Today I’m going to touch topic on some SEC news.
Be sure to bookmark this page as it will be continuously updated for your convenience.
The SEC recently released two new rules that essentially go hand-in-hand with one another.
They are NSCC-2022-003 and NSCC-2022-801.
I’ll be breaking these down in simple terms below.
Welcome to Franknez.com – if you haven’t joined the newsletter, be sure to do that below. I’m publishing market news and updates daily.
Let’s dive right into it!
Join the newsletter to become part of an activist group fighting for market transparency!
Receive weekly market news to stay up to date.
NSCC-2022-003 and NSCC-2022-801
NSCC-2022-003 and NSCC-2022-801 essentially have to do with allocating securities into other pockets of leverage through the use of SFTs.
I’ve seen a few mixed thoughts on this SEC news on Twitter and on Reddit.
However, I’m going to break it down in the simplest form possible, so you have a better understanding of what these new SEC proposals are stating.
If you have any comments, thoughts, or opinions you’d like to make public to the community, be sure to leave a comment below at the end of the article.
What is an SFT?
An SFT is basically a leverage tool that will allow parties to simultaneously exchange the same securities between one another, in exchange for collateral.
For example, the purpose of NSCC-2022-801 is to establish new ‘membership categories’ and requirements for ‘sponsoring members’ and sponsored members where they can access this leverage tool.
It’s a safety net for institutions with overleveraged positions to hold owed securities, but ensures sales are delivered in the market, preventing FTDs and naked shorting.
SFTs involve the owner of securities transferring those securities temporarily to a borrower, typically a hedge fund.
The middleman in this scenario tends to be either a bank or a financial firm.
In return for the lent securities, the borrower of those securities transfers collateral to a party with an interest rate attached to that collateral.
SFTs in a nutshell are meant to provide liquidity to markets to make delivery on short-sales, and avoid FTDs, naked shorts, and similar situations, according to the report.
Will these rules benefit retail investors or hedge funds?
SFTs can also be seen as a program that will allow the NSCC to liquidate a defaulter’s net position in an orderly way to prevent massive market disruption.
NSCC-2022-003 limits the positions that need to be liquidated to reduce the volume of required sales activity in the market.
What regulators have essentially created is a ‘legal’ backdoor for overleveraged hedge funds to launder illegal naked short sells and FTDs.
NSCC-2022-003 and NSCC-2022-801 are essentially the same proposals only with slight updates.
Keep in mind these are only proposals.
So, while these new rules could be beneficial to retail investors as far as eliminating naked short selling in the future, it washes away the damage already created by overleveraged hedge funds today.
I strongly believe short sellers should be held accountable to closing their overleveraged positions first.
If the SEC wants to protect the integrity of the market and prevent massive disruption worldwide, they will hold short sellers accountable, relieving all pressure imposed on heavily shorted stock.
Failure to do so will mark the event as the greatest financial theft in stock market history.
We are on the brink of massive change.
History is being written; one of two decisions will be made, and the outcome will last forever.
SEC Email: firstname.lastname@example.org
You can follow me on: Twitter | Facebook | LinkedIn
Thank you so much. I’m going to send them my opinion everyday.
Not sure that they care, but I’ll feel better that I did for myself and others.
This sounds like stimulation of the class or caste system. Remove the opportunities of the lower class and continue to reward the upper social groups. I suppose if one does not desire change and is content with owning nothing this would work. Most folks I speak with are opposed to working for someone to enjoy the fruits of their labor. As I understand, the Security Exchange Commission (Government Silo) is complicit with imposing this upon its citizens. I’m not okay with that. Are you?
Frank, I follow your posts avidly and they are always interesting and often on the money, but given that you are on our side rather than the HF’s i wondered if it was a good thing to suggest that the MOASS may not happen, as people are easily swayed. I realise you only speak the truth / what you feel is accurate, but we don’t want retail investors to not hold their shares, as we know what damage that can do?
As a middle class retiree, feels like i am at the bottom of the food chain, should I say , the trading chain. (Like many others I’m sure). I will continue to hold, but seems like an endless up hill battle.
Thank you Frank for your continued honest updates. It’s appreciated.
This bulls**t goes through I will take all my money out of the market and never invest again.
I am a concerned investor that don’t have a lot of knowledge on what is going on.
If it wasn’t for Frank Nez I would know less. I live by the rules,policies and the laws
Of the land in order to survive. Abuses need to be held accountable for their actions.
Just because they are rich and I am not doesn’t mean they should be given a different
Set of rules to live by. We as retailer’s need to be heard. Can someone let people like me know what to say( in a nice way) to the SEC to express our concerns.
Maybe get thounds of us to sign a petition or bombard the SEC with thounds of
Emails..EVERYDAY about doing their jobs the right way.
Thr Markets change and the Weatlthy will always win until a few war like markers have been made. Unfortunately change only understands War and until the financial terrorists are eliminated publically the same practiced will remain status quo…..
Billie Michener, per your comment, I listed a draft response below you can send to
SEC for new proposed rules if you wish.
I oppose the new SEC proposed rules (NSCC-2022-003 and NSCC-2022-801).
They bail out market maker/hedge funds that are in a bad position often because of
illegal naked shorting (selling fake shares and failing to deliver). The MM/hedge funds
get a cash/asset “loan” to hedge/cover their losses, but they aren’t required to close out
their fake shares sold positions. The net result is collusion to manipulate a stock price
lower without having to actually close out their naked short position. It is very much
against retail investors interests.
It sounds like an SEC accessory to fraud scam to “legalize” selling fake shares by allowing MM/hedge funds to just get funds loaned to them, so they could say they could buy back the fake shares sold (if they wanted to) without actually covering the illegal shorts. The net result is illegal manipulation downward of the stock when they don’t have to actually cover their shorts (fake shares sold).
Pretty much nailed it. So, the proposal says that it would prevent naked shorting from occurring and it’s a safe way of maintaining ‘balance’ per say, but it looks like a copout for the synthetics that are already owed. It’s definitely a topic retail investors should have a say on.
Doesn’t sound like they’re necessarily erasing them, sounds like they’re going to have to back their bet with physical property and assets whether it be their own or the lenders. At least this is some sort of accountability and could potentially be tracked.
Sure, I will trade my AMC shares for that corner office building in nyc. Or maybe a penthouse suite!
The value of the asset pledged could be skewed to have a significantly higher value than it does. That will allow HF to liquidate for less with overvalued assets as “fake” collateral
I completely agree that short sellers need to be held accountable for the short positions they already hold. But, if 2008 has taught us anything, the government will bail themselves out of the mess they ALLOWED to be created at the expense of the consumer (retail). The system is rigged, and they would rather drag us through the mud than admit to any wrongdoing or actual justice served to the parties that were allowed to create this mess. It’s extremely frustrating as a middle class citizen to play the game by their rules, that they don’t even enforce or acknowledge, to then have our potential opportunity to succeed squandered by the people in place to protect RETAIL.
Retail must raise awareness – it’s just a proposal, but shareholders should stay informed, nonetheless.
What does this mean for someone who has 1000 amc shares at 26$? Thanks!
It doesn’t mean anything for retail at the moment, it’s simply a proposal right now. Investors should remain informed and voice their concerns on the matter.
How will they use a back door to get out of the position? There is only one way to close a short position.
How does this erase billions of naked shorts across AMC/GME/and all the others?
Let’s start a discussion!