality
Meanwhile retail and sane institutions gutted the shorts
Retail investors took a bath too. I don't know to what degree, but lots of people were undoubtedly left holding the bag. Was it more than the hedge funds? Good question.
I expect it was just rich assholes transferring money to other rich assholes, plus some retail investors who scored the jackpot and a bunch more who lost it.
I've got a friend who was playing volatility games when it was in the $400 range, and she got out after losing money (hopefully not too much, but eh, she can afford the hit). Given the wallstreetbets reddit I doubt she was the only one who won/lost while it was up there.
Me, I think the price now is still nutty. But at least they've used that stock price to get a bunch of cash to reformulate what Gamestock is/does/means long term.
I don't think it's a slam dunk that many were hoping, but as far as I'm concerned this report confirms some very important things for me.
One, most short sellers very likely did not close out their positions. On the volume from the numbers/graphs they provide, it is just completely nuts to consider that all shorts have closed, so there goes that media narrative.
Two, if the amount of unique accounts holding GME jumped from 10k to 900k in January... it's very likely some millions now. If you conservatively say each account holds 10-15 shares of GME, then that's the float of outstanding shares right there. I've seen screens of accounts owning hundreds if not thousands of shares.
Three, out of ~100 (if I recall from the report) "memestocks", GME is the only reported one in January with crazy outstanding Short Interest. So other stocks promoted since then as the 'next GME' are likely just pump and dumps, including AMC, KOSS, BB, NOK, CLOV, etc... List goes on.
Four, of the short volume that they did show from January, they specifically leave out Market Makers. Which is interesting because I imagine Citadel falls into that category, as a few others could as well. So... yeah, data seems incomplete.
And five, SEC confirms in the report that some short sellers have sold short the 'bucket stocks' that we have gone over before like XRT and others in order to get passed the short sell restriction on GME. Pretty much confirming earlier research and theories by some Redditors earlier in the saga.
So a lot of interesting things being said and confirmed, without specifically saying "no corruption", "no naked short selling", "all shorts have closed all positions", etc... It's like reading the Comey report, except not as damning.
Twitch: KoopahTroopah - Steam: Koopah