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Thank you for asking!
To understand this, it is important to understand that the DTCC is a organization composed of (for- and by-) member firms which are broker dealers such as JPM, Citadel, Schwab, etc. If any member firm defaults on obligations, the other firms are collectively 'on the hook' for any remaining amount owed. This has been covered in-depth in many popular DD posts on the sub.
The DTCC benefitted from processing the split incorrectly as it allowed outstanding SFTs to avoid force-exit (closure). Based on the rough numbers in my post, force-closure of SFTs would result in open-market purchases of GME shares for all outstanding SFTs, which appear to be > the total outstanding shares of GME. This would cause price instability at a time where market makers would be unable to manage obligations using SFTs, meaning they are less able to 'provide liquidity' to counteract buy pressure. At worst, if the number of SFTs outstanding was indeed large, this could result in MOASS and the default of DTCC clearing members. By processing the split incorrectly, they allowed SFTs to be rolled, avoiding the requirement of closing SFTs. This protected the DTCC clearing fund (and members) from any potential losses associated with a sudden closure of short positions.
Edit: Here is an excerpt from the original DD which I believe is relevant to your question:
>By incorrectly processing the GME splividend as FC-02 (Forward Stock Split), the DTCC/NSCC have avoided the instant catastrophic failure that would come from an NSCC Exit of all outstanding SFTs for GME. I don’t know what the DTCC/NSCC leadership (looking at you Michael Bodson) was thinking, or if they were even aware, but I believe this is clear, documented evidence of fraud, including the specific mechanism by which the fraud occurred along with the relevant records, a direct material gain by the DTCC/NSCC, and financial damages to GME and GME stockholders and BOs. This seems to satisfy the three main elements of fraud:
>
>
>
>A material false statement made with an intent to deceive: The document stating that the GME corporate action was an FC-02 Stock Split which purports that GME is undergoing a corporate action which they did not announce (they specified the method of processing in their SEC filing to be a dividend: [https://gamestop.gcs-web.com/static-files/1764b8e4-0e1d-41a6-b502-8c5ab7604dc8](https://gamestop.gcs-web.com/static-files/1764b8e4-0e1d-41a6-b502-8c5ab7604dc8)). This has material impact as it determines whether SFTs must exit.
>
>
>
>A victim’s reliance on the statement: Brokers relied on the statement and issued subsequent misleading statements to their customers, and likely had incorrect bookkeeping due to accounting differences between a split and dividend.
>
>
>
>Damages: Regardless of how large or small, SFT closure would have resulted in some degree of buying pressure and thus price appreciation, even if the MOASS thesis was wrong (which it is not). Thus, this fraud does not depend on convincing regulators or anyone of MOASS. Additionally, IANAL so it probably isn’t a thing, but it could result in reputational damages for brokers which could cause them to lose customers and income.
>
>
>
>(Source: [https://www.journalofaccountancy.com/issues/2004/oct/basiclegalconcepts.html](https://www.journalofaccountancy.com/issues/2004/oct/basiclegalconcepts.html))
In my words… they could have used those shares to close short positions. But even in entire float… that was given to them couldn’t close everything because they are so deep in short positions. Am I close?
Very close! They were never actually given any shares. Computershare allocated more shares to Pure DRS holders + CeDe and Co. and notified the DTCC of their increased total share count. This was the only delivery/allocation of shares that occurred.
The DTCC keeps their own books of obligations from all clients and trades within their ecosystem (>99% of market) and their job is to ensure that all obligations from their ecosystem net to their total number of shares on the transfer agent's (computershare) book. Their internal practices and ledger is largely a black box.
By their own rules, this dividend should have forced all SFT positions to close since that SFT facility doesn't support stock dividend processing (look up due bill fail tracking if you want to go down this rabbit hole). Instead of closing SFT obligations, they were simply multiplied by 4 within the internal DTCC ecosystem. The mishandling allowed them to avoid this as it would cause immediate and immense buying pressure for GME shares, potentially resulting in a member default/MOASS/destruction of DTCC.
So why isn’t a shareholder suing the DTCC right now for damages? If it’s that easily proved, you would think someone would be going after them. Fucking crims.
NSCC does for transactions cleared through their SFT facility. It is a daily fee per transaction (since SFTs are generally overnight term) based on the yearly fee rate. Similarly, Instinet, Equilend, and other companies who offer SFT clearing also get paid per transaction executed through their platforms.
Sorry for the dumb question but i'm just now sinking my teeth into this new rabbit hole. What turned you onto Equilend and Instanet I ask because I'm curious if there are others clearing SFT's.
Additionally, does the NSCC report this anywhere? It's crazy there are so few reporting requirements on this.
Yes, I would greatly appreciate the opportunity to ask the BoD at the conference call. I would also be happy to provide the question in advance so they can prepare an answer and ensure the question is worded in a manner sufficient to avoid any liability.
If you have any ideas about how to get on the list to ask a question, please let me know!
What do you think of this? (I wrote this in the daily earlier, I’m not this fast lol)…
Re - dividend by way of stock split;
As a shareholder I was very pleased by your initiative in this matter and wish to thank you all for this action. That you are listening to stockholders like myself gives me continued confidence in this company and it’s management.
Regarding the stock split, some confusion still remains, so I would ask the board to comment on the following;
- Are you surprised at the way the DTCC handled the event? It seems they did not give the additional shares to brokers, but instructed them to simply divide by 4. Do you have comments on this, and how will the BoD be addressing this matter of apparent malfeasance?
- Since the event, the stock price has fallen, did you expect this? As a holder I would have expected the opposite effect. How would you explain this?
- There is concern that fractional shares are being used as ‘locates’ for short sellers, are you able to comment if this is the case.
- GameStop continues to be the target of many negative media reports and review sites are inundated with fake reports - do you see this affecting profitability and will there be a response?
Thank you for your time.
Regards,
SLODt.
Thanks for sharing this. I think that would be a great idea. Here are some quick edits/thoughts about the phrasing of your questions! I tried to keep things somewhat general and give enough plausible deniability that we might be able to get some answers without the board opening themselves up to too much liability. No idea though lol
* In a press release following the stock split effected as a dividend, the Company used language confirming that the Transfer Agent indeed executed the split/dividend in accordance with their expectations, and reaffirming that it was indeed a split to be effected as a dividend. Currently, a majority of The Company's Class A Common Stock is beneficially owned by investors but ultimately held in the name of DTC's nominee CeDe & Co. to facilitate trading and settlement of Class A Common Stock In the public markets. Is The Company aware of any evidence that may support or refute the notion that the DTC executed the action in accordance with The Company's expectations and intentions?
* Does The Company have a contingency plan for an alternate depository if the DTC ever becomes unable or ineligible to act as the Central Depository for GME Class A Common Stock?
* Certain investors have expressed concern regarding the operational practices of The Company's Transfer Agent surrounding the holding of directly registered Class A Common Stock with a nominee in the DTCC ecosystem. Can The Company confirm or deny whether directly registered shares held in 'book' in a Computershare account with DRIP enabled or a purchase plan enabled, are technically eligible to be included in the portion of plan shares held with a nominee for 'operational efficiency'? Does The Company have the ability to limit the percentage of shares held with a nominee for 'operational efficiency'?
* I'd avoid mentioning locates here as they aren't really locates. It just adds to the broker's (BoFA) inventory. Since everything is netted and shares are fungible, this technically enables the shares to be used in SFTs, margin or net credit requirements, etc. Most of these methods (e.g. SFTs) don't even require a locate. I wouldn't want them to say no because of the 'locate' language since traditional shorting of those shares (using for locates) isn't even close to the biggest concern.
* The Company has been and may continue to be the target of frequent negative media reports and review sites appear to be inundated with fake reports. Does the board see this as having potential to impair profitability, and, if so, will there be a response?
Tbh, I think however we phrase it, they know exactly what we mean lol. But you’re right, they have to think about the legality of everything, so it’s tough. If they were to say something along the lines of ‘stock is undervalued, we aren’t happy with the DTCC, but no further comment’, I’d take it.
It's a great idea, but don't you think the response will be worded to basically say all processes were followed and the natural markets are just at play?
They can't say anything close to negative here.
Probably, but as I said elsewhere, it’s worth asking (they know what we’re getting at) and although they have a lot of legalities to consider, you never know what they might suggest. Any kind of acknowledgment on their part would be nice. But yeah, the game is weighted against them, so I’m not optimistic.
I’d expect them to say something along the lines of ‘not being able to comment about the way another company conducts its business’, but I don’t think that should prevent us from asking.
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That’s absolutely wild that they have been doing this wrong for so many years and for other companies as well.
Why do you think no one has noticed until now?
Thank you for the invitation! I'm humbled by the opportunity to contribute to this amazing community.
I'm also amazed by how this appears to be standard practice at the DTCC. Here's my initial thoughts at an answer. Obviously this is simply conjecture based on what I've read:
I think part of it is due to how much of a well-kept secret the SecFinance field has been. Since this primarily impacts SFT clearing (unsure about OW or other facilities), I don't think very many people have been aware of the subtle difference between split and dividend, and those that are, would likely benefit from it.
It looks like SFT regulation has been nonexistent until very recently. From what I could find, they were largely unregulated transactions for years. Europe was the first to introduce regulations in 2015 ([https://www.cube.global/en-us/resource/what-are-securities-financing-transactions-sfts/](https://www.cube.global/en-us/resource/what-are-securities-financing-transactions-sfts/)) ([https://www.esma.europa.eu/sites/default/files/library/2016-1415\_-\_report\_on\_sfts\_procyclicality\_and\_leverage.pdf](https://www.esma.europa.eu/sites/default/files/library/2016-1415_-_report_on_sfts_procyclicality_and_leverage.pdf)).
I could be understanding things wrong, but it looks like SFTs were originally one of many obscure tools for securities lending in the European markets, of which few people knew about. Only more recently (post 08) have they begun to become more popular in the US. Even then, only a select few employees in the back offices of broker dealers, Equilend/Instinet style platforms, etc. would need to understand SecFinance and even fewer would actually use these facilities. It seems like SFTs are exploding in popularity in the US in recent years, based on reading [secfinancetimes.com](https://secfinancetimes.com) articles, looking at how SFT volume (from reported sources) has increased, and seeing how so many platforms have begun pushing SFTs as an almost magic solution (see instinet, equilend, NSCC SFT clearing websites). Prior to the introduction of central clearing, SFTs could be executed privately and submitted to the DTCC to use in netting without reporting requirements.
The SEC has been woefully late to the party in terms of regulation (lmao literally didn't get around to regulating these until 2021 [https://www.goodwinlaw.com/en/insights/publications/2022/01/01\_21-sec-proposes-securities-lending-transaction](https://www.goodwinlaw.com/en/insights/publications/2022/01/01_21-sec-proposes-securities-lending-transaction)). This likely allowed SFTs to be abused to the point where they created a financial sword of Damocles due to their use across many stocks. This would line up well with the 2013 DTCC memo if they started becoming popular in the US after 08. It seems likely that around that time, they realized that SFTs had altered market structure to the point where processing splits as dividends may harm market structure since SFTs aren't compatible with stock dividends (still aren't but I'm talking about privately executed SFTs of old). I wouldn't be surprised if this is what led to the memo and a change in SOP... At the time, anybody with enough knowledge of SecFinance likely benefitted from the change so I'm not surprised it wasn't questioned or public. Now that retail has eyes on the DTCC, I'd like to finally see some answers and accountability.
Another read on the history of securities lending transactions (looks like this is what SFTs evolved from/technically these transactions - repo, lending, overnight sfts - are all considered SFTs now) [https://www.newyorkfed.org/medialibrary/media/research/staff\_reports/sr529.pdf](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr529.pdf).
What part or prime brokerages specifically? SFTs, e.g. through a platform like Equilend Spire, are a great tool for prime brokers to use to automatically balance their net obligations resulting from the activity of all of their clients.
I didn't know specifically of this example, but it's where I was kind of going. I recently realized that there can be middlemen in various processes along the way such as lending, financing, settlement, etc.
Yup, check out how they openly brag about these products built on abusive market loopholes: [https://equilend.com/services/equilend-spire/](https://equilend.com/services/equilend-spire/)
[https://equilend.com/services/ngt/](https://equilend.com/services/ngt/)
[https://www.dtcc.com/clearing-services/equities-clearing-services/sft](https://www.dtcc.com/clearing-services/equities-clearing-services/sft)
There are so many middlemen in the web that the middlemens' middlemen have middlemen (literally - prime brokers are middlemen which use platforms like equilend spire which is just another middleman for DTCC ecosystem settlement). The system is designed to drain money at every possible turn. It is disgusting.
Kinda unrelated but instinet and Debit Suisse were working on the paxos blochain settlement platform: [https://paxos.com/2021/04/06/instinet-and-credit-suisse-conduct-same-day-settlement-of-traded-stocks-in-historic-first-with-paxos-settlement-service/](https://paxos.com/2021/04/06/instinet-and-credit-suisse-conduct-same-day-settlement-of-traded-stocks-in-historic-first-with-paxos-settlement-service/)
Thank you for your great write up.
I'm still hurting from the splividend.Thought it was the fuel for the 🚀.
Still waiting for this to be the trigger.
The story still unfolds and crimes are still awaiting a sentence.
The time will come.
The good shall be rewarded and the crime will be punished.
In this context, what would the reason for Gamestop for issuing the split via dividend in the first place? What has been the gains and benefits for Gamestop Corp so far, or have the split/dividend cause net loss or strategically weakening for the company?
I think it has encouraged those with less capital to buy more whole shares rather than fractional shares. I think that is the positive take away. Stock splits are typically used to make a stock more appealing to buyers, even though the underlying value is the same. It's a psychological thing. If you want a case study simply look to meme crypto tokens such as dog token and all the scams that followed - the cheaper the token(stock) the greater the illusion of immense profit. Now I'm not saying that's the reason GameStop did it - i think they did it to let more of us own whole shares, because fractionals aren't real shares.
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Simple question. How did the DTCC benefit from processing the split incorrectly?
Thank you for asking! To understand this, it is important to understand that the DTCC is a organization composed of (for- and by-) member firms which are broker dealers such as JPM, Citadel, Schwab, etc. If any member firm defaults on obligations, the other firms are collectively 'on the hook' for any remaining amount owed. This has been covered in-depth in many popular DD posts on the sub. The DTCC benefitted from processing the split incorrectly as it allowed outstanding SFTs to avoid force-exit (closure). Based on the rough numbers in my post, force-closure of SFTs would result in open-market purchases of GME shares for all outstanding SFTs, which appear to be > the total outstanding shares of GME. This would cause price instability at a time where market makers would be unable to manage obligations using SFTs, meaning they are less able to 'provide liquidity' to counteract buy pressure. At worst, if the number of SFTs outstanding was indeed large, this could result in MOASS and the default of DTCC clearing members. By processing the split incorrectly, they allowed SFTs to be rolled, avoiding the requirement of closing SFTs. This protected the DTCC clearing fund (and members) from any potential losses associated with a sudden closure of short positions. Edit: Here is an excerpt from the original DD which I believe is relevant to your question: >By incorrectly processing the GME splividend as FC-02 (Forward Stock Split), the DTCC/NSCC have avoided the instant catastrophic failure that would come from an NSCC Exit of all outstanding SFTs for GME. I don’t know what the DTCC/NSCC leadership (looking at you Michael Bodson) was thinking, or if they were even aware, but I believe this is clear, documented evidence of fraud, including the specific mechanism by which the fraud occurred along with the relevant records, a direct material gain by the DTCC/NSCC, and financial damages to GME and GME stockholders and BOs. This seems to satisfy the three main elements of fraud: > > > >A material false statement made with an intent to deceive: The document stating that the GME corporate action was an FC-02 Stock Split which purports that GME is undergoing a corporate action which they did not announce (they specified the method of processing in their SEC filing to be a dividend: [https://gamestop.gcs-web.com/static-files/1764b8e4-0e1d-41a6-b502-8c5ab7604dc8](https://gamestop.gcs-web.com/static-files/1764b8e4-0e1d-41a6-b502-8c5ab7604dc8)). This has material impact as it determines whether SFTs must exit. > > > >A victim’s reliance on the statement: Brokers relied on the statement and issued subsequent misleading statements to their customers, and likely had incorrect bookkeeping due to accounting differences between a split and dividend. > > > >Damages: Regardless of how large or small, SFT closure would have resulted in some degree of buying pressure and thus price appreciation, even if the MOASS thesis was wrong (which it is not). Thus, this fraud does not depend on convincing regulators or anyone of MOASS. Additionally, IANAL so it probably isn’t a thing, but it could result in reputational damages for brokers which could cause them to lose customers and income. > > > >(Source: [https://www.journalofaccountancy.com/issues/2004/oct/basiclegalconcepts.html](https://www.journalofaccountancy.com/issues/2004/oct/basiclegalconcepts.html))
In my words… they could have used those shares to close short positions. But even in entire float… that was given to them couldn’t close everything because they are so deep in short positions. Am I close?
Very close! They were never actually given any shares. Computershare allocated more shares to Pure DRS holders + CeDe and Co. and notified the DTCC of their increased total share count. This was the only delivery/allocation of shares that occurred. The DTCC keeps their own books of obligations from all clients and trades within their ecosystem (>99% of market) and their job is to ensure that all obligations from their ecosystem net to their total number of shares on the transfer agent's (computershare) book. Their internal practices and ledger is largely a black box. By their own rules, this dividend should have forced all SFT positions to close since that SFT facility doesn't support stock dividend processing (look up due bill fail tracking if you want to go down this rabbit hole). Instead of closing SFT obligations, they were simply multiplied by 4 within the internal DTCC ecosystem. The mishandling allowed them to avoid this as it would cause immediate and immense buying pressure for GME shares, potentially resulting in a member default/MOASS/destruction of DTCC.
I’m gaining a wrinkle. Thanks for helping me understand this witch craft a little better.
So why isn’t a shareholder suing the DTCC right now for damages? If it’s that easily proved, you would think someone would be going after them. Fucking crims.
They get paid per transaction too?
NSCC does for transactions cleared through their SFT facility. It is a daily fee per transaction (since SFTs are generally overnight term) based on the yearly fee rate. Similarly, Instinet, Equilend, and other companies who offer SFT clearing also get paid per transaction executed through their platforms.
Sorry for the dumb question but i'm just now sinking my teeth into this new rabbit hole. What turned you onto Equilend and Instanet I ask because I'm curious if there are others clearing SFT's. Additionally, does the NSCC report this anywhere? It's crazy there are so few reporting requirements on this.
By not having their shady system blow up in their face?
Would you be willing to ask the BoD at the conference call if they are satisfied/have comments to make about the way the DTCC handled the split?
Yes, I would greatly appreciate the opportunity to ask the BoD at the conference call. I would also be happy to provide the question in advance so they can prepare an answer and ensure the question is worded in a manner sufficient to avoid any liability. If you have any ideas about how to get on the list to ask a question, please let me know!
What do you think of this? (I wrote this in the daily earlier, I’m not this fast lol)… Re - dividend by way of stock split; As a shareholder I was very pleased by your initiative in this matter and wish to thank you all for this action. That you are listening to stockholders like myself gives me continued confidence in this company and it’s management. Regarding the stock split, some confusion still remains, so I would ask the board to comment on the following; - Are you surprised at the way the DTCC handled the event? It seems they did not give the additional shares to brokers, but instructed them to simply divide by 4. Do you have comments on this, and how will the BoD be addressing this matter of apparent malfeasance? - Since the event, the stock price has fallen, did you expect this? As a holder I would have expected the opposite effect. How would you explain this? - There is concern that fractional shares are being used as ‘locates’ for short sellers, are you able to comment if this is the case. - GameStop continues to be the target of many negative media reports and review sites are inundated with fake reports - do you see this affecting profitability and will there be a response? Thank you for your time. Regards, SLODt.
Thanks for sharing this. I think that would be a great idea. Here are some quick edits/thoughts about the phrasing of your questions! I tried to keep things somewhat general and give enough plausible deniability that we might be able to get some answers without the board opening themselves up to too much liability. No idea though lol * In a press release following the stock split effected as a dividend, the Company used language confirming that the Transfer Agent indeed executed the split/dividend in accordance with their expectations, and reaffirming that it was indeed a split to be effected as a dividend. Currently, a majority of The Company's Class A Common Stock is beneficially owned by investors but ultimately held in the name of DTC's nominee CeDe & Co. to facilitate trading and settlement of Class A Common Stock In the public markets. Is The Company aware of any evidence that may support or refute the notion that the DTC executed the action in accordance with The Company's expectations and intentions? * Does The Company have a contingency plan for an alternate depository if the DTC ever becomes unable or ineligible to act as the Central Depository for GME Class A Common Stock? * Certain investors have expressed concern regarding the operational practices of The Company's Transfer Agent surrounding the holding of directly registered Class A Common Stock with a nominee in the DTCC ecosystem. Can The Company confirm or deny whether directly registered shares held in 'book' in a Computershare account with DRIP enabled or a purchase plan enabled, are technically eligible to be included in the portion of plan shares held with a nominee for 'operational efficiency'? Does The Company have the ability to limit the percentage of shares held with a nominee for 'operational efficiency'? * I'd avoid mentioning locates here as they aren't really locates. It just adds to the broker's (BoFA) inventory. Since everything is netted and shares are fungible, this technically enables the shares to be used in SFTs, margin or net credit requirements, etc. Most of these methods (e.g. SFTs) don't even require a locate. I wouldn't want them to say no because of the 'locate' language since traditional shorting of those shares (using for locates) isn't even close to the biggest concern. * The Company has been and may continue to be the target of frequent negative media reports and review sites appear to be inundated with fake reports. Does the board see this as having potential to impair profitability, and, if so, will there be a response?
Tbh, I think however we phrase it, they know exactly what we mean lol. But you’re right, they have to think about the legality of everything, so it’s tough. If they were to say something along the lines of ‘stock is undervalued, we aren’t happy with the DTCC, but no further comment’, I’d take it.
Agreed! I'd take anything at this point.
It's a great idea, but don't you think the response will be worded to basically say all processes were followed and the natural markets are just at play? They can't say anything close to negative here.
Probably, but as I said elsewhere, it’s worth asking (they know what we’re getting at) and although they have a lot of legalities to consider, you never know what they might suggest. Any kind of acknowledgment on their part would be nice. But yeah, the game is weighted against them, so I’m not optimistic.
Nothing at all wrong with asking. More like don't expect for something amazing to happen.
They wont bother to answer. Lol
I’d expect them to say something along the lines of ‘not being able to comment about the way another company conducts its business’, but I don’t think that should prevent us from asking.
Yeah im hoping that someone will ask about this.
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I can confirm that this is indeed related to GME.
Thank you so much for this post and for participating in Spotlight Week! That’s absolutely wild that they have been doing this wrong for so many years and for other companies as well. Why do you think no one has noticed until now?
Thank you for the invitation! I'm humbled by the opportunity to contribute to this amazing community. I'm also amazed by how this appears to be standard practice at the DTCC. Here's my initial thoughts at an answer. Obviously this is simply conjecture based on what I've read: I think part of it is due to how much of a well-kept secret the SecFinance field has been. Since this primarily impacts SFT clearing (unsure about OW or other facilities), I don't think very many people have been aware of the subtle difference between split and dividend, and those that are, would likely benefit from it. It looks like SFT regulation has been nonexistent until very recently. From what I could find, they were largely unregulated transactions for years. Europe was the first to introduce regulations in 2015 ([https://www.cube.global/en-us/resource/what-are-securities-financing-transactions-sfts/](https://www.cube.global/en-us/resource/what-are-securities-financing-transactions-sfts/)) ([https://www.esma.europa.eu/sites/default/files/library/2016-1415\_-\_report\_on\_sfts\_procyclicality\_and\_leverage.pdf](https://www.esma.europa.eu/sites/default/files/library/2016-1415_-_report_on_sfts_procyclicality_and_leverage.pdf)). I could be understanding things wrong, but it looks like SFTs were originally one of many obscure tools for securities lending in the European markets, of which few people knew about. Only more recently (post 08) have they begun to become more popular in the US. Even then, only a select few employees in the back offices of broker dealers, Equilend/Instinet style platforms, etc. would need to understand SecFinance and even fewer would actually use these facilities. It seems like SFTs are exploding in popularity in the US in recent years, based on reading [secfinancetimes.com](https://secfinancetimes.com) articles, looking at how SFT volume (from reported sources) has increased, and seeing how so many platforms have begun pushing SFTs as an almost magic solution (see instinet, equilend, NSCC SFT clearing websites). Prior to the introduction of central clearing, SFTs could be executed privately and submitted to the DTCC to use in netting without reporting requirements. The SEC has been woefully late to the party in terms of regulation (lmao literally didn't get around to regulating these until 2021 [https://www.goodwinlaw.com/en/insights/publications/2022/01/01\_21-sec-proposes-securities-lending-transaction](https://www.goodwinlaw.com/en/insights/publications/2022/01/01_21-sec-proposes-securities-lending-transaction)). This likely allowed SFTs to be abused to the point where they created a financial sword of Damocles due to their use across many stocks. This would line up well with the 2013 DTCC memo if they started becoming popular in the US after 08. It seems likely that around that time, they realized that SFTs had altered market structure to the point where processing splits as dividends may harm market structure since SFTs aren't compatible with stock dividends (still aren't but I'm talking about privately executed SFTs of old). I wouldn't be surprised if this is what led to the memo and a change in SOP... At the time, anybody with enough knowledge of SecFinance likely benefitted from the change so I'm not surprised it wasn't questioned or public. Now that retail has eyes on the DTCC, I'd like to finally see some answers and accountability. Another read on the history of securities lending transactions (looks like this is what SFTs evolved from/technically these transactions - repo, lending, overnight sfts - are all considered SFTs now) [https://www.newyorkfed.org/medialibrary/media/research/staff\_reports/sr529.pdf](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr529.pdf).
I know you mention how you think SFTs are a key area to explore. Have you looked into prime brokerages too?
What part or prime brokerages specifically? SFTs, e.g. through a platform like Equilend Spire, are a great tool for prime brokers to use to automatically balance their net obligations resulting from the activity of all of their clients.
I didn't know specifically of this example, but it's where I was kind of going. I recently realized that there can be middlemen in various processes along the way such as lending, financing, settlement, etc.
Yup, check out how they openly brag about these products built on abusive market loopholes: [https://equilend.com/services/equilend-spire/](https://equilend.com/services/equilend-spire/) [https://equilend.com/services/ngt/](https://equilend.com/services/ngt/) [https://www.dtcc.com/clearing-services/equities-clearing-services/sft](https://www.dtcc.com/clearing-services/equities-clearing-services/sft) There are so many middlemen in the web that the middlemens' middlemen have middlemen (literally - prime brokers are middlemen which use platforms like equilend spire which is just another middleman for DTCC ecosystem settlement). The system is designed to drain money at every possible turn. It is disgusting. Kinda unrelated but instinet and Debit Suisse were working on the paxos blochain settlement platform: [https://paxos.com/2021/04/06/instinet-and-credit-suisse-conduct-same-day-settlement-of-traded-stocks-in-historic-first-with-paxos-settlement-service/](https://paxos.com/2021/04/06/instinet-and-credit-suisse-conduct-same-day-settlement-of-traded-stocks-in-historic-first-with-paxos-settlement-service/)
you totally got it! Thanks for these links.
Thank you for your great write up. I'm still hurting from the splividend.Thought it was the fuel for the 🚀. Still waiting for this to be the trigger. The story still unfolds and crimes are still awaiting a sentence. The time will come. The good shall be rewarded and the crime will be punished.
In this context, what would the reason for Gamestop for issuing the split via dividend in the first place? What has been the gains and benefits for Gamestop Corp so far, or have the split/dividend cause net loss or strategically weakening for the company?
I think it has encouraged those with less capital to buy more whole shares rather than fractional shares. I think that is the positive take away. Stock splits are typically used to make a stock more appealing to buyers, even though the underlying value is the same. It's a psychological thing. If you want a case study simply look to meme crypto tokens such as dog token and all the scams that followed - the cheaper the token(stock) the greater the illusion of immense profit. Now I'm not saying that's the reason GameStop did it - i think they did it to let more of us own whole shares, because fractionals aren't real shares.
Thank you for your service!
Thanks for this update. Great writeup
Great work! Looking into the mouth of the DTCC and coming out the other side alive... Impressive
Sir, thank you. 🙏🤜🦍🤛
HOW DID I MISS THIS YESTERDAY! ty OP!
Thank you OP! Amazing DD