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Isn’t the reality that the DTCC was forced to increase collateral requirements? You understand that if GME drops to $80 today, a large number of GME trades fro
by valuearb 6y ago
Isn’t the reality that the DTCC was forced to increase collateral requirements?
You understand that if GME drops to $80 today, a large number of GME trades from last week are going to refuse to settle. What is Congress going to do? Force the DTCC to eat the losses?
- sillysaurusx 6y agoA simple solution would be to turn the 3-day settlement period into 1-day, or 0-day. But of course, DTCC has all the incentive in the world not to go along with that. The trouble is that the 3-day period is a "leaky abstraction." It's the sole reason any of this became an issue. It's not a law of nature that "DTCC must insure 3 days of risk."
- gruez 6y ago>A simple solution would be to turn the 3-day settlement period into 1-day, or 0-day. Unless you cut the settlement to 0 the issue will remain. The fundamental issue is that 1) deposit is required, 2) there's a spike in demand/deposit requirements, 3) current reserves can't pay for deposits. Going to 1 day settlement will just cause brokers to reduce their overall reserves in response (no need keeping all that money around!), so the next time a spike occurs the same issue will occur.