AMC has spent 20 day on the threshold list between February 2nd and March 2nd this year.
What is the NYSE Threshold Securities List?
A threshold security protects stocks that have had 5 consecutive settlement days in a clearing house as “Fail-to-Delivers“.
One of the last times we saw AMC make the threshold securities list was in June of 2021 — yes, the same month the stock surged to its all-time high of $72 per share.
Protection from the SEC also requires that the stocks FTDs total more than 10,000 shares.
AMC failure-to-delivers are skyrocketing through the roof this year.
FTDs topped 6.8 million in February (non-cumulative), amounting to more than $36 million in failed to close orders.
The data is still being reported which means there’s a possibility we may see higher FTDs once February’s entire month has been processed.
FTDs, or Failure-to-deliver occurs when one party in a trading contract (whether it’s shares, futures, or options) fails to deliver on their obligations.
These failures derive due to buyers not having enough money to take delivery and pay for the transaction at settlement.
In the case of sellers, it means not having the goods to meet that transaction.
Failure-to-delivers can occur in options trading or when selling short naked, per Investopedia.
Why is AMC Being on the Threshold Securities List Important?
A threshold security comes with regulations that heavily play in retail’s favor.
One of the regulations is known as rule 204.
Rule 204 requires brokers and dealers that are participants of a clearing house to close out failure-to-deliver positions.
Yes, you read that correctly.
Here is the source straight from the SEC’s “key points” under III. Regulation SHO.
“Closing out requires the broker or dealer to purchase or borrow securities of like kind and quantity.” – SEC.
- It’s a win-win situation for retail investors. If hedge funds continue to manipulate the market and generate FTDs then they’ll be obligated by law to cover the millions of dollars and shares they’ve been failing to process.
- On the other hand, if shorts begin to properly exercise contracts then we will begin to see momentum pick up rather quickly from executed trades. This too can create several gamma squeezes due to the amount of volume being pumped into the market.
Short sellers only seem to keep getting themselves in a bind.
Eventually, the only way out plays in retail’s favor.
Sources:
- NYSE Threshold Securities AMC List – visit here
- SEC Key Points About Regulation SHO – visit here
- Threshold Securities – Investor.gov – visit here
- Threshold List Definition – Investopedia – visit here
Curious to hear your thoughts and opinions on this.
Leave a comment down below.
Related: What is the Likelihood of AMC Squeezing Any Moment?
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About The Author
From what I know about the SEC they are of no help to retail investors and a fraud. Why are taxpayer dollars funding them? They don’t enforce laws and enable crime. I am sending this question and complaint to my state representatives.
I’ve heard that some companies have been on the threshold list for over a year and nothing happened. Who’s to say the same thing won’t happen with AMC?
Leave your thoughts below!