Jan. 04, 2022
The holding of retail shares in "street name" by brokers as they lend clients' shares without consent, financial consideration, or voting authority will cause a mass exodus from the traditional stock market as we know it as transactions flow to decentralized exchanges, eliminating need for market makers, brokers etc. Reading between the lines, GameStop may be on the forefront of removing shares from DTCC and implementing an NFT blockchain-based decentralized exchange which would allow for person-to-person trading, allowing for price discovery among other benefits. We often hear that market makers are granted the ability to synthesize/rehypothecate shares in an attempt to "provide the market liquidity." This is counterintuitive as it creates false supply/demand. In extreme demand for a stock, instead of prospective buyers raising their bid, market makers flood the market with additional shares and immediately "cap" the price, interfering with organic price discovery. If the liquidity on a security is bone-dry, what's the problem? It will reach equilibrium without market maker intervention. If a company has 75,000,000 shares outstanding and has given these to the DTCC, at any given time there should be no more than 75,000,000 shares in individual investing accounts, IRA accounts, institutional/insider ownership, mutual funds, etc. The by-product of "providing the market liquidity" is that the synthesized shares are being used for nefarious purposes, creating a downward price action that eventually becomes a self-fulfilling prophecy. The elephant in the room is beginning to knock over vases and Monet paintings in the Park Avenue penthouses. How much longer can it be ignored? Sincerely, JMC