Tag: Hedge Funds (Page 1 of 5)

Phase 6 Margin Call Requirements on The Way

Phase 6 Margin Call Requirements
Market News: Phase 6 Margin Call Requirements on the way | ISDA

Market News: Phase 6 margin call requirements are on the way.

Institutions under UMR who had not previously been affected by these specific margin requirements will be as of September 1st, 2022.

Uncleared Margin Rules (or UMR) were created to address the OTC derivatives market–and its participants– in the wake of the global financial crisis (GFC) of 2008-2009.

It implemented new margin requirements for non-centrally cleared derivatives to avoid further systemic risk.

For this reason, they were ‘phased in’, or broken down by phases.

Institutions affected by phase 6 margin call requirements could find themselves in a sticky situation and I’m going to discuss why down below.

Let’s get started!

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Preparing for margin calls

The requirement to exchange initial margin for over-the-counter (OTC) derivatives is one of the last remaining pillars of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that remains to be fully implemented.

The five-year implementation period began in 2016.

UMR Phases - Phase 6 Margin Requirements
UMR Phases – Phase 6 margin requirements

The chart above depicts the number of counterparties affected throughout each phase.

Phase 5 occurred in September of 2021 where 319 counterparties were affected.

We will be entering Phase 6 in September of 2022, where 775/990 counterparties with more than the $8 billion scope detailed on the graph, or gross amount across all uncleared OTC trades, will be affected.

Phase 5 of UMR touched a mix of sellside and buyside firms, especially medium-sized banks and larger buyside firms.

However, Phase 6 is almost exclusively buyside-focused meaning we could potentially see a massive market rebound, per Bloomberg.

Institutions affected by Phase 6 margin call requirements may include asset managers, banks, hedge funds, and private family offices.

The entire process is extremely challenging according to Bloomberg.

But while it may seem complex in nature, it’s the results that truly matter.

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How long will it take for margin calls to happen?

Although Phase 6 margin call requirements are going into effect on September 1st, 2022, it’s important to note that this is going to take some time.

The derivatives market is massive, now boasting approximately 1 quadrillion derivatives as of May 2022, per Investopedia.

The Senior Principal at BNY Mellon has said in the past that even after Phase 6 there will be margin calls that will still have to be processed.

That’s how massive this event will be.

Phase 6 margin call requirements will begin to margin a variety of sized banks, hedge funds, market makers, and family offices.

The bottom line, the markets need this reset, and its coming.

For a much greater and in-depth walkthrough of what this event means, check out AMCBIGGUM’s video below.

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For You: Retail Investors Petition to Fire SEC Chairman Gary Gensler
Phase 6 Margin Call Requirements meaning

Ex-Citadel Portfolio Manager Exits Millennium Hedge Fund

Millennium Hedge Fund CEO
Millennium Hedge Fund CEO Israel Englander.

Market News: An ex-Citadel and now former portfolio manager to hedge fund Millennium is exiting the $56.3bn in AUM company.

Maulin Shah joined East53 last year after roles at Citadel, Perry Capital and Balyasny Asset Management, LinkedIn shows.

East53 is one of more than 270 investing pods at Millennium, which uses individual teams to wager across asset classes independently. 

Millennium remains one the biggest and most successful hedge fund platforms in the world. 

The hedge fund is also known for being one of the top 10 financial institutions shorting AMC Entertainment Holdings, Inc.

Financial institutions have lost billions this year from betting against ‘meme stocks’ with some, such as Melvin Capital who betted against GameStop, even shutting down.

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Millenium Hedge Fund Trading Team Shuts Down

Hedge Fund Millennium
Market News: Hedge Fund Millennium lets go of East53 pod.

East53 Capital, which makes merger arbitrage-focused investments, is closing up shop and its senior portfolio manager Maulin Shah is departing, via Bloomberg.

Millennium hedge fund’s trading team had the ability to take up to $3 billion in gross exposure, but is closing due to risky and excessive losses, people with knowledge of the matter said. 

It was burned in part by unsuccessful trading relating to Twitter (TWTR), Citrix Systems Inc., Tenneco Inc. and the proposed Rogers Communications Inc. takeover of Shaw Communications Inc.

A spokesman for Millennium declined to comment and Shah didn’t immediately respond to a request for comment.

New York-based Millennium posted year-to-date gains of 6% through June, Bloomberg News has reported.

Millennium is one of the few hedge funds posting gains this late into the year so far.

Short sellers have lost billions all year shorting Tesla, Apple, Amazon, and of course, AMC and GameStop.

Betting on deal announcements

Business News

Hedge funds focused on merger arbitrage attempt to profit from perceived market inefficiencies before or after a deal is announced.

Many have been hurt by a widening average spread on US transactions, which spiked above 15% over the past three months, up from 10% in January and near a similar level seen during the pandemic in early 2020, according to data compiled by Susquehanna International Group.

US hedge fund Millennium Management had closed several of its “pods” in 2020 run by teams of traders in response to losses related to violent market swings caused by growing fears over the economic impact of coronavirus. 

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JP Morgan Manipulated Gold to Keep Hedge Funds Happy

JP Morgan manipulated gold
Market News: JP Morgan manipulated gold and silver market

An ex-trader says JP Morgan spoofed gold to keep hedge funds happy.

He says client orders made a lot of money for the bank.

Big hedge funds like Moore Capital Management and Tudor Capital Corp. were so important to JPMorgan Chase & Co. that its precious-metals traders routinely manipulated gold and silver markets to get the best prices on client orders, the former trader for the bank told a Chicago jury. 

“They brought in a huge volume of trading, which made the bank a lot of money and our team a lot of money,” John Edmonds, a former trader on JPMorgan’s precious metals desk, said on Wednesday when asked about the incidents.

This isn’t the first time a bank colludes with hedge funds to cheat non-institutional investors from their money.

Here’s the latest market news.

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JP Morgan manipulates gold and silver market

Gold and Siver Market
Gold and Silver Market

Edmonds worked on the JP Morgan precious-metals desk for more than a decade and pleaded guilty in 2018 to conspiracy and commodities fraud related to “spoof” trading. – Bloomberg

Spoofing is a term used when traders place market orders and cancels them before the order is fulfilled, initiating fake orders into the market without the intent of paying them.

Earlier this year the DOJ targeted hedge fund Muddy Waters for flooding the market with fake orders.

John Edmunds is currently testifying against his former boss, Michael Nowak, the longtime head of the trading desk, gold trader Gregg Smith and hedge funds salesman Jeffrey Ruffo.

They’re accused of thousands “spoof” trades in which huge orders were placed and quickly canceled in the hope of moving prices up or down so they could complete desired trades.

Prosecutors allege the traders were influenced by the needs of hedge fund clients, whom at times were looking to buy or sell millions of dollars in gold or silver in a matter of seconds or minutes.

Edmonds said that when a client needed an order filled, everyone on the desk would stop trading so as not to “get in the way” of filing that order.

Edmonds said he’d regularly watch Nowak or Smith use spoof trades to fill those order, per Bloomberg.

Bank gets caught red-handed

JP Morgan Precious Metals Desk
JP Morgan Precious Metals Desk

Jurors were shown instant messages between Ruffo and traders at Moore Capital and Tudor, as well as Smith’s trading records around those communications as evidence of improper trading in gold and silver futures.

Edmonds, who sat near Ruffo and Smith, said the hedge fund clients were “price sensitive” and concerned about even small differences in prices of gold and silver given the massive size of their orders.

One example from prosecutors was an order on Dec. 12, 2011, by Moore Capital, which sought to sell 1 million ounces of silver at $31 an ounce.

Smith placed orders to buy 1,190 futures contracts, each for 5,000 ounces of silver, data presented to the jury showed.

Edmonds said that was consistent with a spoof trade designed to drive the price higher, where Smith wanted to sell.

Minutes later, Smith sold 200 contracts, which is the equivalent to 1 million ounces, and canceled his buy orders.

The jury also heard about a Jan. 18, 2012, gold trade on behalf of Tudor where Ruffo was asked to unload more than 900 contracts.

As the price of gold decreased around 8 a.m., Tudor’s James Phelan wrote to Ruffo, “tell Gregg to wake up,” according to a chat log.

Shortly thereafter, Smith started entering orders on the buy side. “He was trying to move the market higher so he can sell at a higher price for an important client,” Edmonds said.

Sources – Bloomberg.

Will JP Morgan face any consequences?

JP Morgan manipulated gold and silver market to keep hedge funds happy
JP Morgan manipulated gold and silver market to keep hedge funds happy

The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago).

For the reasons explained in this Opinion, the Defendants’ motion to dismiss, R. 114, is denied except for the bank fraud counts (Counts 5–7).

Those counts are dismissed.

The remainder of the Superseding Indictment survives.

You can view the entire case text, opinion, and details here.

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Related: Chicago Tribune Says Citadel Securities' Dark Pool Targets Small Investors

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Who is The DTCC and What Are Their Legal Duties?

Market News: DTCC
Market News: Who is the DTCC?

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?

who is the DTCC?
Depositary Trust and Clearing Corporation

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.

Also, be sure to stick around for the latest market news.

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Tiger Global Parts Ways with Partner Who Caused Massive Losses

Tiger Global Sam Harland
Market News: Tiger Global parts ways with Sam Harland

Tiger Global just parted ways with Sam Harland, the partner responsible for sinking the hedge fund when it betted on Carvana.

The hedge fund suffered 52% in losses this year through May.

Their average cost basis is $105.80, more than five times the $24.27 level the stock closed on Friday.

Both Harland and Tiger Global Management declined to comment on his departure according to Bloomberg.

Here’s the latest market news.

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Hedge funds struggle to stay afloat

Hedge funds seem to be stranded on a sinking ship as losses accumulate this year.

One hedge fund who betted against GameStop is closing this month.

Last year many hedge funds were forced to cut their losses and throw in the towel on losing bets.

Tiger Global Management closed 2021 with a 7% loss.

They reported a 52% loss this year through May.

Tiger Management Losses
Tiger Global Management losses (blue) | Tiger Global Management News

The hedge fund may be on track for its worst year yet.

Earlier this year we saw Citadel and other hedge funds faced default on Russian bonds from tech company Yandex.

Investors tried pulling out $250 million from Coatue Management but the hedge fund couldn’t meet investors demands.

Aside from the shorting of ‘meme stocks’, hedge funds are also getting burned from tech stocks falling.

The NASDAQ has fallen nearly -32% this year-to-date taking down every major tech company down with it.

Amazon (AMZN) is down more than -37% this year, Tesla (TSLA) -45%, and Apple (AAPL ) -27.72%.

Carvana is down nearly -90%, one of the heaviest held assets by Tiger Global Management.

Tiger Cubs ditch positions

The Tiger Cubs alliance consists of Tiger Global Management, Lone Pine Capital, Coatue Management, Maverick Capital, Viking Global Investors and D1 Capital.

According to Bloomberg, majority of the Tiger Cubs stock picks are in tech stocks.

Tiger Global exited 83 positions depicted in the chart below and entered only 2 new positions.

Tiger Cubs ditch positions
Tiger Cubs ditch positions

The Tiger Cubs have been known for piling into the same or similar stocks primarily because they all had the same mentor.

Below is a list of only some tech companies the Tiger Cubs have recently reduced from their positions.

Big name companies include Carvana, DoorDash, Netflix, and Shopify to name a few.

Tiger Cubs Losses
Tiger Cubs Losses | Tiger Global Management News

These companies might have been extremely convenient during the pandemic lockdowns, but the truth is people are going out now.

Now that gyms are open to the public, people have no need for Peloton.

Netflix couldn’t replace the movie theatres, and so on.

Some experiences are simply irreplaceable.

And it’s showing in tech company stock.

I’d love to hear your thoughts on the matter.

Join the discussion in the comment section of the blog down below.

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Bank of America Increases Short Position in AMC

Market News: Bank of America AMC
Market News: Bank of America increases AMC puts

Bank of America and JP Morgan continue to bet against AMC despite the repercussions.

Like hedge funds, banks have also been under much public scrutiny for betting short in the market.

Regulators subpoenaed some of the largest banks and hedge funds after investigating communications between the two parties earlier this year.

Goldman Sach’s dark pools were investigated in May – a popular issue amongst the retail community.

Combined, hedge funds and banks have millions of shares working against the largest movie theatre chain in the world.

And in this article, I’m going to break down the most recently reported numbers.

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Bank of America bets against AMC Theatres

Market News: Bank of America Increases Short Position in AMC
Market News: Bank of America increases short position in AMC

Bank of America increased their short bets against AMC in May, according to this Fintel report.

The bank now holds a total of 1,007,500 puts of AMC Entertainment Holdings, Inc. stock.

Retail investors were shocked to discover BofA was one of the top 10 financial institutions betting against the movie theatre chain last year.

And they haven’t left, but rather remained bearish on AMC.

The ball might be in their court in today’s bear market, but retail investors are already weary of the market’s integrity.

Last year, hedge funds sought out to destroy the movie theatre chain by shorting it to bankruptcy.

But retail investors put a stop to the madness – saving AMC Entertainment from collapsing, and inflicting billions of dollars in damage to short sellers.

Retail investors even closed their bank accounts with Bank of America after discovering the bank was betting against the beloved movie theatre stock.

Meme stocks were no joke.

Corporate fraud and corruption were exposed, retail made money, and the media lost all credibility.

But Bank of America isn’t the biggest bear when it comes to AMC stock.

Here’s a list of other banks and hedge funds going short on AMC.

Institutions shorting AMC stock

Institutions shorting AMC stock - who is shorting AMC
Who is shorting AMC?

#1. Susquehanna – 11,004,100 shares short

#2. Citadel – 4,889,900 shares short

#3. Goldman Sachs – 2,785,00 shares short

#4. Group One – 2,221,900 shares short

#5. 683 Capital – 1,992,600 shares short

#6. Bank of America – 1,007,500 shares short

#7. Wolverine Trading – 921,400 shares short

#8. Piction Mahoney – 500,000 shares short

#9. JP Morgan – 400,000 shares short

None of these institutions have closed their positions in AMC.

One hedge fund that was removed from the list is Sculptor Capital LP – the institution closed their small position at a loss this year according to Fintel.

Anchorage Capital closed last year after betting against AMC.

The hedge fund held 4,000,000 puts prior to shutting down.

Even Gabe Plotkin’s Melvin Capital is shutting down in June after GameStop crippled the short seller last year.

Bank of America might have increased their short position in AMC, but is it wise to bet against retail?

Retail has power, and I think retail is about to prove it again very soon.

I’m interested to learn what you think.

Leave your thoughts in the comment section of the blog below.

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Market News: NSCC-2022-003 Approved

NSCC-2022-003
Stock Market News: NSCC-2022-003 has been approved

NSCC-2022-003 has been APPROVED.

The filing replaced NSCC-2021-010 which was withdrawn on March 25th of 2022.

The rule aims at providing a more stable environment for market participants and I’m going to break it all down below.

Let’s get started.

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NSCC-2022-003 SFT clearing service

NSCC-2022-003 would implement the SFT clearing service (securities financing transactions).

This means the NSCC would act as a third party to clear FTDs (failure-to-delivers) from various institutions.

The NSCC would also collect margin from both the lender and borrower to mitigate any risk.

Here the NSCC essentially acts as a referee, preventing overleveraging, naked shorting, and FTDs in the market.

Predatorial short selling strategies could potentially be eliminated due to this filter.

The NSCC believes it can reduce market disruption from fire sales by liquidating positions in small batches.

I’ve stated in recent articles and on my channel that a squeeze in AMC and GameStop will likely occur in sequences.

A ‘controlled squeeze’ so to speak to avoid systemic risk in the market.

It’s very possible NSCC-2022-003 was created to unwind this mess in a manner that would prevent the stock market from collapsing.

Does the rule help hedge funds?

Yes, but it also helps retail investors.

While NSCC-2022-003 provides a safety net for overleveraged institutions, it will also create more balance in the market for retail investors.

The NSCC is requiring all SFT members to provide a $250,000 margin minimum amount.

And with DTCC B16845 already raising margin requirements, I think it’s fair to say hedge funds are being put on a leash.

Investors have been asking me, what happens if a hedge fund defaults?

Will they be held accountable for their short positions?

Assuming a hedge fund becomes an SFT member, under NSCC-2022-003, the NSCC would take all responsibility and be obligated to meet all settlements.

Although the proposal requires a $250,000 margin minimum, the NSCC is requiring members to hold sufficient liquidity to cover the largest settlement obligation.

In other words, every short position will be obligated to get closed.

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Related: Is a New AMC Stock All-Time High Coming Soon?

Hedge Fund Tiger Global on Brink of Shutting Down?

Hedge fund Tiger Global
Market News: Hedge Fund Tiger Global down more than 50% this year.

Hedge fund Tiger Global is on the brink of collapsing.

WSJ reports the hedge fund is lost 52% for the year up to May.

It was down 34% this year through March but the institution keeps sinking.

Melvin Capital threw in the towel after suffering several losses this year.

Is hedge fund Tiger Global the next one to go?

Let’s discuss it.

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Let’s dive right into it!

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Hedge fund empires crumble

Melvin Capital lost a staggering 20.6% the first quarter this year alone.

In 2021, they took a heavier hit with 50% in losses.

Now Gabe Plotkin’s Melvin Capital is shutting down end of June.

The Tiger Cubs, an alliance consisting of hedge fund Tiger Global Management, Lone Pine Capital, Coatue Management, Maverick Capital, Viking Global Investors and D1 Capital are facing massive losses this year too.

According to Bloomberg, majority of the Tiger Cubs stock picks are in tech stocks.

Which as we know, have been plummeting all year.

Tiger Global exited 83 positions depicted in the chart below and entered only 2 new positions.

Coatue Management is another hedge fund who has been struggling to keep its doors open this year.

Last year investors demanded to pull out $250 million from the hedge fund but Coatue was unable to meet demands.

Coatue said the money they could not deliver to their clients was being held in private companies, making it difficult to liquidate.

Today we see Coatue Management exited 35 stocks and only entered 12 so far.

The rest of the cubs aren’t doing so well with everyone exiting more positions than entering them.

Hence the reason why we’ve seen the market fall all year.

Will hedge fund Tiger Global close?

Tiger Global Hedge Fund

Although the hedge fund has wiped out more than $16 billion in assets under management, Tiger Global continues to hold on.

“We take very seriously that our recent performance does not live up to the standards we have set for ourselves over the last 21 years and that you rightfully expect. Our team remains maximally motivated to earn back recent losses,” the hedge fund wrote.

But even then, the hedge fund has struggled to find a winning strategy.

Tiger Global was down more than 34% the first quarter of 2022.

And instead of finding a solution, the hedge fund sank to a total of 52% halfway through Q2.

Things aren’t looking so good for the hedge fund.

What do you think?

Will hedge fund Tiger Global be the next institution to fall?

Leave your thoughts in the comment section of the blog down below.

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Related: Ken Griffin Attacks: "Pension Plans Destroyed by Retail Investors"

SEC Charges TradeZero America for Halting ‘Meme Stocks’

SEC Charges TradeZero America
Market manipulation: SEC charges firm for deceiving customers in ‘meme stock’ halt.

BREAKING: The SEC is charging TradeZero America and co-founder with deceiving customers about ‘meme stock’ trading halts.

“The Securities Exchange Commission today charged broker-dealer TradeZero America Inc., and its co-founder Daniel Pipitone, with falsely stating to the firm’s customers that they didn’t restrict the customers’ purchases of meme stocks when in fact they did.”

The SEC does not mention in the press release which three ‘meme stocks’ customers were not allowed to buy.

I’ll link the official source below.

Let’s discuss it.

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TradeZero America deceives customers about meme stock halting

TradeZero America Meme stocks

In late January of 2021, many broker firms halted the purchase of ‘meme stocks’.

You might have heard of the Citadel and Robinhood scandal, where the two colluded to remove the ‘buy button’.

While the scandal became headlines, the transcripts available weren’t enough to charge the institutions.

The SEC released a press release today stating that TradeZero America is being charged for deceiving its customers.

The firm told its customers they did not halt the purchase of meme stocks when in fact they did.

After the halt, TradeZero and Pipitone made misleading public statements via interviews, social media, and in a press release in an effort to distinguish their company from brokers that restricted trading during that period. 

In a Reddit “Ask Me Anything,” Pipitone said, “That some trading firms are blocking these symbols is disgusting, unprecedented… Our clearing firm tried to make us block you and we refused.”

Side note: THIS STATEMENT is disgusting.

TradeZero America received a $100,000 penalty, and co-founder Pipitone received a $25,000 penalty.

Although the SEC did not mention which ‘meme stocks’ were prohibited from being purchased, GameStop and AMC have been the two biggest ‘meme stocks’.

I assume the third was Bed Bath & Beyond.

Source: SEC Press Release

Where are ‘meme stocks’ headed in 2022?

Meme stocks

AMC and GameStop continue to be heavily shorted.

While both companies have survived the pandemic and have shown a dramatic fundamental improvement, short sellers have not left.

Both these stocks have an extremely high short interest and shares on loan.

More and more retail investors are piling in these two stocks for a short squeeze play that was merely suppressed last year.

Trading was halted in both AMC and GameStop in late March of 2022.

AMC rose to $34 per share while GME stock rose to $199 per share.

This form of market manipulation continues today.

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Related: Ken Griffin Speaks Out on Retail Investors and Meme Stocks

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