New SEC rules

[Buckminster]

Lots of new rules could squeeze the shorties.

 

[NicoV]

Lots of new rules could squeeze the shorties.

Nice. Was that written by Eddy Murphy?

 

[Buckminster]

Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

 

[Buckminster]

New NSCC Rule Change Poised to End the Short Squeeze Saga - The Tokenist
@Artful Dodger suggested this won't impact MMs much.

 

[adiggs]

Thanks for posting this @Buckminster .

This is important news at least to me. Even if a month for now I'm of the opinion that this is a nothing-burger, the possibility that it isn't is important to know about.

 

[Buckminster]

Here is a good article summarizing how HF, MM and others manipulate stocks and we all know that Tesla has been heavily manipulated over the years and even today. I can't express how frustrating it is to read how easy it is for them to invest tsla stocks that don't exist to short them or to create an artificial amount of Tesla shorts. Its illegal and fraud and should be banned and prosecuted.

How wall street creates Counterfeit shares for AMC and GameStop

Stock manipulation and illegal naked shorting are two of Wall Street's dirty little secrets.

news.investorturf.com

 

[Buckminster]

That's just for Retail short sellers, who are forced to play by the actual rules. Whereas, any two* Options Market Makers can simply play 'hot potato', swapping their naked shorts (on which they play no interest since these shares do not exist and thus have no payee). Then, if they eventually do create a fail-to-deliver (FTD report expected to be filed only after 14 days), they can simply move those shares to a satellite exchange like Toronto TSX where the FTDs are nolonger reported to FINRA.

TL;dr It's a rigged game, Retail is fleeced on the long and the short side by MMs+Hedgies

P.S. *last I heard, their were 28 registered entitities making a market for TSLA Options

 

[Buckminster]

The SEC could get some dentures (low probability). Congress could act (unlikely). TSLA could move to another Exchange such as the LTSE (won't change the broader Market).

I think the best solution is a some form of block-chain technology, coupled with instant settlement of trades (not the current 2-day for stocks, 1-day for options). That would negate the very reason to allow naked short selling by MMs (that is, the golden calf, liquidity).

Do I think the SEC will act (in my lifetime)? No, I don't but I'm a ***** ****.

SEC.gov | SEC Issues Proposal to Reduce Risks in Clearance and Settlement

www.sec.gov

 

[Buckminster]

Warning shots fired:

https://twitter.com/x/status/1643335710840070148

 

[Buckminster]

https://twitter.com/x/status/1660558450328498177

 

[Buckminster]

https://twitter.com/x/status/1668347644182159393

 

[Buckminster]

Really the solutions are quite simple and specific IMHO.
First, tax all short sales including any made by market makers, say, 2% of security price when shorted, deducted from transaction at time of short initiation;
Second, tax securities lending operations by taxing borrowers 3% of borrowed share value and lenders also 3%, each deducted at initiation date;
Third, tax gains on shorted stock sale at mandatory 15% of gain, deducted from proceeds;
Those are wildly implausible in the present environment, although FDR would have liked it;

However, for those participants which are FDIC insured (Another Glass-Steagall innovation that continues) supplemental premium charges can be easily justified by ensuring that short sale and securities lending are both categorized as high risk activities and require 100% capital charges. That one is both possible and administratively permissible, plus entirely compatible with Basel IV. Those requirements would need to be mandated as part risk modeling of each institution and could be easily coupled with mandatory explicit disclosure of such activities.

The Basel IV issues would apply to the majority of custodians, most major brokers, and avoids the SEC institutional disinclination to have any effective regulation at all for such activities, but in a different environment they should class short selling as a non-investment activity, hence discouraging those activities further.

We can be certain that these will NOT happen so long as the wealthiest entities such as Citadel have so much political clout. Without reform of US campaign finances any reform cannot ashen. In particular, prohibiting PAC's and removing Corporation ability to contribute unlimited support MUST happen to achieve any progress at all in the US.

Finally, other countries have unique problems but no major market is so blatantly structured to benefit market makers and speculators...not even Hong Kong/China.

These are my fantasies. 'Ain't gonna happen'!

 

[Buckminster]

https://twitter.com/x/status/1680987643486646272

 

[Buckminster]

Off topic:

https://twitter.com/x/status/1681017118014455809

 

[Buckminster]

... and don't forget 'mismarking' Short sales as Long. It's practically free for Market Makers like Citadel Capital: (while discretely condoning the practice by the $SEC)

SEC Fines Citadel Securities $7 Million for Mismarking Orders | Investopedia (2022-09-22)

"Regulators explained that Citadel violated a provision of its Regulation SHO, aimed at preventing abusive short selling practices by requiring broker-dealers to mark sale orders as long, short, or short exempt.​

"The SEC charged that over five years, Citadel incorrectly marked millions of orders, denoting some short sales as long sales and vice versa. Officials indicated that stemmed from a coding error in the company’s automated trading system, sending wrong information to regulators."​

Thru these three methods: naked-shorting, non-FINRA non-reporting, and mismarking orders, criminal organizations like Citadel are making a mockery of the stock market. It is anything but fair and transparent.

#SEC due ur job

 

[Artful Dodger]

SEC Charges Citadel Securities for Violating Order Marking Requirements of Short Sale Regulations. | sec.gov › news › press-release (Sep 22, 2023)

SEC.gov | SEC Charges Citadel Securities for Violating Order Marking Requirements of Short Sale Regulations

www.sec.gov

 

[Buckminster]

For context for those who've not been following this issue here for years:
- market makers write their own rules together with other direct market participants. There is no material regulation;
-the minimal regulation that does exist simply exacts nominal penalties for not following their own rules exactly;
-enforcement, insofar as it exists is mostly from the SEC, which from time to time penalizes 'programming mistakes' that miscategorizes trades, so...
-the penalties, when they happen at all, rarely exceed a few minutes profits from the miscatagorization;
-even short sales can be, for direct market participants, rolled over almost infinitely, but..
-if they get it wrong, they're market makers so they simply 'make the market' repair the damage.
-the higher the float from individual investors the better the odds are to manipulate without offending other participants. hence TSLA.
-the more the security represents a threat to major issuers of debt and equity the more incentive there si to manipulate.
The foregoing eight points have been applicable since the Depository Trust Company (DTC) was formed in 1973, accentuated to extremes by the slightly later advent of programmed trading. All the analytics and velocity calculations retail traders can invent and develop cannot change the fundamental constraint to individual invertor short term trading success. I will put this one in all caps, for it needs to be shouted!
MARKET MAKERS CONTROL AND EXECUTE BASED ON INSTANTANEOUS KNOWLEDGE OF ALL MARKET ACTIVITY. RETAIL INVESTORS NEVER HAVE ACCESS TO THAT ACCURACY AND PRE-KNOWLEDGE OF ORDERS AS ENTERED.
There si a reason the Citadels and others try to keep a very, very low public profile.
The corollary is about the world of securities lending: Nearly all major institutional investor and securities custodians make much of their revenues by securities lending. That includes nearly all the 'no-disclosed fee' brokers. That really means that every one of us who has a margin account, or any account at all with many brokers, has given the right to lend their own securities without, in most cases, and sharing of profits for that lending or even having it disclosed. In short, many of us HODL people are actually helping the shorts by lending our own shares without our own knowledge.

All this is perfectly legal. After all, in the USA the insiders write the rules. It is called 'self-governance'.
[we repost these points every couple of years because most retail investors have no idea at all. This is all public information, just obscure. For details an easy beginning is reading the DTC published rules. Warning: it is very, very boring and highly detailed.]

 

[Buckminster]

https://twitter.com/x/status/1712969224174379096

 

[Buckminster]

https://twitter.com/x/status/1718208065021817113

Citadel boss. I paid for the palm trees...

 

[Buckminster]

https://twitter.com/x/status/1721091169369690388