01/02/2021 Sim, Virgínia, o sistema está claramente montado | ZeroHedge

Translated to: Portuguese Show original Options ▼

Yes, Virginia, The System Is Clearly Rigged

BY TYLER DURDEN SUNDAY, JAN 31, 2021 - 19:30

Authored by Omid Malekan via Medium.com,

Before sharing my opinion on the WallStreetBets events of last week, I want to make one thing clear: I
believe strategies like the ones used to drive the price of Gamestop stock higher are reckless and
dangerous. I would never participate in them. They are likely to end badly for the majority of those who get
involved.

With that out of the way, let’s review something important that happened last year, when big cap tech
stocks like Tesla and Apple started exhibiting unusual volatility to the upside. It turned out that Softbank,
one of the largest institutional investors in the world, had been executing a dangerous strategy of

buying record amounts of out of the money call options on those stocks. Their actions forced some
of the options trading establishment into something called a gamma squeeze, a positive feedback loop that
can be thought of as the options markets’ equivalent of a short squeeze. Here’s the FT:
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The surge in purchases of call options — derivatives that give the user the right to buy a stock
at a pre-agreed price — has been the talk of Wall Street, as the sheer size of the trades
appears to have exacerbated a “melt-up” in many big technology stocks over the past few
months. In August alone, Tesla’s share price shot up 74 per cent, while Apple gained 21 per
cent, Google’s parent Alphabet rose 10 per cent and Amazon 9 per cent.

One person familiar with SoftBank’s trades said it was “gobbling up” options on a scale that
was even making some people within the organization nervous. “People are caught with their
pants down, massively short. This can continue. The whale is still hungry.”

As the article also points out, it was generally understood that what Softbank was doing (with
billions of dollars, no less) was dangerous. Not only could it end badly for them, but it had painted
other players into a corner, creating a dangerous dynamic that could reverse abruptly.

Now, knowing all of that, and having seen the systematic crackdown on retail investors executing a similar
strategy last week, we can ask a few simple questions:

1. How many of Softbank’s service providers refused to execute their trades? How many banks, prime
brokers or options dealers said “sorry, this a dangerous strategy that will end badly, plus it puts the
rest of the market at risk. You can no longer buy call options on these particular stocks”?

2. How many veteran financial reporters working in TV or print expressed shock and outrage? How
many pontificated out loud about the blatant disregard for fundamental analysis?

3. How many people at the SEC, Federal Reserve, U.S. Treasury or even the White House actively
monitored the situation and worried about the safety of the market?

4. How many people within the traditional financial establishment argued that perhaps we need tighter
regulations to prevent this sort of thing from happening?

You already know the answer to all of these questions. Even if you don’t understand the technical aspects
of how Wall Street works, you know in your heart that so-called institutional investors often do risky,
dangerous, and (in retrospect) stupid things, but nobody ever stops them. This despite the fact that every
once in a while those same strategies end in disaster and put the rest of the financial system, not to
mention the broader economy, in jeopardy.

You know this because in the back of your mind, you remember something about a fund called Long Term
Capital, which was run by Nobel prize winners, blowing up in the late 1990s. You lived through the 2008
crisis and may have read a book like Too Big to Fail or seen a movie like The Big Short. You vaguely
remember reading about something called a repo crisis in 2019. You recall how just last year, at the start of
the Covid crash, central banks like the Federal Reserve had to pump ten times more money into Wall
Street than Main Street, even though ordinary people needed the money more.

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What you understand intuitively about all of these events is that the pros — the supposedly sophisticated
investors who control the vast majority of capital in the world — somehow fucked up. They did things that
enriched them, but ended up costing society as a whole. And yet, not only did nobody in a position of
power try to stop them, but regulators and government representatives — the people who are supposed to
be looking out for your best interests — argued that your tax dollars should be used to bail them out. Their
gambling didn’t make you any richer, but their crapping out still cost you.

Despite what the financial media would like you to believe, the most surprising thing about last
week wasn’t the fact that a bunch of beaten down stocks went flying. Crazy shit happens in the stock
market all of the time, especially in an era of record monetization when the Federal Reserve prints money
faster than Taylor Swift releases albums.

Most of the self-righteous hand wringing was an act. Aggressive investors utilizing leverage in herd-
like fashion to pursue a risky bet is nothing new. It’s called trading, and that’s what most money mangers
do. They don’t invest. There’s a reason why banks and hedge funds have trading desks and people call it
the trading day.

No. The real controversy last week was about who was winning and who was losing. Retail people
on apps like Robinhood aren’t supposed to stick it to the big boys. They are supposed to be the so-
called dumb money, the schools of tiny fish that exist so whales like Softbank and Citadel have something
to feast on. People who go to Davos aren’t supposed to lose money to kids from Denver. But last week,
they did. That’s why the financial establishment reacted so strongly.

Let me pause here to reiterate my belief that I think this kind of trading is extremely risky and not that far
removed from betting at the track, regardless of who is doing it. I strongly advise everyone I know to stay
way from margin trading, options and short squeezes. That said, I think people should be free to do
whatever they want with their money, especially now that their central bank is doing everything it can to
destroy its integrity.


I am outraged by the hypocrisy of the financial services industry. Any doubt that the system is
rigged has been eliminated. Why do the rich only ever get richer? Because of what happened last
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rigged has been eliminated. Why do the rich only ever get richer? Because of what happened last
week.

In all my years of working in this industry, I have never heard of brokers pulling the plug on their clients
because they were making too much money.

If anyone is to be banned from putting on risky trades, it should be the supposedly sophisticated
hedge funds who’ve needed to be bailed again and again, not your cousin who recently bought a
few shares of GME in her Robinhood app. Your cousin wasn’t the one who fucked up in 1998 or 2008 or
2019 or 2020. She didn’t drive Lehman Brothers into the ground or destroy MF Global.

But the financial establishment — the same establishment who’s always gone out of its way to celebrate
people like John Meriwether, Dick Fuld and John Corzine — decided that your cousin wasn’t allowed to
play the same game, and had the audacity to pretend this was for her own protection.

The fact that she was making money off of hedge funds like D1 (one of Robinhood’s biggest investors) and
Citadel (one of Robinhood’s biggest sources of revenues) had nothing to do with it. The fact that Ben
Bernanke has been a senior advisor to Citadel and Janet Yellen has collected almost a million
dollars in speaking fees from the same firm had nothing to do with it.

The issue here isn’t how the aggressive buying of stocks like Gamestop ends, because it’ll probably end
badly. The issue is that nobody ever tries to stop hedge fund managers from doing the same exact thing.
When they gamble with our futures, it’s called capitalism. But when retail people do it, it’s a menace to
society that must be stopped.

Firms like Robinhood are now claiming that they didn’t freeze trading in a handful of stocks
because of some nefarious conspiracy. They did it because the back-end clearinghouses like DTCC
who process their trades forced them to put up too much capital for those names. Here’s the New
York Times:

A more detailed explanation: Brokerages post money with the D.T.C.C. to cover customers’
transactions while they wait for the trades to settle. With such a big surge in trading, the
clearing hub wanted more assurance: “It’s the D.T.C.C. saying ‘This stuff is just too risky,’ ” said
the Bloomberg Intelligence analyst Larry Tabb.

Other online brokerages also cited the D.T.C.C. as a factor in decisions

 to impose trading
restrictions.

The brilliance of this excuse is that it only proves the skeptics and conspiracy-theory believers
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right. DTCC is a for-profit monopoly that sits at the heart of America’s financial system. It is controlled by

the biggest Wall Street institutions and responsible for all public equity settlement. A subsidiary of it literally
owns every single share of publicly traded stock in America. Yes, you read that correctly. You don’t actually
own your shares of Apple or Microsoft, they do. You are only allowed to enjoy the financial benefits of
being an investor because your corporate overlords let you. Why? Because the government wants it that
way (the fact that financial firms like DTCC always donate a lot of money to politicians has nothing to do
with it.)

It’s quite possible that the above justification for the crackdown is technically true: clearinghouses and firms
like DTCC suddenly jacked up their collateral requirements because they were afraid the short squeeze
would reverse and end badly. On the surface, this is plausible.

But why have we never heard of the same thing happening to the institutions who also pursue
risky trades, use margin, trade options, and often pile into the same crowded trades? Why didn’t this
sort of thing happen last year, at the start of the pandemic? Surely an environment where everything is
crashing is more dangerous to the back-end plumbing of Wall Street than one where only a few stocks are
going up.

E aí jaz o X da questão. Os fundos de hedge e bilionários não tiveram que ser restringidos no ano
passado porque o governo interveio e usou trilhões de dólares do seu dinheiro para garantir que
“o sistema” continuasse funcionando para eles . Assim como em 2019, 2008 e 1998.

Pessoas comuns não têm esse tipo de proteção, então não podem jogar. Os bilionários que constroem
mansões ridículas muito perto da água ganham seguro grátis contra enchentes, mas você é um mero
locatário, então não se qualifica.

Se nosso sistema financeiro fosse remotamente justo, ou pelo menos consistente em sua resposta
a desenvolvimentos incomuns, o Fed teria estado ao telefone com DTCC e Robinhood a semana
toda, oferecendo injeções de liquidez e linhas de crédito para manter o sistema funcionando. O
Departamento do Tesouro teria começado a planejar um fundo de emergência para socorrer os acionistas
da Gamestop e da AMC se necessário, e o Congresso teria começado as deliberações sobre o Programa
de Alívio ao Investidor de Varejo Problemático.

E se. 
Daqui a alguns anos, quando a maior parte do mundo tiver mudado para um tipo diferente de
sistema financeiro, um sistema totalmente transparente, construído sobre propriedades
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