On April 29, the DTCC released B16845-22 under the ‘settlement’ category.
The subject reads: changes to DTC collateral haircuts.
The notice is directed to all market participants and I’m going to touch topic on what this means down below.
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DTCC B16845-22 margin calls
DTCC B16845-22 says that affected participants may be margin called if they have reduced their collateral.
The reason being is that equities with reduced collateral value may significantly drop in price.
Stock prices over $10 will see an increase in margin requirements by 25%.
For prices between $7.50-$9.99 per share, margin requirements will increase by 30%.
There will be a 50% margin increase on stock prices between $5.00-$7.49, and a 100% increase on stocks with prices below $5 per share.
So, will DTCC B16845-22 affect AMC stock or GME stock?
Yes, since AMC is trading around $15 per share and GameStop is trading above $114.
Both these stocks will raise margin requirements by 25%, making it less accessible for short sellers to short the stocks.
However, as long as short sellers are able to meet margin demands, the heavy shorting will continue.
Why was this rule implemented?
The stock market has been facing massive selloffs as well as heavy short selling.
It’s possible DTCC B16845-22 was implemented as a way to cool off short selling, allowing the markets to catch a breather.
Some of the top CEOs in America have stated that they don’t expect this bear market to last long.
I don’t think anyone wants to see the U.S. go into another recession very soon.
While short sellers might have been able to profit from this market’s downside, I think we’re going to see more upside very soon.
What do you think?
Join the discussion in the comment section below?
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We want our money back New York slicksters. Home of publishers scam clearinghouse.
Indeed, hopefully this rule is a true mandate, which will make it much more expensive for short sellers to destroy companies.
Has this rule DTCC B16845-22 being proposed or is it a sec law now? If it is it won’t discourage short sellers that are big firms , only works to our favor , if they are too over leveraged and not enough collateral, and caught in a short squeeze, either was I have my position in Amc and can wait patiently .
Mike
Let’s start a discussion!
If margin debt is collateralized by equities that are losing value in a bear market then the combination of a reduction in value of the collateral securing the loan and a reduction in leverage will require substantial cash calls to stay in compliance with the loan or a substitution of additional equities or an increase in the shares of the current collateral. Bottom line is there is a lot less margin debt capital available to manipulate the market with.
Thanks, so is this rule in effect now ? That gives retailers a fighting chance to get their money back