Welcome back to the channel everyone today, i want to talk about whether brokers are starting to go bankrupt and also what happens if a broker does go bankrupt. How does the sopc insurance work, and i also want to talk about evergrande being investigated for potential market manipulation? So stay tuned and let's make some money, but before i dive into the video, if you haven't already be sure to sign up to moomoo using the special thomas james, investing promotion. Not only do you get a free stock worth up to 350, and not only do you get a second free stock with another guaranteed value of 50, but you also get a third free stock on top of that with another guaranteed value of at least 30 dollars. So that's at least 80 in guaranteed free stocks, just for signing up with moomoo and depositing at least a hundred dollars.

You could always sell those free stocks and get two entirely free shares of amc just for signing up and depositing linked in the description below and now i want to dive straight in with the key information so hope for the best prepare for the worst. An overview of the securities investor protection corporation or sipc insurance and how it might impact the mother of all short squeezes. So this guy's just decided to drs his shares or direct register. His shares from e-trade to computer share and he says i hope my e-trade drs from the 23rd of september completes soon.

But after my third discussion with the broker yesterday, stating that the ftd of my shares will last for another four days, i began to prepare for the worst. So what this bit here basically means is that e-trade is struggling to locate or has been struggling to buy. Shares in gamestop for just over two weeks in order to send them to computer share e-trade, actually doesn't even have the shares on hand, and they can't even locate any, and he says i started digging more into sipc insurance and the broker liquidation process. In the last e-trade 10-q prior to being acquired by morgan stanley, they had 782 billion dollars in customer assets.

Before the gamestop saga, i could not fathom a situation where e-trade would need to be liquidated, and he says this is no longer the case. There is a chance: e-trade has failed to receive and or created quasi-cfds with gamestop and purchased or internalized through their brokerage. They claim the failure to deliver the rs and acad's transfers of gamestop shares is due to an extreme system backlog of transfer requests, which is potentially possible. As we know at the moment, tons and tons of people are trying to drs their gamestop and amc shares, and he says i hope this is true.

However, i'm not certain that it is true. As a result, i've spent the last several days digging into sopc insurance to better understand what will happen to my account if another idiosyncratic risk event such as january 2021, occurs and results in a liquidation. I made a post last week about my concerns with e-trade. If you want more background information, i'm not a financial advisor.

This is not financial advice. This post is intended to be educational for those wanting to know more about sopc insurance. So what does sopc insurance actually protect against? Well, sipc protects against the loss of cash and securities, such as stocks and bonds held by a customer, a financially traveled sipc member brokerage firm. The limit of sipc protection is five hundred thousand dollars, which includes a two hundred and fifty thousand dollar limit for cash.

Specifically, most customers of failed brokerage firms are protected when assets are missing from customer accounts. There is no requirement that a customer reside in or be a citizen of the united states. A non-us citizen, with an account at a brokerage firm that is a member of sipc, is treated the same as a resident or citizen of the united states, with an account at an sipc member brokerage firm. So as an example, the sipc could have stepped in and taken over the liquidation of robin hood in january.

During the three billion dollar margin call, they did not as new investor capital injections, combined with the nfcc reducing the capital requirement from 3 billion dollars to 700 million dollars, helped avoid insolvency. The unprecedented move to position close only many securities also helped. Although the legality of the action to pco is still being debated, so what happens if a broker is liquidated? Well, a us broke. Liquidation is obviously a fairly rare event and the 2011 failure of mf global was the last time that sopc stepped in.

While the mf global case was settled in 2016, there are still open cases and claims from the 2008 failure of lehman brothers and the bernie madoff ponzi scheme, and therefore this highlights how the sipc, liquidation and payouts process usually takes years to be resolved. So the main takeaway here is to obviously sell your shares in amc and gamestop during the squeeze before your broker gets liquidated. So, as you can see here, there's then a bit of an faq section on sipc insurance, obviously, as usual i'll leave the link to this post down in the description below in case, you want to read through all of the faqs, but i want to focus on This one just here specifically so what happens to customer name securities as in direct registered shares, customer name securities are securities that are registered directly in the name of the customer and not registered in the name of the overall brokerage and are held in custody at the Brokerage firm separate from the brokerage's assets customer name securities a return to their owner, even if their filing date value is more than 500 000 assigned stock power attached to a security, even if blank may render the security no longer in customer name. If a security is no longer in customer name, it is treated like other securities held by the brokerage for customers and becomes part of the fund of customer property.

So therefore, obviously you get segregated from the brokerage's assets and liabilities and is one of the first things to be repaid because it's not actually their property and the poster says. In my humble opinion, the unprecedented and idiosyncratic events from january 2021 were just a preview of. What's to come with the mother of all short squeezes, it will be an event, unlike anything, anyone has ever witnessed, and many will not be prepared for the fallout. I expect many brokers are going to fail and the entire global financial system is going to change forever.

I expect sipc will be used on a scale never seen before. There is a chance. Sopc insurance is fully depleted, as the current targets of assets is only 5 billion, with a 2.5 billion dollar line of credit provided by the us treasury, which obviously is almost out of cash as well. So at the moment, the sopc fund has around four billion.

Maybe five billion dollars of cash in it at the moment. Obviously, this fund is separate from the dtcc insurance, which is basically all of the assets of all the member banks of the dtcc added together. He then says the best way to protect yourself from the risks associated with a broker. Failure is to remove the broker from the equation by direct, registering your shares.

I have spoken about this in a video beforehand, but i do also want to do some more research myself before i start promoting the drsing of shares, and then he says that it's also important to understand how the claim process works after a liquidation occurs wherever possible. The securities owned by customers are returned to the customers, so the customers can be put in the same position. They were in before the liquidation. Now this part, i think, is really important to understand properly, both for broker liquidations and for hedge fund liquidations as well.

Now the way most people think about it and let's take amc as an example is let's say, a hedge fund has a one billion dollar short position on amc stock amc stock then triples to three billion dollars and the hedge fund can't afford to buy back all Those shares and therefore gets liquidated, it doesn't mean they have zero dollars in cash and therefore that entire three billion dollars just gets lost and none of the shares get bought back may actually have 2.8 billion dollars in assets and cash, but because they don't have the Full 3 billion, it means the losses on their short position, overrode the value of all of their assets and therefore they couldn't meet that liability and therefore get liquidated. The hedge fund will be made to sell off their 2.8 billion dollars worth of assets and use those assets and cash to buy back as much of the short position as they can and then that's where the dtcc come in and props up the additional 200 grand They meet on the shortfall fairly similar story with a brokerage going under. They may meet most of the obligations, but obviously not all of them, and then that's where the sopc insurance comes in to prop them up and therefore, if necessary, the sopc funds may be used to purchase replacement securities in the open market, while the number of securities To be placed will equal the number in your account on the filing date. It's always possible that market changes may result in the returned securities having lost some or even all, of their value as calculated on a filing date.

In other cases, the securities may have increased in value since the filing date as well. In certain cases, it may not be possible to deliver some or all of the securities that were in your account. In those circumstances, you will receive a payment from the trustee up to at least the sopc limits for the filing date value of the securities. Now that bit, there is really really important if the sopc cannot obtain the securities needed to settle claims.

A cash payout based on the closing price of the security on the day that broker failure is recorded in court will be used instead. Therefore, really the shorts never intend to close their positions. Even a forced closing of short positions can have limits placed on the ultimate payout by forcing broker insolvency well before the gamestop or amc peak by using this clause in the sipc. So basically, the hedges that are currently shorting, amc and gamestop are hoping that the brokerages go bankrupt first, because then it can be kind of like a controlled liquidation process or a controlled squeeze, but obviously direct, registering your amc in gamestop shares removes that 500 000 limit And i also wanted to talk about the us sec investigating our chaos for potential market manipulation.

The ussec is investigating our chaos. Capital management, the family office, run by bill huang that defaulted on margin calls earlier this year. The securities regulator is probing the firm's trading activity, including whether it concealed the size of its bets on public companies. Authorities are also scrutinizing whether archagos bought multiple stakes in the same companies across several banks or several different accounts to avoid triggering public disclosure rules.

The collapse of the investment firm in march triggered losses of more than 10 billion dollars at some global banks with credit, suisse, nomura and morgan stanley being the hardest. Here, the archaeos meltdown led to calls for more stringent regulation of family offices, which are investment. Funds set up by wealthy families, and i also think it's really really interesting - that merrill lynch was just fined 850 000 for regulation. Sho violations that are primarily focused on improper netting of positions to eliminate filter, delivers action, says photodeliver obligations were reduced, while short positions were not reduced.

This is merrill's application of the multi-day approach, applied, pre-failed credit without regard to the correspondent's respective pre-settlement purchases and short positions, and allowed the correspondents to use purchases made by another correspondent to reduce their close-out obligations when they had a short position in the purchase security. So basically, this is like the transferring of shares or the transferring of put and call options to meet those close out obligations for a fail to deliver. Basically, one fund kicking the can down the road or kicking the can to another fund so that that fund can meet their close-out obligations. And now, just in case you were wondering what's going on in china, china evergrande's offshore bond default is imminent bondholders, advisers, say and also china's largest bank restricts, forex and commodity trading for retail investors.

China's industrial and commercial bank of china stated in a statement that starting october 17th, it will suspend new account openings for so-called account forex business under this business individuals can trade forex against the yuan for speculative or hedging purposes, and it also says that, starting from november 14Th, existing clients will be also barred from opening new trading positions. Therefore, they're, basically stopping regular retail investors like you, and i, from betting against the yuan, to basically hedge their own savings accounts, guys be sure to. Let me know down in the comments below what you think about sipc insurance and also how, in a weird way, if a broker does end up going under those shares can be purchased at a finite value or effectively a cash compensation given at a finite value, and Also you're down there, if you haven't already be sure to sign up to moomoos and the special thomas james, investing promotion linked in the description below and as always guys. If you enjoyed this video, be sure to check out some of my others.

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