In today’s market news, the SEC is imposing a new rule that would force money managers to periodically disclose short sale reports.
Hedge funds have already begun to retaliate against the rule as it would give away their ‘trading strategies‘. But hedge funds have also been overleveraging their positions in plays such as AMC and GameStop.
How will this rule make an impact on both these short squeeze plays? I want to discuss why this is very positive news for AMC, GameStop, and other ‘meme stocks’.
Welcome to Franknez.com – I think it’s safe to say most of you have no faith in the SEC. However, I feel like it’s important for us to intentionally look towards regulators to create real change. We cannot be loud and in the end expect nothing out of it. If we’re going to be loud, expect change to be the result of your efforts. Demand it.
Let’s get started!
Gears Have Begun To Move
Why does change take long? Change usually requires a specific amount of energy to begin manifesting in present time.
The energy it takes to change the color of your living room walls will take more time than the energy that is needed to change a lightbulb in your restroom.
Apes have been asking for massive change; monumental change in the markets.
The change we yearn does not happen with a flick of a switch. The change we’re looking to make will affect millions upon millions of people, even after our stories here on earth are done.
For a movement to make history, massive amounts of action and energy are required. Hence the length of real change to become present.
The community has made itself known to real entities with legal power to make change happen. I’ve been saying it for months now, your voice is a powerful weapon against the corruption in this world.
And because of your boldness and your courage, the gears towards monumental change in the markets have begun to move.
What Does Short Sale Disclosure Mean?
A short sale disclosure would allow the SEC to have full disclosure of the amount of shares that hedge funds are borrowing from other institutions to short stocks in the market.
Here’s where it gets interesting.
We know that hedge funds have been overleveraging their positions through phantom shares, or naked shares (non-existent), due to failure-to-deliver data, dark pool trading percentage, and anomalies in intraday charts that push the price down regardless of buyers outweighing sellers.
A short sale disclosure would mean hedge funds by law will be required to show regulators the powerplant behind the curtains if they are to continue these type of operations.
And hedge funds are nervous. We’ve seen hedge funds beg the OCC to delay liquidation, and are now seeing pushback regarding this new short sale disclosure rule.
Short Sale Disclosure Could Eliminate Naked Shorting In The Markets
At least theoretically right? Hedge funds are able to report information to regulators that essentially lands on a ‘safe zone’ type of filing.
Often times market manipulation is overlooked due to the misinformation that is being reported.
A short sale disclosure puts immense pressure on hedge funds. It could prevent them from engaging in illegal shorting strategies.
Failing to do so could open the possibility to regulators suspending these strategies in general. I don’t doubt that in the fight for a fair market this could become a reality.
A short sale disclosure could be seen as a type of audit to monitor hedge fund activities. The anomalies in the market have gotten the attention of Gary Gensler, chairman of the SEC.
And as I mentioned earlier, it takes a lot of energy and time to get the gears moving.
The short sale disclosure rule could be proposed by November next month, via Bloomberg intel.
Community, this is very optimistic news. We can’t keep attacking the very people who can actually impose regulations on this powerful adversary.
We are a very intelligent community. Let’s not self-sabotage our opportunity to make a real and positive impact in the markets.
Could Short Sale Disclosure Trigger Margin Calls?
If buying power is exceeded, or overleveraged, it’s possible hedge funds could face margin calls. Margin requirements could be raised and accounts may get liquidated depending on the short sale disclosure information.
It may sound simple but know that the markets are far from simple. Hedge funds will not go down without a fight.
But if you’ve seen Ken Griffin recently, it looks like the boss battle is almost over.
How Will This New Rule Affect ‘Meme Stocks’?
Take away massive shorting in the markets and you’ll get the real picture of what a real supply and demand market looks like.
If you analyze the technical chart data of AMC and GameStop you’ll find that the price moves down when it should not be moving down.
You cannot compare how massive buyers are compared to sellers in both these plays, yet we see the price of these stocks get driven down when supply and demand should be narrating a different story.
Hedge funds have been manipulating AMC and GameStop’s price action to benefit financial institutions in a market that’s better-tailored for one player.
This is why the SEC is also implementing the Market Structure Modernization rule. Market plumbing has drawn big attention from politicians, investors, and regulators alike.
The SEC will be targeting PFOF and the market dominance of financial firms, including Robinhood and Citadel Securities.
This would be massive! Retail investors do not trust Citadel to process their securities.
Eliminating the flow of transactions to this financial firm could mean a massive difference in FTDs, and even dark pool trading!
However, this rule could come by April. Change takes time.
Here’s Why An AMC Rebound Is Right Around The Corner
I published this article explaining why I believe AMC will rebound soon. The data has to do with short interest and volume patterns.
A lot of you have shared this article recently and I actually appreciate you for doing so.
I know all too well what it feels like to just want this play to simply pop. Every single one of us has this in common.
Time is on our side, don’t forget to enjoy the present.