The latest report on AMC FTDs shows failure-to-delivers spiked to $9,906,536 for the month of October so far, with data still coming in.
This is equivalent to 1,640,155 FTDs.
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.
Let’s discuss it.
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AMC Gets Hammered by Clearing Houses
According to Investopedia, AMC FTDs can occur if there is a technical problem in the settlement process carried out by the respective parties (clearing houses).
Seeing as Citadel Clearing LLC transacts orders worldwide, there’s a major conflict of interest here.
Ken Griffin’s Citadel LLC is short on AMC Entertainment stock, so there’s a very distinct connection here.
It’s unlikely FTDs have been a result of retail buyers since the majority are purchasing the equity on cash accounts where orders execute almost immediately.
Naked short selling seems to be the most probable cause here as $AMC has tumbled despite heavy retail interest.
So far, it seems like the SEC isn’t willing to tackle FTDs in both AMC and APE.
In fact, Gary Gensler says there’s a possibility that naked shorting isn’t even involved.
But I’m curious to know your thoughts on this.
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Also Read: Credit Suisse Warns Investors of Naked Short Covering
We know the cause and the cure for FTD’s but the SEC has it’s own FTD’s Failure to deliver adequate enforcement.
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