year was about to wrap up and be over you thought we saw all the crazy shit right well uh i'm here
to tell you you know 12 52 my time we just had three filings drop out of the three big
subsidiaries of the dtcc which is the nscc the national clear securities clearing corporation
the fixed income clearing corporation and the depository trust company and they all
have the title of enhanced capital requirements and make other changes i'm going to repeat that
enhanced capital requirements dtcc's filing is 165 pages long ficc's filing is 240 pages long
nscc's filing is 1293 pages long and 1179 of those pages are redacted due to confidential information
now upon looking into this i'm not going to go into it too much right now because this it's late
or early whatever you want to call it um this was uh filed 12 13 it references meetings that
were held all the way back in november so they've been working on this quite some time
but the gist of this one if you remember the sft service
if you remember what that's designed to do it's the securities financing transactions service
so what that's designed to do is i don't know if you remember but there's two critical components
of that sft service one of them is fire sale the other one is liquidity drain now when
it comes to fire sale when a lot of members in nscc or dtc if a lot of them start liquidating
assets simultaneously that's called a fire sale it affects the broader market and the sft is designed
to mitigate that risk it's going to mitigate that risk because the sft service works as two going in
one coming out cuts the problem in half it's it it's going to help sustain the impact of these
market stress conditions they've been referring to all year now this is the filing here that gives
us insight to what those conditions are going to be because what they're proposing to do is
they're forcing to eliminate small and medium-sized members completely from the nscc
by forcing them into a situation where they're going to have to be required
to sell their assets to pay for the excess net capital requirements that are becoming enhanced
and they're not just being enhanced a little they're being enhanced by
20 times so i'm going to leave you with a couple of comments or email comment responses from
smaller banks and firms that just got wind of this proposal and let you see what they think about it
it kind of gives a good summary too for now but i'll go into more detail tomorrow and i still
haven't looked at the dtc ficc but i'm assuming it's very similar um but let's take a look
samuel f leck blocks out what who he's with or where he's from so we're going to read it
okay subject dtcc's proposed capital increase below is dtcc's latest proposal they are proposing
to increase the minimum capital requirement fold it clearly targets dtcc's smallest participants
and makes no economic sense the proposal discriminates against smaller broker dealers
creates unwarranted barriers to entry and is anti-competitive and is therefore at odds with
the goals of the securities and exchange act this proposal makes no sense why would a firm
that has a margin requirement or otherwise known as a var tier of five hundred thousand dollars
need 10 million dollars in excess net capital dtcc's margin is supposed to account for the risk
so why does a firm that according to dtcc could lose 500 000 need 10 million in excess net capital
the proposed of the proposal makes no sense or even less sense when one considers that a firm
with one billion dollar var would also have only a 10 million dollar minimum capital requirement
the proposed var tiers are extremely low and designed to target dtcc's smallest participants
it ignores the mega sized participants that pose real risk for dtcc and instead
discriminates against smaller firms that over the years have not shown to create much exposure
for dtcc it is simply ridiculous that a firm five hundred thousand dollars at risk needs ten million
which is twenty times the amount of risk when a big player or a firm with one billion
only needs 10 million which is just one percent so on the small side you need two
thousand percent of the amount at risk when a big player only needs one percent the amount of risk
that is f'd up so if you think retail is the only party here being taken advantage
of this year it's no no no it's all these big players that you see in every security nowadays
so if dtcc felt that it needed to raise the capital requirements it would target the
large firms that actually create exposure this proposal is a thinly veiled attempt to eliminate
dtcc's smallest participants eliminate they are trying to execute the slaughter is coming this
is particularly offensive giving that there will be no grandfathering for existing member firms
they're given the finger and kicked out the door this proposal is similar to dtcc's proposal
in 2013 that was successfully defeated they've tried this before in 2013. wait hold on a minute
just gonna check something real quick uh
let's see here no what am i doing let's go here reverse repo chart duh
because there's i remember it looks like a dinosaur like a there's a hump at some point
when was that hump if it was 2013 i'm gonna shit my pants oh fudge oh god okay so hear me out hear
me out they tried this in 2013 they failed repo demand kind of starts going up for the first time
ever in that regard all of a sudden we hit you know 2018 everything starts to go back down
so you're telling me at the same time they're trying this again the repo starts
going up again to all i mean whatever whatever stopped it back then has not worked this time
um this is the pro this is the crux of the problem this is this right here it's clears
day so you're telling me that and sorry this is going to be a lot longer video than i thought now
because you're telling me that how many of these i open jesus i'm autistic which one is it
god man there it is i mean 2013 when was it in 2013
uh capital
is this today's yeah god dang it that's why you go here you go tools
anytime custom range from zero one uh wait what's the format zero one zero one 2013 to
12 31 2013 then you hit go now you refine it what
did it give the proposal name i don't know i don't want to waste any more time with that but uh maybe
we'll get another one here down here but yeah you see that it's this is going to cause huge problems
huge they're trying to eliminate small players they're trying to you know further the monopoly
and then you have the majority of this filing redacted of course because it's likely due to
the sft server scene we know they've been testing it all year so just it's just nuts
it's just nuts and then we have this last one right here basically says ladies and gentlemen
this firm has been a member of ddcc or nscc for more than 30 years we have recently learned of the
proposal to alter membership requirements by means of broadly increasing required excess net capital
also the current proposal is far less rigorous than it was uh its predecessor okay so from a
2013 white paper when was it we suspect it suffers at least one important deficiency of that effort
that similarity discrimination against mid-size and smaller member firms and in favor of the
industry's largest participants so then it goes on to say dtcc and nscc are regulated monopolies in a
consolidating industry under known circumstances should they erect barriers to entry or cause
further consolidation through excessive capital regulatory requirements that are not based on risk
the overarching danger posed by sifis nsafm nsafmu's are obviously well known to the
authors of this proposal but their importance is shrouded by maximum ec and requirement
of only 10 times that of the smallest member firms each of the top members are burdened too little
or the smallest are burned too much please rethink this proposal
jeez louise man you think if you thought this was over yeah buckle up this shit's not done yet
2022 is gonna be insane that's nuts though that i'm gonna figure out when this was
i'll get into more detail on this tomorrow but look i mean it's all coming together everybody