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Saturday: The Day Brokerage Houses Throw Clearing Firms Under the Gamestop Bus
Vanity ^ | 1/30/2021 | RinaseaofDs

Posted on 01/30/2021 7:09:35 AM PST by RinaseaofDs

It's has begun.

Today Webull is throwing ETC under the bus, trying to justify why you can SELL a stock and not buy it.

The source link contains an explanation of what a Clearing Firm does.

ETC is the near-monopoly player in the industry.


TOPICS:
KEYWORDS: brokerage; crime; gamestop; reddit; risk; systemic; theft
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The CEO of Webull is claiming that the Clearing Firm ETC is becoming illiquid, and thus BUYING the stock requires too much capital to sustain.

However, SELLING is fine.

I get that the firm SOMETIMES finances the trade during the two day clearing period of the stock.

What I DON'T get is the following:

1. If the money is actually in your account, this doesn't make any sense. If you are buying on the margin, this explanation makes sense. Ergo, it should be OK to buy or sell any stock if you have the money in the account.

2. If buying creates excess counterparty risk, but selling doesn't, WHO'S ON THE OTHER SIDE OF THE TRANSATCTION? ONe hand can't clap. Somebody has to buy the trade.

I'm posting this because today you're going to get pummeled by the term SYSTEMIC RISK.

I called this yesterday. Government bailout incoming.

Citadel, ironically, IS a clearing firm.

Oh, and Webull CEO agrees that the triggering event was that some clearing house allowed Citadel to short 140% of GME.

NOBODY IS TALKING ABOUT WHO ALLOWED THAT TO HAPPEN.

Clearing Houses are clutching their pearls at having to back counterparty risk on trades from people with ACTUAL MONEY IN THEIR ACCOUNTS, but they had no problem at all allowing a single company to borrow 100 percent of the shares of a company, plus 40 percent more that doesn't exist.

What that means, and what Clearing Firms are supposed to have, is an inventory of the stocks they lend in order to be able to legally lend the stock.

Whichever firm lent the shares to Citadel, what they originally represented is that:

1. They owned 100 percent of GME (which is clearly not true, even if you are talking about the 'float' or the shares that are publically available) and then loaned 40 percent more that cannot exist.

2. They had no problem loaning a total of 60M shares of GME to a single company and sustaining that risk for an entire month, waiting for the 140 percent to be paid back, which cannot happen.

However, today, buying GME is just too much risk because they have to temporarily finance the trade for two days. They claim this EVEN THOUGH the money has left your cash account.

But SELLING IT, where in the clearing firm PAYS YOU IMMEDIATELY for the buy trade (somebody is buying) - that incurs no risk at all since they are not financing the buy side of the trade (even though they are counting on the buy side of the trade to pay for the trade).

As you can see, there is going to be a wall of bullsh!t the likes of which we haven't seen since 2008 (or November 2020 if you count the election, which wasn't financial so I didn't want to count it, even though it was clearly bullsh!t) is going to inundate every orifice of the media, internet, social media, and planes flying banners behind them.

I recommend setting condition DOG ZEBRA throughout the ship today.

It's going to get very, very thick.

I post this because I admit I don't understand the clearing end of all of this fully yet, but that's where it is going.

I invite the erudite insights of those knowledgeable in this today.

1 posted on 01/30/2021 7:09:35 AM PST by RinaseaofDs
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To: RinaseaofDs

Gordon Gekko : Someone reminded me I once said “Greed is good”. Now it seems it’s legal. Because everyone is drinking the same Kool Aid. Gordon Gekko : You know what they say, “Parents are the bone on which children sharpen their teeth.”


2 posted on 01/30/2021 7:24:54 AM PST by Kartographer ("We mutually pledge to each other our lives our fortunes and our sacred honor." )
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To: RinaseaofDs

Does this mean that I now can legally sell that bridge in Brooklyn? Wheeeeee!


3 posted on 01/30/2021 7:27:57 AM PST by BwanaNdege ( Experience is the best teacher, but if you can accept it 2nd hand, the tuition is less!)
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To: RinaseaofDs

Yup x1000%

Citadel allowed firms to play loose because it cracked on a bunch of nobodies. Like a mob goomba going around and doing shakedowns. Except this time he got fresh with someone who wasn’t as much a nobody as he thought. Now Citadel has to sweat a bit.

The thug killed John Wick’s dog. Big mistake.


4 posted on 01/30/2021 7:28:38 AM PST by Bogey78O (So far so good.)
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To: Kartographer
If buying creates excess counterparty risk, but selling doesn't, WHO'S ON THE OTHER SIDE OF THE TRANSATCTION? ONe hand can't clap. Somebody has to buy the trade.

This is the part that's been bothering me for a few days now. Do they mean you can put up for sale, but allow no buyers? So the only effect is to drive the price down.

This way they can drive any publicly traded business to bankruptcy, unless they (wink, wink) follow the new Dem Left totalitarian control. Freedom? Ha ha...

5 posted on 01/30/2021 7:32:37 AM PST by jeffc (I'm a Patriot, and the media are our enemy)
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To: RinaseaofDs

This is old-fashioned “kiting”, “paper-hanging”, NSFing. I hate it but you’re right: bailout incoming.


6 posted on 01/30/2021 7:34:24 AM PST by Migraine ( Liberalism is great (until it happens to YOU).)
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To: jeffc

Think less political. They do it for financial control. As I understand it, Thursday they did this to drive price down to allow short sellers to make contract purchases. Otherwise they’d have lost billions more.

They risked jail to keep from losing everything.


7 posted on 01/30/2021 7:35:03 AM PST by Bogey78O (So far so good.)
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To: RinaseaofDs
Much of the reason for clearinghouses is that there is a residual and irreducible risk of error, fraud, and bad faith in financial transactions. The clearinghouse is there to avert and resolve those back office issues by gathering facts and applying skilled human judgment so as to resolve problems and claims quickly and fairly.

Massive transaction volume can overwhelm the back office operations of stock traders and clearinghouses. If that happens, the entire financial system can seize up and then collapse as the public loses faith. Whether that risk is present now is hard for even high level insiders to determine.

8 posted on 01/30/2021 7:41:45 AM PST by Rockingham
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To: Kartographer

.


9 posted on 01/30/2021 7:43:21 AM PST by sauropod (#ImpeachMcConnell. #Resist. #NotMyPresident.)
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To: RinaseaofDs
If the money is actually in your account

Your account is digital and virtual. There is no "money" there.

Everything is a Ponzi scheme these days.

If you do not have possession of it, it is not yours.

If you think the corrupt courts are gonna make you whole, fuggedaboutit.

Some folks are gonna have to learn that lesson the hard way.
10 posted on 01/30/2021 7:45:03 AM PST by cgbg (A kleptocracy--if they can keep it.)
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To: RinaseaofDs
But SELLING IT, where in the clearing firm PAYS YOU IMMEDIATELY for the buy trade (somebody is buying) - that incurs no risk at all since they are not financing the buy side of the trade

So the the Easter bunny magically puts the money into the account IMMEDIATELY. Gee, I thought it had to come from the buyer.

11 posted on 01/30/2021 7:47:39 AM PST by BiglyCommentary
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To: BwanaNdege
Does this mean that I now can legally sell that bridge in Brooklyn?

I'm interested. Do you take bitcoin?

12 posted on 01/30/2021 7:49:46 AM PST by Fresh Wind (Joe Biden: The best president Chinese money can buy.)
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To: Bogey78O
They risked jail to keep from losing everything.

Now they can do both!

13 posted on 01/30/2021 7:50:05 AM PST by null and void (Since I'm a punster, a jokester, and a well rounded funny guy, my personal pronoun is "He He")
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To: jeffc

The discussion is actually over who gets to buy. By suspending certain trading venues from buying, small traders are impeded and Gamestop stock being sold is thereby directed to desperate short seller hedge funds.


14 posted on 01/30/2021 7:51:37 AM PST by Rockingham
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To: RinaseaofDs
WHO'S ON THE OTHER SIDE OF THE TRANSATCTION? ONe hand can't clap. Somebody has to buy the trade.

Silly wabbit. Trix are for kids!

15 posted on 01/30/2021 7:51:54 AM PST by Fido969 (,i.)
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To: Bogey78O

It may not be polical right now, but I’m cynical enough to believe there are Leftists looking at this to make it so, for more control of everything.


16 posted on 01/30/2021 7:52:11 AM PST by jeffc (I'm a Patriot, and the media are our enemy)
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To: RinaseaofDs

You can’t sell a stock without someone buying it, it is called a trade for a reason


17 posted on 01/30/2021 7:52:54 AM PST by dila813
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To: RinaseaofDs

If nobody can buy it, how can one sell it?


18 posted on 01/30/2021 7:53:12 AM PST by trebb (Fight like your life and future depends on it - because they do.)
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To: RinaseaofDs

“He who sells what isn’t his’n, must buy it back, or go to prison.”


19 posted on 01/30/2021 7:57:25 AM PST by Real Cynic No More (Make America Great. Prosecute Dems who break the law!)
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To: RinaseaofDs

The SEC would do us all a favor if it would outlaw short sells.


20 posted on 01/30/2021 7:59:39 AM PST by Real Cynic No More (Make America Great. Prosecute Dems who break the law!)
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