Retail investors have pulled up some information on the DTCC regarding the blockage of margin calls.
The Reddit community is calling the organization corrupt.
But what exactly is the DTCC and how do they play an important role in our markets?
In this article I’m going to explain the duties of this corporation in simple terms and also touch topic on questions retail investors might have when it comes to AMC and GameStop.
Let’s get started.
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Who is the DTCC?
The DTCC (Depositary Trust and Clearing Corporation) is an American post-trade financial services company providing clearing and settlement services to the financial markets.
The DTCC processes trillions of dollars of securities on a daily basis.
As the centralized clearinghouse for various exchanges and equity platforms, the DTCC settles transactions between buyers and sellers of securities.
The information is recorded by its subsidiary, the NSCC.
After the NSCC has processed and recorded a trade, they provide a report to the brokers and financial professionals involved.
This report includes their net securities positions after the trade and the money that is due to be settled between the two parties.
Conflict of interest
Clearing corporations such as the DTCC may receive cash from a buyer and securities or futures contracts from a seller.
The clearing corporation then manages the exchange and collects a fee for this service.
The size of the fee is dependent on the size of the transaction, the level of service required, and the type of security being traded.
Investors who make several transactions in a day can generate significant fees.
This means every naked share that has been created on the ‘short side’ has been recorded and bypassed by the DTCC/NSCC, all for a fee.
And this is where retail investors begin to question the integrity of the financial market.
One of the DTCC’s bigger partners is Bloomberg LP, a privately held media and software company.
Retail investors are weary about Bloomberg due to having a dark pool where institutions can make unregulated trades.
Bloomberg also happens to be a media platform where Citadel’s Ken Griffin is made to feel at home.
The short seller remains to this date one of the top 10 institutions shorting AMC stock.
Related: Wall Street Journal is Indirectly Owned by Citadel's Ken Griffin
DTCC removing margin calls
There is information going around in the retail community of the DTCC removing margin calls and it’s creating somewhat of fear, uncertainty, and doubt.
After digging around for a while, it’s important to note that the DTCC did indeed remove margin calls, but on January 28th of 2021.
This isn’t necessarily occurring right this moment.
A press released was published advising of the circumstances that occurred during the time ‘meme stocks’ were halted.
The DTCC waived $9.7 billion of collateral deposit requirement on January 28th, 2021, limiting institutional losses and limiting retail profits.
Could the DTCC have been playing the middleman to prevent the market from completely collapsing?
Or was this blatant market manipulation?
The organization allowed several naked shares to flood the market but never stepped in to level the playfield for retail investors.
So why step in to minimize institutional losses?
I think it’s safe to say those client fees really make things happen.
The SEC is by law responsible for regulating the DTCC, but the DTCC is a company who caters to a wide range of institutions in the financial market.
And according to the SEC Chairman Gary Gensler, they need whistleblowers to really tackle the issues at hand.
Is the DTCC corrupt?
Most retail investors openly think so.
The corporation is a business that processes orders between buyers and sellers but caters to financial institutions – not retail investors.
The DTCC along with the NSCC are very well aware of the naked shorting issue in our market.
But they’ve failed to put a halt to it.
One can view this negligence as being complicit.
I’m curious to learn what you think.
Leave your thoughts in the comment section of the blog down below.
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