Are your shares being delivered - SECURITIES EXCHANGE ACT OF 1934 ?

Submitted by NOVUS_ORDO_SECLORUM6 t3_ygex0b in wallstreetbets

SEC. 17A. NATIONAL SYSTEM FOR CLEARANCE AND SETTLEMENT OF SECURITIES TRANSACTIONS

(a)(1) The Congress finds that— (A) The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.

(a)(2)(A) The Commission is directed, therefore, having due regard for the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers and dealers, clearing agencies, and transfer agents, to use its authority under this title— (i) to facilitate the establishment of a national system for the prompt and accurate clearance and settlement of transactions in securities

(b)(3) A clearing agency shall not be registered unless the Commission determines that—

(A) Such clearing agency is so organized and has the capacity to be able to facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible, to safeguard securities and funds in its custody or control or for which it is responsible, to comply with the provisions of this title and the rules and regulations thereunder

(F) The rules of the clearing agency are designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible, to foster cooperation and coordination with persons engaged in the clearance and settlement of securities transactions, to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions, and, in general, to protect investors and the public interest

(G) The rules of the clearing agency provide that its participants shall be appropriately disciplined for violation of any provision of the rules of the clearing agency by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, or any other fitting sanction.

(b)(5)(C) A registered clearing agency may summarily suspend and close the accounts of a participant who (i) has been and is expelled or suspended from any self-regulatory organization, (ii) is in default of any delivery of funds or securities to the clearing agency, or (iii) is in such financial or operating difficulty that the clearing agency determines and so notifies the appropriate regulatory agency for such participant that such suspension and closing of accounts are necessary for the protection of the clearing agency, its participants, creditors, or investors.

TLDR: SEC is responsible for ensuring clearing agencies, and therefore parties participating in said clearing agencies, never Fail To Deliver (FTD) securities. SEC data from second-half of September 2022 shows 2,687,705,568 FTDs of 68,260 tickers. Yes that’s 2.6 BILLION shares that where NOT prompt and accurate clearance and settlement of securities transactions and the SEC not only has the data but manages the publishing of it.

SECURITIES EXCHANGE ACT OF 1934: https://www.govinfo.gov/content/pkg/COMPS-1885/pdf/COMPS-1885.pdf

SEC bi-monthly FTD reporting: https://www.sec.gov/data/foiadocsfailsdatahtm

Edit: TRILLION TO BILLION; 2,687,705,568 is billions.

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NOVUS_ORDO_SECLORUM6 OP t1_iu8b6dt wrote

SEC tries to make you think that FTD is ‘just part of the system, see we even give you the data’. Well it’s not. That’s not to say that FTD would never happen, though when it happened the offender is to be reprimanded, including suspension and expulsion from participating in the clearing agency (and therefore market). 2.6 BILLION FTDs that’s not a slip, that’s systemic. Clearly the SEC has and is not doing anything to adhere to these federal laws.

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stuckindayz t1_iu93lvj wrote

As an analogy.

You buy a car online. Pay everything, it says it's getting delivered.

You wake up the next day with a giant car sized cardboard box in your driveway, with a picture of the car you ordered on the outside but nothing is in the box.

When you go to complain, they say "Look on the box, the cars right there, you'll get the internal product from your cardboard box... uhh..whenever we can find it" and now queue a 3-90 day waiting period... if you ever even get it.

Most of the time, the cars value dropped so much, you just sell the cardboard box back to the company or to someone else and say "oh well, I only lost 10% of what I paid"

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NOVUS_ORDO_SECLORUM6 OP t1_iu9d3rj wrote

Great analogy. And on top of that, it’s not just the single buyer of the car in this specific case that’s affected right? What about all of the other people that already own this car, but are now looking for a new model. Well, when they go to sell the car (real car) it’s not worth as much as it should be because the dealer already sold a ton of empty cardboard boxes to other consumers; KBB data says there are a bunch of these cars out there and a bunch of others for sale, this car isn’t worth as much because a buyer can find this car anywhere from a seller who will probably take less to sell it.

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stuckindayz t1_iu9f2ov wrote

Ya the value of the car is affected in many ways.
Then you get into the aspect of the market itself for cars ordered online delivered in your driveway in a box; if the big guy is doing this with his car, but actually delivers after a week, you'll have skeezy pieces of shit middle and smaller guys pop up.
They will not fulfill the obligation of putting the product in the actual box until the last actual required delivery date, but at some point realize they can get away with selling A LOT more boxes than they even make in their single factory, by just buying the boxes from the larger guy and shipping them from their factory.
Some will even cut up their original cardboard and ship these smaller boxes that could never fit a car, basically becoming "IOU's" to the car buyer that right out of the purchase could never actually produce the car.

So eventually this fraud circle of shit digs deep until all of a sudden the big guys have so many orders they can't fulfill the boxes because too many skeezy bastards are buying to sell and now the big guy is only delivering every 2-3 weeks. But not only that, you also have the fact that instead of delivering X amount of cars with X Amount of boxes, the small and medium pieces of shit have to deliver up to 3 or 4 cars for every large box, because they cut them up so much to resell.

If no one stops the cycle, it, like all other crashes in history, gets to a point where someone calls someone out for not fulfilling a contractual obligation and then it unravels and goes Kaboom.
"The tide goes out" and all the cardboard boxes get flattened at once to see which have cars inside and a shit ton of innocent people get fucked.

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NOVUS_ORDO_SECLORUM6 OP t1_iu9h7w8 wrote

All of this. And at the same time there is a special police force, tasked with the sole purpose to prevent this level of corruption. But the police are sitting around eating donuts with the car CEOs watching and letting it all happen.

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stuckindayz t1_iu9iimk wrote

So the special police force is owned by the largest cardboard box car companies "independent" conglomerate , and it did a good job of making it seem like the cardboard box ordering system was safe, and that you'll always have a car and that the cardboard box car fraud will be kept to a minimum.
Not always, but hopefully most of the time.
The low credit costs as of recently flooded so much fuckin money into fraudulent small and middle sized cardboard box car factories that it's literally impossible to deliver all these cars needed for the amount of cut up boxes that exist in driveways.
So the police force knows this, goes to the big guys and says.. we can't fuckin do our job cause if we do the whole thing is gonna collapse.

And now weird shit has been happening to hopefully force all the people with smaller boxes to sell literally 100% of them out in the real world because there is not enough materials on the planet to make all the cars needed to fulfill these empty boxes.

So now either the entire market breaks unless 100% of those tiny boxes get sent back to the factories.
Unfortunately some weirdo's realized how they could demand their car from the tiny boxes, and now everyone is SUPER PANICKING because almost 1/3rd of all the cars possible are already gone and nothings fixed.

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4200amcShares t1_iu98x3m wrote

Preach! First amendment we use first! We’ll look at the others if the first don’t work!

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sookableh5 t1_iuc73v2 wrote

2,687,705,568

is this not billion? i thought trillion was 1,000,000,000,000?

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NOVUS_ORDO_SECLORUM6 OP t1_iucm7pz wrote

Wow you are correct! Thank you for catching this, will update Trillion to Billion.

As a note though, checking the SEC link, the data that is shown is an aggregate snapshot on the specific day of reporting. It shows existing FTDs and new FTDs as of that reporting day. Since this data is only generated 2 times on scheduled dates per month, we are effectively only seeing 2 trading days per month of FTD data. This means that between the reporting dates there could be a FTD spike, but if they are settled before the next reporting date, they would never be captured in the data.

So the data is not cumulative over the first half or second half of the month period as the naming convention seems to imply, it is just a reference on a certain given day. We could never know the true cumulative FTDs because that’s not what’s reported.

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grimkhor t1_iu8creq wrote

I'm just trying to make money. If you get the stock market shutdown that would be a bummer for my plans.

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NOVUS_ORDO_SECLORUM6 OP t1_iu8eov9 wrote

If your money making plans are to buy a stock and then later sell it at a greater value, it’s going to be more difficult to make money if you buy a stock and it is never delivered (FTD). It will show in your broker account but that doesn’t mean it was settled by the broker. Why would the seller FTD your stock? Because they sold you something that they don’t own so they can’t deliver it to you, which means that price you paid is just a price that is not necessarily the true market value of the stock. That means you may have overpaid (or underpaid but who knows, not you). The sellers that are FTDing and selling stock that they don’t own essentially want you to overpay because they want the price of the stock to go down, you sell at a loss, they buy the stock back at a lower price and then your loss is their gain, all while they never actually owned the underlying security at all. You basically just gave them free money because the SEC lets them FTD. Shouldn’t someone that sells something to you actually own the product, and also literally give you the purchased product?

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grimkhor t1_iu8h0a2 wrote

Ok but why should I care? If I buy a fake stock and can hold it for years and then I can still sell it later. I still get the dividends. The broker still sends me the votes for my stocks. Shutting down the stock market seems worse for me tbh.

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NOVUS_ORDO_SECLORUM6 OP t1_iu8mzjh wrote

You mentioned you can sell it later, but who is to say that it will be at a profit? It could be at a loss. And that loss could exceed whatever dividends that were paid out or positive company direction based on voting outcomes. If brokers continue to FTD on other trades for the same company you have invested stock in, over the years there is greater chance that the value of the stock will go down. And that is not necessarily from accumulating a massive amount of outstanding FTDs at any given time. Even if/when FTDs are settled, having existed at any point the FTDs dilute the value of the shares. The reason is that they are effectively producing more shares of the company than actually exist, and just like any example of supply and demand, excess supply devalues the underlying good. And that is just the direct effect that brokers who FTD have on the value of companies’ stock. By devaluing the stock, they are inhibiting the financial well-being of the company and limiting business potential based on a lower valuation. This can affect the success of the company and therefore indirectly devalue the stock.

This isn’t about shutting down the stock market, it’s about regulating the stock market per United States laws. The SEC is clear as day not doing so, which affects all investors and only enriches financial institutions. So are you against upholding the laws, especially when identifiable damage is being done?

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jackofspades123 t1_iu91q52 wrote

You have no guarantee your vote counts actually

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NOVUS_ORDO_SECLORUM6 OP t1_iu9dxq1 wrote

This is true as well, my response was mainly to focus on how, if things even like a vote actually being counted properly existed, there is still a great issue with FTDs as far as an investment.

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kinance t1_iu9d3ey wrote

How do u make accurate assessment of price of anything if supply is manipulated. Say a world with 1 apple and 100 oranges the apple rare there is only 1. Now i will ftd apples when people buy them i sell hundreds of imaginary apple that i never deliver. I never have to deliver the apple i just keep money until people need to get rid of their apple to get something else.

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NOVUS_ORDO_SECLORUM6 OP t1_iu9fm67 wrote

Exactly. And to be clear, the industry justifies FTDs through rule:

Rule 203(b)(1) and (2) — Locate Requirements. Rule 203(b)(1) generally prohibits a broker-dealer from accepting a short sale order in any equity security from another person, or effecting a short sale order in an equity security for the broker-dealer’s own account, unless the broker-dealer has: borrowed the security, entered into a bona-fide arrangement to borrow the security, or reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due. Rule 203(b)(2) provides an exception to the locate requirement for short sales effected by a market maker in connection with bona-fide market making activities.

With this rule, the broker-dealer basically just always says either they had reasonable grounds to believe they could borrow the share or that they were participating in bona-fire market making activities. Yet there is no proof required at all to verify this, they literally just say it.

After this happens and a share cannot actually be located or borrowed come settlement, a FTD is generated.

So again, 2.6 Billion FTDs reported second half of September. 2.6 Billion times broker-dealers said they thought they could borrow a share and were wrong. Clearly an extraordinary amount of corruption.

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Freadom6 t1_iu8zgxk wrote

Good stuff OP. Keep opening eyes wherever you can.

What's a couple TRILLION shares amongst friends? /s

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DoomerGloomerBloomer t1_iu94y9x wrote

GameStop is so 2021. Get a life, OP.

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NOVUS_ORDO_SECLORUM6 OP t1_iu9edjr wrote

You can make that assumption, but as stated in the post just last month 2.6 Billion FTDs were reported across 68k tickers… this affects everyone who purchases stock of a public company… and every publicly traded company…

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