The latest Stocksera AMC FTD report shows that fails-to-deliver dollar amount spiked as high as $31 million in November.
This is equivalent to approximately 4.3 million FTDs.
The last day of the month shows FTDs amounted to $4 million, or approximately 546.4K FTDs.
December’s report will become available during the new year.
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-deliver can occur in options trading or when selling short naked, per Investopedia.
AMC Entertainment has been a big target for short sellers looking to profit from the demise of the century old movie theatre chain.
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How Are FTDS Being Regulated?
High AMC FTD reports have been surfacing throughout the year as parties fail to meet their obligations when it comes to fulfilling their orders.
The problem arises from clearing corporations, or self-regulatory organization FINRA.
FINRA stands for the Financial Industry Regulatory Authority and is a self-regulatory government organization that oversees U.S. broker-dealers.
The organization contains records of every trade made available intraday, including that of naked short sales.
FINRA requires firms to be able to meet their short sale requirements as well as have a process to close out fails to deliver within their required timeframes.
FTDS (fails-to-deliver) are mounting up every month according to SEC data, and FINRA is unable to get firms to close out these obligations.
The retail community is calling it foul play, alleging the possibility of lobbying within the self-regulated organization.
FINRA’s justification towards FTDs say that firms face challenges related to miscalculations.
But it’s these ‘miscalculations’ that are allowing short sellers to get away with millions of dollars in damages.
AMC Entertainment Isn’t the Only One
Many stock tickers are affected by large FTD counts, not just AMC.
But as more retail investors have educated themselves in the markets, more systemic problems seem to have emerged, or rather brought to light.
The retail community has raised concerns to the Chairman on social media and have even criticized his lack of action to protects retail investors.
He says the SEC is continuing to look into short selling to provide participants with better market transparency.
Proposals regarding conflicts of interest and a new settlement cycle are also underway for 2023.