Dance of Darkness: The SEC and Darkpools (Original for Apes/Snyder Cut)
Dance
of Darkness: The SEC and Darkpools.
Hello everyone, thank you for your patience and for reading this thesis on darkpools and the SEC in advance. Firstly, let us note this is strictly not financial advice, this is just research I have compiled over weeks for entertainment purposes, this all-public information and is not intended to effect the price action of any stock in any shape, way or form.
The article will be divided into 3 major chunks, SEC
and the financial derivatives market, darkpools of credit swaps and synthetic
shares today, FUD dispersal and legal ramifications of naked shorting. My
motivation for writing this article was triggered by two conditions, the
ongoing process of appointing Gary Gensler as the SEC chairman, and the
revelation of the existence of massive darkpool trading certain meme stocks, in
an effort, to bamboozle the retail investor.
---THE SEC SECTION---
Gary Gensler, the former chairman of the CTFC
(Commodities Trading Futures Commission) is currently in the process of being
appointed the SEC chairman. Currently, the senate banking committee has
approved Gensler at a 14-10 vote (https://www.investmentnews.com/senate-banking-committee-approves-gensler-nomination-203813 ,
https://www.c-span.org/video/?509429-1/sec-chair-cfpb-director-confirmation-hearing ),
and he will be voted on by the senate proper in a weeks time on April 12th (https://www.thinkadvisor.com/2021/03/31/schwab-expects-activist-sec-under-gensler-senate-sets-confirmation-vote-date/ ).
He is expected to have bipartisan support and be sworn in as the new SEC
chairman. Gary Gensler is extraordinarily hated by Wall Street for a couple of
reasons, the main reason is he is a hardnosed regulator interested in the
transparency of the market place and democratizing market place information in
favor of the little guy (https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection ).
This fundamentally goes against the closed country club nature of Wall Street;
this was shown by the enforcement of the Dodd-Frank act (https://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act
, https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp
).
So let us elaborate what happened; let us take a trip
back memory lane the last time Wall Street made a grievous market error 2008.
In order to fully explore this memory, we must take a side journey through the
paths, to the financial derivatives market and credit default swaps (https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp
, https://www.investopedia.com/terms/d/derivative.asp
). The financial derivatives market, specifically futures, we're designed by
markets to allow farmers, ranchers, manufacturers, industrialists, producers
etc., to lock in prices and mitigate risk in the production and operation of
businesses. As such, the core of what these markets are about is to lock in
prices for commodities and to manage risk; by allowing investors to lock in
prices or rates and thereby manage risk and volatility. As such, the
derivatives market is quite essential to the supply management side of the real
economy (the part of the economy where you and I work in), as such any
meltdowns in the derivatives market can and in 2008 had spilt over to the real
market. As such, combined these markets are very very large, estimated at 640
trillion dollars (https://www.investopedia.com/ask/answers/052715/how-big-derivatives-market.asp ),
in market capitalization, and according to Gary Gensler that represents roughly
22 dollars of hedging for every dollar exchanged in the real economy (https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection );
he did say that specific figure in 2010 though, so it maybe way higher right
now. As such futures and swaps are invested in almost every aspect of our lives
(food, fuel, mortgages, credit rates, interest rates, etc.). As such, given the
importance of the derivatives market, it is imperative it stay transparent and
competitive; this was not the case in 2008.
This was due to two things being in play in 2008,
darkpools and credit default swaps, specifically CDSs insuring against CDOs
composed of mortgage bonds collapsing. This was due to the underlying assets
(mortgages) defaulting at a rapid rate, causing the collapse of the bonds,
causing the CDOs composed of the bonds to collapse/default in price; causing
the CDSs to kick in and insure against the original value of the bond upon
inception of the CDSs. This transaction occurred, you guessed it, in darkpools.
We shall cover darkpools in high depth and breadth in a short while so bear
with me; before I go down further down the path of memory lane, let me explain
the terms I stated forward and quickly go over the darkpools, and what Gary
Gensler's response to this was.
As such lets start with CDOs; collateralized debt
obligations, think of these as financial products composed of multiple other
financial products backed by assets like bonds, collateralized loans etc. (https://www.investopedia.com/terms/c/cdo.asp#:~:text=A%20collateralized%20debt%20obligation%20(CDO)%20is%20a%20complex%20structured%20finance,derived%20from%20another%20underlying%20asset
., https://www.investopedia.com/terms/c/cdo.asp#:~:text=A%20collateralized%20debt%20obligation%20(CDO)%20is%20a%20complex%20structured%20finance,derived%20from%20another%20underlying%20asset .).
CDS: Credit Default Swap; in short, it's insurance
against a value of a security in case it's value drops. How this works is, you
take out a policy against a security, and pay somebody else to take the risk of
its valuation falling. This risk is taken off your shoulders, by you paying the
other party a premium to maintain the insurance policy (i.e. you hedge against
your securities dropping in value). As such the value of the security you are
insuring is safe, if you keep up your premium payments, insuring you against
risk. Furthermore, if you choose to exercise your insurance, as the value of
the security falls, you are paid out your insured amount; if the value of the
security increases and you choose to close out/exercise, you will take that
loss + premiums. (https://www.investopedia.com/terms/c/creditdefaultswap.asp#:~:text=A%20credit%20default%20swap%20(CDS)%20is%20a%20financial%20derivative%20or,with%20that%20of%20another%20investor.&text=To%20swap%20the%20risk%20of,the%20case%20the%20borrower%20defaults .)
Darkpools: Darkpools are exchange forums that
replicate open stock exchanges, closed off to the public designed to hide
institutional trading intent. In other words, by Gary Gensler himself,
darkpools are designed to lack regulation, transparency and the light of transparency
must be shone upon them (https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection ,
https://www.investopedia.com/terms/d/dark-pool.asp ).
Now that I believe everything has been established let
us quickly reiterate the chain of events in 2008, and Gary Gensler's response
as the CFTC chairman; and how he dealt with darkpools before (meme stock
synthetic shares are in darkpools I would speculate).
So let us begin, Banks relax loan requirements to make
cash of interest and mortgages-> package those into bonds --> package
those into CDO's --> market them as great investment, while the underlying
bonds are absolute garbage (this became garbage around 2006) --> Michael
Burry and co notice this and take CDS on them --> wait 2 years, 08 roles
around --> the market corrects itself violently where CDS's are basically used
to wipe out mortgage CDO's; these transactions occur in darkpools, away from
the public eye; all the while like right now the media say everything is
absolutely fine, you should totally hold onto your mortgage and get it
refinanced (sell your meme stocks today, squeeze is definitely over, you should
totally believe us).
As such in short, the unregulated swaps market spilt over into the real economy and exposed everyday Americans to real risk (with meme stocks its reversed, the shorter are at real risk right now).
In comes in, Gary Gensler and the Dodd-Frank act
Due to the crash, the Dodd-Frank act was designed to
curb excessive market abuses and speculation due to the lack of transparency
due to darkpools. As such it had 3 main goals according to the to be SEC
chairman (https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection ,
https://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act ,
https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp ):
i) Bring Transparency and competition to swap
darkpools
ii) Lower risk
iii) Increase market integrity
As such, according to Gary Gensler 90% of unregulated
swaps and futures were brought in from darkpools and mandated to use clearing
houses, so position data could be marked real time for the public to view.
Furthermore, the Dodd-Frank act established several
other protections (https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp ),
these are as follows:
i) Protections against the formation of too big to
fail institutions (so citadel can fail, and everybody will be fine
hypothetically), as a failure of any one of them could negatively affect the US
economy.
ii) The Consumer Financial Protection Bureau (CFPB),
established under Dodd-Frank also worked to curb predatory mortgage lending, deterring
high commission mortgage brokers from closing high interest loans with high
fee's; stopping the feedback loop of bad loans being dished out in exchange for
high commissions, fees and interest. It also protects consumers from excessive
credit and debit card fees and interest, by my understanding (https://www.govinfo.gov/content/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf )
iii) Volcker Rule: It restricts banks investing in
speculative trading and eliminates proprietary trading
(https://www.investopedia.com/terms/p/proprietarytrading.asp); furthermore
Banks are not allowed to be involved with hedge funds or private equity firms
considered to be too risky; lastly in an effort to minimize possible conflicts
of interest, financial firms aren't allowed to trade proprietarily without
sufficient "skin in game" (https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp ).
Furthermore, the Volcker Rule: "regulates financial firms' use of
derivatives to prevent "too big to fail" institutions from taking
large risks that might wreak havoc on the broader economy" (Citadel maybe
intimately familiar with this).
iv) Whistle-blower Program: The Dodd-Frank act also
goes ahead and strengthened and expanded the whistleblower program. As such it
specifically established a mandatory bounty program (you heard that right, if
you hunt down a shill spreading "insider information", that alludes
to collusion or any other illegal activities, you get a big fat reward). I'll
let the text from Investopedia take this one here:
"Specifically, it established a mandatory bounty
program under which whistleblowers can receive from 10% to 30% of the proceeds
from a litigation settlement, broadened the scope of a covered employee by
including employees of a company's subsidiaries and affiliates and extended the
statute of limitations under which whistleblowers can bring forward a claim
against their employer from 90 to 180 days after a violation is
discovered"
Meaning, you as a whistleblower can receive up to 30%
of the litigation settlement amount, if you can provide concrete evidence of
collusion (we'll expand on naked short fines in a bit after the in-depth dive
through darkpools as promised.); so if you have proven insider information,
happy hunting:
Lastly, to end this section I'll leave the actual
Dodd-Frank act here in case any legal scholars are reading this and would like
to dissect this: https://www.govinfo.gov/content/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf .
Now going back to the man who enforced this and
brought the banks and other bad financial actors under control the last time by
busting these darkpools, Gary Gensler. If Gary Gensler is appointed, and if
these hedgefunds have their short positions in darkpools to dupe the consumer;
they will not only be breaking a litany of federal financial regulation laws. Furthermore,
the SEC, DTTC, and hedgefunds/institutions long on meme stocks (Blackrock) have
already started swimming around sensing blood in the water, once Gary Gensler
comes in, based on his previous behavior of effectively curb stomping illegal
actors into submission, I can see him litigating Citadel and co (if they are
guilty) out of existence and forcing them to close, like he did last time as
the Future's chairman.
*Recap for Apes*
So let us recap, swaps and darkpools we're used in
2008 to insure against the financial collapse created by the greed of financial
institutions. The reason why we haven't had an exact repeat of 2008 is because
of the Dodd-Frank act; and the enforcer that took out Wall Street Gary Gensler,
is going to be running the SEC during meme stock chaos; which means the shorts
loose their friends in high places that haven't been enforcing the rules.
From here on we shall take a deep dive into how
darkpools work, then talk about the hypothetical legal implications of shorter
being caught with illegal naked shorts in darkpools; so, let us begin.
---DARKPOOL SECTION FOR APES---
So, let's begin with the darkpool definition in layman
terms; darkpools in essence are exchanges off of exchanges. A growing problem
that brokers and retail investors noticed is that if a lot of small-scale
orders are going through a relatively large and complicated fee system, for
instance with the NYSE (https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf ).
This is detrimental to both retail trading due to the
convoluted pricing model as well as the broker-dealers that can, if they
reached a certain threshold of clients, could mostly trade internally between
clients anyway. Morgan Stanley (https://www.morganstanley.com/disclosures/morgan-stanley-dark-pools ),
Goldman Sachs (https://www.thetradenews.com/guide/goldman-sachs-sigma-x/ )
and of course Citadel (https://www.reuters.com/article/us-citadel-darkpool-idUSKBN0MN22Q20150327 ,
closed in 2015 after harsher reporting requirements, go figure) all run darkpools
just for that purpose.
This, in turn, adds a sort of "buffer" in
front of the exchanges, once enough shares are circulating in the darkpools any
buy and sell order can be fulfilled to 100% outside of the exchange during
normal trading activity.
But as with any buffer, if you know how to play the
system, it can be abused as an amplifier. If you were a hedgefund that wants to
make a quick profit off shorting a stock, you lend as many shares as possible,
dump them on the exchange and watch all the retail investors trying to
"cut their losses" while you phone up CNBC or Fox Business to spread
the news of falling prices (opinion pieces, and opinion = speculation) to even
the last boomer to get them to sell. Once you start to see a decrease in
volatility after "smart" retail traders start buying shares, you try
to cover your short position in the darkpools. This allows you, as every retail
investor is looking at the exchange charts, to buy up shares on a downward
momentum without influencing the chart price (immediately). This obviously
works vice versa if you have a long position and want to dump it at a profit.
Drive up the exchange price, sell off in the darkpools. Cramer admitted to part
of the process in an interview (https://www.youtube.com/watch?v=jIfixbq_u0Q ),
on the darkpools, while not mentioned, it is certainly part of the process.
An illustrate how this might work in an example:
Company A wants to acquire company B ASAP by buying up
let's say 30% of shares of company B. Company A therefor goes to market maker M
to buy shares for them. M then proceeds to start buying shares on the exchange
to drive the price up a bit.
Meanwhile they try to buy up as many shares from the
darkpools as possible, in order to not drive the price up on the open exchange.
The price on the exchange usually reflects in the darkpools, but not vice versa
(because people look at the exchange prices, shortages in darkpools only show after
a slight delay).
If you were to say that a purchase of 5% of the float
would drive up the price of shares from B up by 5%, that would mean that after
the buy the price would be 30% higher with around 15% higher than start price
average.
That is if people were not to start day trading the
shares, which probably will happen.
However: if you were to do the same thing with
darkpools you suddenly see that while the price on the exchange goes up, M is suddenly
able to buy shares from places that do not influence the share price.
Again, 5% purchase on the open market equals 5% price increase. If 10% can be covered over the darkpools, only 20% affect share price, leaving us with an average of about 10% higher than starting price.
This is 5% that was "saved" for M and A. M obviously wants a small fee for the service totaling 2%, that leaves A with around 3% saved; that 5% came from the retail investor that was not aware of the movements in the darkpools. It costs the retail investor money. It robs you of your 30% gain in that scenario and gives you 20% instead. It costs you.
Now, remember how Cramer said that researching sentiment is key in order to pull that stunt off (https://www.youtube.com/watch?v=r07Gg92YjOI )? Well, wouldn't it be easier to pay brokerages as a hedgefund to process their order flow? That way you can not only instantly know the sentiment without any bias, but also take the opposite side of a trade by going short, thereby negating any buying pressure, be it dark pool or exchange or even direct to a limited degree where the order gets executed. This, in conjunction with a possible delay in order execution to arbitrage money (https://youtu.be/RNgzOr-m6ok?t=89 ), has been somewhat discussed in the congressional hearings. This in all essentialities is a (albeit slow) money printer that Citadel created for themselves; that we can confidently speculate exists.
Not only that, but if Citadel believes that your decision
to buy a stock is stupid, they could take the other side of the trade by
shorting it and giving you the shorted share
This is where Citadel (they're the largest market
maker) and CFD trading comes in:
By going through darkpools, Citadel as a market maker could in theory capitalize on such scenarios massively; furthermore until 2015 they ran their own darkpool, called Apogee (https://www.iotafinance.com/en/Detail-view-MIC-code-CDED.html ) which was decommissioned in 2015 possibly due to increased reporting/transparency requirements (https://www.reuters.com/article/us-citadel-darkpool-idUSKBN0MN22Q20150327 ).
However, by operating one of the most successful darkpools called Apogee, Citadel as a market maker was able to capitalize on such scenarios massively. Since then, Citadel switched to Citadel Connect, which does not qualify as an alternative trading system and therefore does not need to report.
But what are the implications if we suddenly have a relatively large trading platform that is owned by a market maker? Said market maker can 1. get real time data about (retail) sentiment and 2. can decide to take the other side of the trade; just like stated earlier.
Best case scenario for Citadel, if they wanted to short a stock would be to not have shares involved at all or making a contract for difference with you; this means you make an agreement with Citadel to get the current share price at any time you like from them, without ever having to buy or sell the shares.
This kind of trading is heavily regulated however, and therefore not really that common, especially seeing how it's mostly speculative anyway. They do have a way to engage in a similar tactic however: naked shorting.
As we all know, under Reg SHO 203 b 2 iii (https://www.law.cornell.edu/cfr/text/17/242.203 )
market makers are allowed to short a security under a bona fide agreement,
meaning without ill intend. As if that would have stopped anyone before, the
worst is a slap on the wrist by SEC (before Gary Gensler), the best is massive
tax-free profits.
So, what they do is naked short the stock by pretending
to act in good faith, aka buying naked calls from another party that they
control, here "Citadel LLC" (the hedgefund part). After that they can
lend the equivalent amount of shares out to either "Citadel LLC" or
any other party, which then dump them on the open market. This however breaks
after 3 days, since the "shares" that were put on the exchange never
existed, therefore becoming FTDs. Once the FTD status is reached after X number
of days, they simply go to their "Robinhood" buddies (or whatever
other party, can be a shell company) and ask them to write ITM call options,
excersie them and replace their FTD-IOUs with ones from Robinhood. Once these
reach their FTD status they do that in reverse, with Citadel's IOUs replacing
those of Robinhood. Repeat ad infinitum and you can crash a stock price by
printing shares faster than the federal reserve can print dollars. If
institutions (inevitably) bail out, only retail remains. And if retail does not
have a collective opinion on certain securities, we see a run by retail to get
rid of the bag.
Now what I've said may sound despairing and should get
you angry, however I believe this cycle has almost been crushed, due to apes
buying and holding. Allow me to present to you this diagram:
In this diagram you can see how, they can use
synthetic share production mechanisms, blatantly creating synthetic shares in a
darkpool as market maker (citadel runs it), making phantom shares using calls,
Failure to Delivers, explicit naked shorting (creating IOU's), etc. (there's
tons of illegal production mechanisms, most of which we're covered in my old
DD's and a quick recap example above). Once they've determined which method
they'll use, they target the security, and the flow chart begins. If they use
the darkpools, they can theoretically create an infinite amount of synthetic
shares (they'd have to buy infinite real shares to buy though to cover though
if their a) caught with synthetics or b) get margin called).
As apes have been effectively been buying up all
synthetics and creating price floors as you've seen, a hedgefund at this point
has 2 choices; cover all the shares (the smart choice), or digging themselves
in the hole deeper hoping you will sell creating FUD (reddit/discord
infiltration will tell you when their getting desperate); so they can finally
cover, as such if investors keep buying and holding, either more rocket fuel
gets added to the rocket or they cover; either or, doesn't matter what anybody
else says.
Lastly here's a list of darkpools that I found that
have existed in "the state of play", back in 2014, I apologize I
couldn't find anymore recent data:
https://link.springer.com/content/pdf/bbm%3A978-1-137-44957-3%2F1.pdf (I WOULD HIGHLY RECOMMEND GOING THROUGH THE
DARKPOOLS); (FYI Goldmansachs has one, and they just got margin called for
context: https://www.youtube.com/watch?v=mP4yaoQll7I (if your r/wsb YouTube links aren't allowed
for sources sorry) due to Bill Hwang)
*Recap for Apes*
Now lets recap, what we've discussed in the; SEC
chairman Gary Gensler is well versed in bringing swaps out of darkpools which
caused the last crash and is coming in during the point of the SEC during a
speculative short squeeze that will top all other short squeezes in human history
(in my speculative opinion), This may cause the greatest wealth transfer in
history.
The elites from any society would not like this as it
would mean, their status would be tarnished; as such they will resort to any
amount of financial war crimes to try to make sure that doesn't happen. However,
during the last financial war (2008), the good man Gary Gensler came in and
enforced the rules congress passed, this time he's coming in again. I believe
he will enforce the rules and bring justice to these financial war crimes again
as shown by his record; as such before that happens you will see FUD
intensifying (which is already happening, expect more of this); as such if
you've been in the game this long, you should know the drill by now.
---LEGALITIES FOR APES---
Before we full relate this to our meme stocks, let's
talk legal for a bit; if Citadel as a market maker is using order flow,
darkpools, and synthetic shares to balloon to the height of being to big to
fail, they violate a half dozen federal laws and policies, targeting you the
consumer. So lets go over them (I'm a physicist by training not legal expert so
I'll link the laws and tell you guys my speculation and let legal experts
handle it):
Firstly, let me put the sources on naked shorting and
counterfeit/synthetic shares first:
https://www.investopedia.com/terms/n/nakedshorting.asp
http://counterfeitingstock.com/CS2.0/CounterfeitingStock.html (I WOULD REALLY RECOMMEND READING THIS)
The Dodd-Frank act:
https://www.govinfo.gov/content/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf
Naked shorting fines:
http://www.businesskorea.co.kr/news/articleView.html?idxno=26998
https://www.sec.gov/about/offices/ocie/options-trading-risk-alert.pdf
https://www.sec.gov/alj/aljdec/2013/id490bpm.pdf
https://www.sec.gov/litigation/admin/2010/34-62025.pdf
SHO rule:
https://www.law.cornell.edu/cfr/text/17/part-242
https://www.law.cornell.edu/cfr/text/17/242.203
Anti-collusion and market manipulation laws:
https://www.investopedia.com/terms/c/collusion.asp
https://www.sec.gov/files/Market%20Manipulations%20and%20Case%20Studies.pdf
https://www.mcgill.ca/iasl/files/iasl/aspl614-competition_and_antitrust-laws.pdf
Possible conflicts of interest using Orderflow
payment:
https://www.sec.gov/rules/final/orderfin.txt
Insider trading laws:
https://www.sec.gov/Archives/edgar/data/25743/000138713113000737/ex14_02.htm
https://www.seclaw.com/insider-trading/
So as stated above, I am no legal expert; however, I
will tell you of my understanding of them based on the sources I have read, any
legal expert reading this is; feel free to correct me and post them in the
comment section below (I want a specific rebuttal based on the legal text
though, your co-operation is appreciated).
If a market maker like Citadel, or any other firm that
has shorted meme stocks, utilizing darkpools, collusion and synthetic shares to
try and dupe retail investors that simply "like the stock" and are
buying and holding, by my understanding they violate:
i) Anti-collusion and market manipulation laws: By
working together with other institutions they are colluding and manipulating
the price, that simple.
ii) Naked shorting: Borrowing a security that doesn't
exist to shorting is straight up illegal, and if you are caught using naked
shorts the fines can range from $5,128 - $14,887 (USD) per naked short (sources
are given in the naked shorting section).
iii) Synthetic share creation: This in my opinion
would qualify as a naked short and market manipulation; as not only are you
shorting a share that doesn't exist, you are manipulating the market so the
price goes down by diluting supply, also illegal.
iv) SHO rule violations: From the SEC: Regulation SHO
requires broker-dealers to identify a source of borrowable stock before
executing a short sale in any equity security with the goal of reducing the
number of situations where stock is unavailable for settlement (https://www.sec.gov/investor/pubs/regsho.htm#:~:text=Regulation%20SHO%20requires%20broker%2Ddealers,stock%20is%20unavailable%20for%20settlement );
as such if a broker-dealer cannot identify the source of a stock, before a
short sale, its illegal.
v) Dodd-Frank act violations: If Hedgefunds are found
colluding with each other to rig the market using short shares to become too
big to fail, that violates the Dodd-Frank act as it is explicitly designed to stop
according to you guess it Gary Gensler the new incoming SEC chairman (https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection ).
vi) Insider Trading Laws: Trading based on non-public
information; in my opinion this is blatantly illegal as such the debate is black
and white; thus illegal.
vii) Order flow payment: The SEC, and Congress are
currently debating whether order flow payment is legal in the first place; we
shall see what conclusion they come to.
Lastly, this is all I've found so far, but if you find
anymore illegalities please go ahead and comment down below.
As such, let's wrap up these financial war crimes
(their war crimes, because they are explicitly designed to hurt the innocent;
retail investors). Thus, if Citadel is using synthetic shares to make itself
too big to fail hypothetically would constitute as basically a massive
financial war crime, as it would break anti-collusion, the Dodd-Frank act,
prohibition against naked shorting, SHO rules, prohibition of Market
manipulation, insider trading, etc. (lawyers have at it); as such if they are
caught would be facing legal and financial extinction (of course this is just
speculation by a dude on the internet, confirm it for yourself; if this is true
however and can be proven in court, I believe it can be constituted as a
financial war crime and should be dealt with accordingly). Furthermore if you
have insider information proving this, you by the Dodd-Frank act's
whistleblower program are entitled to up to 30% of the settlement amount, so
happy hunting apes (https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp ).
If you are reading this on r/wallstreetbets (if this
gets on there) this is as far as I can go without it violating the new rules,
due to the sub-reddit's size; as such I will leave with you a thanks for
reading my work, and further sources to backup my argumentation.
List of sources (apologies if some of these sources
we're already used in the article, but I needed to be transparent and
thorough):
https://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp
https://www.c-span.org/video/?509429-1/sec-chair-cfpb-director-confirmation-hearing
https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection
https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision
https://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act
https://www.investopedia.com/terms/l/libor.asp
https://www.bbc.com/news/av/business-21532735
https://en.wikipedia.org/wiki/Gary_Gensler
https://www.pionline.com/washington/gary-gensler-cleared-senate-confirmation-sec-chairman
https://www.forbes.com/advisor/investing/gary-gensler-sec-chairman/
https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection
https://www.c-span.org/video/?509429-1/sec-chair-cfpb-director-confirmation-hearing
https://en.wikipedia.org/wiki/Dodd%E2%80%93Frank_Wall_Street_Reform_and_Consumer_Protection_Act
https://www.investopedia.com/terms/l/libor.asp
https://www.bbc.com/news/av/business-21532735
https://en.wikipedia.org/wiki/Gary_Gensler
https://www.pionline.com/washington/gary-gensler-cleared-senate-confirmation-sec-chairman
https://www.forbes.com/advisor/investing/gary-gensler-sec-chairman/
https://www.c-span.org/video/?304711-1/financial-regulations-consumer-protection
https://www.dtcc.com/legal/sec-rule-filings
https://www.investopedia.com/terms/o/otcqx.asp
https://www.investopedia.com/terms/o/otcqb.asp
https://www.investopedia.com/terms/o/otc-pink.asp
https://www.warriortrading.com/top-3-risks-trading-otc-markets/
https://www.sec.gov/news/statement/shedding-light-on-dark-pools.html
https://www.investopedia.com/terms/n/nakedshorting.asp
https://www.investopedia.com/terms/d/dark_pool_liquidity.asp
https://www.imanet.org/-/media/4c6c7650a0024853a1c61963d7865649.a
https://www.investopedia.com/articles/optioninvestor/08/synthetic-options.asp
https://www.law.cornell.edu/cfr/text/17/part-242
https://www.law.cornell.edu/cfr/text/17/242.203
Thank you for your attention, and I hope you have a
wonderful day; none of this was financial advice, and purely opinion based on
the sources given for entertainment purposes. Lastly, I am not a cat, and like
the stock.
Now if you are still here, this is for sub-reddits
other than r/wsb. We will now briefly talk about the evidence for darkpools
being used for both meme stocks GME and AMC; and why the shorts want you to
sell so so badly. Let us begin:
---MEME STONK SECTION---
First come the sources for my absurd arguments:
https://www.reddit.com/r/amcstock/comments/mcexii/citadel_and_others_have_over_2000000000_shares_of/
https://www.reddit.com/r/GME/comments/mcfq4e/shitadel_other_hedgies_are_trading_over_525/
https://www.schwab.com/margin-updates
So let us begin with what the magnitude of 1 of these
darkpools that "glitched" into existence; the TD darkpools. As you
can see respectively for 4.6 bill synthetic shares (floats only 450 mill for
amc) and 630 mill synthetic shares for GME (float is 45.3 mill according to
yahoo finance: https://finance.yahoo.com/quote/GME/key-statistics/ ).
Darkpool specific "glitch" data:
https://www.reddit.com/r/amcstock/comments/mcexii/citadel_and_others_have_over_2000000000_shares_of/
https://www.reddit.com/r/GME/comments/mcfq4e/shitadel_other_hedgies_are_trading_over_525/
As you can see this would roughly be 10.22x float in
one dark pool for AMC, and 13.91 x float for GME. Now recall, I said this list
is important right; https://link.springer.com/content/pdf/bbm%3A978-1-137-44957-3%2F1.pdf .
Moving forward I'd like to propose the idea that the TD darkpool may not be the
only darkpool with a similar float count (we will continue to use data with
sources going forward, to speculate), keep that question at the back of your
mind, we'll address it moving forward.
From here we will focus on relating meme stock darkpools to the similarities, the current scenario. Furthermore, we will explore the possibilities of meme stocks without halts, and why a further delay would cause a larger squeeze than the one already scheduled in as an inevitability. So let me reiterate you apes, we'll go over 08 and meme stock darkpools, show how the magnitude of their financial war crimes, intentions of institutes going long, and then go over the hypothetical scenario of that TD dark pool not being the only darkpool with synthetic meme stonk shares in them; let us begin.
So as stated in the prior sections, these darkpools are designed to hide institutional intent, lack transparency and are being used to get away from the eye of the authorities, retail investor and general public. This allows them to manufacture synthetic shares in peace without having it be public knowledge that the retail investor could track, as well the insurance companies (because how dare you want market integrity and transparency right?). With the synthetic shares from lets say the TD dark pool being manufactured, can go 2 be dumped on to exchanges; through a naked, then shorted driving the supply up and price down, diluting the stock. Sounds simple enough, so they just use darkpools do bypass their illegality naked shorting, as darkpools lack transparency.
As such these memestonk darkpools are not so dissimilar
from the darkpools that held CDO's and their corresponding swaps. Both are
being used to hide financial instruments that will inevitably cause the
financial landscape to change forever. As such, if you hold shares of meme
stocks, you hold insurance against the financial landscape change; the average
ape, you heard me right, holds a swap (Credit Default Swap; CDS). And the
shorts hold the CDO's. Similarly, I believe you can expect a massive gain if
you hold these meme stocks as insurance policies; similar to 2008 (https://www.youtube.com/watch?v=3hG4X5iTK8M ,
https://www.youtube.com/watch?v=II4Ct2n5FiE );
furthermore the media and the "sophisticated" investors are currently
laughing at you right now; the same way it happened in 2008 until housing
market collapsed, similarly you will have the last laugh when this squeezes.
Now let us have a check list, between 2008 and now:
i) Darkpools hold crucial financial securities that
will determine how the market will function: check
ii) Media and "sophisticated" investors are
advising retail to invest in other stocks other than meme stocks (CDS's): check
iii) Market at an all time high: Check
iv) Gary Gensler is coming into clean the mess: Check
v) Banks and Hedgefunds are scrambling to get their
finances in check to prepare for the financial firestorm: Check
vi) The average person believes everything is fine:
Check
vii) Nobody is selling either meme stock, and are in
the process of doubling down (nobody sold their CDS's too, and doubled down on
synthetic CDO's): Check (https://capital.com/amc-entertainment-holdings-cl-a-share-price ,
https://capital.com/gamestop-share-price )
vi) Institutions are starting to view these stocks as insurance and are buying in: Check.
As you can see most factors for a market change are here, now lets talk about how the GME squeeze before the halts, how it may have played out, and how this created, the situation with the darkpools, similarly to when prices of the mortgage bond prices were increasing when the underlying mortgages were failing; it was artificial, like the trading halts. As such here are some screenshots, during the halts:
As you can see, without the halts GameStop would've
jump to 10k the next day, immediately forcing the shorts to cover; they didn't
do that, they went ahead and used a combo of synthetic shorting and darkpools
to tank the price and make retail apes hold the bag, however that didn’t work,
and we are at our current predicament with the darkpools.
Furthermore, if you check the margin requirements for
meme stocks:
ii) https://www.schwab.com/margin-updates
So, they're up to 300% from their usual 100%, which means their really hard to borrow, which means inevitably they will squeeze. Combine this with the darkpools as elaborated above, and the financial illegalities that have been proven in this article, you can start to comprehend the magnitude of their financial war crimes.
Now let us address the intention of institutions going long; I'll be honest, I think they're planning to wipe out their competition completely like in 2008, last time Lehman Brothers, Bear Stearns, Merrill Lynch etc. went down; this time Citadel and other market makers, while institutions that go long on these meme stocks will simply take their wiped-out competitions market share and place. This is what I'd do if I we're Blackrock or Vanguard at this point.
Now finally let us address the final point of this section and move on to a recap and how this series of DD's will play going forward. Remember that question, what if TD is not the darkpool, well; based on these 2 sources:
i) https://link.springer.com/content/pdf/bbm%3A978-1-137-44957-3%2F1.pdf
ii) https://otctransparency.finra.org/otctransparency/AtsIssueData (NMS Tier 2, January 25th moving forward (when it started))
In my speculative opinion, the TD darkpools is guaranteed not to be the only darkpool. If all darkpools that involve AMC have a synthetic share count of 4.6 bill or higher, or even the 2 bill that Citadel holds, you could see how this could blow to Olympus Mons (https://en.wikipedia.org/wiki/Olympus_Mons ). really really fast, and how screwed the shorts would be; hence the FUD.
Going forward this will be a 3 part series for AMC, and 2 part series for GME; you beautiful apes have held so far despite all this and you my friends have nothing but my highest respects, I believe your efforts will be rewarded with Martian tendies sooner rather than later.
The AMC series will consist of this article, FUD: the
desperation of shorts, AMC the climb to 10k and battle of 12008.01. The GME
series will consist of one additional article: GME, the stonk of the century.
A quick preview of FUD: the desperation of shorts, will consist of me addressing "mUh gOvErNmEnT wIlL iNtErVeNe aT 500 #trustmysourcesbro", share dilution (in my opinion will not happen, its a ploy to get the share recounts), the squeeze not happening (total FUD cause math). As DFV said, hang in there, helps on the way.
Now, let's recap these apes, I've covered a lot and I
understand it can be overwhelming but I'll try to recap it in layman's terms to
the best of my abilities. The first crucial point is they most likely owe more
than 10x float on AMC, and 13x float on GME hence they're desperate, they are
resorting to financial war crimes breaking a dozen laws trying to prevent you
from picking up your tendie orders, this happened in 2008 and in case anything
drastic happens, memestonks are your insurance and you will more than likely
have your insurance policy be exercised, all the mathematical indicators for a
squeeze are there, now its just a when, darkpools are designed to hide the
truth and hide intent, and because of those synthetic shares in these pools,
they are most likely panicking; lastly when this squeezes, you holds you apes
hold all the cards, and you, not the institutions, you determine how this
timeline and the future plays out.
---HIGH LEVEL SUMMARY---
A lot has been covered, let’s summarize. This is a repeat of 2008, but this time we hold the insurance policies, in case this moons. The similarities are quite startling, from the SEC chairman Gary Gensler coming to bust this down, them using darkpools to screw the average person out of tendies, committing financial war crimes in broad daylight to shake apes. Furthermore, the darkpools explicitly showing both meme stocks have been naked shorted by at least 10x, this squeeze is mathematically confirmed, and we are looking at a fallout, how big the fallout will be depends on how big the hole they dug themselves with these darkpools; but in any case, apes hold the insurance policies so I believe we should be chilling, and if we continue to buy and hold we are simply buying more insurance for stonks we like. As such to sum it up in one sentence, their hiding in darkpools, Gary Gensler is starting the hunt and we have the insurance policies.
---What you can look forward to in this series--
As stated above, this series will diverge into 2 hyper focused parts; one GME focused, another one AMC focused. The AMC series will be:
i) Dance of Darkness: The SEC and Darkpools
ii) FUD: the desperation of shorts
iii) AMC the climb to 10k and battle of 12008.01
GME:
i) Dance of Darkness: The SEC and Darkpools.
ii) GME, the journey too Olympus Mons.
---TLDR---
Their hiding in darkpools and using ETFs, naked shorting and synthetic shorting to manipulate the market hoping people will sell so they can exit the feedback loop as illustrated; there are most likely multiple darkpools with synthetic shares hence their desperation (+ their overleveraged). These memestocks have become swaps (CDS's: Credit Default Swaps), and those who hold them hold insurance against any financial disturbance. The longer this manipulation continues, the larger the correction will most likely be.
---Final Commentary and Thanks---
Thank you for sticking with me and going through this
rather long article, the reason why I keep this article long and extensive is
because I believe in market transparency and integrity like Gary Gensler;
furthermore I do not believe in hit pieces, I believe all the data should be on
the table and that the average person can and will be able to understand the
market, and does not need to be guided into making decisions, as I believe the
average person knows their situation best and is capable of making decisions
that most benefit them in their situation. As such, these articles moving
forward will remain long, extensive and mathematical in nature; in an effort to
bring as much transparency as possible to the marketplace.
Furthermore, I understand there is a lot of FUD floating around on meme stocks, these articles serve as papers that can be used to counter this; as they are designed to investigate the causes of why meme stocks act the way they do (the complexities of meme stocks are quite extensive as you may have noticed), thus in my believe help counter the cloud of FUD on both of these stonks.
Lastly, I usually don't do this; however, I will put in a request as we are in extraordinary times now and I believe in the average person and my fellow ape. I would ask you to share this wherever you can (my favourite is stockwits), twitter stockwits, facebook, instagram, whatsapp, etc; get the message out, I believe there are a lot of people that would benefit from the information posted; also the more feedback going here, the less of an echo chamber and the livelier this discussion becomes, allowing us to learn more about aspects of meme stonks that we may have missed in this article. Thank you in advance if you have shared this on your platforms of choice; I hope it helps a lot of apes; and as DFV, during congressional testimony, alluded to Hang in there. Here's a quick quote to encapsulate the entire article in my opinion: "You will never do anything in this world without courage. It is the greatest quality of the mind next to honor" - Aristotle. Finally, here's a quick hashtag you may use if you feel like using social media to make this article spread fast: #DanceofDarkness.
Legal Disclaimer: None of this was or is financial
advice, this is purely speculative opinion based on the sources as presented in
this article; as such this should be taken as for entertainment purposes i.e
the entertainment of ideas. Lastly, I am not a cat, and I like the stock. Thank
you for your time.
Amazing read. Thank you
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