Welcome back to the channel everyone today i want to break down the new dtcc rules around capital requirements and also the new rules around security-based swaps. So stay tuned and let's make some money, and now i want to dive straight in with the key information. So, let's start by talking about the new proposed rules around security-based swaps. Obviously i don't want to read through this full 197 page document, so i've highlighted some of the key impacts and key changes.

So this new rule has been designed and proposed to prevent fraud, manipulation and deception in connection with affecting transactions in or around the security-based swaps. Basically, these new rules are to improve the disclosure and the public disclosure of security-based swaps and also to avoid fraudulently influencing the chief compliance officer of each individual fund. So, firstly, when will these changes take effect? Well, it says: transaction reporting for security based swaps has been required since november 8, 2021, but public dissemination and this improved reporting is going to begin on february, the 14th 2022. So, therefore, even though these institutions are already supposedly reporting more information on their security-based swaps and have been since november, we're not likely to see any changes or real impacts until february of 2022 right now, if an institution is very largely overexposed with their security-based swaps.

At the moment, the only people that know about it are that institution and the dtcc and therefore likely to receive a free pass. But when this information is disseminated publicly to other funds and other institutions, and also us the general public, if there is a fund or an institution out there, that is way over leveraged on the security-based swaps, they will basically be forced to reduce their exposure because, obviously, All of the other institutions and us the general public will be very unhappy if they are so massively overexposed and therefore it wouldn't surprise me if there's many other entities like citadel, that are holding massive short positions through offshore entities and through these security-based swaps. That obviously aren't disclosing their positions that are going to be forced to disclose them in february of 2022 or forced to cover them before the release, so they don't look too bad now. I also want to read this new ruling in section 9, which i think is ridiculous, that it wasn't already a ruling paragraph j of section 9 makes it unlawful for any person, directly or indirectly, by the use of any means or instrumentality or interstate commerce, or of The mails or of any facility of any national securities exchange to affect any transaction in or to induce or attempt to induce the purchase or sale of any security based swap in connection with which such person engages in any fraudulent, deceptive or manipulative act or practice makes A fictitious quotation or engages in any transaction practice, or course of business, which operates as a fraud or deceit upon any person, so to condense all that down.

It basically makes it illegal for any person to create any fictitious purchase or sales, so therefore makes it illegal to create a fictitious or fake closeout of a security-based swap position. It's surprising that that wasn't already illegal to create fake closeouts. So i do think it's good that these hidden swap positions or these hidden short positions are going to soon be revealed to the public, but now, let's also talk about those capital requirements and those new proposed rules. If you didn't already know right now, you can currently get up to 250 dollars in free bitcoin.

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The first part is the equity capital requirements and the second part is the var requirements or the value at risk requirements. So under the previous requirements, the broker dealer would have to have five hundred thousand dollars in excess capital. If they do not clear for other firms or one million dollars, if they do clear for other firms in terms of equity, capital, they'd also have 50 million dollars in equity capital at all times under the new rules. This is now changed to being tiered.

If they don't clear for others, they have to have up to five million dollars in excess net capital, so a 10 times increase, and if they do clear for others, they now have to have up to 10 million dollars in excess net capital. So also a 10 times increase there as well, and instead of having 50 million dollars in equity capital at all times, they now have to have 500 million dollars in cet1 or set 1 capital at all times. So that's a massive 10 times increase to those capital requirements and obviously the nfcc has already received some pushback from institutions. The first comes from samuel at lex securities he said below is dtcc's or nscc's latest proposal they're proposing to increase the minimum capital requirements tenfold.

He's obviously complaining and saying: why would a firm that has a margin requirement or var tier of hundred thousand dollars need 10 million dollars in excess net capital? He said dtcc's margin or i guess the dtcc insurance is supposed to account for the risk. So why does a firm that, according to dtcc, could lose thousand dollars need ten million dollars in excess net capital? Now? One point i do agree with is where he says it ignores the mega sized participants that pose real risk for the dtcc and instead discriminates against solely smaller firms. Obviously, we can see here their bar tears are below a hundred thousand dollars. A hundred to five hundred thousand dollars and over five hundred thousand dollars, but in the grand scheme of things that isn't actually very large and i think they need many many more tiers.

If we have a look at robin hood back on the 28th of january, the daily var requirement at the start of january 28th was 1.4 billion dollars, obviously significantly higher than only 500 000. They probably need more tiers in here for say over 5 million over 50. Over 500, and maybe even over 5 billion, but i do think that should require firms like robin hood to have significantly more excess net capital. To obviously avoid what happened back in january 28th, when robin hood had to turn off the buy button to reduce their daily var requirement, obviously, because robin hood turned off the buy button, it brought that requirement down from 1.4 billion dollars to only 354 million.

He said it's simply ridiculous, that a firm that has 500 000 at risk needs 10 million dollars in excess capital, as in 20 times the amount of risk, but a firm that has one billion dollars at risk needs only 10 million dollars, as in one percent of The amount at risk he said if the 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. So therefore, while i do think new capital requirements and increasing those capital requirements, significantly is a good idea. I also think they need to focus more on the larger firms and not the smallest firms in terms of the dtcc.

They are also making equity capital changes. Changing from two million dollars in excess equity capital to 15 million dollars in excess cet1 capital - now i guess this is just a slightly different division, because obviously the nfcc requirements were much much higher now. Something i also found very very interesting is that there's a current dtc watch list an enhanced surveillance list. It says dtc's watch list is a list of participants that are deemed by dtc to pose a heightened risk to it and its participants based on credit ratings and other factors.

So specifically, the watch list is a list of participants with credit ratings derived from dtc's credit risk rating matrix of five six or seven. Now i tried to do some searching and unfortunately, this dtc watch list isn't available to the public, but it would be very, very interesting if it was available to the public to see which participants of the dtcc posed the highest risk. That way, we could see which participants of the dtcc and which institutions had the highest leverage and were the most exposed and the most likely to go bankrupt or be liquidated. Now the ficc have also changed their capital requirements from a hundred million dollars of equity capital.

25 million dollars of net worth and excess net capital of 10 million to that same new implementation from the nscc, which is the 500 million dollars in cet-1 capital and therefore a five-times increase from the ficc from 100 million dollars to 500 million dollars. So why is that good for amc? Well, obviously, it means that participants and institutions now have to hold a lot more capital and a lot more cash and therefore can't be as heavily exposed or over leveraged and therefore will have to close some of their short positions or risk liquidation. Obviously, if they can't meet these new capital requirements and these new margin requirements, they will get liquidated and forced to sell off all of their long positions and cover all of their shorts. Now you may say tom: these new capital requirements sound, absolutely brilliant, but when are they coming into effect? So from the nscc paper, we've got a heading, saying, implementation time frame pending commission approval, the nfcc would implement the proposed changes to enhance its capital requirements for members.

One year after the commission's approval of this proposed rule change, so it sounds like a very long time frame, but actually it may be happening right now, so why do i say it might be happening right now. If i scroll down to the member outreach section, it says, beginning in june 2019 nscc conducted outreach to various members in order to provide them with the advanced notice of the proposed enhancements to nscc's capital requirements. Then, at the very top of the page it says the proposed rule change was approved by the risk committee of the board of directors of nscc at a meeting. Julie called and held on december 15, 2020 and obviously one year from this date would bring us to december 15 2021 and therefore these changes could have been implemented last week.

Sometime and obviously, if any members are failing to meet these new capital requirements, they will likely be liquidated next week. Obviously those liquidations do take. Some time could take a few days, could even take a week or two, but we'd expect to see changes from these new capital requirements over the next week or two, and on top of this it seems that chinese creditors are getting desperate to receive their money back From evergrande with claims, totaling 13 billion dollars, but the worrying thing is that evergrande have said there is no way we can repay. So many creditors with our limited resources, said an evergrande executive who asked not to be identified.

He said we will. Let judges decide who gets paid and how much and therefore, if the evergrande suppliers won't even be getting all of their money back, there's no way that any of the bondholders will either. There was a little tier list i saw a little while ago of who would be getting their money back from evergrande. First first was the employees, then was the suppliers, and only then later on was the bondholders and the debt holders and then obviously finally, the shareholders and therefore, if ever grind, they can't even properly pay the employees and the suppliers.

Well, the bondholders won't be getting any of their money back and also won't be able to use those bonds as collateral to meet those new collateral requirements. Guys be sure to. Let me know down in the comments below what you think about the new capital requirements imposed by the dtcc, the nfcc and the ficc, and how this is going to impact amc and guys. If you want to stay up to date with all of my latest stock and crypto picks or if you just want some help with amc and gamestop, be sure to check out the patreon and the private discord linked in the description below and become part of, the Team, and as always guys if you enjoyed this video, be sure to check out some of my others.

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