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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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Update: On March 25th, 2022, NSCC withdrew the proposed rule change (SR-NSCC-2021-010) detailed below.
This article will stay up for archive purposes. You may read the original text below to see how this proposal would have affected short sellers and retail investors. Leave a comment below with your thoughts on the cancelation of this proposal.
Welcome to Franknez.com – the blog that fights against FUD media. Today we’re discussing a rule that could potentially help retail investors against market manipulation.
Let’s get started!
(ARCHIVED 2021) | Updated March 30th, 2022.
Although this proposal has been delayed a few times, I’m going to go over the significance of it if passed.
We must urge regulators to pass this proposal because it will level the playfield for retail investors.
What is going on with the NSCC essentially cleans the slate for retail investors.
The AMC community will now be able to drive AMC’s share price without illegal tactics in the stock market if this proposal is passed.
All the opposition that prevented AMC Entertainment stock from reaching $100 per share will no longer be able to drive the stock down if this goes through.
As a result, the momentum that retail investors create will bring higher and quicker upswings in AMC stock.
Breaking away from $30-$40 range
Like many potential catalysts, this could very well be one that could wipe out more hedge funds.
This means they can no longer short AMC stock in extreme measures using naked shorts like they have been.
The FTDs? All call options in the money should now be properly executed which will result in gamma squeezes that will drive up AMC stock up; breaking the $30-$40 range.
If you bought in during AMC’s climb, you’re about to break even real soon.
And once you do, you’re going to begin seeing profits on paper shortly after.
The NSCC is going to watch every transaction
The NSCC has the potential to take away the enemies’ weapons and now it’s time for retail investors to charge full on.
If this proposal goes through, hedge funds will be stripped from their power to manipulate AMC through naked shorting and FTDs.
Short sellers now cannot take another massive round of momentum.
This momentum could cause immediate liquidation by brokers if margin accounts fall short of requirements.
A third wave of momentum will eliminate more hedge funds shorting AMC and could potentially spark the MOASS.
The NSCC requires collateral
NSCC-2021-010 Market Regulators Preventing Naked Shorting and FTDs
If that wasn’t enough, the NSCC-2021-010 also requires that lenders have the collateral at hand when trading stock.
So now hedge funds have JP Morgan, Charles Schwab, and the NSCC requiring them to keep an insane amount of cash at hand for once they get squeezed out of their positions.
