Well, apes: at every turn, it feels like the big boys up on top of the pyramid scheme, that is, the us stock market they're looking for every opportunity they can to sort of just roll one past your eyes, and i haven't been on reddit in quite a While but i i happen to see some stuff rolling around twitter today, i decided to peruse a decently talked about uh subreddit, which is our slash amc stock. They are discussing a new filing that just recently came out, which is nscc-2022-003 an amendment to a previous filing. I want to actually take the time that i adjust this today, as i do find it to be pretty moderately important, uh they're talking about just as a tl, dr fire sale mitigations, which is pretty much exactly as it sounds like you want to prevent uh a Fire sale, which is a massive buying opportunity, i.e mass liquidations and perhaps margin calls uh and harsh sell-offs in different stocks due to what institutions do on the back end when they are making uh different loans right. So i want to take the time to discuss this here today.

As always, i'm not a functional 599, please think to say the grain of salt uh, let's get into the video. What you're gon na notice here is that i've got four different, screenshots uh directly picked from this website. If you'd like it, this is going to be linked in the description box. Down below this is the actual filing itself.

It is 188 pages long. I wanted to grab the tl dr of this, and what a lot of people have been hotly discussing, which is the actual uh fire sale sort of uh mitigation that the nscc, the national security clearing corporation, is trying to uh take care of before we get into It uh uh. What is this even about right? What's sort of the meat and potatoes behind this there's three sort of big big buzzwords if the nscc you already know what that is, i just said that sft, which is a security financing, transaction uh and a security financing transaction. Is this piece that i'm gon na discuss over here right? The market is very complex.

One of those complexities, probably unnecessary complexities, is what happens between a borrower and a lender. So if you were to look at a business loan right, let's just say that you want to take out a business loan from a bank. I'm going to give you this example. First uh, then you would be the borrower.

The bank would be the lender. You want to take out a loan of. Let's just say i don't know: 250 000, it's a business loan right. What do you typically give them? In exchange you give them collateral collateral can come in the form of a couple different things.

It can be a cash secured collateral, it can be uh a house, it could be a car. Typically, you just want to show them that you've got something that they can hold on to in case hits the fan, and you can't pay them back. The 250 000 right well, what happens if you can't pay them back to 250 thousand dollars, is they will likely uh hold on to this cash or they'll repossess your house, so they'll repossess your car uh. But what happens if you pay that all back right? Let's just say, hypothetically speaking here that you gave them cash and the bank decided to invest that cash right cash went into a different security and all of a sudden, you paid back your 250k.

You send back 250k to the bank right and you want your money back. You say: hey, i'm good on my 250. where's, my money, you know and the bank decided to invest it into. I don't know netflix, let's just hypothetical here uh.

Let's say they put all your collateral on the netflix and it's like i don't know, maybe 10 or 250k, so that's 25. 25k collateral right. Well, all of a sudden. They got to pull that out of the stock.

I got to pull out this 25 25k and, if there's other people in a situation like this, where the bank is forced to pull out, what you can see is netflix having a harsh sell-off. And if you haven't thought already that i had a harsh sell-off. It can get worse based on this exact thing conditions like this. If you were to replicate it in the stock market, uh a borrower and a lender which has the same sort of relationship right, the borrower wants to borrow from the lender.

Sometimes it's a security. Sometimes it's just uh cash. Let's just say in this situation: it's 25 million dollars and these guys are putting up collateral of either uh securities cash. Typically, these two things right uh and it's 10, so 10 of 25 million dollars, i think, would come out to uh 2.5.

2.5 million is what you put up as a collateral and all of a sudden you're good, you're good. You want you give them the 25 mil back, but they have to liquidate out 2.5 million dollars. Now this on a much larger sort of scale, can really cause some harsh fire sales across the stock market. But the big red flag here, which you're probably already noticing as a trend is the lender, will typically reinvest collateral money which is heavily talked about within this uh, this filing that just recently came up.

So what i've done is i've highlighted a couple key things that i find to be important if you want to start off with this, the actual subreddit uh, the title of this is yeah, stay calm, slash, zen, and they will rob you from your mo ass uh. It's got 2700 upvotes. I'm gon na link this as well in the description box, if you'd like to look through it uh, but this is the page that you can see in here. I i thought there was a couple more things that were important to discuss as well uh.

What you're going to notice here is this. In the case of securities lending transactions, the primary risk of fire sales relates to the reinvestment of cash collateral by institutional firms. Right, the cash collateral coming from the borrower right to the lender. They send over that cash collateral and what these firms will do is reinvest it back into the stock market.

That's piece one! This is a form of a security financing transaction in sft and the lenders that the that are the lenders and securities lending transactions. Those institutional firms will typically reinvest the cash collateral they receive from the borrower into other securities. This in and of itself is probably okay as long as these institutions are sitting on enough cash right, they're cash heavy enough to not have to worry about liquidating uh, whatever amount of money they have in these. These different securities - that's doesn't seem to be the case, though, if the nscc, the national security clearing corporation, is sweating over this uh, which brings me into this.

A substantial number of disconnected and competing liquidations by multiple lenders can create fire sale conditions, essentially to say this is the equivalent of a margin call you can witness stocks have massive sell-offs, especially uh. If a lot of parties are doing stuff like this, if a lot of parties are in a situation where they just have to, they have to liquidate their shits and get back collateral to the borrower. Uh from the lender, you're gon na have huge huge, huge pullbacks, and this is something that can be typical of uh, this sort of transaction, an sft. This could also happen uh if the borrower is in a situation - or, i should say, maybe yeah the borrower's in a situation where uh they're underwater.

So if the borrower's underwater and the the lender needs that collateral they've got that collateral as sort of a mitigation, and they have to kind of collect that to make sure that they're taking care of themselves while they try and bang on the doors of whoever's up Right that can also cause massive fire sales. It brings me into this right. This is actually not an order. This is not just a sequential.

This is page four of uh all the pages i'm gon na talk about, but it starts out here. The base three capital leverage requirements as implemented by the u.s banking regulators, constrain the ability of agent lenders and brokers to intermediate and facilitate sfts security financing transactions. So, if there's already a problem here right, this is where i'm going with this. If the underlying sort of issue is that these guys are reinvesting collateral, money and reinvesting that collateral money can come in the form of risk, if they're not sending enough cash to return that collateral in a situation where it needs to be returned, why the would this Not be regulated, why would it not? Why is? Why? Is this all why it shouldn't be a thing right now? This doesn't seem that complicated and the nscc appears to recognize this as an issue and there's sort of strategy for for taking care of this uh.

We will go over here in just a second, but they view this as a risk. For this specific reason - and this big buzzword right here, 2008 should really catch your eye. Liquidity risk may also rise if, in the context of a stressed market scenario, which is kind of funny, because that seems to be happening right now, you look at what's happening with inflation. You look at what's happening with the market.

The insane volatility, the whiplashing back and forth seems fishy. Borrowers are literally concerned about their counterparty's credit worthiness, seek to unwind their securities lending transactions and obtain the return of their cash collateral or securities. Read this one more time. Borrowers or lenders concerned about their counterparty's credit worthiness, seek to unwind their securities lending transactions and obtain the return of their cash collateral securities.

What does this mean? It means that hey, if i'm the borrower and i'm looking at the lender right now and i'm thinking to myself, you know i don't know why this guy is borrowing me money, this dude's getting on. Let's just say that this is bill. Ackerman, who just invested 1.1 billion dollars in netflix the borrower sees this. It's all over the headlines.

They see that the lender just lost a piss ton of money on on netflix they're, like you know what i don't really think i should be borrowing from you. I want my collateral back. Here's your cash, the lender's like well, i just lost a crap ton of money on netflix. So now i got to give you back this cash.

How am i supposed to do it? Well, they got to sell their cash, which they maybe had invested into netflix. Maybe they invested into disney who the hell knows. You know it could be anything uh, but this can create a snowball effect of lots of algorithms lots of institutions. Uh, lots of high frequency traders to have to get that cash back which could cause massive massive sell-off.

This also occurred to a certain extent in 2008 and was this is what pisses me off the most by far if this happened in 2008? Why is it an issue that you are worried about right now, huh, that's what i want to know. What about 2008 didn't teach you guys that you need to be regulating what these guys are doing. I don't understand that that doesn't make any sense to me. It makes none, i mean it's, it's like you, pissed on the electric fence and it zaps you and you end up in the hospital you're in a coma and you wake up a year later and you think to yourself.

You know what 10 years from now, i'm just going to piss on the electric fence. Again, maybe it'll be different, maybe maybe i won't. I won't go to the hospital and this guy's right now, the moment in time we're at this guy's just starting to unzip his pants get ready to piss on it and like how do you not learn your lesson here? This doesn't make any sense to me uh, and that brings me to this final piece right, their sort of solution. What they'd like to do - and i find this to be hilarious uh, is - is right here.

They would like to provide confidence to borrowers borrowers and lenders that they will receive back their cash securities and thereby lessen parties inclination to rush to unwind their transactions in a stressed market scenario. Who are they talking about here? With borrowers and lenders? Toots institutions, fat cats? Not you - and this is the point that was driven home uh in this reddit post, which i'm gon na i'm gon na. Very simply, uh just skim over here right check this out. This is coming from super stock, which is where our slash amc, stock, uh rip.

This from, if you do a sort of a keyword search, what you're gon na notice is that sponsoring members mentioned 563 times. You guys can read all this. You can see it sponsored member default risk, institutional securities, lending blah blah blah, never once transparent or transparency. Never once retail, never once fair, you are not a consideration in this.

This is a protection mechanism that is meant to uh hold off the the wave of incoming doom that could come for institutions uh, which are a couple different things over leveraged and illiquid. I'm sure you guys have been hearing this a lot all over twitter, uh and youtube and reddit and all this sort of thing, but the market is very illiquid right now. There's there's a lack of liquidity with the moves that you were seeing across the spy. For example, are very low volume moves and what i mean by that is, if you were to compare the daily volume now to what it was back when we were really truly ripping these moves.

This insane volatility is not coming out a lot of dollars. Moving the the actual etf itself - and this translates to every other ticker in the stock market - it applies to basically everything. So what does that mean? It means that the stock market is decreasing in liquidity if it's decreasing in liquidity, there's already a risk for an over leveraged, firm and over leveraged bank and over leverage institution to be in a situation like this and really get the end of the stick. And what happens when they get the into the stick right stocks go doom doom candles they get sloshed they get they get wiped.

They flush hard like what happened with netflix. Imagine netflix across the entire stock market. That's like a replication of what happened in 2008. All right, it's not good! It's not good, and this is my my takeaway from this.

The last thing that i'll say before my final thoughts is, if you want to make some noise about this uh, like i mentioned before, i'm gon na link this reddit post in the description box down below you can comment on it uh. You can comment on this and tell the nscc how much this pisses you off uh that you weren't even a fourth dot. You weren't, even you weren't, even a freaking, a nipple hair on a chest of uh of a gorilla all right. This girl's got a lot of hair.

You weren't you wearing one single hair on that freaking gorilla. It's not good! You can comment on this. It might take away my grand take away from this entire uh amendment to filing and they're they're sort of uh risk mitigation. So to speak on fire sale conditions in a stressed market scenario.

Is this: the solution is simple right. The solution isn't even about the nscc stepping in to regulate no, that ain't it that the solution is lenders should not be reinvesting collateral. Why i'll tell you why they're greedy they want to make their money? They want an opportunity to to to make money on their their their loan. Whatever you want to do that guess what banks do in a business loan they charge an interest rate.

There are already interest rates that are accrued right when you lend out cash or stock or securities or anything so keep that in the back of your mind, huh seems like a simple solution, and i think this is something that is definitely worth making noise about. So if you want to do that, uh go over here to reddit check this out reading this. Do you understand how important it is? I don't give a about transparency. All i care about is uh.

I i think this goes much deeper than just this stock by the way this. This really applies to everything. I think that's an important differential to make uh but but comment on this. I think this is worth making a comment on and uh.

That's what i've got for this video. So hopefully this uh this provided you some insight. Uh talk about it, man. I think this is a a topic worth diving into without a shadow of a doubt and that's what i've got for you catch.

You guys all later appreciate. You watch your lovely taps. Peace.