4 ms·

Any resolution to the failure to deliver issue? Folks selling stuff they don't own, and then not even fixing the issue in time for settlement? It's so weird t

Any resolution to the failure to deliver issue? Folks selling stuff they don't own, and then not even fixing the issue in time for settlement? It's so weird that the SEC doesn't crack down harder on this behavior by the bigger players. The volume in dollars and shares is massive. The penalties way too light. This would seem casually to create real fragilities in the system. If I'm reading this correctly about $42B worth of fails in the second half of may alone.

JumpCrisscross 4y ago
This is not an issue. Only certain players can naked short, namely, market makers, and they earn that privilege by having margin requirements that satisfy the trade in almost every situation. The edge cases usually involve a hedge fund going bust. (For example, if a market maker simultaneously buys from a leveraged fund and sells, then the fund goes under. In that case, the market maker has a certain number of days to pony up or get collateral seized.)
- Pv9KKy3 4y ago
  Except it's a massive issue. Millions of shares and billions of dollars in stuff fails to deliver. For something that shouldn't be an issue this should be impossible, but it happens routinely. https://www.sec.gov/data/foiadocsfailsdatahtm https://www.sec.gov/data/foiadocsfailsdatahtm and download and total up the value of all the fails - it's eye opening. Fail-to-Deliver Shares Value PIMCO DIOF Jan. 29 $422M iShares Core Bond ETF Jan. 20 379M iShares U.S. FA Bond ETF Jan. 19 361M GameStop Jan. 28 359M GameStop Jan. 27 292M These are fails on just one day. It's pathetic this is allowed. You should not be able to sell something you can't deliver.
  - JumpCrisscross 4y ago
    > it's a massive issue. Millions of shares and billions of dollars in stuff fails to deliver It’s not. FTD means failure on a particular timeline. Almost all of those shares get delivered in the end. > You should not be able to sell something you can't deliver You can trade this way if you want. It’s special settlement and you’ll pay out the nose [1] for zero benefit. But sometimes people do weird things with derivatives and need instantaneous settlement. So someone (usually a bank) with stock certificates will sell them, zero settlement risk involved, for a premium. (This is what someone facing FTD penalties will eventually have to do.) FTD is a non-issue. It has zero practical downside. It nevertheless serves as catnip for Redditors trying to redirect blame for their gambling losses. [1] Out of curiosity, I checked with a former colleague. They said they used to charge a flat fee, but recently switched to match crypto fees, since a lot of crypto people have been looking to instantly settle and they’re used to paying massive transaction costs. TIL.
    - Pv9KKy3 4y ago
      Not a meme stock investor. The penalties are pathetic in most cases. If I fail to deliver $100M in treasuries I'm paying maybe 5K a day. Folks are playing games under the hood with this. Stock price crashing on some shares you sold? Buy them late and settle late. I'd be curious what happened with FTD on things like bear sterns imploding. I like how folks keep on assuring us that selling something you don't own is a non-issue :) That's a tell right there on where the morals of wall street are - in the toilet. We are in 2022. We still have T+2 settlement (in part so folks can shuffle stuff on the backend). T+1 should be an obvious no brainer requirement. And frankly I'd go for gross real time personally - and nuke these firms out of the water including their financing and margin revenues.
      - JumpCrisscross 4y ago
        Again, if you want instantaneous settlement, you can have it. Most people do this because they’re desperate. Some do it for emotional reasons, the same way some investors refuse to allow their shares to be lent out or held in street name. It sounds like you have an emotional response to this issue, and so might benefit, mentally if not financially, from demanding special settlement.

JumpCrisscross 4y ago

This is not an issue. Only certain players can naked short, namely, market makers, and they earn that privilege by having margin requirements that satisfy the trade in almost every situation. The edge cases usually involve a hedge fund going bust. (For example, if a market maker simultaneously buys from a leveraged fund and sells, then the fund goes under. In that case, the market maker has a certain number of days to pony up or get collateral seized.)

Pv9KKy3 4y ago
Except it's a massive issue. Millions of shares and billions of dollars in stuff fails to deliver. For something that shouldn't be an issue this should be impossible, but it happens routinely. https://www.sec.gov/data/foiadocsfailsdatahtm https://www.sec.gov/data/foiadocsfailsdatahtm and download and total up the value of all the fails - it's eye opening. Fail-to-Deliver Shares Value PIMCO DIOF Jan. 29 $422M iShares Core Bond ETF Jan. 20 379M iShares U.S. FA Bond ETF Jan. 19 361M GameStop Jan. 28 359M GameStop Jan. 27 292M These are fails on just one day. It's pathetic this is allowed. You should not be able to sell something you can't deliver.
- JumpCrisscross 4y ago
  > it's a massive issue. Millions of shares and billions of dollars in stuff fails to deliver It’s not. FTD means failure on a particular timeline. Almost all of those shares get delivered in the end. > You should not be able to sell something you can't deliver You can trade this way if you want. It’s special settlement and you’ll pay out the nose [1] for zero benefit. But sometimes people do weird things with derivatives and need instantaneous settlement. So someone (usually a bank) with stock certificates will sell them, zero settlement risk involved, for a premium. (This is what someone facing FTD penalties will eventually have to do.) FTD is a non-issue. It has zero practical downside. It nevertheless serves as catnip for Redditors trying to redirect blame for their gambling losses. [1] Out of curiosity, I checked with a former colleague. They said they used to charge a flat fee, but recently switched to match crypto fees, since a lot of crypto people have been looking to instantly settle and they’re used to paying massive transaction costs. TIL.
  - Pv9KKy3 4y ago
    Not a meme stock investor. The penalties are pathetic in most cases. If I fail to deliver $100M in treasuries I'm paying maybe 5K a day. Folks are playing games under the hood with this. Stock price crashing on some shares you sold? Buy them late and settle late. I'd be curious what happened with FTD on things like bear sterns imploding. I like how folks keep on assuring us that selling something you don't own is a non-issue :) That's a tell right there on where the morals of wall street are - in the toilet. We are in 2022. We still have T+2 settlement (in part so folks can shuffle stuff on the backend). T+1 should be an obvious no brainer requirement. And frankly I'd go for gross real time personally - and nuke these firms out of the water including their financing and margin revenues.
    - JumpCrisscross 4y ago
      Again, if you want instantaneous settlement, you can have it. Most people do this because they’re desperate. Some do it for emotional reasons, the same way some investors refuse to allow their shares to be lent out or held in street name. It sounds like you have an emotional response to this issue, and so might benefit, mentally if not financially, from demanding special settlement.