Silicon Investor - Lessons Learned

[Don Green] Here’s a 1-page “cheat sheet” summary of the core philosophy in Bill William...

Don Green — 8/29/2025 5:21:23 AM

Here’s a **1-page “cheat sheet” summary** of the core philosophy in Bill Williams’ *Trading Chaos*. You could literally keep this beside you while trading:

---

# ?? Trading Chaos – Bill Williams (Cheat Sheet)

### **Core Theme**

Markets look random but are actually **chaotic systems** with hidden patterns. Success = combining **chaos theory tools** with **psychological discipline**.

---

## 1. **Mindset Before Method**

* Trade what you see, not what you think.
* Beliefs > Indicators: Your mindset shapes how you interpret the market.
* Key habits: Patience, discipline, detachment from fear/greed.

---

## 2. **Chaos = Order in Disguise**

* Chaos theory: irregular patterns contain structure.
* Markets = nonlinear systems with feedback loops.
* Look for **fractal patterns** and repeating setups, not predictions of exact outcomes.

---

## 3. **Bill Williams’ 5 Progression Levels**

1. **Novice** – Learning basics, overwhelmed by randomness.
2. **Advanced Beginner** – Sees patterns but overtrades.
3. **Competent** – Starts applying rules and discipline.
4. **Proficient** – Reads the “story” of the market.
5. **Expert** – Trades with flow; integrates psychology + method seamlessly.

---

## 4. **Core Tools**

* **Alligator Indicator** – 3 smoothed MAs (jaw, teeth, lips) showing trend phases.
* **Fractals** – Repeating price formations marking potential reversals.
* **Awesome Oscillator** – Measures market momentum.
* **Market Facilitation Index** – Gauges price movement efficiency.

---

## 5. **Practical Application**

* Wait for alignment of tools (e.g., Alligator waking up + fractal breakout).
* Trade with the flow of chaos, not against it.
* Small losses = tuition; large wins come from catching order in chaos.

---

### **Key Takeaways**

* Markets aren’t random—they’re chaotic.
* Psychology is the foundation of trading.
* Indicators only work when your beliefs and behavior align with market reality.
* The edge comes from recognizing **hidden structure in apparent disorder**.

---

?? **One sentence summary**:
*Trading success comes from mastering yourself first, then using chaos-derived tools to align with the market’s natural patterns.*

---

[Don Green] Alleged Manifesto of Man Who Set Himself on Fire Outside the Trump Trial Posted ...

Don Green — 4/20/2024 5:30:07 PM

Alleged Manifesto of Man Who Set Himself on Fire Outside the Trump Trial Posted Online

My name is Max Azzarello, and I am an investigative researcher who has set himself on fire outside of the Trump trial in Manhattan.

https://theponzipapers.substack.com/

This extreme act of protest is to draw attention to an urgent and important discovery:

We are victims of a totalitarian con, and our own government (along with many of their allies) is about to hit us with an apocalyptic fascist world coup.

Whistleblower’s Claim: The author presents themselves as a whistleblower, revealing a supposed totalitarian conspiracy.
Bank Run Initiated: In March 2023, Peter Thiel allegedly started a bank run, which is a significant financial event.
Extensive Research: The author mentions conducting 1,500 hours of research to uncover evidence of the conspiracy.
Long-Term Impact: The conspiracy is claimed to have been “bleeding us dry since 1988” and is predicted to soon collapse the world economy.

Co-pilot summary

primary subjects mentioned:

Please note that these explanations are based on the information available and the context provided. Some of these topics, particularly those related to conspiracy theories, should be approached with a critical mind and corroborated with information from multiple sources.

[Don Green] Thoughts worth Saving Frank Breslin Three Reasons Why Public High Schools Don’...

Don Green — 4/17/2024 8:54:39 AM

Thoughts worth Saving

Frank Breslin
Three Reasons Why Public High Schools Don’t Teach Critical Thinking

The following warning should be affixed atop every computer in America’s schools: Proceed at your own risk. Don’t accept as true what you’re about to read. Some of it is fact; some of it is opinion masquerading as fact; and the rest is liberal, conservative, or mainstream propaganda. Make sure you know which is which before choosing to believe it.

Students are exposed to so many different viewpoints on- and offline and so prone to accepting whatever they read, that they run the very real risk of becoming brainwashed. If it’s on a computer screen, it becomes Holy Writ, sacrosanct, immutable, beyond question or doubt. Teachers caution students constantly against taking what they read at face value, since some of these sites may be propaganda mills or recruiting stations for the naïve and unwary.

Not only egregious forms of indoctrination may target unsuspecting young minds, but also the more artfully contrived variety, whose insinuating soft-sell subtlety and silken appeals ingratiatingly weave their spell to lull the credulous into accepting their wares.

To prevent this from happening, every school in America should teach the twin arts of critical thinking and critical reading, so that a critical spirit becomes a permanent possession of every student and pervades the teaching of every course in America. This would be time well-spent in schools acting in loco parentis to protect their students from the virulent contagion of mental toxins.

While ensuring students’ physical safety is a school’s first order of priority, the school should be no less vigilant in safeguarding them from propaganda that will assail them for the rest of their lives. Caveat emptor!Let the buyer beware! Everyone wants to sell students a viewpoint, against which schools should teach them the art of self-defense.

Teaching students how to be their own person by abandoning Groupthink and developing the courage to think for themselves should begin from the first day of high school. More important than all the information they will be learning during these four crucial years will be how they critically process this information either to accept or reject it.

It is a rare high-school graduate who can pinpoint 20 different kinds of fallacies while listening to a speaker or reading a book; who can distinguish between fact and opinion, objective account and specious polemic; who can tell the difference between facts, value judgments, explanatory theories, and metaphysical claims; who can argue both sides of a question, anticipate objections, rebut them, and undermine arguments in various ways.

The essence of an education — the ability to think critically and protect oneself against falsehood and lies — is a lost art in America’s high schools today. This is unfortunate for it is precisely this skill that is of transcendent importance for students in defending themselves.

Computers are wonderful things, but, like everything else in this world, they must be approached with great caution. Their potential for good can suddenly become an angel of darkness that takes over young minds.

A school should teach its students how to think, not what to think; to question whatever they read, and never to accept any claim blindly; to suspend judgment until they’ve heard all sides of a question; and interrogate whatever claims to be true, since truth can withstand any scrutiny. Critical thinking is life’s indispensable survival skill, compared to which everything else is an educational frill!

While teachers do encourage critical thinking, there has never been a way of formally integrating teaching this skill into existing curricula. Apart from a few teachers who do train their students in this art, most teachers do not for one simple reason — there is no time.

State education departments mandate that so much material be covered that critical thinking cannot be taught; nor can the courses themselves be critically presented. To cover the curriculum, courses must be taught quickly, superficially, and uncritically, the infallible way of boring students, of trivializing learning, and unintentionally brainwashing the young.

This is a source of frustration to teachers, who would rather teach their courses in depth to give students an informed understanding of the issues involved; the controversies surrounding those issues; the social and political resistance their field of inquiry may have encountered and its cultural impact; in short, the splash and color of its unfolding drama.

At the same time, teachers must keep an eye on the clock to finish their course by the semester’s end when there is scarcely time to teach the “official” viewpoint, much less the competing views of the controversy surrounding those questions.

This omission of alternative theories leaves students with the mistaken impression that there is no scholarly disagreement about what they are taught, as though what is presented is self-evident truth.

The problem, of course, is that it may not be the truth at all, but only one side of a debate that happens to be the “official” view of the moment, with other views unacknowledged, much less explored.

Not that every discipline lends itself to controversy, but most subjects do, with key questions still fiercely debated. History, psychology, sociology, economics, the natural sciences, the arts and humanities are all teeming with scholarly conflicts, yet this is regrettably kept from students for lack of time.

Some teachers may make a glancing reference to specialist debates, occasionally cite alternative theories, or provide as much critical comment as possible on the bias of the course text, but what is sometimes possible is not nearly enough.

The sheer bulk of material necessarily inhibits its critical treatment, which requires time to explore rival theories so that students can experience the excitement of learning and the contentious world of ongoing scholarship.

Rather than partaking of a sumptuous banquet, students receive only thin gruel, insufficient nourishment for curious young minds. Because students are taught only one view about everything, they simply accept that view with no understanding of the attendant controversy.

However, were they taught a second and third theory, along with their respective pro and con arguments, students would be drawn into a more nuanced understanding of the respective issue, try to determine which theory was right, and discover their minds as they experienced the excitement of intellectual inquiry.

Such breakthroughs occur all too seldom in classrooms today because only one “weary, stale, flat, and unprofitable” viewpoint is all they learn about anything, given the breakneck speed at which the course is taught. Imagine the intellectual stimulus were several theories routinely presented about every question with no attempt at resolving them.

Students would learn the other plausible theories, become curious about which one was right after hearing both the arguments and objections for each of those theories, apply this critical spirit to everything they learn, and the nation would have a more enlightened citizenry less apt to be duped by the specious claims of the charlatans of this world.

Now these would be courses well-worth the taking! However, it is precisely this intellectual ferment that is missing in our schools today, thanks to an educational policy which fosters a climate of indoctrination by default by teaching only one view about everything instead of the controversy that surrounds every question.

The solution, naturally, is simply relaxing this mile-wide-inch-deep approach to curriculum, employed for generations to little effect. In its place, teachers would critically treat as many of the course’s essential questions as possible, omitting what couldn’t be taught in the time remaining. If we want to raise a more reflective generation of students, the critical treatment of less material will have a more lasting effect on students than the present soporific of “material covered.”

This is a damning indictment of an educational policy that compels teachers to become unwillingly complicit in brainwashing students in a one-view understanding of the world and its workings. Teachers want to teach alternative views to avoid such mindlessness, but cannot for lack of time. This long-standing policy of haste and superficiality that trivializes learning instead of making it come alive in all its complexity is easily remedied: State education departments have only to alter their present policies.

While State Education Departments are the first reason why public schools don’t teach critical thinking, community pressure against it is the second. While some communities do welcome critical inquiry as an essential part of their children’s education, others do not, rejecting critical thinking as dangerous and wanting only views taught that agree with their own.

Teachers, however, don’t want to teach only one viewpoint imposed by either the state or community, but several viewpoints about the questions they teach. Education is, after all, discovering that there are more things in heaven and earth than are dreamt of in our own little village.

They don’t want a small vocal minority within a community arrogating to itself the presumption of pontificating for other parents’ college-prep and AP children about what can and cannot be taught in their school. They didn’t enter their profession to indoctrinate students into one point of view, but to educate them by exposing them to as many different viewpoints as possible and leaving it to students themselves to decide which view is correct.

It is the eternal struggle between two opposed visions of what education is about. The first believes that it alone possesses the truth; that those who disagree are wrong; and that it has the right to suppress every viewpoint which disagrees with its own because error has no right to exist. Woe betide a nation should this vision come to power when, alas, it already has with such dreadful results of indoctrination.

The second vision believes that we must always be suspicious of such infallible pretensions to truth, and have a healthy distrust of ourselves and our motives, which may be little more than ethnocentric narrow-mindedness. Education is not about being taught more and more reasons about why we are right and everyone else is wrong.

Rather, it is a process of being given more and more air, a wider perspective that affords us a grander, more Olympian view of everything. It is only then that we can see our own point of view within a much broader context as only one among many.

This view of education teaches us that we often believe what we want to believe in spite of the evidence; that we and our little village think ourselves the center of the universe; and that only the ancient stories believed by our village and handed down from generation unto generation are true.

It teaches that had we been born in another village with different myths, we would have believed that only those stories were true; that an education consists in coming to terms with this realization; and that when we do, we have begun to leave the Plato’s Cave of our culture, forsaking the myths of our tribe and beginning at long last to educate ourselves.

Education to be education and not indoctrination exposes the young to all possibilities, advocates none of them, and encourages students to keep their minds open until they have heard all the options, and only then to decide for themselves or remain undecided should that be their choice.

Unfortunately, this kind of education which encourages critical thinking about all points of view is taboo in many high schools today because the communities in which they are situated insist that only their views be taught.

The result of this mindset is, sadly, all too predictable for their high-school graduates who, never exposed to critical discussion, are overwhelmed by it on their first day in college. They have never heard of even the questions, much less the welter of dissenting viewpoints in answering those questions and the way in which each view critiques the other. Some feel so beyond their depth that they become discouraged, demoralized, and at times even leave college, wondering why their high school never prepared them for this.

It’s the age-old story of what one sows, that must one reap. Only now it is both the students and their parents who must deal with those consequences and the broken dreams of their children who must now pay the price. A high-school college-prep program should be precisely that — a demanding academic program that prepares students for college, not one that denies them the very skills needed to succeed there to make their way in the world.

Fortunately, parents today are now beginning to realize what is happening in their communities, and that it is their children who are the collateral damage of such narrow-mindedness. They understand that a high school must prepare students for college, where they will need critical thinking to survive in thid challenging new environment. They know that their sons and daughters must be ready for intellectual demands the first day on campus, not spend their time in remedial classes learning skills that should already have been learned in high school.

Parents who make deep financial sacrifices to put their children through college want high-school teachers to insist on high standards, and tell those teachers on Back-to-School Night that they will support them when they do. They want their children enrolled in solid college-prep, honors, or AP programs that will help them do well during their college years.

They know that the senior year in high school is notoriously difficult because senior teachers are the quality-control officers for graduating seniors. These teachers will assign homework that stresses critical thinking, difficult reading assignments, and a research paper that advances a thesis, with supporting arguments, counterarguments, and rebuttal. These teachers insist that students take an active part in discussions, have time-management skills, a solid work ethic and old-fashioned Sitzfleisch.

Why do teachers do this and parents support them? The answer is simple — without these skills, students will not survive in college! Teachers of college-prep students and their parents look at high school, and especially the senior year, as the indispensable sine-qua-non to college and not as a party year before settling down in college. This is not why they are paying a yearly tuition of $40,000, so they’ll do all they can to protect their investment.

High school is the training ground to acquire the necessary knowledge, critical-thinking skills and the self-discipline to succeed in college where students will be off on their own for the first time in their lives without the daily support-system of their families, friends, and home environment. They’ll be under tremendous academic and emotional pressure facing rigorous course demands that must simply be met.

Graduating seniors become all too aware of these heightened expectations in their first weeks of college, and if they have any regrets it’s that they weren’t pushed even harder in high school. This is why college-prep, honors, and AP students take their high-school courses very seriously. Moreover, word drifts back from the colleges that everything their teachers told them is true, and if the present senior class wants to survive, they must be battle-hardened by next September.

That being said, the last thing parents want to hear is that some community members are interfering with what is going on at the high school by dictating what college-bound students can and cannot be taught. Parents urge their school board members and school administrators to hold the line when these self-appointed watch-dog groups seek to derail the educational futures of their children.

Fortunately, communities are beginning to understand this as well, and this interference is slowly receding. The Old Guard is becoming aware that it cannot jeopardize the lives of other people’s children in securing an education that will prepare them for college and the larger world outside their village. High schools are preparing students for tomorrow, not the horse-and-buggy days of yesterday.

Until state government and communities allow the teaching of different views — not as truths, but simply as other ways of viewing the world, critical thinking in American high schools will remain a mere utopian dream. Teachers can only advocate for meaningful curricular reform. For this to become a reality, they need the vocal support of both the state education departments and the local communities, but especially parents, who are totally invested in the educational success of their children as no one else could possibly be.

There remains, however, one final logistical problem before critical thinking could transform American schools — that of class size, an enormously under-appreciated reason why critical thinking in the schools could still never become a reality even if the state education departments and local communities instantly saw the light by altering their education policies and letting teachers teach critical thinking in their high school.

And now we come to the crux of the problem. Why are class sizes so unmanageably large to prevent the teaching of critical thinking? State aid cutbacks, relentless school budget defeats in the past, and now vitally-needed school funding diverted to local charters prevent public schools from hiring additional teachers to keep class sizes manageable. Everything is, like so much else in life, so inextricably interconnected.

Instead of teaching classes of 15 students, teachers may be confronted with upwards of 25 to 40 or more students, making the teaching of critical thinking impossible. The energizing storm-center of critical thinking has always been the rapid-fire, cut-and-thrust drama of class discussion.

No classes of over 15 students should ever be scheduled, especially if the power and élan of critical discussion is to be palpably felt in the classroom. Teaching 20 students is crowd control and warehousing students.

Numbers change class chemistry from all-too-willing participants in class discussion to comatose observers in a class of wall-to-wall students. This seemingly mundane matter of class size may seem insignificant to anyone who has never taught high-school students, but large classes are the kiss of death for meaningful learning. Class size matters!

Frank Breslin is a retired high-school teacher in the New Jersey public school system.

[Don Green] Selena Gomez, Timothée Chalamet, Zoe Saldana and billionaire Rihanna took out ma...

Don Green — 3/15/2024 12:31:08 PM

Selena Gomez, Timothée Chalamet, Zoe Saldana and billionaire Rihanna took out massive multi-million dollar mortgages on their extravagant homes

Even A-listers with the largest wallets need a helping hand on the property ladder.

DailyMail.com's latest list of high-earning celebrities who've recently taken out massive mortgages includes Kanye West, his ex-wife Kim Kardashian, and Rihanna – all reported billionaires with extravagant Hollywood housing empires.

The world's most followed female star Selena Gomez – with 430 million Instagram followers – borrowed $3million to finance her luxury Hollywood pad.

Often times these uber-wealthy famous faces prefer to take out loans than use their own mountain of cash, as they get offered low interest rates and can use their money for other investments.

Rihanna: $13.65million loan / $98,950 monthly

In March last year, the Barbados-born pop star bought the same penthouse that the late Matthew Perry lived in before moving out two years ago.

Situated in a luxury condo in Century City, the 9,300sqft home has four bedrooms, seven bathrooms, a soundproofed movie theatre and four outdoor terraces.

The previous owner, billionaire Afterpay co-founder Nick Molnar, sold it to Rihanna for $21million – $7million off the asking price and $600k less than what he paid the Friends actor.

Other notable residents over the years have included Candy Spelling, Paula Abdul and restauranteur Nobu Matsuhisa.

The 36-year-old saddled the place with a $13,650,000 mortgage at a 6.9% interest rate with City National Bank.

That's $98,950-a-month.

Rihanna hasn't released an album since 2016, but there's little worry about her financial status as it's claimed she's worth $1.4 billion by Forbes.

Zoe Saldana: $11.375million loan / $83,000 monthly

The Avatar actress doesn't hesitate to spend big bucks on property.

After putting her Beverly Hills mansion on the market for $16.5million in September, the 45-year-old wasted no time buying a Spanish-style colonial mansion in celebrity hotspot Montecito.

Built in 1930, the five-bedroom historic home was picked up for $17.5million - but also comes with an $11.375million mortgage from JP Morgan Chase Bank.

The interest rate is unknown, but the average rate is currently 7%, meaning Zoe is paying around $83k-a-month.

That's the price one pays for living so close to Katy Perry, Prince Harry and Meghan Markle, and Ellen DeGeneres.

While she waits for her Beverly Hills pad to sell, she's also offering it up for rent at $47,500 per month, which will come in handy to help fund her recent mortgage.

Timothée Chalamet: $5million loan / $24,681 monthly

The actor is now one half of the world's second most famous couple – after Taylor Swift and Travis Kelce, of course.

Kylie Jenner's famous beau scooped up a gorgeous Beverly Hills home with four bedrooms and five bathrooms for $10,980,000 in May 2022.

The lifelong New Yorker, 28, bought the property from model Kate Upton and husband Justin Verlander.

The 5,521-square-foot house, built in 1976, was also owned by tennis legend Pete Sampras and saxophonist Kenny G.

But he needed a few dollars help and borrowed $5million from City National Bank at a generous 3.09% interest rate, which is $24,681-a-month.

Robbie Williams: $32million loan / $169,567 monthly

British singer Robbie Williams has taken out a $32million mortgage on the $49.5million LA home he bought in March 2022.

The three-house estate is situated in Holmby Hills, close to Kylie Jenner and Miranda Kerr, and features eight bedrooms, 11 bathrooms, and the celeb-standard pool and tennis court, plus an impressive garage that holds 15-plus luxury cars.

In March 2022, he sold his old Beverly Hills place to Drake for $75million, then sold his Wiltshire country pad for $8.8million, and his Swiss mansion, near to Lake Geneva, is currently on the market for $30million.

Five months after Robbie purchased his new LA place, he borrowed $32,045,000 from JP Morgan Chase Bank at 3.75% interest rate, which works out at $169,567-a-month, including property taxes.

Kanye West $6.8million loan

The outspoken hip-hop artist is also pretty noisy in the property game – scooping up places all over the US and Europe.

While he's hit the headlines for his rotting $57million Malibu oceanfront mansion, he's also got at least ten more properties to manage from his divorce from Kim Kardashian.

Kanye, 46, was given their four-bed property, in Calabasas, which has been saddled with a $6.8million mortgage with the financial institution Hankey Capital since October 2020.

Kanye and Kim also jointly borrowed $1.65million two years previously – both of these mortgages, totaling $8.45million, are now his sole responsibility.

The couple bought a property for $2.2million in May 2018, Zillow estimates it's now worth $3.3million – that's $5.15million less than his home loans.

There's also a smaller home loan of $392k on a rental three-bed apartment in Thousand Oaks, which Kim and Kanye purchased for $575k in September 2017.

None of the three mortgages list the interest rate, at the time it'd be around 5%, which is roughly $44k-a-month in total including taxes.

Orlando Bloom: $5million loan / $25,810 monthly

The Pirates of the Caribbean actor had been trying to offload his Beverly Hills bachelor pad for years.

The property had been sitting empty since March 2019 when he put the four-bed, four-bath home on the market for $8.99million and moved in with girlfriend Katy Perry.

Within months, the 47-year-old had reduced the price twice to $7.99million as he struggled to sell it.

The actor bought it for $7million in 2017 and took out a $5million mortgage with JPMorgan Chase Bank.

After sitting dormant on the property market for nearly four years, Orlando's luck finally changed. DailyMail.com can exclusively reveal that he found a buyer in November 2023.

The bad news – the buyer paid just $7million, which after all the agents' fees and taxes means Orlando, 47, took a hit on the place.

Orlando may have taken the deal as his interest rate was set to go up from 3.5% to nearly 10% in May.

Monthly payments were $25,810 – and would have doubled at the new rate.

Instead he took the cash and has been living in Montecito with the pop star and their daughter Daisy Bloom.

Kim Kardashian: $3.7million loan / $23,494 monthly

Kim has been building a real estate empire throughout the years.

The 43-year-old took out a loan on the property next door to her $60million Hidden Hills mansion, which she bought for $6.3million in May 2022.

The mortgage was taken out in July last year for $3,743,600 at a 5.375% interest rate with PNC Bank.

That's $23,494-a-month, with taxes. Though it seems like a hefty sum, it's not even a day's work for the mega-rich reality star.

The recent purchase means that she now owns five of the homes surrounding her main house. It's not clear what her plans are for the six bedroom, seven bathroom home.

It was revealed last February that Kim had taken out a huge $48.7million mortgage to buy her $70.4million luxury mansion in Malibu in September 2022.

Selena Gomez: $3million loan / $14,193 monthly

The 31-year-old has been buying up real estate in LA and her home state of Texas for years.

In 2020 she bought an epic Encino home from the late Tom Petty.

The six-bedroom, ten-bathroom home cost $4,895,000.

Selena didn't want to splash out all the cash herself so she went to City National Bank for a $3million loan.

She got a bargain interest rate of 2.69% for the first ten years, which comes out to monthly payments of $14,193.

Robert Pattinson: $3million loan/ $15,579 monthly

The London-born actor now spends most of his time in the UK capital with his pregnant girlfriend, model Suki Waterhouse.

But that's not stopped him from spreading his cash across the pond.

In the summer of 2022, the 37-year-old purchased a secluded villa in Hollywood Hills for $5.3million and borrowed $3million from City National Bank at 3.54% interest.

The home listing boasts a sunny master suite with private balcony, walk-in wardrobe, and bathroom with soaking tub, as well as a sparkling plunge pool and spa.

Fans expressed bewilderment online that Robert was paid a relatively 'paltry' $3million for playing Batman compared to previous actors who'd donned the black cape.

Maybe he was feeling the pinch and needed the loan, but then again, maybe not, when he has a fortune worth in excess of $100 million.

The mortgage repayments on his new place are $15,579-a-month.

Although a Batman sequel wouldn't harm the coffers!

Jay-Z and Beyoncé: $190million cash/ $0 monthly

The power couple deserve a special mention for not only topping the charts for the most expensive home purchase of 2023, but doing it without the help from a bank.

Jay-Z and Beyoncé splashed out $190million cash for a spectacular blufftop complex at Paradise Cove in Malibu.

It's the second biggest deal ever to go through and took 15 years to build. It was designed by Japanese architect Tadao Ando, maybe more widely known for creating Jay-Z's former pal Kanye's Malibu home, which now resembles a bomb shelter.

Why the mega-rich take out a home loan - rather than pay outright
It often pays the super-rich to take out a mortgage on a mega home instead of paying for it outright, a celebrity wealth expert told DailyMail.com.

'You might think if you had so much money, why would you have a loan?' said Robert Pagliarini, based in Irvine, California.

'It usually comes down to one reason. Typically the investor feels that what they are paying on the mortgage is less than what they can do with that money by investing it.

'It also depends on the time frame. If you look back in history, chances are that if you invested that money in a diversified portfolio over the course of a 30-year loan then you would very likely do better than the rate you are paying.

'If you are really, really wealthy, that's the game you play.'

Pagliarini – who handles celebrities, 'sudden wealth' people like big lottery winners, and retirees through his company Pacifica Wealth – said tax breaks don't often factor in super-rich home purchases, except if it is tied to a business.

'At the very wealthy level, there aren't really any tax advantages to having a mortgage. You can deduct against your tax first million dollars of home indebtedness. But at a very high level, that is not going to do anything for a person's tax life.

'The only other area of benefit would be if the property was being used in conjunction with a business. In that case, any sort of expense, whether it is mortgage interest or property taxes or otherwise, then it is a business expense. And you can use that to offset any business income.'

- Greg Woodfield

[Don Green] Libertarian Party chair says RFK Jr. nomination could be 'mutually beneficial'Ro...

Don Green — 3/7/2024 11:02:22 AM

Libertarian Party chair says RFK Jr. nomination could be 'mutually beneficial'Robert F. Kennedy Jr.'s independent presidential campaign is fighting for ballot access in all 50 states
March 7, 2024 7:10am EST

As independent presidential candidate Robert F. Kennedy Jr. fights for nationwide ballot access, the chief of the Libertarian Party said it would be wise for him to run on their ticket.

Angela McArdle, the chair of the Libertarian National Committee, made clear that no decision has been made about RFK Jr. joining the Libertarian Party's 2024 ticket. But she did say such a move could be "mutually beneficial" as the party seeks a candidate who could seal ballot access in all 50 states.

"I'm not allowed to actively recruit anyone for the presidential nomination," McArdle said in an interview on "The Hill on NewsNation." "I'm certainly friendly with his campaign, just like I am with all the other candidates' campaigns."

RFK JR'S CAMPAIGN SAYS HE HAS ENOUGH SIGNATURES TO GET ON BALLOT IN NEVADA

Robert F. Kennedy, Jr. hosts a fireside chat with rapper and producer Eric B. at The Gentleman's Factory on Feb. 18, 2024, in New York City. (John Nacion/Getty Images)

Kennedy has recently floated the idea of running for president as a Libertarian. His long-shot independent campaign against President Biden and former President Trump has only garnered enough signatures for ballot access in four states, and the Libertarian Party has a demonstrated track record of getting on the ballot in all 50 states in 2016 and 2020.

In an interview on CNN in January, Kennedy said he was "looking at" the option of running as a Libertarian, adding that he has a good relationship with the party. He spoke at the California Libertarian Party Convention last month, though he has not committed to joining the Libertarian presidential primary.

NIKKI HALEY TO DROP OUT OF 2024 RACE, ENDING CHALLENGE AGAINST TRUMP FOR GOP PRESIDENTIAL NOMINATION: SOURCES

A view of pamphlets handed out during Robert F. Kennedy, Jr.'s fireside chat with rapper and producer Eric B. at The Gentleman's Factory on Feb. 18, 2024, in New York City. (John Nacion/Getty Images)

McArdle said it would be wise for Kennedy to seek the Libertarian nomination, noting that the party has "the experience and the ground game" to get ballot access in all 50 states.

She said there is no current favorite for the Libertarian nomination "and that's not a knock against him. You know, we have a very ornery group of delegates. They're interested in finding the best, most principled messenger, someone who represents us ideologically. And, we also have a group of people who are very focused on ballot access. And of course, having Robert F. Kennedy Jr. as our candidate would absolutely seal ballot access for us. But it's not decided yet."

BIDEN CRUISES TOWARD LIKELY 2020 REMATCH — BUT SUFFERS DEFEAT TO LITTLE-KNOWN CANDIDATE

Pins and other merchandise in support of Independent presidential candidate Robert F. Kennedy Jr. on display during a voter rally at St. Cecilia Music Center on Feb. 10, 2024, in Grand Rapids, Michigan. (Emily Elconin/Getty Images)

McArdle acknowledged that RFK Jr. would not be a perfect ideological fit for the Libertarian Party, but said both sides have something to gain from his potential candidacy as a Libertarian.

"I think that if he became our nominee, there would be an understanding with us that he doesn't 100% represent us ideologically. He is getting ballot access by using our name and branding. And in return, we are securing ballot access for the future," she said.

[Don Green] I was always curious about this so I asked A.I. Bard ...

Don Green — 12/7/2023 11:45:43 AM

I was always curious about this so I asked A.I. Bard

How do companies like JG Wentworth work for someone who recently won a $25 million lottery and is considering the lottery annuity vs what JG Wentworth has to offer

Bard: Lottery Annuities vs. JG Wentworth: A Breakdown

For a lottery winner of $25 million, deciding between an annuity and JG Wentworth's offer involves understanding the pros and cons of each option. Here's a breakdown:

Lottery Annuity:

Pros:

Guaranteed income: You'll receive a steady stream of income over a set period, providing financial security.

Tax advantages: Depending on the structure, some annuity payments may be tax-deferred until you receive them.

Protection from bad financial decisions: Spreading the winnings over time can prevent hasty spending and encourage responsible financial planning.

Cons:

Less immediate access to funds: You won't receive the full $25 million upfront, limiting immediate spending power.

Potential for lower overall value: Inflation and market fluctuations can erode the value of future payments.

Limited flexibility: Making changes to the annuity payment structure can be difficult or costly.

JG Wentworth:

Pros:

Lump sum payment: You'll receive the entire $25 million upfront, allowing for immediate financial freedom.

Flexibility: You have complete control over the money, allowing for investments, debt repayment, or fulfilling other financial goals.

Potentially faster access to funds: The process of selling your lottery payments to JG Wentworth can be quicker than receiving annuity payments.

Cons:

Lower overall value: JG Wentworth will offer you a discounted amount for your future payments, meaning you'll receive less than the full $25 million.

Loss of guaranteed income: You lose the security of guaranteed income and become responsible for managing the funds responsibly.

Tax implications: You'll pay taxes on the entire lump sum in the year you receive it, potentially pushing you into a higher tax bracket.

Factors to Consider:

Financial goals: What are your financial priorities? Do you need immediate access to funds or prefer a guaranteed income stream?

Financial knowledge: Are you comfortable managing a large sum of money or prefer the security of an annuity?

Risk tolerance: How comfortable are you with the risk of potential lower returns from an annuity or losing control of the funds with JG Wentworth?

Tax implications: Consult a financial advisor to understand the tax implications of each option.

Additional Resources:

JG Wentworth: jgwentworth.com

National Lottery: national-lottery.co.uk

Financial Planning Association: financialplanningassociation.org

Ultimately, the best option depends on your individual circumstances and financial goals. Weigh the pros and cons of each option carefully and seek professional financial advice to make an informed decision.

Human: Any idea or estimate what JG Wentworth offer might be on the 25 million

Bard: Unfortunately, I cannot give you a precise estimate of JG Wentworth's offer on the $25 million lottery winnings. The exact amount they would offer depends on various factors, including:

The specific structure of the annuity: Annuities can vary in their terms and payouts, which will affect the value JG Wentworth is willing to pay.
Current interest rates: Lower interest rates generally lead to higher lump-sum offers from JG Wentworth.
JG Wentworth's internal pricing model: This model considers various factors like market conditions and their risk tolerance.

However, I can provide you with some general information that might help you estimate the potential offer:

JG Wentworth typically offers 40-60% of the present value of the future annuity payments.
Based on this range, for a $25 million annuity, JG Wentworth might offer between $10 million and $15 million.

Here's a table with some potential offers based on different present value percentages:

Present Value Percentage	JG Wentworth Offer
40%	$10 million
50%	$12.5 million
60%	$15 million

It's important to note that these are just estimates, and the actual offer may vary significantly.

Recommendation:

To get a more accurate estimate, it's best to contact JG Wentworth directly and provide them with the details of your specific annuity. They will be able to assess your situation and give you a personalized offer.

[Don Green] AMC Entertainment Holdings, Inc. vs Hedge FundsAMC Entertainment Holdings, Inc. ...

Don Green — 12/1/2023 9:39:59 AM

AMC Entertainment Holdings, Inc. vs Hedge FundsAMC Entertainment Holdings, Inc. Survives Hedge Funds Onslaught

SHIBUYA, TOKYO, JAPAN, November 30, 2023 / EINPresswire.com/ -- Another year moving forward meme stock darling NYSE:AMC (AMCE Entertainment Holdings, Inc.) survives Covi-d 19 pandemic aftermath, bankruptcy, and a full range onslaught of negative narrative articles from supporter of Hedge Funds to suppress AMC stock. AMC CEO Adam Aron unorthodox introduction of APE stocks and a recent reverse stock split strategy to keep the theater chain opened worldwide was a success.

Based on available public information, NYSE:AMC stock has been suppressed with naked shorting, millions of FTD’s not closed, ETF swaps, and public negative narratives from news articles supporting Hedge Funds.

Now with the United States SEC intervening with a new upcoming rule on transparency to stop stock manipulation from naked shorting, AMC and many other public traded companies will have a fair playing field in the stock market not abused by dark pool and spoofing. Presently, South Korea and Thailand has now banned “short selling”. Many companies went bankrupt due to not able to raise equity caused by naked shorting.

Hedge Funds liquidity has dried up with many worldwide Banks closing doors. Recently, AMC the company improved their fundamentals from movies coming out and Taylor Swift in theaters globally.

Now with RENAISSANCE: A FILM BY BEYONCÉ in December, new movies and distribution plans, AMC future earnings looks positive going into 2024 and years to come. Bankruptcy is no longer in the cards as AMC thrives with a new outlook in fundamentals. AMC Entertainment Holdings, Inc. vs Hedge Funds, who will win? Based on fundamentals, retail investors including SEC sees a MOASS coming, while Hedge Funds scramble with liquidity issues. Proof is that several Hedge Funds have closed, and many will be bankrupt by Banks being over leveraged.

????? looks forward in seeing Anime and Asian cultural movies in all AMC Theaters worldwide. Who knows maybe RED: Fate and Time Inseparable…A Promise could be seen in AMC Theaters. ????? and one of its future partners, Japan’s top powerhouse publication/entertainment company may discuss their titles distribution directly with AMC Entertainment Holding, Inc.? A proposal is in consideration and
????? look to expand future titles and collaboration with Asia entertainment companies.

Additional joint Japan business venture updates will be made available in future global press release as details acceptable to ????? and its affiliates.

This article contains forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results, specifically in the areas of future sales growth and profitability. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, the effect of government regulation, competition and other material risks.

Stock recommendations / Ad and comments presented on mafip.org are solely those of the stock quotes, third parties', and forum opinions. They do not represent the opinions of mafip.org on whether to buy, sell or hold shares of a particular stock. Investors should be cautious about any and all stock recommendations and should consider the source of any advice on stock selection. Various factors, including personal or corporate ownership, may influence or factor into a forum opinion. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

Mafip.org a private corporation holds no registered stock of the said affiliation.

[sjemmeri] 20 Most Common Investing Mistakes; I would put #19 first. steve

sjemmeri — 11/8/2023 8:45:31 AM

[Don Green] 20 Most Common Investing Mistakes [graphic]

Don Green — 11/7/2023 5:00:39 PM

20 Most Common Investing Mistakes

[Don Green] Why Does California Keep Winning Powerball Jackpots? [graphic] Key TakeawaysCa...

Don Green — 10/27/2023 11:13:11 AM

Why Does California Keep Winning Powerball Jackpots?

Key Takeaways

California players have won 5 of the 10 largest Powerball jackpots
Players in other states claim the lottery is rigged
Data proves California is no outlier

Powerball jackpots seem to be growing larger and larger each year. Its becoming a common occurrence for drawings to have over $1 billion jackpots up for grabs. Why is it that winnings tickets always seem to be from California?

As of this post, of the Top 10 largest Powerball jackpots EVER, five of the have been purchased in California!

Players across the internet are crying foul and claiming the drawings are rigged in favor of larger states like California. As your personal lottery expert, we’re here to put these conspiracies to rest and shed light on why players in California keep winning the Powerball jackpots.

The Infamous Delayed DrawingDuring the largest Powerball jackpot ever on November 7, 2022, the drawing was delayed because an “unnamed” state, at the time, needed to complete additional security protocols. That state was later revealed to be Minnesota and due to the massive jackpot at stake, required extra time to complete appropriate oversight.

Some internet chatter raised suspicions about the integrity of the lottery due to this delay, suggesting that it may be rigged in favor of larger states like California. While some skeptics on the internet have called the delay into question, it’s essential to clarify that such delays are not uncommon when dealing with such substantial jackpots. Maintaining the integrity and security of the draw is paramount, and every precaution is taken to ensure fairness.

We are fully supportive of delaying any drawing to ensure its done without even the slightest chance of manipulation. While many delays have occurred in drawings over the years, the size of this drawing drew added attention from very anxious players.

Debunking Lottery Rigging TheoriesConspiracies suggesting that lotteries are rigged in favor of certain states often make the rounds online. However, let’s put these notions to rest with some actual data.

California is the largest state by population and its residents love playing Powerball. We reviewed sales data for recent Powerball drawings and California accounted for around 15% of all the Powerball ticket sales. Of the 48 states and territories that play Powerball, most states make up 1% or less of all ticket sales.

California residents are holding a significantly higher number of tickets than residents of other states. Below is the the number of tickets sold for the October 11, 2023 jackpot of $1.7 billion. As you can see California makes up 14% of all sales and just 7 states make up 50% of all ticket sales.

Analyzing the Historical DataTo gain a deeper understanding of California’s Powerball success, we reviewed historical jackpot data dating back to 2013, spanning the last decade of Powerball drawings which mirrored when California joined Powerball. The results were interesting and put the California phenomenon into perspective.

One of the most telling findings from the data was the relationship between ticket sales and the number of jackpot wins in California. California consistently contributes around 14-15% of ticket sales and during the time it has been a member of Powerball, has claimed just 14% of the jackpots.

Of the 101 jackpot claims during that period, California players won 14 times. We reviewed the other top five winningest states and the number of California wins didn’t stick out like a sore thumb: Florida (11 wins), New Jersey (9 wins), New York (8 wins) and Tennessee (5 wins).

The Odds and ProbabilityThe fundamental truth about lotteries, such as Powerball, is they are games of chance. Powerball, in particular, has astronomical odds of winning the jackpot, with a odds of approximately 1 in 292 million.

Regardless of ticket sales or the size of a state’s population, the odds of winning remain constant from one ticket to another. California’s repeated jackpot wins are better attributed to the volume of ticket sales as opposed to nefarious manipulation.

ConclusionThe notion that players in California keep winning the Powerball jackpots due to favoritism or rigging is unfounded. In fact, if Powerball or any lottery were to lose the trust of its players due to manipulation, it would cause significant harm to the game and lotteries in general.

The data from the past decade of Powerball wins reveals a clear pattern: California’s percentage of ticket sales coincides with the number of jackpots wins. However, given the recent size of jackpots, greater attention has been given to these record breaking drawings. California’s string of luck can be attributed to the massive number of tickets purchased (and chances to win) versus any shady practices.

The next time you hear someone claim that the Powerball is rigged in favor of large states like California, remember that the lottery is governed by probability, not conspiracy. California’s success in the Powerball is simply a result of participation and the luck of the draw. As we continue to dream of hitting the jackpot, let’s celebrate the occasional Californian winner as hope we can be the next big winner ourselves.

[Don Green] AMC-APE Bet Has Handed 150% Gains — and 260% Losses — to Traders Bloomberg [gr...

Don Green — 7/29/2023 10:03:53 AM

AMC-APE Bet Has Handed 150% Gains — and 260% Losses — to Traders

Bloomberg

(Bloomberg) -- A seemingly sure-thing bet on AMC Entertainment Holdings Inc. shares has turned out to be anything but, as some traders appear to have more than doubled their money, while others lost over 250%, in just a few months.

The wide range of possible outcomes in the so-called arbitrage trade underscores a truism in these kinds of wagers: timing is everything. An analysis from data firm S3 Partners shows that simply shifting the start date of the trade by one month made the difference between losing nearly 200% — possible when leverage is involved — and gaining more than 100%.

AMC-APE Bet Possible Outcomes |
Investors in the trade are buying the company’s relatively cheap preferred shares, while selling the common shares short, betting that preferreds will be converted into ordinary stock. Over time, if AMC’s plan is successful, arbitrageurs could see profits.

But so far for hedge fund managers and other investors, this meme stock has offered a wild ride. The potential results vary so much in part because the gap between the securities in the trade has fluctuated wildly. And since traders have to finance their trade, the longer it lasts, the more they can lose.

“Some people think that when you do an arbitrage trade, you’re locked in and will have a profit,” said Ihor Dusaniwsky, managing director and head of predictive analytics at S3. “But you’re not locked in on financing costs, which are eating into your profits every day, even on weekends.”

AMC-APE Spread On a Wild Ride | Arbitrage trade mirred in borrow costs, legal saga
The analysis, which looked at trades made at the beginning of every month since AMC issued the preferreds last year, found returns ranging from a loss of about 260% to a gain of about 152%. Starting the trade on Feb. 1 could have resulted in losses of more than 190%, while a month later, the trade would have more than doubled investors’ money.

The trade stems from AMC’s status as a meme stock company. It sold common equity to retail investors to raise money for acquisitions. Then it reached the maximum number of shares that its corporate charter allowed it to issue, spurring it in August 2022 to create preferred stock that it called AMC Preferred Equity Units, or APEs.

It sold additional APEs as well, and then sought approval from both classes of investors to convert APEs into common stock. Some common share investors objected to the way that approval process was put together, and sued.

The company negotiated a settlement, which a Delaware judge rejected last week. Then AMC revised its plan, and investors are now hopeful that it will win approval to essentially convert preferreds into common. While originally each APE share was meant to convert into one share of AMC common stock, after the revised plan, the conversion will effectively be one APE share is equal to 0.882353 shares of AMC.

Racing Against TimeS3’s analysis assumed the trader was posting an average daily margin of 15% of the market value of both the long and short positions with their prime broker, recalculated daily to account for swings in asset prices, with variation margin added or subtracted. The profit or losses calculated were based on the assumption that the conversion happened on July 24, and also included borrowing costs.

Read more: AMC-APE Bet Looks Like Easy Money, But It’s Perilous for Traders

The timing for any conversion remains unclear, and the longer the process extends, the harder it will be for many investors to profit from the arbitrage. But some investors can make money even if they unwind now.

“In March, all these trades were profitable,” S3’s Dusaniwsky said. “It’s only later that a lot of these trades became unprofitable.”

[Don Green] Unusual Put Option Trade in AMC Entertainment Holdings Inc - (AMC) Worth $1,172....

Don Green — 7/18/2023 10:22:32 AM

Unusual Put Option Trade in AMC Entertainment Holdings Inc - (AMC) Worth $1,172.00KOn July 17, 2023 at 16:12:46 ET an unusually large $1,172.00K block of Put contracts in AMC Entertainment Holdings Inc - (AMC) was sold, with a strike price of $10.00 / share, expiring in 4 day(s) (on July 21, 2023). Fintel tracks all large options trades, and the premium spent on this trade was 8.56 sigmas above the mean, placing it in the 100.00th percentile of all recent large trades made in AMC options.

This trade was first picked up on Fintel's real time Options Flow tool, where unusual option trades are highlighted.

What is the Fund Sentiment?

There are 459 funds or institutions reporting positions in AMC Entertainment Holdings Inc -. This is a decrease of 16 owner(s) or 3.37% in the last quarter. Average portfolio weight of all funds dedicated to AMC is 0.15%, an increase of 87.12%. Total shares owned by institutions increased in the last three months by 3.74% to 139,073K shares. The put/call ratio of AMC is 1.70, indicating a bearish outlook.

For more in-depth coverage of AMC Entertainment Holdings Inc -, view the free, crowd-sourced company research report on Finpedia.Analyst Price Forecast Suggests 46.60% Downside

As of July 6, 2023, the average one-year price target for AMC Entertainment Holdings Inc - is 2.31. The forecasts range from a low of 0.50 to a high of $4.72. The average price target represents a decrease of 46.60% from its latest reported closing price of 4.33.

See our leaderboard of companies with the largest price target upside.

The projected annual revenue for AMC Entertainment Holdings Inc - is 4,784MM, an increase of 17.25%. The projected annual non-GAAP EPS is -0.38.

What are Other Shareholders Doing?

VTSMX - Vanguard Total Stock Market Index Fund Investor Shares holds 16,026K shares representing 3.09% ownership of the company. In it's prior filing, the firm reported owning 16,170K shares, representing a decrease of 0.90%. The firm increased its portfolio allocation in AMC by 12.65% over the last quarter.

NAESX - Vanguard Small-Cap Index Fund Investor Shares holds 13,548K shares representing 2.61% ownership of the company. In it's prior filing, the firm reported owning 13,699K shares, representing a decrease of 1.12%. The firm increased its portfolio allocation in AMC by 16.84% over the last quarter.

VISVX - Vanguard Small-Cap Value Index Fund Investor Shares holds 9,515K shares representing 1.83% ownership of the company. In it's prior filing, the firm reported owning 9,599K shares, representing a decrease of 0.88%. The firm increased its portfolio allocation in AMC by 21.53% over the last quarter.

VEXMX - Vanguard Extended Market Index Fund Investor Shares holds 7,193K shares representing 1.39% ownership of the company. In it's prior filing, the firm reported owning 7,112K shares, representing an increase of 1.12%. The firm increased its portfolio allocation in AMC by 17.64% over the last quarter.

Geode Capital Management holds 7,165K shares representing 1.38% ownership of the company. In it's prior filing, the firm reported owning 6,891K shares, representing an increase of 3.82%. The firm increased its portfolio allocation in AMC by 18.43% over the last quarter.

AMC Entertainment Holdings Background Information
(This description is provided by the company.)

AMC is the largest movie exhibition company in the United States, the largest in Europe and the largest throughout the world with approximately 1,000 theatres and 11,000 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying its Signature power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty and subscription programs, web site and mobile apps; offering premium large format experiences and playing a wide variety of content including the latest Hollywood releases and independent programming.

Key filings for this company:

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Amendment No. 1)This story originally appeared on Fintel.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

[Don Green] [youtube video] Why This Micro-Cap Company Is Targeting Naked Short Sellers Je...

Don Green — 7/13/2023 9:59:19 AM

Why This Micro-Cap Company Is Targeting Naked Short Sellers

Jeremy Frommer is an American financier and entrepreneur based in New Jersey. His career includes over two decades on Wall Street, working as a hedge fund and portfolio manager, and on the sell-side of the financial industry, building and selling two financial services companies. He is CEO of Jerrick Ventures

Micro-cap company Creatd has been taking steps to protect its shareholders from abusive trading practices such as naked short selling.According to the company's CEO Jeremy Frommer, naked short selling has become a toxic lending environment among micro-cap companies.Naked short selling has also been suspected in AMC and GameStop shares.

See also: Why AMC Stock Could Be A Ticking Time Bomb For Short Sellers At Current Levels

Why Creatd Is Going After Naked Short SellersCreatd ( CRTD) - Get Free Report is a holding company in the communication services industry that provides opportunities for brands and creators to multiply their impact across platforms, people, and technology.

The company, headed by Jeremy Frommer, has a market cap of $22 million and was recently delisted from the Nasdaq. Creatd failed to meet the exchange's minimum bid requirements because it trades below $1 per share. Currently, the company is traded on over-the-counter (OTC) markets.

Recently, Creatd drew the market's attention after an announcement that it would engage with market surveillance firm ShareIntel to protect its shareholders from naked short-selling activities.

ShareIntel uses a SAAS (software as a service) platform that provides public companies with access to shareholder position movement and settlement data.

According to Frommer, it's necessary to take a closer look if a company and its underlying stock are being targeted by illegal practices such as naked short selling. Furthermore, the CEO promises to escalate this topic to the top level in the financial markets.

"I intend on escalating this issue to the highest levels of the financial services industry to protect the integrity of the capital markets, especially the more vulnerable entrepreneurial, growth-oriented stocks," said Creatd's CEO.

Why Is Naked Short Selling a "Death Sentence"?During RHK Capital's recent Disruptive Growth Conference, Creatd CEO Jeremy Frommer spoke about the nefarious practice of naked short selling.

He mentioned that, from United Airlines ( UAL) - Get Free Report at the turn of the 21st century to GameStop ( GME) - Get Free Report and AMC Entertainment ( AMC) - Get Free Report more recently, the practice of naked short-selling has wiped out the reserves of many American workers.

“It has destroyed their pensions and eliminated their jobs from pilots to bag handlers to grocers, to technologists and scientists working for life-saving medication.”

Also, according to the CEO, the illegal trading practice is weakening the financial strength of the underlying companies. This has led to a toxic lending environment.

“Who pays the price? [Naked short selling] can be a death sentence for a company irrespective of the company's intrinsic value. I know that it nearly killed my company," Frommer said.

Finally, Frommer reiterated that it is almost 2023 and still no authority has addressed the issue. His criticism also said that in the last few years, what had been just an agreement between a few stock loan departments has become an "institutionalized technology-driving money-making machine."

“And it does not matter if they get fined millions or even a few billion. They are treated as line items. It’s just another cost of doing business.”

Naked Short Selling in GameStop and AMC StockGameStop and AMC investors have long urged greater transparency across the market. And with their holdings being allegedly directly harmed by practices such as naked short selling, it’s not hard to see why.

One of the indicators that raise suspicion of odd trading activities is the failure-to-deliver (FTD) data. FTD occurs when one of the parties fails to fulfill its obligations on the settlement date.

However, this metric is closely associated with naked short selling. This practice generates so-called "phantom shares" that don't exist, potentially harming the liquidity of a shorted asset and diluting its share price.

As can be seen in the chart below, throughout 2-22, GameStop's shares failed to deliver and had high peaks between May and August, surpassing the 1-million-share mark on certain trading days.

When looking at AMC's FTD data, the numbers are much higher than GameStop's. Throughout this year, failure to deliver exceeded 9 million shares in a single trading session in June, and several other times passed 1 million shares — until as recently as November. See below.

With such high FTD numbers in AMC stock, the huge community of "AMC apes" on Reddit believes that the cinema company's stock has been hurt by predatory short-selling practices, such as naked shorting.

In the middle of this year, AMC created the AMC Preferred Equity (APE) unit as a non-dilutive dividend. Their "main" purpose is to add value to AMC, but APEs can also serve as a kind of share count for the AMC's total shares.

APEs may shed light on the use of synthetic shares by AMC short sellers — as AMC CEO Adam Aron himself pointed out:

The Bottom LineNaked short selling is certainly a controversial subject. Some market participants see the practice as not harmful and believe that its prevalence has been exaggerated. Others see the practice as a confusing and harmful trading practice.

Yet none of the issues regarding naked short selling in stocks like AMC, GameStop, and micro-cap stocks have been either confirmed or clarified by authorities.

However, the U.S. Securities and Exchange Commission (SEC) has announced a proposal for one of the most significant market structure reorders in recent years. The proposal involves improving the competition between market makers and payment-per-order flow practices.

Recently, market-making companies like Citadel Securities have been the subject of a lawsuit by biotechnology company Northwest Biotherapeutics ( NWBO) for allegedly illegal trading practices such as spoofing. Spoofing is a manipulative practice in which a trader issues an order but then cancels it before it is executed.

Events like the meme craze have helped bring more public interest regarding trading structure. This is a good thing, because it's pushing authorities to take a closer look at these issues and hopefully provide more clarity as soon as possible.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

[Don Green] Hedge funds are using ChatGPT to do all their mundane grunt work usually relegat...

Don Green — 6/4/2023 10:45:11 PM

Hedge funds are using ChatGPT to do all their mundane grunt work usually relegated to junior staffers

Fortune

The latest artificial-intelligence hype is powering a massive surge in the stock market on bets that a new era of innovation is nigh.

Yet for money managers who weaponize computing advances for an investing edge, the era of ChatGPT holds a less lofty promise for now: Automating the grunt work.

So-called generative AI is already helping to speed up mundane tasks known to crush the spirit of junior Wall Street employees, hedge funds say — from reviewing reams of market research to writing basic code and summarizing fund performance.

Chatbots could eventually help generate material efficiency gains and provide more rewarding work for their human overlords, possibly at the cost of jobs. But it’s early days yet.

At systematic hedge fund Campbell & Co., its quants have spent months experimenting with using the tech behind ChatGPT to summarize internal research and write boilerplate code. Yet generative AI tools are proving no game-changer for their day-to-day investing methods, just yet.

“They are very strong for code completion, editing, finding errors and fixing bugs,” said Kevin Cole, chief executive officer at Campbell. “Our model would keep humans in the loop — an assistant to the human helping to make their job more efficient.”

AI on Wall Street is a broad church that includes everything from machine-learning algorithms used to compute credit risks to natural language processing tools that scan the news for trading. Generative AI, the latest buzzword exemplified by OpenAI’s chatbot, can follow instructions and create new text, images or other content after being trained on massive amounts of inputs. The idea is that if the machine reads enough finance, it could plausibly price an option, build a portfolio or parse a corporate news headline.

As hedge funds experiment with the latest iterations of these tools, the ultimate goal is improving investing performance. For now, boosting productivity — accelerating coding, research and client communications — is the most obvious benefit. It’s why the likes of Citadel’s Ken Griffin said in March the firm is negotiating an enterprise-wide license to use ChatGPT, betting that it will automate an “enormous amount of work.”

At Man Group, one of the world’s largest hedge funds, Rob Furdak says ChatGPT can speed up the preliminary parts of research by reviewing a stack of academic papers on a particular topic and detecting basic patterns in data sets.

“A big part of the research process is cleaning the data, mapping it and then doing a preliminary analysis,” said the chief investment officer for responsible investment. “ChatGPT could say ‘that’s an interesting hypothesis, but here are other hypotheses you may want to investigate as well.’”

The firm is also looking into automating the grunt work of investor relations, he said, since ChatGPT can easily explain performance by synthesizing market data and fund returns.

Wall Street, of course, is already famously filled with computer wizards that populate algo trading desks, quant hedge funds and high-frequency market makers, and to them, ChatGPT’s capabilities might not seem that new. The current frenzy has arguably been fueled as much by the sudden widespread availability of the tool as any advances in what generative AI actually does.

Still, early studies suggest the chatbot does represent some steps forward. For instance, Fed researchers found it beats existing models such as Google’s BERT in classifying sentences in the central bank’s statements as dovish or hawkish.

A paper from the University of Chicago showed ChatGPT can distill bloated corporate disclosures into their essence in a way that explains the subsequent stock reaction. Academics have also suggested it can come up with research ideas, design studies and possibly even decide what to invest in.

Peter Cotton, chief data scientist at Intech Investment Management, is among recent converts after testing the robot himself. He posted on Github a conversation he had with ChatGPT, where he used it to write code for extracting data and making predictions.

“My whole workflow has been dramatically changed,” he said. “I’m surprised by just how much knowledge is stored inside.”

The technology isn’t perfect, however. ChatGPT has been known to make up facts and spit out different responses to the same prompt, and is only trained on data up to late 2021. Meanwhile, in an industry where trade secrets are anxiously guarded, many are still hesitant about relying on external software.

For that reason, Campbell has also experimented with an open-source and less powerful GPT model that it can run entirely within its own systems, said CEO Cole.

“We have to be very careful about risks of IP leakage with those types of tools because with ChatGPT, you’re sending queries to OpenAI servers,” he said.

While hedge funds figure out what’s possible with generative AI, the consequences for the industry’s human workforce remain undecided for now.

Greg Bond, chief executive officer of Man Numeric, Man Group’s Boston-based unit, reckons the tech could be an opportunity for creative employees who lack technical expertise but can ask the right questions.

“If we assume research productivity is dropping more globally, you can either hire more people or you could have some digital researchers that are a force multiplier on your existing research and technology staff,” Bond said. “Ultimately what would be nice is if we could automate the innovation process itself.”

[Don Green] A 24-year-old stock trader who made over $8 million in 2 years shares the 4 indi...

Don Green — 6/1/2023 9:29:31 AM

A 24-year-old stock trader who made over $8 million in 2 years shares the 4 indicators he uses as his guides to buy and sell

May 23,2023

Jack Kellogg, stock traderJack Kellogg
One of Jack Kellogg's main indicators is the volume-weighted average price (VWAP).

This shows the average price paid for shares and helps him gauge sentiment.

He only uses indicators as a t=rough guide but never trades solely on them, he noted.

Jack Kellogg began trading stocks right out of high school in 2017.

Five years into his craft, he has already been exposed to various types of market conditions, including the stock market crash of 2020, the raging bull rallies of 2021, and the bear market of 2022. One thing he has learned through it all is to keep things simple and remain flexible.

"There's this acronym: KISS, keep it simple stupid. I don't think people need super fancy indicators to make money trading. I'm just using basic trend lines, support, resistance, volume, and those are all my indicators," Kellogg said. "I think if you overcomplicate the indicators, it will actually throw off your trading because then you're trading more on the indicators than the actual price action."

This attitude has allowed him to become a versatile trader who takes both long and short positions when appropriate, which helped him to continue trading throughout the bear market of 2022. His tax returns, viewed by Insider, showed that he reported over $8 million in gains from day trading in 2020 and 2021. His returns gained momentum in 2020 when he had a total income of $1.6 million. In 2021, that amount grew to a total income of $6.5 million.

Kellogg has come a long way since starting off with $7,500 which is what he initially deposited when he started trading. His road to success wasn't a straight line. When he first attempted to trade, he was down a few hundred dollars. This led him to realize that he didn't know what he was doing.

So his next moves included switching off real trading and testing his skills through paper trading. Then, he signed up for an online course his parents helped pay for. The program, which was created by Timothy Sykes, a trading teacher and former penny-stock trader known for claiming to flip his bar mitzvah cash gift into over $1 million in gains, helped him develop the skills and patience he then used to craft his skill.

By the time the stock market began to rally hard in 2020, he was ready to ride the upwards wave. In 2022, when the market slowed, he continued to reel in profits by betting on popular stocks like Bed Bath and Beyond (BBBY) and AMC (AMC), the latter of which banked him $60,000, according to a screenshot of his E-Trade brokerage account. He also traded a few small-cap stocks and saw large wins on single trades like Intelligent Living Application Group Inc. (ILAG) which earned him over $91,000, according to screenshots of his Guardian account.

His top 4 indicators The first indicator he uses as a sentiment guide is the volume-weighted average price (VWAP), which shows the average price paid for shares through all trading adjusted for volume. He uses it on the daily chart as a guide to determine a good buy-in price for the stock he's trading. This keeps him from being a chaser, the term popularly used for those who enter a position too late or after a stock begins to rally.

If the goal is to buy low and sell high, you don't want to pay more than what the average buyer paid, he noted. Therefore, Kellogg won't enter a position if the price is above the VWAP line. The opposite is true if he's shorting a stock: if the price is beneath the VWAP, he generally won't short the stock.

Oftentimes, he'll use this indicator to also determine when to exit his position because that point can sometimes indicate where a stock's price will begin to drop off. The same is also true in reverse: he'll sometimes use the VWAP to determine the price point where he'll cover his position. Therefore, if he shorted a stock at $9 and the VWAP is at $7.50, he'll use that price as a point to lock in profits.

For example, on January 5, he took a short position on ticker AMTD at $2.50. VWAP's center line was trending at around $2.22. So Kellogg covered his position at $2.25 and made a 10% profit.

The next indicator is linear regression, which shows the direction price is trending and when it may change its direction. They are three lines that overlay the candles. The lower and upper lines are the ranges of price movements or volatility, while the center line indicates the average between the two. Price action above the top line signals an overbought stock, and below the bottom line, an oversold stock.

"So the better a stock is respecting the lines of the channel that's created, the more predictable I think the stock's going to be," Kellogg said. This gives him a better sense that the stock's price action will trend according to his thesis.

The next indicator is volume which shows the number of shares being traded at any moment in time. Kellogg mainly uses volume as a potential indicator that a stock may reverse.

"Seeing big volume go through, I know that potentially a lot of people are on the wrong side. So if a big volume spike goes through near the high of the day, it's possible that a lot of people are buying the stock and a lot of people are chasing," Kellogg said.

Finally, he keeps his eye on the support and resistance lines, the former being where the price tends to hold and the latter where it tends to sell off. The levels change throughout the day. Kellogg tries to find the key levels by looking for a parallel increase in volume in those areas. He also pays attention to how many times and for how long a price level holds to determine how strong that point is. While it's not an exact science, general areas where the price hoovers for 30 minutes to an hour are the strongest, he said.

"Eventually, you'll see a bouncing ball-type price action if the stock is going to go lower," Kellogg said. "So you see it bounce from $7 to $8, then bounce again from $7.30 to $7.50, and then bounce from $7.40 to $7.10, then bounce from $7.20 and eventually cracks the support below $7. And then the question is, is it going to create a resistance level at $7 and continue to head lower?"

At the end of the day, price action is king, Kellogg noted. Even if you have a thesis about why a stock's price can move in a certain direction, if the price is moving differently, you need to cut losses.

"I don't ever just base my entire decision off an indicator. So if an indicator isn't agreeing with the trade thesis, then I simply will cut my losses," Kellogg said. "So I've never ever blamed any of my losses ever on an indicator because I don't let it get to that point. If the price action is continuing down, then I will cut my losses or if the price action is continuing up, then I'll cover my short positioning."

Everyone has access and can view the same data — it's really about what you do with that data, he said. Where most traders struggle is with the psychology of trading. You can have the best strategy and indicators, but if you don't have the discipline to stick to it, then you will constantly find yourself in a bad situation. Most people don't put in enough effort to master their emotions, he said.

[Don Green] Unusual Put Option Trade in AMC Entertainment Holdings (AMC) Worth $940.00K On ...

Don Green — 4/8/2023 8:54:05 AM

Unusual Put Option Trade in AMC Entertainment Holdings (AMC) Worth $940.00K

On April 6, 2023 at 14:53:32 ET an unusually large $940.00K block of Put contracts in AMC Entertainment Holdings (AMC) was sold, with a strike price of $13.00 / share, expiring in 43 days (on May 19, 2023). Fintel tracks all large options trades, and the premium spent on this trade was 5.49 sigmas above the mean, placing it in the 100.00 percentile of all recent large trades made in AMC options.

This trade was first picked up on Fintel's real time Unusual Option Trades tool, where unusual option trades are highlighted.

Analyst Price Forecast Suggests 43.11% Downside

As of April 6, 2023, the average one-year price target for AMC Entertainment Holdings is $2.30. The forecasts range from a low of $0.50 to a high of $4.72. The average price target represents a decrease of 43.11% from its latest reported closing price of $4.05.

See our leaderboard of companies with the largest price target upside.

The projected annual revenue for AMC Entertainment Holdings is $4,784MM, an increase of 22.31%. The projected annual non-GAAP EPS is -$0.38.

What is the Fund Sentiment?

There are 470 funds or institutions reporting positions in AMC Entertainment Holdings. This is a decrease of 39 owner(s) or 7.66% in the last quarter. Average portfolio weight of all funds dedicated to AMC is 0.05%, a decrease of 35.36%. Total shares owned by institutions decreased in the last three months by 3.78% to 134,110K shares. The put/call ratio of AMC is 1.52, indicating a bearish outlook.

What are Large Shareholders Doing?

VTSMX - Vanguard Total Stock Market Index Fund Investor Shares holds 16,170K shares representing 3.11% ownership of the company. In it's prior filing, the firm reported owning 15,513K shares, representing an increase of 4.06%. The firm decreased its portfolio allocation in AMC by 43.79% over the last quarter.

NAESX - Vanguard Small-Cap Index Fund Investor Shares holds 13,699K shares representing 2.64% ownership of the company. In it's prior filing, the firm reported owning 13,122K shares, representing an increase of 4.21%. The firm decreased its portfolio allocation in AMC by 43.56% over the last quarter.

VISVX - Vanguard Small-Cap Value Index Fund Investor Shares holds 9,599K shares representing 1.85% ownership of the company. In it's prior filing, the firm reported owning 8,957K shares, representing an increase of 6.69%. The firm decreased its portfolio allocation in AMC by 45.03% over the last quarter.

VEXMX - Vanguard Extended Market Index Fund Investor Shares holds 7,112K shares representing 1.37% ownership of the company. In it's prior filing, the firm reported owning 6,947K shares, representing an increase of 2.31%. The firm decreased its portfolio allocation in AMC by 42.39% over the last quarter.

Geode Capital Management holds 6,891K shares representing 1.33% ownership of the company. In it's prior filing, the firm reported owning 6,843K shares, representing an increase of 0.70%. The firm decreased its portfolio allocation in AMC by 45.55% over the last quarter.

AMC Entertainment Holdings Background Information
(This description is provided by the company.)

AMC is the largest movie exhibition company in the United States, the largest in Europe and the largest throughout the world with approximately 1,000 theatres and 11,000 screens across the globe. AMC has propelled innovation in the exhibition industry by: deploying its Signature power-recliner seats; delivering enhanced food and beverage choices; generating greater guest engagement through its loyalty and subscription programs, web site and mobile apps; offering premium large format experiences and playing a wide variety of content including the latest Hollywood releases and independent programming.

This story originally appeared on Fintel.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

[Don Green] AMC’s APE-conversion settlement could lead to ‘potentially massive’ $16 billion ...

Don Green — 4/5/2023 5:38:28 PM

AMC’s APE-conversion settlement could lead to ‘potentially massive’ $16 billion equity raise, says analyst

The stock conversion is part of AMC’s ongoing battle to eliminate debt

AMC’s APE-conversion settlement paves the way for a huge equity raise that could bring in as much as $16 billion.(MarketWatch photo illustration/Everett Collection)

AMC’s APE-conversion settlement paves the way for a huge equity raise that could bring in as much as $16 billion, according to B. Riley Securities analyst Eric Wold.

Wold said that the settlement clears the decks for a “potentially massive” equity raise. “Should the conversion of APE units to AMC common shares be permitted to proceed — along with the increase in authorized common shares and 1-for-10 reverse stock split — we continue to see a positive path for the company to raise significant amounts of capital,” he wrote in a note released Tuesday.

Related: AMC stock plunges 22% after company agrees to settlement terms, opening up for APE conversion

“At the recent trading price of AMC shares (accounting for the after-market performance on Monday), this would indicate the potential for as much as $16 [billion] in equity to be raised by the company,” Wold added.

AMC’s stock plummeted 23.7% before market open Tuesday, while the APEs rose 16.9%. AMC shares ended Monday’s session up 2%, or 79.9% off its 52 week high, FactSet data show. The APEs ended Monday’s session up 0.7%.

The movie-theater company’s total aggregate principal debt was $4.9 billion at the end of 2022, down from $5.2 billion at the end of 2021.

Also see: AMC shareholders approve APE conversion in ‘landslide victory’ but stock tumbles

Last month, AMC shareholders voted in support of the company’s proposal to convert AMC Preferred Equity units into shares of common stock in what the company’s CEO Adam Aron described as a “landslide victory.”

“Although we had felt it would be difficult for the judge to rule against the validity of this vote given the overwhelming support of stockholders, this now seems to be a moot point with the binding settlement announcement,” Wold wrote. “While we maintain our Neutral rating and $4.50 [price target] until final approval is granted and the conversion occurs, we still expect the prices of APEs and AMC shares to converge.”

AMC describes itself as the largest movie-theater company in the world, with approximately 950 theaters and 10,500 screens across the globe.

Related: AMC ‘positioned really well’ for 2023, says Wedbush

Over the past two years, AMC has been on a roller-coaster ride that took it from beleaguered pandemic victim to meme-stock phenomenon. AMC’s stock has risen 25.6% in 2023, outpacing the S&P 500’s SPX, -0.25% 7.4% gain, while the APEs have risen 5%.

Of eight analysts surveyed by FactSet, three have a hold rating and five have a sell rating for AMC.

Additional reporting by Claudia Assis.

[Don Green] I am retired Navy So I find this very interesting and a Lesson Learned Reinfor...

Don Green — 3/28/2023 7:50:52 AM

I am retired Navy So I find this very interesting and a Lesson Learned

Reinforce the Navy Reserve

Sailors man the rails as the USS Ronald Reagan departs for Yokosuka, Japan, from Naval Station North Island in San Diego, Calif., August 31, 2015. (Mike Blake/Reuters)none

All Our Opinion in Your InboxNR Daily is delivered right to you every afternoon. No charge.

“It is not that life ashore is distasteful to me. But life at sea is better.” —Sir Francis Drake

Here’s what we know: The Navy is as valuable in peacetime as it is in wartime. Were it not for our forces afloat, the seas would be significantly more at risk from the predations of piracy, as well as endangered by rogue states. The stolid presence of American warships is the guarantor of international sea lanes by which the world’s poorest are supplied the means of economic advancement and by which the world’s wealthiest nations develop their life-bettering technologies. From the South China Sea to the Suez and Panama Canals, vessels bearing the designation “USS” protect the goods necessary for energy, nourishment, and shelter.

Here’s another thing we know, having been reported almost everywhere: The market has rarely been tougher for military recruiting. When the Navy reports that it cannot find enough new sailors to replenish its annual losses, it is an international trade concern just as it is an American defense concern. An arrogant assertion? No, it is the unvarnished truth. There exists no force on earth that can secure the sea lanes if our Navy is allowed to atrophy — and the atrophy would be self-inflicted by rigid bureaucracy.

To take Drake’s remark a step further, life at sea should be the keel upon which the modern Navy’s retention lies. A sailor on land, in the shipyard, or at a mustering depot is a body that can be better used aboard the nation’s seagoing vessels. Be he mopping, working an underway replenishment, or filling one of the multitudinous roles required to maintain the vessel’s mission readiness, it should be a priority to see the young seaman detached from anything other than deployments and preparing ships to deploy. But what to do when fresh sailors are getting hard to come by?

Last year, to make up for its recruitment gap, the Navy dipped into its delayed-entrant savings account. Consequently, there’s no longer a fund of pending recruits to draw from. If young Americans are both less inclined to serve as well as less qualified — just 23 percent are qualified today, and not even 10 percentare inclined to join up in the first place — then we must look elsewhere for those who would take up a seabag and cross the ship’s brow.

If not new bodies, then what about Certified Pre-Owned? We should recruit the already recruited, some 48,000 of them, the young veteran sailors in our schools and workplaces — and it would be easier than one might think. As any salesman will tell you, a repeat sale is easier than a cold call.

Right now, when a sailor leaves the service, he’s gone. He’s made the excruciating decision to leave his shipmates, attend separation classes, and finally walk himself outside the gates of the naval base with nothing but a DD-214, a few tattoos he didn’t have at 18, and, for some, a void of purpose. For many, this void is an opportunity, but it is nonetheless novel and terrifying. There’s no easy way back aboard, though he’s more qualified than anyone driving past him.

Separating requires hardening one’s heart against the appeals of senior leadership to stay, so it’s unlikely he’s ready to return. But a year later? When he’s meeting up at a bar in Greater Milwaukee with other guys he served with, and they get to talking about their time, isn’t there a part of him that wishes, as they do, that he could go back for just a while longer? Almost always, yes.

But to return to the service often requires as much or more work than his original enlistment, and he doesn’t want to go through a year of paperwork just to get orders to a ship in the yards, where he’ll be for four years — he wants to sail. He wants to fly to Oahu and step aboard a ship the day it points its bow westward under steam.

Here is an opportunity: We should seek out experienced separated sailors and offer them temporary positions back aboard soon-to-be-deployed vessels the sailing of which depends on men with their qualifications. Additionally, we should reformat the reserves to make continued deployments possible without unnecessary mustering and rigamarole.

First, the hard numbers. When a sailor enlists, he signs up for eight years in the Individual Ready Reserve (IRR) as an addendum to his active-duty contract (i.e., the timer for the inactive obligation starts counting down the second he’s sworn into the service). Additionally, a recruit often receives a “secret” security clearance that lasts for ten years; without the clearance, a sailor is essentially unable to serve on a ship. For simplicity’s sake, let’s assume neither of these numbers is adjustable. Whether a sailor has a four-year enlistment or extends it to six or eight, he has the inactive obligation and the benefit of a decade under a security clearance.

It would benefit the Navy to keep sailors on retainer even after an active enlistment ends. If I had my druthers, the process would be as simple as the engineering officer getting the captain’s approval (a captain who needs to meet certain minimums for viability to deploy), then picking up his phone and asking his former sailors if they’d be willing to come back for a cruise. If a former sailor said yes, the JAG — a Navy lawyer — would send over a contract that reenlisted the refrigeration mechanic for nine months, with the understanding that the deployment could be extended. The sailor would report to an existing Military Entrance Processing Station (MEPS) and go through the normal medical lookover. He’d then be handed a ticket and jet off to meet the ship. After a successful deployment, the sailor would receive a completion bonus and return to whatever else he had going on in his life. (More practically, an anodyne call from the chief engineer urging a former sailor to report to MEPS to hear about an opportunity seems like a more OPSEC-friendly version, though lacking in dramatic satisfaction.)

Simple as that.

The former sailor already knows ship life, the Navy’s expectations, and how to manage a watch rotation and maintenance. It takes two years to get a recruit past the NUB (non-useful body) stage (boot camp then schooling then on-board qualifications); it’d take two days to get a former sailor back into the routine. When old salts rode along on Tiger cruises — an opportunity for civilians to ride a ship home from Hawaii to homeport with an active sailor they know — it was easy to pick them out because they knew how to move around the ship and speak the language. The only difference was that the salts were grayer, happier versions of active-duty sailors.

But I’m not talking about bringing back retirees for a glory cruise. No, we have tens of thousands of sailors leaving the service every year who are of sound body and mind, most of them still in their twenties, who don’t want to do the Navy full-time or put up with the imposition of Selected Reserve (SELRES) — the type of reserves that have monthly drilling musters and other superfluous obligations.

Most return sailors would be junior enlisted — the labor force of the ship. We could have used an extra couple of watch standers on every deployment I was a part of, but I never did see a reservist slotted in to that or any other position needed before deployments. Having to switch to a twelve- from an eight-hour shift because someone was busted for drugs or got pregnant weeks before deployment was . . . frustrating. Frustrating because we knew no one was coming to fill that gap, so we should all get used to less sleep. Please know, however, that officers in the reserves inform me that a recent policy shift looks to improve this relationship. Sailors in high-demand rates (jobs) — such as a fire controlman with an AEGIS specialty — retain that title when joining the active reserves. Also, there’s now a portal where active reservists can apply for billets on ships in need of certain qualifications.

Consider the secondary advantages of more fluid hiring practices. The Navy would clean out some of the ranks of reluctant lifers who are leery of returning to the civilian world. If sailors knew the door wasn’t slamming behind them and so were less afraid of going forth, I have to think that some of the nastier culture issues in the service might dissipate with the pressure relief of a door left ajar. People who feel trapped are rarely generous or fun to work with — we all served with an E-6 like this at some point.

Then the financial incentives. On one hand, the Navy would be paying for the part of a ship’s cycle that gets the best return — the deployment phase — instead of offering huge reenlistment bonuses to sailors leaving for shore duty or for a ship welded to a pier. For many sailor-turned-civilian-turned-sailors who are hard-up in their civilian lives, the opportunity to stash away cash would be welcome and, with the move away from the pension system, would allow former sailors to avail themselves of the Thrift Saving Plan (the pension’s replacement) for a protracted period to ensure a more secure retirement.

Here’s what I know: The Navy needs sailors, and it doesn’t look like they’ll be streaming into recruiting offices. I offer my suggestion as a way for the most vital branch of the military to quickly rectify a deficit, improve the mission readiness of the fleet, and allow captains to efficiently man their ships without having to beg a detailer for the impossible. We have built into an enlisted man’s contract the structure for eight to ten years of at least sporadic assistance. Rather than allow qualified individuals to disappear, we should call them back for the things that matter most. With 90,000 sailors between IRR and SELRES, we have the bodies. Let’s make it as seamless as possible to get them where we need them to be.

Sailors will forever wish to sail. Let them.

[Don Green] What Does AMC Stock Have to Do With the Collapse of Credit Suisse?Not so long ag...

Don Green — 3/24/2023 5:27:11 PM

What Does AMC Stock Have to Do With the Collapse of Credit Suisse?Not so long ago, Credit Suisse predicted that AMC shares would reach less than a dollar per share. However, the tables have turned. Here's what you need to know.
Mar 23, 2023 8:48 AM EDT
Swiss bank Credit Suisse collapsed over the weekend and will now be acquired at a discount by rival UBS.Credit Suisse analysts had rated AMC shares as a "sell" and expected the stock to reach below $1.Credit Suisse's chairman blames social media and retail investors for the swift downfall of the bank.
Figure 1: What Does AMC Stock Have to Do With the Collapse of Credit Suisse?

Getty Images

Read also: GameStop (GME) Reports A Profit, Stock Goes Bananas. Short Sellers In Panic

What Happened to Credit Suisse?Over the weekend, Switzerland-based financial giant Credit Suisse ( CS) - Get Free Report collapsed. Shares of the bank are now worth less than $1.

But Credit Suisse's problems were no new development. The bank had struggled with financial losses, mismanagement, scandals, and liquidity concerns for years.

In 2021, Credit Suisse was one of the banks involved in the Archegos Capital Management scandal, which caused it $4.7 billion in losses.

Credit Suisse was also the lead investor in the failed Greensill Capital two years ago and was involved in an espionage scandal five years ago, along with other troubles.

Now rival Swiss bank UBS ( UBS) - Get Free Report is set to acquire Credit Suisse at a hefty discount.

What Credit Suisse's Chairman SaidThis week, Credit Suisse chairman Axel Lehmann was asked about the reasons behind the bank's collapse. His answer was surprising.

According to Lehmann, not only had the bank been overcome by risk, but it was also affected by an outdated business model.

He pointed out that the bank's customers had been loyal for quite a long time. However, since last autumn, a social media storm has targeted Credit Suisse, shaking the confidence of its investors.

Fox Business journalist Charles Payne tweeted that Lehmann deserves to be nominated for "Clown A$$ of the Year" for that statement:

When Credit Suisse Poked the Apes Last October, Credit Suisse joined the AMC Entertainment ( AMC) - Get Free Report bears. The bank's analysts rated the theater chain as a "sell" and forecast a price target of 95 cents.

Credit Suisse's main problem with AMC was the company's lack of profitability. According to Credit Suisse, even if attendance levels were to return to pre-pandemic levels, AMC would still need to see healthy returns on its balance sheet.

Apparently, the Swiss bank wasn't counting on this happening.

Credit Suisse's position on AMC has been interpreted by many individual investors as a case of the pot calling the kettle black. At the time, Credit Suisse itself was worth less than $4 per share and was already showing signs of approaching penny-stock levels.

With Credit Suisse's business already in turmoil, many in the market started to question its survival.

Investors began to turn their attention toward the rapid decline of Credit Suisse and, of course, its potential spillover effects.

The bank reported steadily decreasing revenues, losses from its Russian business, and also litigation costs. This forced the bank to drastically reduce its headcount at the end of last year.

Today Credit Suisse shares are worth less than $1, while AMC's stock trades for nearly $5 per share.

The Bottom LineThe collapse of Credit Suisse didn't happen overnight, nor did it have only one cause. There was an accumulation of factors that had already been weighing on the bank's outdated business model — along with many bad strategic decisions over the past years.

Perhaps the final blow came when retail investors on social media platforms scrutinized Credit Suisse's reputation. This possibly impacted the abrupt collapse of its share price.

AMC and GameStop ( GME) - Get Free Report are the most-talked-about stocks on social media sites like Reddit. Socially mobilized retail investors — also known as the "Apes" — believe that banks and institutional investors are the enemies of individual investors due to their unequal trading structures.

So it's not hard to understand why many retail investors root against financial institutions like Credit Suisse.

Even last October, when the social media storm hit Credit Suisse shares hard, company executives issued a memo telling employees not to confuse stock performance with the bank's capital strength and liquidity.

Since 2021, we've probably seen the most speculative stock market in history. The negative exposure of Credit Suisse on social media was just the icing on the cake.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

[Don Green] Equities Execution in Focus GlobalTradingMarch 2, 2023 With Katherine Chairez, H...

Don Green — 3/3/2023 8:19:18 AM

Equities Execution in Focus
GlobalTradingMarch 2, 2023
With Katherine Chairez, Head of Execution Strategy, Harris Associates

Briefly outline your career background and current role/responsibilities at Harris Associates.

I spent the first 11 years of my career on the sell side in financial engineering and execution consulting roles at Goldman Sachs and then Citadel Securities in New York. From there, I moved to the buy side with UBS Asset Management in Chicago, where over four years I focused on trading strategy and analytics and eventually headed the Americas equity trading desk.

I currently serve as the head of execution strategy at Harris Associates, a role I’ve held for the past four years. In this role, I am responsible for best execution initiatives across global equities with a focus on algorithmic trading, automation and strategy selection.

How has the execution landscape evolved over the course of your career?

When I entered the electronic trading space in 2005, dark pools had not yet reached prominence in the U.S. During that time, algorithm utilization, when it occurred, was often confined to primitive volume-weighted average price, time-weighted average price and percentage of volume strategies.

With the emergence of dark pools and fragmentation, so too emerged a second generation of liquidity seeking algorithms. Child order placement was no longer just about size, time and price, but also venue.

Advancements in technology gave way to further innovation—new order types, new venue types, etc.—and speed became a differentiator.

Along the way, as the landscape became more complex, electronic solutions became even more essential.

How has Harris’ execution strategy adapted to such changes in the execution landscape?

The ability to navigate a constantly changing landscape is critical to an effective execution strategy. Necessarily, the way Harris executes today looks very different compared to even just five years ago.

For example, with more volume shifting toward the close in the U.S., we have pivoted to incorporate imbalance feeds, utilize better auction estimates and leverage D-Quote flexibility.

In Europe, where we have seen periodic auctions, LIS venues, SIs and MTFs exhibit statistically different markouts, we have focused on curating an appropriate liquidity experience for various segments of our flow.

Overall, as we have worked with our brokers to develop custom algorithmic strategies that align with our various order segments, we have shifted to a higher proportion of low touch trading.

What allows Harris to manage execution so well?

We run a very efficient team at Harris. From trading to analytics to execution strategy, and including our support teams and technology stack throughout, we are aligned on our trading philosophy and approach across more than 30 markets.

Because we run lean, we are also very nimble. We are able to adapt quickly to improvement opportunities that crop up over time. Oftentimes, we are the first client to approach a broker to request a given feature.

We maintain frequent interactions with our brokers around the globe so that we can supplement our observations at Harris with what they see more broadly. These collective findings often motivate new initiatives and collaborations, such as new algorithm features or strategies, that we pursue on our path of continuous improvement.

Finally, we have the full support and trust of our portfolio managers, which allows us to pursue the initiatives that we think will be most meaningful for our clients.

How have objectives around execution strategy changed?

While the landscape has changed considerably over time, the name of the game has remained the same: liquidity. The challenge, though, is not about separating good liquidity from bad, as some believe. The challenge is in understanding one’s own liquidity needs, discerning the goals of would-be counterparties, and ascertaining how and when those interests should intersect. In my opinion, firms that can do these three things well are serving their clients well.

How do you measure the effectiveness of your execution strategy?

We utilize structured A/B experiments to observe the effectiveness of a given test strategy versus the status quo. Harris uses impact-adjusted arrival price as our primary benchmark for measuring trading costs. We also consider other factors and data points, such as volume-weighted average price, participation-weighted price, reversion and liquidity capture, for additional insights on execution quality.

How do you see execution strategy needs changing in the future?

I think we’ll continue to see a trend toward more consistency and transparency around best execution oversight, which hopefully will arm the buy side with more information and control.

We’re definitely staying tuned to the market structure developments in the U.S. While there remains uncertainty about the current proposals, there is potential for significant impact to some key players in the space. We must try to anticipate how that might impact our clients.

Longer term, with the execution strategy function becoming increasingly technical, I think we’ll continue to notice a natural shift of early career technical talent across industries. It will be interesting to see how temporary and/or permanent work-from-home and hybrid protocols in finance affect the early career talent pipeline in the space.

[Don Green] How to watch football like an expert from the comfort of your couch Ted Nguyen [...

Don Green — 2/28/2023 7:53:36 PM

How to watch football like an expert from the comfort of your couch
Ted Nguyen
[Follow our live blog for all NFL Week 3 scores and action]

American football is one of the most complicated, potentially confusing sports in the world – if not the most complicated, potentially confusing sport in the world. But that’s part of what makes it so captivating. There are multiple games of chess being played on the field from snap to snap that even the most avid watchers could miss. There is always something to learn about the game and there are levels to watching it.

To achieve Level 1, or beginner level, one must know the general rules, know a little bit about every position, and some basic strategy. To achieve Level 2, or intermediate level, one must know the rules enough to make a legitimate argument during challenges, know some of the nuances of every position, and be able to identify some schemes. To achieve Level 3, or expert level, one must know almost every rule and its intent, understand every position and the many different archetypes of every position, and be able to identify many different schemes.

[Listen to Ted Nguyen’s podcast Run The Film]

To achieve Level 4, which is that of a film analyst, one must able to identify most schemes and thoroughly understand strategy. Being a Level 4 viewer doesn’t require any higher level of intelligence than the next person, but it does require one to sacrifice more important things in life to nerd out over studying football. And Level 5 is that of a competent coach. The goal of this article is to try to get readers to Level 3 and set readers up to get to Level 4 if they choose to sell their souls to further their football education.

Common misconceptions and questionsHow can you tell whether it’s an RPO or play action?

With the spread game becoming a bigger part of the NFL every year, analysts who specialize in the pro game are still playing catch-up with college concepts. Right now, the hot buzzword is “RPO,” which stands for run/pass option.

An RPO is a run play that has a pass concept built into it. The quarterback makes a pre-snap or post-snap read on a defender that the offense doesn’t block. The theory behind the RPO is to read the extra defender in the box rather than blocking him. If the offense has five blockers and there are six defenders in the box, the quarterback would read the sixth defender.

A play action is a play in which the offense will fake a run to get defenders to step up, and then throw a pass.

However, commentators seem to mistakenly call every shotgun play with a fake run action an RPO, when the play could simply be a play-action pass. So how can you tell the difference between a regular play action and RPO? Watch the offensive line.

If the offensive line isn’t aggressively getting to the second level, it’s a play action. The linemen might even initially take a few steps like they are run blocking before stopping at the line of scrimmage.

If they get downfield on a pass play, you know it’s an RPO. It is illegal for a lineman, who is usually an ineligible receiver, to be more than 1 yard downfield of the line of scrimmage without making contact with an opponent. This seems to be a gray area with referees, who don’t make this call often. Offensive coaches don’t mind, while this has been a point of contention for defensive coaches.

After the Chiefs beat the Broncos in Week 8 of 2018, former Broncos head coach Vance Joseph complained about the Chiefs going too far downfield on their RPOs.

“Linemen are 5 yards downfield, how do we fix that? I don’t know,” Joseph said. “What’s the rule say? I don’t know. But we have to figure this out and that’s on tape. That’s on tape, I’ve seen it.”

What’s the difference between a bubble screen and true screen?A true screen is a play in which the quarterback will take a drop-back to invite the pass rush to go after him. Offensive linemen would block for a couple of seconds before letting the pass rushers “beat” them and then release downfield to block. The idea behind a true screen is to draw the rushers in and throw the ball over their heads and get a convoy of offensive linemen ahead of the ball carrier.

A bubble screen is one in which the ball is immediately thrown to the perimeter. Only skill players block on a bubble screen play and offensive linemen are uninvolved in the actual bubble screen. Bubble screens are often used as the pass option as part of RPOs.

So don’t get mad at the play-caller for calling too many bubble screens. He may be calling plays in which the bubble screen is an option and it’s being thrown because the offense has a numbers advantage.

What is the purpose of motion and shifts?A shift is when multiple players move and get set before the ball is snapped. Shifts are usually used to quickly change the formation so the defense doesn’t have a lot of time to adjust to it.

A motion is when a player is still moving before the snap. By rule, only one player is allowed to be in motion before the snap.

Why do teams put a player in motion?

Early in the game, play callers might use a lot of motion to see how a defense will respond. They might be able to take advantage of the knowledge later in the game.Motion could give a quarterback information. For example, if a defender follows the motion man across the formation, they would know the defense is likely in man coverage.Offenses could outflank defenders with fly motion or threaten to outflank them, which forces them to react.Because motion happens right before the snap, defenders have to quickly communicate changes in a small time window, which can cause lapses.Motion doesn’t allow the defense to stay set and settle in mentally.First-year Cowboys offensive coordinator Kellen Moore used a motion or shift on nearly every snap in his debut against the Giants. In the clip, he used motion to set the back in shotgun late. Defenses will typically be alert for a RPO on the side that the running back is offset to in the gun so by motioning him in the backfield late, Moore didn’t give the Giants a chance to set up a RPO defense.

What is the difference between zone coverage and pattern match?Classic zone coverage or what Nick Saban calls “country” zone is when defenders are responsible for areas of the field. They’ll drop into those areas while keeping their eyes on the quarterback and reacting to the ball.

Pattern match is an umbrella term that could refer to zone match and man match. In zone match coverages, defenders drop to an area but are eyeing receivers and reacting accordingly. Their drops and movement change based on the route distribution. An example of this is Nick Saban’s rip/liz coverage.

In man match coverage, defenders are reading receivers and will eventually lock on man-to-man with receivers according to their reads after the route distribution. A good example of a man match system is Mike Zimmer’s schemewith the Vikings.

What is a true double team?You’ll often hear announcers say quarterbacks are throwing into double or even triple coverage, and it may look like they are correct because by the time the camera catches up with a throw there might be multiple defenders around the ball. But if you watch closely, most of the time that’s just the secondary converging after the ball is thrown.

A true double team is a defensive call. The team that probably uses the most true double teams is the New England Patriots. You can often tell a true double team by the alignment of the defensive backs.

This is an obvious example as you can see two defensive backs in the grill of the receiver. A more common example is if a safety is heavily tilted toward a receiver before the snap and gets his eyes on the receiver post snap. The Patriots call for a true double team is one “1 double (players number)”

Example: If they want to double Reggie Wayne (No. 87), the call would be “1 double #87”.

When the Patriots & Belichick played the Colts in the 2014 AFCCG, TY Hilton saw 1 Double & Cover 7 brackets the entire game. Have to take away #13. pic.twitter.com/gtxQUhu89G

— James Light (@JamesALight) January 5, 2019

Quarterbacks aren’t always “looking off” defendersQuarterbacks will stare down deep safeties or purposefully look in a different direction in order to get them to move because zone defenders will react to the quarterback’s eyes. This is known as “looking off.” But the term is thrown around too loosely.
Just because a quarterback looks elsewhere before eventually getting to his target doesn’t mean he’s “looking off” the defender. He could just be going through his progressions. If it’s a well-designed play concept, his progressions should have a similar effect of a “look off.” Route combinations are designed so that if one route is covered, another should open up.

Tips on watching the game: ‘Find the grass.’How we watch on TV is largely affected by the camera angles. Broadcasts tend to favor tight camera angles that are zoomed into wherever the ball is going. The problem is that there are 22 players on the field and oftentimes we can’t see the secondary and how the routes are developing downfield. Essentially, half of the story of the game is being hidden, especially with the ever-increasing usage of the passing game.

The NFL is starting to experiment with the usage of the sky cam, but based on backlash from fans I don’t anticipate a major change in how the game is shown. We can still watch the game smarter, but until fans are allowed to choose their own camera angles, we’ll have to take our clues where we can get them.

Chris Brown, the editor of Smart Football and one of the central figures in the evolution of how football is being covered more analytically, offers his advice:

“Before the snap, find the grass. A lot of people say to understand what’s really going on ‘watch the defense,’ or ‘watch the linebackers’ (partially on the theory that you will naturally find the ball) which is perfectly fine advice, but the reality is it’s a kind of odd way to watch an entire game or for more than just a few plays.

“The easier and to me just as interesting thing is to, before the snap, instead of watching the QB look at the sideline or whatever, is try to look at the defense and figure out where the “grass” is — are they packed in tight and way off the receivers? Are they spread out with big gaps/bubbles inside? Is anyone covering the slot receiver? Chances are that whatever you see is the same thing that the QB and offensive coordinator sees too, and you’ll be amazed at how often the ball goes to that grass… as well as how often good defenses show open grass and then close it up fast. Then once the ball is snapped you can watch as a normal, though now more informed, fan.”

Here, you can see the defensive backs are backed off and the inside linebacker and outside linebacker are lined up tight in the box. There is plenty of grass underneath on the inside of the two-receiver side. Quarterback Jimmy Garoppolo hit his receiver, who ran a slam route, right into the void for a nice gain.

Just following Brown’s advice, you’ll be able to predict where the ball will go more often than not, and if that space closes up quick you might have recognized a defensive disguise, which is worth noting.

How to watch the game like an NFL quarterback with Carson PalmerIf you want to take things a step further, you can play armchair quarterback and try to process the defense pre-snap like quarterbacks do. To help us understand how a quarterback reads defenses, I talked to former NFL quarterback Carson Palmer, who was as cerebral as any quarterback to have played the game. Here is what he looks for at the line of scrimmage broken down in steps:

1. What personnel group is on the field?Pay attention to the offensive personnel that is in the game and how the defense is reacting. If the offense has 11 personnel (3 receivers, 1 running back, 1 tight end) in the game, does the defense have its nickel (5 defensive backs) or dime (6 defensive backs) in? This affects matchups and noticing these things will help you find mismatches and look really smart in front of your friends when you yell, “look out, there’s a linebacker on Travis Kelce!”

2. Is it a single high defense with one safety in the middle of the field or is the middle of the field open because there are two deep safeties?With most TV broadcasts, you’ll at least be able to see the safeties before the snap. Count how many deep safeties there are. If there is one safety, the coverage is likely going to be cover 3 zone or cover 1 man. If there are two safeties, it is likely cover 2 zone, cover 4, or 2-man.

3. Then you get into your cadence and you try to figure out which way the safeties are rotating or rollingNFL quarterbacks are too good for teams to just keep their defense stagnant and make it easy for quarterbacks to read what the coverage is. Safeties will often show one look and then rotate or roll when the quarterback starts his cadence. Where they move or how they move gives the quarterback clues to what the coverage is and where pressure could be coming from.

“If they start as a middle of the field open defense with two high safeties and as the snap count gets underway, do they roll down to a single high safety? And which way are they rolling? Are they rolling towards the tight end or the slot receiver? If they are rolling down and rotating one way, are they rotating because they are bringing pressure from that side? So is the safety coming down to the nickel side because the nickel is blitzing? Or is the safety coming down to insert inside the nickel and play run defense in the middle of the formation?”

Amazingly Palmer and other NFL quarterbacks had to answer these questions and process all this information in the matter of seconds while they are barking out the cadence. As a viewer, the more you practice looking for these keys from the TV screen, the better you’ll be at predicting what’s coming before the snap and maybe even predict what quarterbacks should be seeing, but remember you do have an advantage as a viewer when you can see the screen from a wide view and don’t have pass rushers pinning their ears back looking at you like you’re Thanksgiving dinner.

I was surprised to hear that Palmer said that he didn’t really look at where the cornerbacks are lined up before the snap. He said he would look at that on the sidelines from images from the eye in the sky after the play and obviously he would have an idea where through film study while preparing for the game.

“It’s hard to see and hard to tell what’s going on outside as far as corners leverages. Now, there are so many guys playing press bail. They’ll come up and press the receiver and at the snap, they’ll turn and bail. It’s sort of irrelevant. It’s great to know but it’s a lot more to see than what you really need to see pre-snap.”

This makes sense because there is only so much a quarterback could see and process from his vantage point and quarterbacks could likely know how they will set their progressions by knowing what sort of coverage shell (one high or two high) that the defense is in. But as viewers, we get to see the corners pretty easily and they can give give us clues to what sort of coverage the defense is in.

Are the corners backed off? Where are their eyes? If there is one deep safety and the cornerbacks are also backed off with their eyes on the quarterback, it’s likely a cover 3 zone. You won’t know the coverage for sure until after the snap but you can figure out most coverages just based on the pre-snap alignment of the safeties and cornerbacks.

4. Advanced blitz indicators“Well, the advance indicator is trying to see what side the nose tackle is shaded on because a lot of teams will bring pressure to the bubble (B-gap) but that’s next level PhD kinda stuff,” explained Palmer. “That’s something you look for in year five, six, seven, eight, and on. But for a young quarterback that’s something that could get overlooked and really you don’t have time to figure that out.”

The idea here is that a lot of blitzes will be run toward the B-gap or the side that the one-technique defensive tackle is lined up. Obviously, this isn’t a hard, fast rule but it’s something to look for along with other clues that might help a quarterback figure out where a blitz is coming from. Palmer also mentioned that some defenses will move the shaded nose tackle before the snap so quarterbacks don’t get a bead on where their blitzes are coming from.

“As I got more experienced, I started looking for more bluffs. For example, a young nickel cornerback early in the snap count at the line of scrimmage might try to step at you to show you that he’s coming but normally, they are bringing the blitz from the other side once he starts to do that,” said Palmer. “So look for the bluff and I assume he’s not coming till he proves that he will come. Normally, they are just trying to get your eyes over there and bring the pressure from the other side before you recognize it.”

Even as a former quarterback, Palmer admits it’s hard for him to recognize things like where the pressure is coming from when watching on TV. We see what the camera is focused on and often they are too zoomed in on the quarterback, which leaves out half of the story of the game. But that doesn’t mean we as viewers shouldn’t try. It really does make the game more rewarding when you can see some of the things that Palmer talks about.

What’s everyone yapping about before the snap?Oftentimes the broadcast will pick up on a quarterback’s pre-snap communication and while we won’t be able to understand all of it, there are some common calls that we can figure out.

Turn up your sound. Audio in the clip.

“Rip” usually means the offense is sliding the protection to the right, while “Liz” means the offense is sliding the protection to the left. It may vary from team to team but usually if you hear a word that starts with the letter “R,” it indicates right and “L” left. These words might not always refer to protection, it could mean that a quarterback is changing the direction of a run play.

If you hear the quarterback or center bark out something like: “52 is the Mike,” he’s identifying who the middle linebacker is because it affects how the protection is set.

Quarterbacks could also completely change the play but they’ll use code words that are often impossible to figure out because they could change from week to week.

One of the last things that a quarterback will bark out is the signal to start the cadence. Peyton Manning’s famous cadence starter was “Omaha,” which told the rest of the offense that the ball will be snapped on the next sound. Other cadence starters could be “Sunday” or “Monday.” Some cadence starters could tell the offense to go on first “hut” or second “hut.”

There are games that the offense will play with cadence starters or cadences if defenses start to get a bead on them. Manning had a way to turn his Omaha call into a hard count. It’s impossible to know what every call at the line of scrimmage means but there are some universal calls that you’ll hear over and over again.

What to look for post-snapAfter the snap, viewers are completely at the mercy of the camera. Again, broadcasts will typically zoom in on the quarterback so you won’t have any idea what is happening with the route concepts and how defenses are reacting to them.

If you’re lucky, you can see a safety rotation and confirm the coverage or catch a defense disguising – defenses could present one look before the snap but switch to a different coverage after the snap in an attempt to confuse the offense. You could usually catch a quick glimpse at what the corners are doing before they are out of the picture. If their eyes are locked on the receivers in front of them, they are probably in man coverage.

The way to get the most information after the snap is to try to have a soft focus on the offensive line, while mainly focusing on the ball. The offensive line doesn’t lie. If they are firing aggressively down field, the offense is going to run the ball. If they back away from the line of scrimmage, it’s a pass. Linemen can deceive to a degree but usually have a tough time lying.

Got all of that?If you’ve carefully read or already know the information in this article, you are either already an “expert” viewer or at least on your way to becoming one. However, context is key. After all, in order to recognize cover 4, you have to know what it is. A helpful place to start is to click on the hyperlinks in the article, but don’t be satisfied there. There are so many great resources for you to further your football education in the internet age. The more schemes you know, the closer you will get to Level 3 and beyond.

(Top photo: Jason O. Watson / Getty Images)

[Don Green] The AMC And APE Consolidation Saga, Part 3 [graphic] Bill Oxford/iStock via Ge...

Don Green — 2/27/2023 2:23:20 PM

The AMC And APE Consolidation Saga, Part 3

Bill Oxford/iStock via Getty Images

This article is written as a continuation/update based on two previous submissions, the AMC/APE Convergence Trade and AMC and Antara Jointly Loosen Lockup Restrictions, But Why?. If you are not familiar with the situation, I strongly suggest you read those articles first.

Feb 13-17th - As expected, Antara SellsWe left off by hearing that Antara Capital and AMC Entertainment Holdings, Inc. (NYSE: AMC) had agreed to loosen their lockup restrictions allowing Antara to sell up to XX Million shares at any time, and AMC could sell up to YY Million shares at any time. AMC later clarified that they would not sell until after their Q4 earnings report on Feb 28th (likely a couple days after that based on typical earnings blackout procedures).

Given that Antara had the ability to sell shares of AMC Preferred Equity units ( APE), and the economic incentive (they would make 300-400% on their sales based on a $0.65 purchase price), they clearly did and reported it on their Form 4.

In addition to their APE sales, they have a significant quantity of options-hedges in place. Via a series of Form 3 and Form 4 filings from Antara, I've managed to reconstruct a forecast of Antara's position in AMC and APE as of Feb 17th:

SEC Reports

My interpretation of Antara's position is that they have hedged their long APE position with March, April, May and June put options. They are heavily weighted towards the March expiry because they are (or as you'll soon see, WERE) confident that the vote would succeed and share consolidation would occur as expected on 3/14.

Feb 20-24th - And then the wrinkle...Late on Feb 20th, a class action suit was filed in Delaware Chancery Court requesting a temporary restraining order to prevent/delay the vote from happening and being effective on March 14th. I'm not a lawyer and have little interest in dissecting the merit (or lack thereof) of the case's minutia. However, procedurally, the existence of this suit added a considerable amount of uncertainty as to whether or not the vote (and share consolidation) would go forward as planned.

Information percolated through social media, court dockets, and traders. The market was slow to react, but ultimately people who were betting on the consolidation were forced to unwind their positions. The arbitrage spread between AMC and APE widened significantly, from $2.70 to as high as $4.30, finally settling around $4.00

Market Data

On Thursday Feb 23rd, the courts had a quick hearing between the defendants (AMC) and the Plaintiffs to discuss how the case would proceed. Due to the fast-approaching vote date, they agreed that there would be a hearing on March 10th. The hearing would either be for a temporary restraining order (TRO) or a Preliminary Injunction (PI).

As you will see with the Form 4's that will likely be disclosed later tonight (Monday February 27th), Antara closed the majority of their March put position on Thursday and Friday after hearing about the courts plan to move forward.

This action is incredibly telling because they are the largest active trader/arbitrager in this market, and they presumably have the best information. They have very little faith in the March deal close date and are selling their hedges at a loss, because holding them will result in them losing even more. (Note: losing money on the hedges will likely still result in a profit on this entire position.)

Based on the Form 3 & 4 filings and other public options data, Antara’s positioning before and after the 2/23 hearing can be forecasted and is anticipated to look like:

SEC Reports

The high strike puts ($5 / $6) had significant extrinsic value remaining and were closed out completely. For the $3’s, there was significant volume immediately after the hearing:

Market Data Providers

I strongly suspect this is Antara further reducing their March hedges, and anticipate that we will see this corroborated in their Form 4 filings to be released tonight (2 business days after the trade date). Antara seems to be leaving their $2’s, but likely weren’t sold because they simply aren’t worth very much anymore (~$0.08), and given the size of the position, any re-positioning would be constrained by market liquidity.

Feb 27 - And here we are...We're now all caught up, except there's a tweet circulating that purports to be a leaked email from the plaintiffs council. If genuine, the implication ( and follow up on twitter) is that AMC will still hold their vote, as scheduled on March 14th. However, if the vote succeeds, the share consolidation will not occur until after the results of the preliminary injunction ruling held on April 27th.

This "leaked email" may be entirely fabricated, or it may be genuine. If it is genuine, it creates the following sequence of strategic advantages that benefit the different major parties:

The plaintiffs get a significant amount of time to do discovery, which gives them a higher chance at being successful.The defendants get to hold their vote as scheduled. One might ask why is this important, and the crucial reason to me is because AMC and Antara lock up agreements expire immediately after the special meeting/vote (independent on whether the share consolidation is effective or not). If a TRO was granted and no vote was held, it makes slows down the timer on AMC and Antara share sales.AMC gets to segregate their issuance of shares from Antara's selling of APEs. Ultimately the result of this delay is that Antara will make less money and AMC will make more money. In the world where AMC and Antara are "competing to sell shares" after the original 3/14 vote + consolidation dates, Antara will now be selling pre-consolidation APEs on 3/14+, and AMC can issue post-consolidation AMC/APE shares in May/June. Most likely, AMC will get higher prices and Antara will get lower prices.This scheduling fits the narrative that (at first glance, was bizarrely) suggested by AMC's lawyers at the 2/23 meeting. They said to the judge something along the lines of "we would like to hold the vote and just not make it effective until later." A non-effective vote is useless, unless your lockup is contingent on holding the vote.What's next?The AMC-APE arbitrage spread currently sits at $4.25, which is basically higher than it has ever been since the announcement of the plan to consolidate the classes 2 months ago on December 21st. Anyone historically attempting to "arbitrage" the deal by buying APE and shorting AMC (either explicitly, or synthetically via options), has almost certainly lost money- unless they had impeccable timing to catch the random ups and downs of the spread.

At the moment of writing this article, there is no confirmation of the hearing dates going forward, but the market is pricing in a significant delay. If the rumors prove to be untrue, significant uncertainty will persist until the results of the March 10th hearing. If the rumor is true and confirmed, arbitragers will have to make the difficult decision to either close their position at a significant loss, or continue to chase the arbitrage by borrowing shares for an additional 2-3 months. Both of those are very unappetizing options and will likely result in the arbitrage spread widening.

The author continually trades in/out of various positions based on what he perceives as dislocations in the market's pricing and the implied probabilities of deal outcomes.

Acknowledgement: Credit to Jasper Chan for working on this article with me.

[Don Green] Payment for Order Flow (PFOF) Explained February 22, 2023 by Ziga Breznik [gr...

Don Green — 2/23/2023 8:16:11 AM

Payment for Order Flow (PFOF) Explained

February 22, 2023 by Ziga Breznik

In recent years, the subject of payment for order flow, often known as PFOF, has garnered a significant amount of attention, notably in the aftermath of the scandal involving GameStop and Robinhood.

In this blog, we will be taking a deep dive into what payment for order flow is, how it operates, as well as the benefits and drawbacks of using this trading model for a retail customer.

In addition, we will go through the regulations governing PFOF, look at some real-world applications of it, and speculate about its potential stock market uses in the years to come.

What exactly is meant by “Payment for Order Flow”? In layman's terms, pay-for-order-flow, or PFOF, refers to the practice of brokers receiving payments from market makers in exchange for sending client orders to specific market makers. On the other hand, market makers earn money off the difference in price between a security's bid and ask price. This remuneration may come in the form of a percentage of the spread or a flat charge per share, depending on the agreement between the parties.

When a consumer uses a broker to place an order, the broker can either carry out the transaction themselves or forward the order to a market maker.

In the second scenario, the market maker is the one who is responsible for paying the commission to the broker in exchange for the right to carry out the order. Afterward, the market maker either carries out the transaction themselves or forwards the order to another venue, such as a stock exchange.

The primary benefit of PFOF is that it enables brokers to offer commission-free trading to customers. Brokers can collect money from market makers while at the same time offering consumers with minimal or no commission costs because of the relationship between the two parties. On the other hand, market makers profit from a steady stream of order flow.

Pros and Cons of Using Payment for Order Flow PFOF, like any other kind of trading practice, has both its share of pros and cons. Let's have a look at some of the most important benefits and drawbacks of this option for retail traders.

ProsLow or No Commission Fees: The primary benefit of order flow payments is that it enables brokers to provide consumers with the option of zero commission trading. This presents a substantial opportunity for many traders, especially those who engage in frequent transactions or who work with very small amounts of money. Better Prices: Because market makers profit from the spread, they have an incentive to offer the best possible price for a security. This can result in better prices for customers than they might receive if their orders were executed by the broker itself. Improved Liquidity: PFOF may also be of use in increasing the market's overall liquidity. Market makers have the opportunity to earn a profit from the spread by buying and selling securities, an action that may contribute to the market's ability to sustain a healthy level of activity. Cons of PFOF Potential Conflicts of Interest: One of the most serious concerns when dealing with PFOF is that it has the ability to generate possible conflicts of interest for brokers. They may be encouraged to prefer one market maker over others since they are getting charged for taking orders to a certain market maker. Yet, doing so may not be in the best interest of the consumer because it is in the best interest of the market maker. Lower Transparency: PFOF may also have the effect of lessening the degree to which the market is transparent. Clients may not be aware of which market maker their order is being sent to or the remuneration that their broker is getting for directing that order in certain cases. Less Control Over Order Execution: When a customer places an order through a broker, they may have less control over how that order is executed than if they were executing it themselves. This can lead to potential slippage and other issues.Official Regulation PFOF is a heavily regulated practice in the United States. The Securities and Exchange Commission (SEC) requires brokers to disclose the compensation they receive for directing customer orders to market makers. The SEC also requires brokers to ensure that customer orders are executed at the best possible price, taking into account all available market information.

Recently, there have been calls for increased regulation of PFOF. Some critics argue that it creates potential conflicts of interest and reduces transparency in the market. Othershave proposed banning PFOF altogether, while others have suggested alternative models that would provide customers with more control over their orders.

In 2020, the SEC conducted a review of the practice of PFOF and released a report on its findings. The report highlighted the potential conflicts of interest associated with PFOF and recommended that the SEC take additional steps to increase transparency and ensure that brokers are acting in the best interest of their customers.

Examples of Payment for Order Flow in ActionMany popular brokers and market makers in the United States use PFOF. Some of the most well-known examples include Robinhood, TD Ameritrade, and Citadel Securities.

Robinhood is perhaps the most famous example of a broker that relies heavily on PFOF. The company has been criticized for prioritizing its relationships with market makers over the best interests of its customers. In 2021, Robinhood paid a $65 million settlement to the SEC for failing to properly disclose its use of PFOF and for other violations.

TD Ameritrade is another well-known broker that uses PFOF. The company has been criticized for not being transparent enough about how it routes customer orders and for potentially prioritizing certain market makers over others.

Citadel Securities is one of the largest market makers in the United States and is a major player in the PFOF space. The company has been accused of having too much influence over the market and has been the subject of investigations by regulators.

ConclusionPFOF is a complex and controversial practice that has both advantages and disadvantages. While it allows brokers to offer commission-free trading to customers and can help increase market liquidity, it can also create potential conflicts of interest and reduce transparency.

As the SEC continues to review the practice of PFOF, we will likely see increased regulation and potential changes to how brokers and market makers operate. While it is unclear what the future of PFOF will look like, it is clear that it will continue to be a topic of discussion and debate in the trading community.

Ziga Breznik is the owner and head of research at PublicFinanceInternational.org – he is an active investor in the forex, crypto and stock markets – he has seen trading platforms disappear along with his investments – especially during the “crypto boom”. Ziga learned the hard way that finding a reputable and trustworthy online brokerage is key to long-term success in the financial markets. He founded PublicFinanceInternational.org as a platform where he shares his research with one goal in mind: to provide unbiased and trustworthy online brokers reviews.

[Don Green] It's a Trap! Why You Shouldn't Bet Against the Price Difference in AMC Stock and...

Don Green — 2/15/2023 7:47:23 AM

It's a Trap! Why You Shouldn't Bet Against the Price Difference in AMC Stock and APE SharesDespite the price differences between AMC's common and preferred shares, using an arbitrage trading strategy could be too risky. Here's why.
Bernard ZamboninFeb 14, 2023 5:39 AM EST
AMC Preferred Equity (APE) units are currently trading for a few dollars lower than AMC Entertainment's common stock.Many traders — including Jim Chanos — are betting that AMC shares will plunge to meet the value of the APE units.It is possible that APE will rise to match the price of AMC stock, rather than AMC falling to match APE units.
Figure 1: It's a Trap! Why You Shouldn't Bet Against the Price Difference in AMC Stock and APE Shares

Noam Galai | Credit: WireImage

Read also: Why AMC Stock Might Be Ready for Another Short Squeeze

What Is the AMC/APE Arbitrage Strategy?Ever since the creation of AMC Entertainment's ( AMC) - Get Free Report preferred shares — the AMC Preferred Equity (APE) units — many traders have been using an arbitrage strategy. This involves exploiting the price difference between the two.

After all, theoretically, AMC and APE should be trading at the same price because they share the same underlying assets.

But APE shares have been trading around $2, reaching $3 in January. At the same time, AMC shares have been trading around $5, reaching $6.80 in the first week of February.

Famed short-seller Jim Chanos is among the many traders who have employed an arbitrage bet. A few months ago, he revealed that he had a short position in AMC while "going long" APE.

In a nutshell, he's betting that AMC shares will come down to APE's level. However, Chanos' AMC strategy has not yet paid off.

Why an AMC Arbitrage Strategy Is a Bad IdeaThe AMC/APE arbitrage trade isn't as simple as it looks.

That's largely because AMC is a meme stock that doesn't behave as it should.

The high volatility levels in the stock cause it to trade with zero correlation to the theater chain's business fundamentals. And that keeps the stock trading in a dissimilar pattern to the APE units.

In addition, betting against AMC shares and going long APE has been complicated by high borrow fees for traders who want to open short positions in AMC.

JonesTrading's arbitrage expert, Cabot Henderson, said that if AMC wasn't so unpredictable, shorting the stock and going long APE would be a guaranteed successful trade.

"If you can get stable borrow [fees], it's a home run. But that's the problem," Henderson said.

According to the strategist, the risk of a short squeeze makes the arbitrage trade in AMC extremely unpredictable: "The real question for 'arbs' is about how to hedge these positions, given the potential for a massive short squeeze."

What to Do InsteadThere's no logical reason why APE units are lagging behind AMC stock.

Since the APE units were created in August 2022, they have not even come close to matching the share price of AMC's common shares.

The most natural thing would be for the prices of both equities to balance out sooner or later.

But because meme stocks defy market logic, shorting AMC can be a very risky trade.

Traders who wish to bet against the theater chain's shares must pay borrow fees of over 160%, which is very high. See below:

Figure 2: AMC's borrowed shares.

Stocksera, data by Interactive Brokers

If AMC stock experiences any sharp upward movements in price — as we've seen with short squeezes — short sellers will be forced to cover their margins and lose money on these very high fees.

In theory, the safer strategy is to bet that the APEs will rise in price to match the common shares, rather than the opposite. Investors can do that by skipping a short position in AMC and just going long APE.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

[Don Green] $20M Mega Millions jackpot won in New York in first drawing after almost $1.35B ...

Don Green — 1/19/2023 4:54:57 PM

$20M Mega Millions jackpot won in New York in first drawing after almost $1.35B Maine winThe Mega Millions jackpot has been won – again.A lucky ticket in New York matched all six numbers to win the $20 million jackpot Tuesday night.Tuesday's win follows the $1.348 billion Mega Millions jackpot that was won in Maine on Friday – which marked the second-highest prize in the lottery game's history.After not having been hit for months, the Mega Millions jackpot has been won in back-to-back drawings.

One ticket sold in New York in Tuesday's drawing matched all six numbers to win the $20 million jackpot, according to the Mega Millions website. Tuesday's winner can also choice the cash option of $10.6 million.

It's a far cry from the $1.348 billion Mega Millions jackpot won in Maine on Friday.

In addition to the jackpot, a ticket sold in Massachusetts matched all five white balls and had the Megaplier to win $3 million.

The jackpot will reset again to the current starting value of $20 million for Friday's drawing.

Meanwhile, the Powerball jackpot is at $439 million with a cash option of $237.3 million, according to the Powerball website.

Are lottery prizes getting bigger? Here's why the jackpots have grown so large.

Friday: Winning ticket for almost $1.35 billion Mega Millions jackpot sold in Maine

Mega Millions winning numbers: 1/17/23The winning numbers for Tuesday night's drawing were 2-12-18-24-39, Mega Ball: 18 and Megaplier was 3X.

When is next Mega Millions drawing?Mega Millions drawings are held every Tuesday and Friday at 11 p.m.

How do I play Mega Millions?The cost is $2 per ticket, but you can add the Megaplier for $1, which will increase the amount of your potential prize up to five times the original prize (except for the jackpot).

Each player selects five numbers from 1 to 70 for the white balls and one number from 1 to 25 for the Mega Ball. However, you can also have the lottery machine generate a random Quick Pick for you.

Prizes vary from $2 for the matching the Mega Ball to $1 million for matching all five white balls (except in California) to the jackpot for matching all six balls. You can check all the prize payouts on the Mega Millions site.

What do you do if you win the lottery? Here's what you need to know.

You don't need to be a U.S. citizen or a resident a particular state where you purchase your ticket.

Where can I play Mega Millions?You can play the game in 45 states plus the District of Columbia and the U.S. Virgin Islands. The states not offering Mega Millions are: Alabama, Alaska, Hawaii, Nevada and Utah.

Many grocery stores, gas stations and convenience stores sell lottery tickets. Some states allow Mega Millions tickets to be purchased online, but beware of scam websites. Check with your state lottery for more details.

What are my odds of winning?Playing the Mega Millions can be exciting, but just don't go spending those millions before you win.

The odds of winning the jackpot are 302,575,350-to-1.

The odds to match all five white balls are 12,607,306-to-1.

What does a lottery's cash option mean?The major lotteries in the United States offer two jackpot payout options: annuity and cash.

The annuity option is paid out over time. There is an immediate payment and then 29 annual payments after that, increasing by 5% each year.

How much will Mega Millions winner get after taxes? $1.35 billion jackpot shrinks quite a bit

The cash option is significantly lower than the advertised jackpot, but it is paid in a lump sum. You don't have to wait decades for all the money.

What was biggest Mega Millions jackpot?Here are the Top 10 jackpots ever since the Mega Millions began in 1996:

$1.537 billion, Oct. 23, 2018: Won in South Carolina$1.348 billion, Jan. 13, 2023: Won in Maine$1.337 billion: July 29, 2022: Illinois$1.05 billion, Jan. 22, 2021: Won in Michigan$656 million, March 30, 2012: Three winners in Illinois, Kansas, Maryland $648 million, Dec. 17, 2013: Two winners in California, Georgia$543 million, July 24, 2018: Won in California$536 million, July 8, 20116: Won in Indiana$533 million: March 30, 2018: Won in New Jersey $522 million: June 7, 2019: Won in CaliforniaWhat's everyone talking about? Sign up for our trending newsletter to get the latest news of the day

What was largest U.S. lottery jackpot ever?Here's a look at the top jackpots were won in the United States, between the Powerball and the Mega Millions lotteries:

$2.04 billion, Powerball, Nov. 7, 2022: California$1.586 billion, Powerball, Jan. 13, 2016: Three winners in California, Florida, Tennessee$1.537 billion, Mega Millions, Oct. 23, 2018: Won in South Carolina$1.348 billion, Mega Millions, Jan. 13, 2023: Won in Maine$1.337 billion, Mega Millions, July 29, 2022: Illinois$1.05 billion, Mega Millions, Jan. 22, 2021: Won in Michigan$768.4 million, Powerball, March 27, 2019: Won in Wisconsin$758.7 million, Powerball, Aug. 23, 2017: Won in Massachusetts$730 million,, Powerball, Jan. 20, 2021: Won in Maryland$699.8 million, Powerball, Oct. 4, 2021: Won in California

[Don Green] Data dictates who will win the Mega Millions lottery The Mega Millions Lottery...

Don Green — 1/12/2023 9:54:47 AM

Data dictates who will win the Mega Millions lottery

The Mega Millions Lottery jackpot has now soared past $1.3. billion. This follows the Powerball lottery grand prize payout of $2 billion this past November. The chance of winning the Mega Millions grand prize is around one in 302 million, slightly worse than the one in 292 million for Powerball — both miniscule odds. However, when there are enough combinations of numbers picked, the likelihood that someone wins increases. The challenge is knowing who that person will be.

Winning the lottery provides images of a carefree life and providing funds to support family and friends. In the ideal, those are all possible outcomes that comes with winning, whether it be $1 billion, $100 million or even $10 million. These are viewed as sizeable prizes for most people who buy lottery tickets.

Yet, for every winner who uses the money wisely, there are winners who squander what is effectively an inheritance. The potential good that could be realized from their winnings end up being a liability that they could not have foreseen.

Lotteries are not entertainment. They are a business, and a highly regressive tax. The majority of people who purchase lottery tickets are low-income earners. These people can ill afford to squander their limited resources on the remote chance of winning a large prize that they believe will change their life for the better. The majority lose, which is how lotteries stay in business.

Payouts from lotteries typically run between 50 and 70 percent. With the excess or profit that remains, some is used to pay lottery expenses. The rest is kept by the state who runs the lottery or has a share in the lottery.

Some states advertise that the earnings from lotteries are used to support public schools. Illinois says that certain lottery earnings will go to the state’s Common School Fund. In reality, this is marketing, since they can say that the money can be used for anything. By directing lottery earnings to fund schools, it frees up general funds for other activities. States can play a shell gameto give the illusion that lottery earnings are used benevolently.

This implicitly suggests that lotteries will not show a deficit. Will school funds be required to cover such a shortfall? Of course not, since lotteries are designed to reap sizeable surpluses. Winnings paid out are set to not exceed what is collected.

For low-income earners who buy lottery tickets, dreams of a big win that will enable them to escape from their financial quagmire is an illusion. The majority of people who win a large lottery prize end up having little to show for it within just five years. In some cases, the winners are worse off than before their lottery win, as they make lifestyle changes, including quitting their job and purchasing expensive items, which they are often ill-equipped to manage.

Winners are also preyed upon by family and friends, seeking to cash in on the winner’s fortunes. Scammers are quick to outsmart such people and look for ways to take their share of the winnings.

Then there are tax management issues, which many lottery winners never had to deal with. Without the assistance of trustworthy tax and investment advisers, a simple life can quickly unravel.

So, who wins the lottery when a large payout occurs?

It is the lottery agency themselves. When payouts reach astronomical levels, like the upcoming Mega Millions payout, more people are willing to shell out a few dollars to win the chance for the grand prize. With more people buying tickets, the grand prize increases — and the agency profits soar.

The best strategy for those who spend their money on lotteries is simple: Don’t buy a ticket. If a person spends $20 every week on the lottery, the $1,000 they spend annually may give them some entertainment value. It will not however yield a positive return on investment.

Unfortunately, the very people who can ill afford to throw their money away are also the very people who are most prone to buy lottery tickets.

Those who do not buy lottery tickets also benefit from additional funds added to state coffers that they are not required to contribute to. It serves as a tax credit for them, paid for by those who buy lottery tickets. They, with the states and agencies who run the lotteries, are the big winners.

So, when the lottery jackpot reaches $1 billion dollars, the data say, avoid buying a ticket and thank those who do for contributing to your state’s general fund.

Sheldon H. Jacobson, Ph.D., is a professor in computer science at the University of Illinois Urbana-Champaign. A data scientist and operations researcher, he applies his expertise in data-driven risk-based decision-making to evaluate and inform public policy.

[Don Green] Mega Millions jackpot up to $510 million before Christmas Kelly Tyko [graphic]Th...

Don Green — 12/23/2022 5:25:47 PM

Mega Millions jackpot up to $510 million before Christmas
Kelly Tyko
The Dec. 23 Mega Millions jackpot has an estimated $510 million jackpot. Photo: John Smith/VIEWpress via Getty Images

More than half a billion dollars is up for grabs in the year's second-largest Mega Millions jackpot ahead of Christmas.

Driving the news: The lottery jackpot for Friday's drawing is an estimated $510 million or a cash option of approximately $266.8 million cash, Mega Millions said in a statement.

If Friday’s drawing has one or more winning tickets, the jackpot is estimated to be the 11th largest in the lottery's 20-year history.Flashback: In late July, a ticket sold in Illinois was the sole winner of the year's largest Mega Millions jackpot of $1.34 billion, the game's second-largest prize ever.

The last Mega Millions jackpot was won Oct. 14 when a $502 million prize was shared by winning tickets in California and Florida.The jackpot has been rolling since the Oct. 18 Mega Millions drawing that started with a $20 million grand prize.Meanwhile, 2022 has been a year of big jackpots.

The world's largest-ever lottery prize was won in November when one ticket won Powerball's $2.04 billion jackpot.When is the Mega Millions drawingMega Millions' drawings are held in Atlanta at 11pm ET Tuesdays and Fridays, which is 8pm PT.

The drawings are posted on the Mega Millions YouTube page.How it works: Two machines pick the numbers in the drawings with the first picking five white balls and the other selecting a gold “Mega Ball.”

Odds of winning Mega MillionsThe odds of winning the grand-prize jackpot are about 1 in 303 million per ticket.

Other odds vary by prize and range from 1 in 37 for matching the Mega Ball to 1 in 12.6 million for matching five balls without the Mega Ball.By the numbers: There have been only six Mega Million jackpot winners so far in 2022.

Since 2017, the number of jackpots won per year has ranged from five to seven.Mega Millions lottery ticket priceA Mega Millions ticket costs $2, but players in most states can "add the Megaplier for an additional $1 to multiply their non-jackpot prizes."

Context: Out of each $2 ticket, roughly 35 cents goes to non-jackpot prizes, about 75 cents goes to fund the jackpot, and the remaining 90 cents goes to the government.

How to play Mega Millions gameLottery players can pick six numbers from two separate pools of numbers — five different numbers from 1 to 70 (the white balls) and one number from 1 to 25 (the gold Mega Ball).

“Quick Pick” or “Easy Pick” tickets can also be purchased where numbers are selected automatically.States that sell Mega Millions lottery ticketsMega Millions tickets are sold in 45 states, Washington, D.C., and the U.S. Virgin Islands, with drawings held each Tuesday and Friday.

Alabama, Alaska, Hawaii, Nevada and Utah do not participate in the lottery.Mega Millions cut-off time: How late to buy ticketsThe deadline to purchase tickets for Friday's drawing varies by state because Mega Millions tickets are sold by individual lotteries.

Sales stop 15 minutes before the drawing in many states, including New York, Michigan, Virginia and Ohio, while Indiana sales on drawing dates cut off at 10:44pm ET.Lotteries in Florida and South Carolina end ticket sales an hour before the drawing, with Idaho ending the night's drawing sales an hour and five minutes prior.Where to buy Mega Millions tickets onlineMega Millions tickets are available to buy online in 10 states and Washington, D.C.

New York also has a subscription to purchase tickets online.Other states with online sales are Georgia, Illinois, Kentucky, Michigan, New Hampshire, North Carolina, North Dakota, Pennsylvania and Virginia.In most cases, you need to live in one of these states to buy an online ticket, but in "all cases you must be physically within their borders when you make any online ticket purchases," the Mega Millions website says.Mega Millions prizes: How much for matching numbers Here are the prize amounts for matching numbers with and without the gold Mega Ball:

Mega Ball: $2 One number and Mega Ball: $4Two numbers and Mega Ball: $10Three numbers: $10Three numbers and Mega Ball: $200Four numbers: $500Four numbers and Mega Ball: $10,000Five numbers: $1 millionFive numbers and Mega Ball: JackpotBetween the lines: Amounts for non-jackpot prizes are higher for players spending $1 extra for the optional Megaplier.

[Don Green] AMC Entertainment: Conversion Of APE Into AMC On The Horizon [graphic] Tom Coo...

Don Green — 12/22/2022 4:04:24 PM

AMC Entertainment: Conversion Of APE Into AMC On The Horizon

Tom Cooper

Back in August 29 2022, AMC Entertainment Holdings, Inc. (NYSE: AMC) launched a preferred equity unit ( APE) as a special dividend to AMC shareholders. This APE preferred equity unit is economically more or less the same thing as a share. However, AMC couldn't issue any more shares at the time and resorted to this preferred that's the same in all but name.

It would have made the most sense if AMC had halved on that day and both AMC and APE traded at 1/2 the previous day's AMC value. But that's not what happened. Instead, AMC holders continued selling AMC but dumped APE:

Data by YCharts

This led to a bizarre valuation discrepancy between the two securities that are otherwise very similar.

This morning, AMC dropped a bomb as it raised a lot of capital by issuing a monstrous amount of APE units:

Raises $110 million of new equity capital through the sale of APE units to Antara Capital, LP (“Antara”) at a weighted average price of $0.660 per share. The APE closing price on the NYSE on December 21, 2022 was $0.685.But the biggest news of all is that the company seeks a shareholder meeting to vote on the voluntary conversion of APE into AMC. Of course, any AMC holder would vote against but according to the last 8-K, there are 516,838,912 AMC shares outstanding. The company issued one APE for each AMC, but according to the December 19 8-K, it issued another 125.9 million AMC Preferred Equity Units through an at-the-market program AND it is issuing another ~250 million units (emphasis added by me):

The sale of APE units to Antara will be split into two tranches. The first tranche involves the immediate purchase by Antara of 60 million APE units under the Company’s at-the-market program (“ATM program”). The second tranche, for the purchase of approximately 106.6 million APE units, as well as the $100 million debt exchange (for 91 million APE units), are subject to the completion of the waiting period under Hart-Scott-Rodino (“HSR”).

If my calculations are correct after this transaction, there will be roughly 516 million AMC units outstanding and ~886 million APE's.

Excerpt of latest AMC 10-Q Balance sheet (AMC 10-Q)

If all units and shares get voted, the APE's have a ~63% to 37% advantage. Many hedge funds and professional investors hold APE and short AMC due to the valuation anomaly. Meanwhile, AMC is famous for its diamond-hand retail shareholder base. I would think it is more likely a higher percentage of the APEs get voted. The enthusiasm of many AMC holders has likely waned as the share price declined 83% year-to-date:

Data by YCharts

It will be tough for AMC holders to defend against this conversion. At the same time, it ultimately hurts AMC and APE holders if these securities are not convertible. The company keeps raising capital, issuing enormous numbers of APE units, while it could have raised similar amounts of capital by issuing much smaller numbers of AMC shares.

Data by YCharts

Pre-market, the APE shares jumped ~90% and AMC shares dropped over 20%. The AMC debt has traded up as bankruptcy becomes less likely after the capital raise and debt exchange. In addition, the conversion would lead to a situation where it becomes cheaper to raise equity capital which also helps solidify the debt.

Depending on where prices are as you are reading this, I think the long APE / short AMC trade makes more sense than ever. There is visibility into a catalyst to make them convertible. I already had this trade, but sized it very small because of the short-squeeze history with AMC. I already owned some AMC June 25' debt with a coupon of 5.75%. It trades at 37 cents on the dollar. I think the outlook for the debt improved the most. I also sold AMC (now combined AMC/APE called AMC1) puts when volatility was high in the past. I'm not quite sure how these are going to work out in this situation. I'm not adding to those.

[Don Green] AMC Entertainment plunges 25% as company raises equity, swaps debt and converts ...

Don Green — 12/22/2022 4:01:44 PM

AMC Entertainment plunges 25% as company raises equity, swaps debt and converts APEs

Victor J. Blue

AMC Entertainment (NYSE: AMC) shares plunged more than 25% in premarket trading on Thursday as the movie theater chain announced a slew of financial transactions, including raising $110M in equity, swapping debt for equity and said it was considering converting preferred shares into common stock.

As part of the announcement, AMC Entertainment ( AMC) said it would sell AMC Entertainment Hldg Pref Equity Units ( APE) to Antara Capital at a weighted average price of $0.66 per share. The closing price yesterday was $0.685.

APE shares soared more than 113% to $1.46 in premarket trading, while AMC's ( AMC) common stock plunged on the news.

In addition, AMC ( AMC) said it cut its debt load by $100M, reducing its 2nd lien notes due in 2026 that were held by Antara in exchange for the 91M APE units.

The company also said it intended to have a special shareholder meeting to vote on proposals from its board of directors to convert APE units into common stock and reverse split its stock at a 1-10 ratio.

“AMC’s ongoing capital raising efforts and balance sheet strengthening continues in earnest," Adam Aron, Chairman and CEO of AMC Entertainment said in the statement.

“Clearly, the existence of APEs has been achieving exactly their intended purposes," Aron added. "They have let AMC raise much welcomed cash, reduce debt and in so doing deleverage our balance sheet and allow us to explore possible M&A activity. However, given the consistent trading discount that we are routinely seeing in the price of APE units compared to AMC common shares, we believe it is in the best interests of our shareholders for us to simplify our capital structure, thereby eliminating the discount that has been applied to the APE units in the market.”

On Wednesday, it was reported that AMC Entertainment ( AMC) ended its talks with Cineworld ( OTCPK:CNNWQ) lenders to buy some theaters in the U.S. and Europe.

[Don Green] Everything you need to know about the math of Powerball With a record-setting $1...

Don Green — 12/16/2022 9:51:24 AM

Everything you need to know about the math of Powerball
With a record-setting $1.9 billion jackpot, you’d think it’s a no-brainer to buy a Powerball ticket. But the math truly shows otherwise.

Playing the lottery is the ultimate low-risk, high-reward scenario. If you lose, you’re only out a few dollars: the cost of your bet. But if you win, even though the odds are stacked against you, the payoff is potentially life-changing, promising a lifetime of easy, luxurious living. You could not only realize all of your dreams that are reliant on financial fortunes, but those of your friends and relatives as well. And here in November of 2022, the Powerball jackpot has hit a whopping new record of $2.04 billion, a new record not just in terms of Powerball, but among all lottery games worldwide.

In order to win, you need to match five normal lottery numbers — white balls numbered 1-through-69 — plus the Powerball: a red ball numbered 1-through-26. Each Powerball ticket costs $2, plus you have the option to pay an extra $1 to activate the power play, a multiplier that increases your payout for non-jackpot prizes.

With a jackpot of $2.04 billion, plus an array of smaller prizes for matching some (but not all) of the balls drawn, here’s everything you need to know about what math says about playing the Powerball lottery.

Having just reached a record $2.04 billion, the Powerball Jackpot of November 7, 2022 has just broken the record for richest lottery jackpot in history. A single winner, excluding taxes, would fall into the top 2000 worldwide in terms of richest people alive today. ( Credit: Julio Cortez/AP)In particular there are some questions you should ask if you’re interested in the math behind Powerball:

What are your odds of achieving each individual winning combination?How much does each winning possibility pay out?Is it worth it to activate the power play option?And finally, how big does the jackpot have to be in order for playing the Powerball lottery to be “worth it” from a mathematical point-of-view?The idea of “worth it” is a subjective one to most people, but from a scientific/mathematical standpoint, it has a very particular meaning. It means that the amount you can expect to win, given an average outcome for the ticket, is greater than the amount you have to bet in order to play. If a Powerball lottery ticket costs $2, for example, buying a ticket would be above the “worth it” line if:

You had a 51% chance of winning $4.Or, you had a 0.1% chance of winning $2001.Or, you had a 1-in-499,999 chance of winning $1,000,000.But buying a ticket would fall below the “worth it” line if:

You had only a 49% chance of winning $4.Or, you had a 0.1% chance of winning $1,999.Or, you had a 1-in-500,001 chance of winning $1,000,000.

This photo, taken at the Money Museum in Chicago, shows what $1,000,000 in cash, in twenty dollar bills, looks like. This is the ‘second prize’ in the Powerball jackpot, with roughly 1-in-11 million odds of such an outcome in Powerball. ( Credit: Steve Rhodes/flickr)Notice how small these differences are, but how in the earlier cases, you can expect to win more than you bet, while in the latter cases, you expect to bet more than you win. This is only an average, of course, but it comes out that way because:

A 51% chance of winning $4 means that an average ticket is worth $2.02.A 0.1% chance of winning $2001 means that an average ticket is worth $2.001.And a 1-in-499,999 chance of winning $1,000,000 means that an average ticket is worth $2.000004.On the other hand, for the latter examples — the ones that fall below the “worth it” line — the translation from probability to ticket worth works out as follows:

A 49% chance of winning $4 means that an average ticket is worth $1.98.A 0.1% chance of winning $1999 means that an average ticket is worth $1.999.And a 1-in-500,001 chance of winning $1,000,000 means that an average ticket is worth $1.999996.Mathematicians call this ratio of how-much-you-win vs. how-much-you-bet the expected value (or expectation value) of a problem. If your expected value is greater than 1.0, or more than the cost of a ticket, then it’s worth it to play. (And if not, then it isn’t!)

This diagram shows the likelihood of achieving outcomes within one, two, and three standard deviations of the mean value, assuming a Gaussian random distribution (i.e., Bell curve) of possible outcomes. Less likely outcomes, at the tail end(s) of this distribution, are often where the most interesting events occur. To get your expected value, you must multiply the odds of each possible outcome by the ‘reward’ for achieving each outcome. ( Credit: Ainali/Wikimedia Commons)That’s the general idea for any sort of gambling/gaming event: work out the balance between your odds of winning a prize (or all of the possible prizes) multiplied by how much that prize is actually worth, and then compare that to the actual cost of the “chance” you buy, to determine how much value each lottery ticket actually holds.

Specifically, then, what does this mean for the game of Powerball?

Let’s work it out.

In every game of Powerball, you get one ticket with five white numbers (out of 69 possible choices) and one red number (the Powerball, out of 26). In order to work out what the expected value is for each Powerball ticket, the first thing we have to do is understand what the set of possible outcomes are, and what your odds are of achieving each one. Here’s an infographic I made that breaks down what your odds are, on each ticket — remember, with five white numbers between 1-and-69 and one red number between 1-and-26 — of achieving each possible outcome.

The odds of achieving every possible outcome with a Powerball ticket as each and every relevant number is drawn. Note that the most likely outcome, of matching no numbers at all, is 65.23% likely, and that a total of 95.98% of the time, no prizes are awarded. (Credit: E. Siegel)Your odds of actually winning the Powerball jackpot are pretty slim: one in 292,201,338. In fact, your odds of winning anything aren’t very good either, since the three most common results are:

no matches of any type (65.23%),one white ball and no Powerball (27.18%), andtwo white balls and no Powerball (3.565%).Those three options all pay out absolutely nothing, and add up to 95.98% of the possible results. In other words, without hitting the Powerball, you need at least three white balls to win anything at all.

That leaves the remaining 4.02% of the time as the only chances you have to actually win something. If the prizes that winning pays out — on average — crosses over a large enough threshold, it will be worth it to bet, and worth it to buy a ticket and play the game.

The possible options, which make up 4.02% of all Powerball tickets sold, for what you should match to win that prize, what the prize for winning is, and what your odds of achieving that specific outcome are. ( Credit: E. Siegel, data from Powerball.com)These prizes vary tremendously in both your odds of achieving them and also in how much they pay out, assuming you do win them. According to the official Powerball site:

Getting the Powerball with either 0 or 1 match from the white balls earns you $4.Hitting either the Powerball with 2 matching white balls or missing the Powerball but hitting 3 matching white balls earns you $7.Hitting either the Powerball with 3 matching white balls or missing the Powerball but hitting 4 matching white balls earns you $100.Hitting the Powerball with 4 matching white balls earns you $50,000.Missing the Powerball but hitting all 5 matching white balls earns you $1,000,000.And, of course, hitting all the numbers — the Powerball and all 5 white balls — earns you the Grand Prize.If you want to calculate your expected value of each Powerball ticket purchased, you need to multiply your odds of winning each prize by the payout of each possible prize, and then add them all together to find out the total worth of each ticket. Given that each Powerball ticket costs $2, with an additional $1 possible for selecting the “Power Play” option, and that the “Grand Prize” payout depends both on the total jackpot amount and how many co-winners there are.

That said, we’ll come back to both the Power Play option and the Grand Prize payout in a bit; first, let’s look at the more likely non-Jackpot options.

The possible combinations of outcomes, the odds of achieving that outcome, the payout, and the contribution of that payout to the expected value of a $2 Powerball ticket. Note that the larger, less-likely prizes only contribute pennies to the overall value of a ticket. (Credit: E. Siegel)For every $2 ticket you buy, you can expect to recoup, on average:

about $0.15 from the periodic $4 payouts,about $0.02 from the periodic $7 payouts,about $0.01 from the periodic $100 payouts,about $0.05 from the periodic $50,000 payouts,and about $0.09 from the periodic $1,000,000 payouts.That means, all told, that the non-jackpot options make each ticket worth only about $0.32, which is a far cry from the $2 you invested. This teaches us two things:

It gives us the information we need to figure out how much the “Power Play” option is actually worth.It let’s us know how much the Jackpot needs to pay out in order for buying a Powerball ticket to be “worth it,” mathematically.First, let’s take on the Power Play option.

The odds of a Power Play along with the prize increases from using the Power Play option, with the odds given when the 10x multiplier both is and is not active. ( Credit: Screenshot from Powerball.com)The Power Play option — which costs an extra $1.00, turning a $2 ticket into a $3 ticket — does the following:

has no effect on the Jackpot/Grand Prize,always doubles the payout of the second-most-lucrative prize, andhas a 1-in-1.75 chance of doubling (2x), a 1-in-3.23 chance of tripling (3x), a 1-in-14 chance of quadrupling (4x), or a 1-in-21 chance of quintupling (5x) the other prizes.If the 10x multiplier is active (only for Jackpots under $150 million), it reduces the chances of all the other options very slightly, and adds in a 1-in-43 chance of tenfold-multiplying (10x) all but the top two prizes.So what’s the extra expected payoff for this additional $1 investment?

It transforms the expected worth of the non-jackpot options, per ticket, from being worth $0.32 up to being worth $0.81. This means you’re spending an extra $1.00 to increase your expected payout by $0.49, a lousy deal any way you slice it.

In fact, even if you happened to hit the 5x option, which happens only about 5% of the time, you only up your expected winnings to $1.34 for the non-jackpot options, which increases your winnings by a mere $1.02. That’s what you need to make it “worth” grabbing the Power Play option: a guaranteed 5x multiplier or better. The fact that the second-biggest-payout is only doubled, no matter what the Power Play multiplier happens to be, makes this a raw deal any way you slice it.

In other words, unless you know you’re guaranteed to get either the 5x or 10x multiplier, you should never take the Power Play option.

With a new record of a $2.04 billion Powerball Jackpot, a sole winner would become the largest-Jackpot lottery winner in history, immediately making them worth more (minus taxes, of course) than Christian Birkenstock, Michael Jordan, and Rihanna. ( Credit: Julio Cortez/AP)So finally, we come to the big prize: the Jackpot, or the Grand Prize, which you win by hitting all five numbers plus the Powerball, something that has a one-in-292,201,338 chance of happening. Given that your ticket costs $2, and the “rest of your ticket” is worth $0.32, it would make sense that as long as the expected value is $1.68 or higher from the Powerball Grand Prize, you’ll come out ahead, and should play.

And that’s correct, mathematically speaking! If your ticket costs $2, but is worth more than $2, it’s mathematically advantageous to play, and to purchase it.

But be careful, because this next step — from a mathematical point of view — is where they trick you. You might think, “Hey, so long as the Powerball Jackpot is more than $245 million, if my odds of winning are 1-in-292 million, I’ll come out ahead of the ‘$1.68 expected value’ per $2 ticket for winning the Jackpot.” But this is wrong for two reasons.

You have to pay taxes on your winnings, and the average Jackpot winner (dependent on your state’s specific tax laws) who takes the lump sum option only gets to keep about 37.2% of the Grand Prize’s value.This also assumes that your winning ticket will be the only winning ticket, but the more people who play, the greater the odds that there will be multiple Grand Prize winners who have to split the prize.

At top, the Powerball ticket sales projections dependent on the size of the Jackpot; over half a billion tickets are expected for each Jackpot over $1 billion. At bottom, the expected value of a $2 Powerball ticket, which, when accounting for taxes and split Jackpots, peaks at Jackpot values of around half a billion dollars and decreases thereafter. ( Credit: Jeremy Elson)Taxes not only crush the expected payout from the Grand Prize, but also the second-largest prize as well: the $1,000,000 for hitting all five white numbers without the Powerball. The average payout for “winning $1,000,000” is only $590,000, which reduces your average ticket’s value by about $0.04 from what we just calculated before. But it’s the notion that “There will be one winner, and that winner will be me” that’s truly erroneous.

If 190 million tickets are sold — pretty typical for a near-$1B Jackpot — the odds are:

34% that no one wins the Jackpot,37% that only one person wins the Jackpot,and 29% that two or more people win, and split, the Jackpot.The greater the Jackpot, the greater the number of people who buy tickets. But once more than about 200 million tickets are sold, which happens at greater Jackpot levels, the less valuable each ticket becomes! A ticket sold for a $1,500 million (or $1.5 billion) Jackpot, in fact, would only be worth about half as much as a ticket sold for a $500 million Jackpot, because you’d most likely have to split the Jackpot, even if you won, with between three and seven other people.

All told, when you take both taxes and split Jackpots into account, you find that even at its maximum value, a $2 Powerball ticket is really only worth about $0.852, or just 43% of what you paid for it. If throwing $1.15 away is worth the amount of fun you’ll have, go right ahead. $0.85 of your ticket goes toward a “fair” lottery; the remaining $1.15 is simply your donation to whatever programs the Powerball lottery supports!

Starts With A Bang is written by Ethan Siegel, Ph.D., author of Beyond The Galaxy, and Treknology. Pre-order his Encyclopaedia Cosmologica here!

[Don Green] Sam Bankman-Fried on GME and AMC Tokenized Shares Short sellers allegedly used ...

Don Green — 12/15/2022 12:57:21 PM

Sam Bankman-Fried on GME and AMC Tokenized Shares

Short sellers allegedly used Sam Bankman-Fried's crypto exchange, FTX, to manipulate the share prices of AMC and GME stock.Bankman-Fried, who has been arrested on charges of financial fraud, gave an interview in which he commented on the issue of tokenized shares of GME, AMC, and others.

How Were Short Sellers Using FTX to Trade AMC and GME?A few weeks ago, a report in The Chainsaw alleged that short-selling hedge funds were using crypto exchange FTX as a "back door" to shady trading practices.

FTX, which has filed for bankruptcy, gave traders the option to trade synthetic shares and tokenized stocks, which consist of digital assets that replicate the price action of real stocks.

However, under FTX's terms, customers could redeem their tokenized stocks through FTX's Swiss operations for underlying shares, if desired.

According to The Chainsaw report, however, FTX attested that its 10 million GameStop ( GME) - Get Free Report and 400 million AMC Entertainment ( AMC) - Get Free Report digital tokens were backed by GME and AMC shares insured under CM-Equity's custody.

However, FTX severed ties with CM-Equity in late 2021, suggesting that throughout 2022 there were neither GameStop nor AMC shares under the custody of the escrow agent.

Raising even more suspicion about the case, FTX removed the white paper on AMC tokens from its website in late November.

What Did SBF Say About GME and AMC?The founder and former CEO of FTX, Sam Bankman-Fried (aka SBF), has been in the media spotlight recently following the insolvency crisis at FTX.

Over the past few years, FTX became one of the world's top three crypto exchanges. However, the misuse of its customers' funds — $10 billion of its customers' money "disappeared" — led to a crisis that has been compared to the notorious Enron scandal and other Ponzi schemes.

Recently, Bankman-Fried was arrested in the Bahamas and charged with wire fraud, securities fraud, and money laundering.

Before his arrest, SBF gave an interview with Unusual Whales. Among other questions, he was asked about whether the tokenized shares of GME and AMC were backed one-to-one. He answered that he thought they were:

However, Bankman-Fried also said that he doesn't have an updated answer to this question after the FTX collapse. But he added that he considers this a reasonable question and has committed to giving a better answer soon.

How Could FTX Have Influenced GME's and AMC's Share Prices?GameStop and AMC may have been influenced due to the cost to borrow their shares, which is based on supply and demand.

Short sellers who want to bet against GME and AMC need to borrow shares to proceed with their trades.

GameStop borrow rates currently stand at 7.5% annualized. However, throughout this year, GME shares were rare and therefore hard — and expensive — to borrow on several occasions.

For example, the stock split at the end of May caused borrow fees to jump by nearly 130%. And fees remained sky-high, at 30%, during July and August.

Currently, AMC is also a hard-to-borrow stock, with annualized fees of 23%. However, in mid-November, AMC borrow fees reached over 100% annualized.

In theory, if short sellers were redeeming GME and AMC tokenized shares through FTX without the use of a custody agent, they could have avoided paying high borrowing fees.

We Need More Clarity From SBFThe Chainsaw's allegations of trading irregularities facilitated by FTX, while well-founded, have yet to be confirmed.

Hard evidence is needed that brokerage firms have used FTX's tokenized stocks to short the stocks. Even though Sam Bankman-Fried has not given a final answer on this issue, it's unclear whether any wrongdoing has technically occurred, thanks to regulatory confusion surrounding cryptocurrencies.

U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler has addressed this issue. He said in September that he has been working with Congress toward the regulation of crypto security tokens and related intermediaries.

SBF's arrest the day before his scheduled testimony before Congress has frustrated the American public. They deserve to hear about the wrongdoings at FTX directly from him.

However, congressional officials hope that another hearing with SBF will take place shortly to clarify several unresolved issues — such as the matter of tokenized shares.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)

[Don Green] SEC Proposes New Best-Execution Rule, Draws Criticism By Melanie Waddell SEC C...

Don Green — 12/14/2022 6:20:57 PM

SEC Proposes New Best-Execution Rule, Draws Criticism
By Melanie Waddell

SEC Chairman Gary Gensler, however, stated at the open meeting that when he arrived at the agency he was “surprised” to learn that the SEC didn’t have a best-execution rule. “FINRA plays a really critical role as a membership organization for broker-dealers … it’s an important part of the mix, but I would say that we have many rules where the SEC has a role and FINRA has a role.”

Republican Commissioner Mark Uyeda opined that “an obvious problem with this proposal is that there are already existing best execution regulatory regimes, which appear to be working well. This rule proposal would add a third best execution regime layered on top of the ones already imposed by FINRA and the MSRB. Do we need another one?“

Payment for Order FlowRon Rhoades, associate professor of finance at Western Kentucky University and director of its personal financial planning program, told ThinkAdvisor in another email that “while having a best execution rule that the SEC itself can enforce (rather than just FINRA) is a positive step, I don’t foresee that this rule will dramatically improve trade execution quality for customers of broker-dealers.”

The SEC’s proposed rule “continues to permit payment for order flow, an insidious conflict of interest and a means of doing business that was popularized by Bernie Madoff. In the end, under principles of agency, the execution of trades on behalf of a broker’s customer imposes upon the broker a fiduciary duty to act in the customer’s best interest when executing the trade,” Rhoades said.

“If the broker has the opportunity to secure additional compensation, such as through payment for order flow, this conflict of interest will lead to breaches of the fiduciary obligation,” according to Rhoades. “Simply put, a fiduciary cannot serve two masters.”

‘Complicated’ Market ChangesThe SEC proposed its new Regulation Best Execution as part of a package of broad equity market structure changes.

The agency adopted amendments to Rule 10b5-1 and new disclosure requirements to enhance investor protections against insider trading; proposed amendments to update the disclosure required for order executions in national market system (NMS) stocks; proposed amendments to the minimum pricing increments, also known as tick sizes; as well as proposed a rule to require certain orders of individual investors to be exposed to competition in fair and open auctions.

Gail Bernstein, general counsel for the Investment Adviser Association in Washington, added in another email that “the SEC issued a package of extremely complicated equity market structure rule proposals under the Exchange Act that, if adopted, will change the landscape for how retail orders are quoted, priced, routed, and filled.”

Among other things, Bernstein continued, “the package calls for retail equity orders to be exposed in open auctions, changes broker-dealers’ best execution obligations, and requires significant new disclosures relating to treatment of retail orders.” IAA, Bernstein said, “will review these proposals carefully to assess their potential implications for investment advisers.”

Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, added in a statement that “the substantial changes proposed today by the SEC are incredibly complex with material impact to all market participants, but particularly to investors. We strongly believe the SEC needs to be extremely careful in its approach.”

Added Bentsen: “Any changes being proposed in the name of competition which may tilt the playing field at the expense of investors should be weighed carefully, be subject to a robust cost benefit analysis, and considered holistically with a view to ensuring there are no negative, unintended consequences for investors.”

As the proposals issued Wednesday “are significantly complex and interrelated, it is essential the SEC provide an adequate comment period to allow all parties sufficient time to provide thoughtful input on the package of proposals,” Bentsen said.

[Don Green] Do You Get the Best Prices Trading Stocks? The SEC is facing off against Citade...

Don Green — 12/14/2022 10:31:05 AM

Do You Get the Best Prices Trading Stocks?

The SEC is facing off against Citadel Securities and other firms over who gets to execute—and profit from—individuals’ trades

One morning in September, Phil Hanson clicked a button on his TD Ameritrade screen and sold 100 shares of Immunovant Inc.

It was among the millions of trades made by individual investors that day. The Houston resident’s order didn’t go to the New York Stock Exchange or Nasdaq Inc., where buyers and sellers haggle over the company’s shares.

Instead, TD Ameritrade sent Mr. Hanson’s order to Citadel Securities, an electronic trading firm that deals directly with brokerages to execute their customers’ trades.

Within milliseconds, Citadel Securities bought Mr. Hanson’s Immunovant stock for $5.0221 a share—an improvement over the best price quoted on exchanges, where buyers were offering $5.02 for the shares.

The result: Mr. Hanson made an extra 21 cents, earning $502.21. Meanwhile, Citadel Securities paid TD Ameritrade a slice of its profit from handling the order, a practice called payment for order flow. Regulatory filings suggest the broker got about 10 cents.

Did Mr. Hanson get a good deal? Proponents of payment for order flow cite gains like his 21 cents as evidence the market works well for small investors. Critics say the practice has so warped the market that it’s impossible to say what Mr. Hanson, who works in financial services, would have earned in a truly open marketplace.

For years, that debate was largely academic. But it’s now at the core of a showdown between powerful trading firms—Citadel Securities chief among them—and a Securities and Exchange Commission chair who views them warily.

On Wednesday, the SEC is set to propose the biggest shake-up of U.S. stock market structure in more than a decade. Chair Gary Gensler has said he wants to give investors a better deal on stock trades by forcing greater competition for their orders. The proposals grew out of a review prompted by the frenzied trading in GameStop Corp. in early 2021.

SEC Chair Gary Gensler at the agency’s headquarters in Washington.Photo: Justin T. Gellerson for The Wall Street Journal
They will likely stir up a hornets’ nest of opposition. Brokerages and trading firms say there’s little evidence the current system hurts investors. Some firms, including Robinhood Markets Inc., have signaled that they could sue the SEC if Mr. Gensler’s changes go too far.

Last year, the 12 largest U.S. brokerages collected $3.8 billion in payment for order flow, according to Bloomberg Intelligence. The largest source of the payments was Citadel Securities, which paid out just under $1.5 billion.

At Charles Schwab Corp., the parent of TD Ameritrade, Jeff Starr, a managing director, said, “When you see the sort of execution quality that we’re getting, it’s really hard to say that payment for order flow is a problem.”

Citadel Securities, though lesser-known than its sister company Citadel, a $59 billion hedge fund, is a behemoth that handles more than 20% of the shares that change hands in the U.S. stock market each day.

Both firms were founded by billionaire Ken Griffin, known for his art collection and trophy homes, including a $106.9 million waterfront estate he recently bought in Miami. He is also a Republican power broker. Since 2021 Mr. Griffin has given more than $68 million to federal campaigns, making him the country’s third-biggest political donor, according to OpenSecrets.org, a nonprofit that tracks campaign spending. On Tuesday, he sued the Internal Revenue Service and Treasury Department seeking damages over a tax privacy breach.

The controversy over GameStop’s January 2021 extraordinary rally and crash thrust Citadel Securities into the spotlight. At the time, Citadel was the biggest processor of orders from Robinhood, prompting a widespread conspiracy theory that Citadel Securities used its influence to halt the meme-stock rally. The firm denies doing this. Still, Mr. Griffin was challenged about his firm’s role in the episode during a contentious hearing of the House Financial Services Committee, where he was grilled by the committee’s chairwoman, Maxine Waters of California, and other Democrats.

Since then, his firm has been less outspoken in criticizing the SEC’s plans than other industry players such as rival trading firm Virtu Financial Inc.

“Citadel is a little bit handicapped because Ken is kind of a lightning rod right now politically,” said Virtu Chief Executive Douglas Cifu. Citadel Securities instead has pressed its case against the SEC’s overhaul at industry conferences and in closed-doors meetings with regulators.

Mr. Griffin met with Mr. Gensler in June 2021 and discussed a Citadel Securities white paper on market structure, in which the firm outlined a set of changes less radical than what the SEC is now planning, people familiar with the matter said. In March, a team from Citadel Securities met with staff from the agency’s trading and markets division, according to people familiar with the meeting. A presentation from that meeting, seen by The Wall Street Journal, touted the firm’s ability to deliver savings to investors.

In an interview, Mr. Gensler said investors would get better prices on their trades if there were more competition between trading firms for their orders. He acknowledged that his plans could hurt the profits of brokers and trading firms.

“Putting folks in competition is better for investors and issuers,” he said. “It might have a tendency to lower some of the economic rents in the middle.”

Citadel Securities will await details of Mr. Gensler’s proposals before deciding how hard to fight them, said Joseph Mecane, the executive who leads the unit of the firm that processes trades for retail brokerages.

“We’re quite proud of the experience that’s been developed for retail investors,” Mr. Mecane said. “Anything that, in our opinion, would impact the retail experience in a negative way would be something that we worry about.”

Ken Griffin, the founder of Citadel Securities as well as of the Citadel hedge fund.Photo: David Kasnic for The Wall Street Journal
Executing trades for individual investors is lucrative for firms such as Citadel Securities because it is more consistently profitable to fill individuals’ orders than to trade with the large, sophisticated investors the firms encounter on public stock exchanges.

Citadel Securities, Virtu and similar trading firms earn money by market-making—the strategy of capturing the difference between the buying and selling price of stocks, known as the bid and the ask.

Market-making is risky on exchanges because institutional investors are big enough to push prices up or down. If a hedge fund is selling millions of dollars of Ford Motor Co. stock, it could chop up the transaction into hundreds of sell orders over several days. A market-maker offering to buy Ford could lose money as it buys over and over, while the big seller drives the price lower.

That makes it attractive for market-makers to deal directly with brokerages such as Robinhood and TD Ameritrade. The customers of such brokers place orders that are typically smaller and more balanced between buys and sells.

Individual investors benefit. Market-makers can offer better prices when they know they’re only facing the little guy, giving sellers like Mr. Hanson higher prices for their shares, while giving greater discounts to buyers of shares.

Traders call this phenomenon “price improvement,” and industry data show that individual investors collectively save billions of dollars a year as a result. In addition, thanks to payment for order flow, nearly all major brokerages have shifted to zero-commission trading since 2019, versus the fees of roughly $40 or more they charged a few decades ago.

Critics of payment for order flow—a mix of Wall Street veterans and advocacy groups pushing for tighter regulation—say the practice creates a conflict of interest. If brokers get paid to route orders, critics ask, are they really putting their customers first?

“At the heart of it, you’re putting a perverse incentive out for the firm that is supposed to be working the hardest to get you the best possible price that they can,” said Doug Atkin, former CEO of brokerage Instinet. “Payment for order flow, at a minimum, clouds that.”

They also say the benefits of the current system are overblown. The reported savings that brokers deliver their customers is based on the difference between the price an investor gets for a stock and its publicly quoted bid and ask price on exchanges. Some analysts say that benchmark is flawed because about 40% of trading volume, including many individual investors’ trades, takes place outside of exchanges.

BestEx Research, a trading-technology firm, estimated in a report last year that if all retail orders were sent to exchanges, bid-ask spreads on exchanges would narrow by 25%. Since the current system makes those spreads artificially wide, the savings that investors receive are inflated, the firm said.

“Price improvement on retail market orders is akin to getting a 30% discount on an item after the shopkeeper raises the price by 40%,” BestEx Research wrote.

Could Mr. Hanson have gotten a better deal? Some analysts who reviewed the data on his trade say it’s possible. For instance, some exchanges allow buyers and sellers to do “midpoint” trades at the price in the middle of the spread, in this case between the $5.02 bid and $5.04 ask. By selling his Immunovant stock at the midpoint, Mr. Hanson would have earned $5.03 a share, or $503 in all. That would have yielded him a gain of $1 instead of 21 cents.

Executives at brokerages and market-makers have questioned the methodology of the BestEx Research paper. Schwab said it got midpoint executions or better on 52% of its customers’ market orders last year.

Payment for order flow emerged in its current form in the 1980s, when it was championed by Bernie Madoff. Decades before his conviction for masterminding a vast Ponzi scheme, Mr. Madoff led a firm that paid retail brokerages for orders and executed them off-exchange.

In 1994, the SEC adopted a rule that required brokers to disclose whether they were receiving such payments. The agency revisited the practice in the decades that followed but always stopped short of a ban, choosing to step up disclosure requirements instead.

Mr. Griffin founded Citadel Securities in 2002 at a time when the transition from old-fashioned trading floors to electronic marketplaces was creating new opportunities for computerized trading. The firm was initially called Citadel Derivatives Group and focused on options market-making.

It urged the SEC to ban payment for order flow in 2004. “This practice distorts order routing decisions, is anti-competitive, and creates an obvious and substantial conflict of interest between broker-dealers and their customers,” Citadel wrote the agency in a letter. Mr. Griffin has said the letter reflected Citadel’s concerns about the options market at the time.

Citadel soon began paying for order flow to break into equities market-making. Former employees say Mr. Griffin was determined for Citadel to win business from big-name brokerages such as Schwab. Citadel positioned itself as a high-tech disruptor, honing its algorithms to give better trade executions than rivals, the former employees said. It had a breakthrough in 2005 when TD Ameritrade agreed to start sending it orders.

By the Covid-19 pandemic, Citadel Securities was handling as much as 47% of U.S. individual investors’ stock-trading volume. It had grown into a global market-maker in futures, Treasurys and currencies with revenue of $7 billion last year, a person familiar with the matter said.

In January 2021, investors banding together on Reddit ignited a tremendous run-up in shares of GameStop and other meme stocks—only to see the rally collapse when Robinhood and other brokers temporarily blocked customers’ ability to buy the stocks. Many social-media users embraced the theory that Citadel Securities had spearheaded the decision to remove the buy button.

Both Citadel Securities and Robinhood denied this. Robinhood said it made the unpopular decision after the clearinghouse for U.S. stock trades demanded billions of dollars of collateral amid the mounting volatility. A congressional report in June confirmed that explanation.

Mobile-ad trucks in New York from an online movement of investors who are critical of Citadel Securities. A caricature of Mr. Griffin is shown in the truck on the left.Photo: Amir Hamja for The Wall Street Journal
Nonetheless, Mr. Griffin was vilified by an online movement of investors calling themselves apes, who trolled him with hashtags such as #CitadelScandal, and some paid for truck-mounted digital billboards to drive around big cities with slogans bashing the firm. “It was a bit of a surreal experience,” recalled Mr. Mecane.

Near the peak of the GameStop frenzy, the Biden administration chose Mr. Gensler as its pick to lead the SEC. Now he is pursuing the most aggressive agenda for an SEC leader in decades, including his proposed overhaul of stock-market structure.

Mr. Gensler has criticized payment for order flow, calling it potentially detrimental to the interests of investors, and last year he indicated he was open to the idea of banning it. He has also said the business of processing individual investors’ orders is concentrated in too few firms.

Citadel Securities says it wins a lot of retail order flow because it offers the best prices. Backing up that claim, a recent academic study based on 85,000 trades at several popular brokerages found that Citadel Securities saved investors more money through price improvement than any other market-maker.

Mr. Griffin has said his firm would be fine even if payment for order flow were banned. “Payment for order flow is a cost to me,” he said in a public appearance last year. “So if you’re going to tell me that by regulatory fiat one of my major items of expense disappears, I’m OK with that.”

Eliminating payment for order flow would be trickier to brokerages, some of which lean heavily on the practice as a source of revenue. Robinhood—which makes the bulk of its revenue from selling order flow for stocks, options and cryptocurrencies—indicated when it went public last year that new restrictions on payment for order flow could hurt its business.

In a June speech, Mr. Gensler appeared to back away from the idea of banning payment for order flow. Instead, he is set to unveil a proposal to funnel investors’ orders into auctions, in which market-makers would compete to give the best price on each trade.

Mr. Gensler’s agenda has brought criticism even from Democrats who might seem like his allies. “There would be no zero-commission trading without payment for order flow,” said Rep. Ritchie Torres (D., N.Y.), a member of the Congressional Progressive Caucus. “So my message to the SEC is simple: Don’t throw out the baby with the bath water.”

Supporters of Mr. Gensler dismiss such concerns as the result of industry scaremongering. "It’s your standard terrify-the-regulators approach,” said Dave Lauer, founder of market-data startup Urvin Finance. “They’ll say, ’You tinker with anything, it’s all going to come falling apart.’”

Many SEC watchers expect the industry to challenge Mr. Gensler’s proposals in court.

“There has been a secular trend in the last two decades toward an improved retail trading experience,” said Jason Clague, a managing director at Schwab. “What we’re struggling to understand from Chair Gensler and his staff is why they feel the market is broken, despite a wealth of evidence to the contrary.”

Paul Kiernan contributed to this article.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

[Don Green] Americans spend more than $7.4 billion on payday loans every year. That’s hardly...

Don Green — 11/3/2022 7:00:21 AM

Americans spend more than $7.4 billion on payday loans every year. That’s hardly peanuts, especially when you consider that these billions are earned $50 to $100 at a time, often off the backs of the Americans who can least afford to part with their hard-earned cash.

For the uninitiated, payday loans — also known as payroll or direct-deposit advances — work like this: A borrower promises to pay a fee, generally in the neighborhood of $15 per $100 borrowed, until their next paycheck arrives. On payday, the lender will claim the fee plus the original amount borrowed. That’s how it works in theory, at least. But many borrowers can’t afford the lump sum payment, so they roll over the original loan, plus the original fee plus a new fee, which is higher than the initial fee because the borrower owes both the principal plus that fee at this point.

The average payday loan is for $375 — and the average borrower ends up saddled with that debt for five months, during which time they pay $520 in interest. When research group the Pew Center on the States released a payday lending report, part of its Safe Small-Dollar Loans Research Project, it discovered these and other sobering facts.

One of the big questions the study set out to address is whether the way payday lenders present their products — as a quick, hassle-free way to get cash for a week or two when an unexpected expense crops up — reflects the kind of experience people actually have with these loans. Are they a quick stopgap, or are they a pricey band-aid solution to chronic financial problems that compound the problem they purport to solve by charging what amounts to triple-digit interest rates?

(MORE: Big Banks Elbow In On Check Cashing, Payday Lending, and Other Fringe Financial Businesses)

Nearly 70% of payday loan users say they use this money for everyday expenses, and only 16% use the funds to cover an emergency or unexpected expense. Disturbingly, 5% of people report taking out payday loans to buy food. That’s pretty much the opposite of an unexpected expense.

Pew researchers throw cold water on the idea that payday loans are a quick fix. Although the term of these loans is generally in the two-week neighborhood, the average borrower is on the hook for five months. During this time, the fees keep adding to the unpaid balance, making it even harder for the borrower to come up with the cash to pay off the debt.

The report also debunks the perception that only the most hard-up, desperate Americans turn to payday lenders. More than 5% of the population, or 12 million people, use these products every year. “People of most ages and incomes use payday loans,” it says. More than 40% of borrowers own their own homes, and a little more than a quarter of them make more than $40,000 a year.

Although white women between the ages of 25 and 44 are the most frequent customers of payday lenders, a look at the percentages shows that some groups bear much more of the brunt of payday lending relative to their population size. African-Americans, the disabled, those without a college degree and people who are separated or divorced are more likely to take out payday loans, the report finds.

Whether or not you’re likely to take out a payday loan depends a lot on where you live; researchers found that residents of states with lax regulation of the payday lending industry are more likely to borrow this way. In states that have implemented the toughest laws limiting the interest and duration of these loans, 95% of would-be borrowers don’t take out payday loans; only 5% go online or elsewhere to get a short-term loan.

The lending industry argues that limiting the number of “rollovers” a borrower can conduct keeps people from cash they need immediately and can’t get any other way. But that’s not really true; when Pew researchers asked payday loan users what they would do if they ran short of cash and couldn’t get a payday loan, more than 80% simply said they’d cut down on other expenses.

Months of being saddled with a debt racking up the equivalent of 300% or 400% APR versus a week or two of belt-tightening — this new research spells out rather clearly which choice is better over the long run.

[Don Green] [youtube video]

Don Green — 10/30/2022 1:35:36 PM

[Don Green] Gensler’s SEC Is Learning to Pick Its BattlesUpending the stock market for uncer...

Don Green — 9/26/2022 7:52:16 PM

Gensler’s SEC Is Learning to Pick Its BattlesUpending the stock market for uncertain rewards shouldn’t be a priority.
The EditorsSeptember 26, 2022, 8:00 AM EDT

Good move.

Photographer: Kevin Dietsch/Getty ImagesFrom regulating crypto to improving corporate disclosure on climate risks, Securities and Exchange Commission Chair Gary Gensler has taken on many daunting challenges that, if things go well, could vastly improve prospects for investors, the economy and the planet.

It’s thus good to see him stepping back from a much less obviously useful quest: upending the stock market for uncertain rewards.

Bloomberg opinion
At issue is the way stock trading works. Right now, the system is quite favorable for the millions of retail investors who trade on their own accounts. Retail brokerages (such as Robinhood Markets Inc.) typically route their orders to wholesale brokers (such as Citadel Securities LLC and Virtu Financial Inc.), which like to take retail investors’ trades because they’re more random — and hence less likely to lead to losses — than those of well-informed investors such as hedge funds. To attract this desirable business, the wholesalers typically offer better prices than what’s available on “lit” public markets. They also send money back to retail brokers, a practice known as “payment for order flow” that has enabled the era of commission-free trading.

Yet useful as it may be for some, this setup — with payments that look like kickbacks and retail orders filled in the dark — has attracted the suspicion of lawmakers, who have put pressure on regulators to do something. To that end, Gensler suggested earlier this year that the SEC might consider banning payment for order flow, and getting everyone to trade with everyone in a more “open and transparent” way.

In theory, such reforms might have advantages. If more retail orders reached public exchanges, they might slightly (on the order of hundredths of a percentage point) improve pricing for pension, mutual and index funds. If retail brokers had to reintroduce commissions, active traders (who on average don’t profit from their efforts) might think twice before piling into (say) meme stocks at absurd valuations.

That said, the costs — both financial and political — could easily outweigh the benefits. Among other things, the clamorous ranks of retail traders certainly wouldn’t be happy about losing their advantages, in terms of both commissions and price. And there would be downsides to any shift of trading to public exchanges, which have their own system of kickbacks and fees. The potential for unintended consequences would be significant.

Matt Levine's Money Stuff is what's missing from your inbox.We know you're busy. Let Bloomberg Opinion's Matt Levine unpack all the Wall Street drama for you.

More to the point, the SEC has better things to do than attempting to restructure the stock market for minimal gain. So it’s good news that, as Bloomberg News reports, the agency has dropped the idea of banning payment for order flow. Let’s hope it’s also letting go of other fraught ideas that might still be on the table, such as forcing trades onto exchanges with order-by-order auctions (which hasn’t worked particularly well in the options market).

For now, the SEC’s limited attention and resources can be better deployed elsewhere.

[Don Green] Why Payment for Order Flow Made Trades Free But Left SEC Skeptical [graphic] Th...

Don Green — 9/24/2022 2:21:10 PM

Why Payment for Order Flow Made Trades Free But Left SEC Skeptical

The way stocks are bought and sold in the US has changed dramatically over the past decade, and at the heart of the changes is something called payment for order flow, or PFOF. It’s what’s made much of stock trading commission-free, which in turn brought into the markets the millions of new retail investors who fueled 2021’s so-called meme stock revolution. But PFOF has also become a focus of attention for the US Securities and Exchange Commission, which after months of deliberations, decided not to ban the practice but to develop other changes that could make the practice less profitable.

1. What is payment for order flow?

It’s money paid to brokerages for the right to execute orders coming from the brokerage’s retail investors. The firms making the payments are electronic wholesalers, also known as market makers, and include such giants as Citadel Securities, Virtu Financial and Susquehanna International Group. Between them, Citadel and Virtu handle more than half of the wholesale trading market; Citadel alone handles one in every four US equities trades. The payment recipients are retail brokers that range from newcomers like Robinhood Markets Inc. to veterans like E*Trade and Charles Schwab Corp. The payments are allowed if the market makers and brokerages are providing brokerage clients with what regulators consider “best execution” on trades, a standard based on a combination of price, speed and other factors.

2. Why are they willing to pay for order flow?

Market makers have spent billions of dollars on sophisticated technology that lets them execute trades involving billions of shares per day. The top six such firms executed roughly $58 billion worth of share orders in March 2022, according to Bloomberg data. These firms make money by paying a little less to buy a stock, or by getting a little more when they sell a stock from retail orders. This small “spread” is essentially part of the price retail investors pay. These tiny profits on smaller orders add up, making it worth paying retail brokerages to have trades sent their way.

3. Why the focus on retail trades?

Institutional orders are larger, can shift the price of a stock dramatically -- exposing the market makers to greater risks if the price swings against them -- and take longer to execute. Retail trades are smaller, so they have less of an impact on price, and can happen in a matter of milliseconds.

4. How big is payment for order flow?

Total payments for order flow in the first quarter of 2022 came to $840 million for both equities and options trades, and $3.8 billion for all of 2021. The number of trades steered to retail wholesalers for equities this way could represent as much as 14% of stock activity, but has varied over recent months depending on the market’s conditions.

5. How has this changed stock trading?

Payment for order flow helped to usher in the no-fee trading era. It gave Robinhood, the upstart financial-technology company, a reliable source of revenue that let it knock its price to trade down to zero, compared with a previous average price of $4.99 per trade. That pushed most of its competitors to follow suit in 2019. Retail trading took off during the pandemic disruptions of early 2020, with people making more investments while stuck at home. That enthusiasm has worn off. Average daily volume of the six larger wholesalers is down 47% from the January 2021 peak. Still, the momentum contributed to the migration of trades happening away from public exchanges.

6. Where did trading move?

There’s been a steady increase in what’s known as off-exchange trading, which has grown from 11% of trading volume in 2004 to 40% in May 2022. Off-exchange trading, which includes alternative trading systems or dark pools, doesn’t display the investor’s asking or offer price, which is information that can drive stock prices up or down, potentially reducing profits. Only the results of trades are made public.

7. What’s the advantage for market makers of off-exchange trading?

Typically a wholesale market maker like Citadel Securities and Virtu will route retail orders through these venues or will “internalize” them by matching buy and sell orders from the flow of trades they’re handling. They say that their freedom from some of the rules governing exchanges means they’re often able to get clients a better price. Firms handling institutional orders may want to trade off-exchange to avoid disclosing the kind of larger orders that can shift prices.

8. What do supporters of PFOF say?

The wholesale-trading firms say that along with subsidized trading, investors are getting some of the best prices ever due to the sophistication of the current system. Price improvement, the amount a retail investor saved compared to the best displayed price on an exchange at the time, is on a pace to reach $3.7 billion for this year. Ending or limiting PFOF could have unintended consequences that lower these savings and end up hurting retail investors, they warn.

9. How about its critics?

SEC Chairman Gary Gensler has been one of the current system’s biggest detractors, but not its only one. Critics say there’s not enough competition among the giant players that dominate the execution of stock trades, and average traders don’t know if they’re actually getting the best prices for their transactions. Gensler has said trades aren’t “free” even when brokers don’t charge a commission, asserting that the costs are baked in somewhere in the system. His goal is to bring more pricing competition and transparency to the equities market through what could be a major overhaul.

10. What is the SEC doing?

It appears to be focused on other ways to make the market more transparent following pushback from industry. The SEC is considering a move to lower access fees that exchanges charge brokerages to execute trades for some stocks, which could push more trading onto the exchanges. The agency also may propose changes that could affect the complicated system of rebates that exchange operators use to lure trading volume, they said. Additionally, the regulator is weighing a plan to force brokers to disclose more about how much trading with them costs compared with benchmarks, a metric known as price improvement, said the people.

• A Bloomberg News article on how the SEC is pulling back from any move to ban payment for order flow.

• A Bloomberg Intelligence analysis of how the revenue from the bid-offer spread is carved up among market makers, brokerages and investors.

• A Bloomberg Businessweek overview of Wall Street’s plans for the battle over PFOF.

• A detailed look at the SEC’s initial proposals by Bloomberg Intelligence.

• A Bloomberg article on Gensler’s views on PFOF and market structure.

More stories like this are available on bloomberg.com

[Don Green] Deleted

Don Green — 9/24/2022 2:15:18 PM

[Don Green] GME twitter.com [X] Sounds like the GME stock split/dividend has completely ...

Don Green — 8/2/2022 10:39:03 AM

GME

twitter.com

[X]

Sounds like the GME stock split/dividend has completely destroyed some brokers back-office systems - I keep hearing about the nightmare of dealing with TDA. Also sounds like overseas brokers are having serious problems, and German brokers are struggling getting shares to people.
— Dave Lauer (@dlauer) August 1, 2022

[/X]

[X]

Sounds like the GME stock split/dividend has completely destroyed some brokers back-office systems - I keep hearing about the nightmare of dealing with TDA. Also sounds like overseas brokers are having serious problems, and German brokers are struggling getting shares to people.
— Dave Lauer (@dlauer) August 1, 2022

[/X]

[Don Green] They Won the Lottery—and Friends and Family Turned on Them “Everybody dreams of...

Don Green — 8/1/2022 10:47:34 AM

They Won the Lottery—and Friends and Family Turned on Them

“Everybody dreams of winning money, but nobody realizes the nightmares that come out of the woodwork,” lamented one jackpot winner whose own brother hired a hitman to kill him.

Photo Illustration by Thomas Levinson/The Daily Beast/Getty/Reuters

Marie Holmes thought she was going to have a heart attack when she realized she’d won a $188-million Powerball jackpot. It was February 2015, and the 26-year-old single mother of four had recently quit jobs at Walmart and McDonald’s to care for one of her kids, who has cerebral palsy. She and her children had been living in a mobile home in North Carolina with her mother.

Holmes rarely played the lotto—only when there was cash to spare. This time, $15 and six numbers changed her life: 11, 13, 25, 39, and 52, with a Powerball of 19.

Holmes told a reporter with WECT, a local NBC affiliate, that she was “thankful that I can bless my kids with something I didn’t have.”

“Your whole life is about to change. How are you feeling about that?” the reporter asked Holmes in one of her first TV interviews.

“I’m ready for it,” Holmes answered. “I’m ready to embrace the change.”

Today, another fortunate soul has the chance to snag an eye-watering $1.02 billion Mega Millions reward and see their world permanently transformed overnight. It’s the third time in the game’s 20-year history that the prize is hitting ten figures.

But while some winners take a lump sum and ride off into the sunset, others seem to stick around in the headlines—for reasons that aren’t always so lucky.

Among the most famous cases of the curse of the lotto is that of Jack Whittaker, who won a record-setting $315 million Powerball on Christmas night in 2002. Then 55, the West Virginia businessman opted for a $113.4 million onetime payout and became an instant celebrity, basking in the light of TV cameras with his family, which soon fell apart. Four and a half years later, Whittaker was filled with regret. “Since I won the lottery, I think there is no control for greed,” he told ABC News. “I think if you have something, there’s always someone else that wants it. I wish I’d torn that ticket up.”

In that short time, Whittaker’s wife, Jewell, left him. His granddaughter Brandi Bragg, who was going to inherit his fortune, died at age 17. Bragg, who’d struggled with drug addiction, was found dumped in a plastic tarp near her boyfriend’s home. “My granddaughter is dead because of the money,” said Whittaker, whose daughter Ginger died of cancer in 2009.

Scandal after public scandal plagued him. Thieves stole hundreds of thousands from his vehicles and home, he was mired in legal battles—including with female casino employees who accused him of assault—and he fell into drinking and gambling.

“Just disappear. Get lost while you still can. The drama is nonstop.”

“I don’t have any friends,” Whittaker told the Associated Press in 2007. “Every friend that I’ve had, practically, has wanted to borrow money or something and of course, once they borrow money from you, you can’t be friends anymore.”

Willie Seeley, who in 2013 won about $4 million after splitting a $450-million jackpot with 15 coworkers, was adamant that he would not suffer such a fate.

Back then, Seeley told NBC that he was moving to a secluded cabin full-time not only for his love of the great outdoors, but also to avoid freeloaders and reality TV producers. He also bought a shotgun for protection. His advice back then for charmed ticket holders? “Just disappear. Get lost while you still can,” he told the network, which is perhaps why The Daily Beast couldn’t reach him Thursday. “The drama is nonstop.”

For Holmes, who also could not be reached for comment, the post-prize controversy included lawsuits from her ex-fiancé, Lamarr Andre McDow, and a local pastor who reportedly claimed she backed out of providing $1.5 million for a retreat center. (The Daily Beast could not confirm the pastor’s court filings.)

A year after winning millions, she appeared on Iyanla, Fix My Life on the Oprah Winfrey Network, which filmed her TV therapy session at a plantation she’d purchased. In the show, Holmes revealed how her mansion was in disarray and how she’d burned through millions to pay McDow’s bail and fund his businesses, and bankrolled allowances for relatives.

Last year, McDow sued Holmes, claiming she’d sold off his automotive business and vehicles and gave away other items he says she had purchased for him as gifts ahead of his prison sentence for trafficking narcotics.

Before the case was dismissed, Holmes’ lawyer filed a memorandum that warned: “This case is the embodiment of the phrase ‘What’s yours is mine and what’s mine is my own. The problem here, however, is that McDow has nothing of his own.”

Courtroom brawls in wake of multimillion-dollar windfalls, or even lesser gambling prizes, are nothing new. In May, a Canadian pizza delivery driver sued 16 of his friends for leaving him out of their lotto pool, which won $1 million. “Why wouldn’t they tell me they won?” the driver, Philip Tsotsos of Windsor, Ontario, asked CBC. “These guys are like family to me.”

Meanwhile, on Vancouver Island, two women are suing their sister Lisa Turnbull over their late mother Frances Lloyd’s $3 million jackpot won in 2021. According to the Vancouver Sun, Lloyd planned to bestow some money upon her family and buy a new house, but she died at age 78 on Jan. 2 without leaving a will and testament.

Turnbull, in an affidavit, says her mother gave her and her husband $1 million to express gratitude for their companionship, as she was Lloyd’s primary caregiver. “She said she was ‘comfortable’ with the balance of the account going to me upon her death,” Turnbull claimed of her mother’s wishes, the Sun reported.

Such family feuds over high-profile paydays are numerous. In 2012, Etta May Urquhart sued her own son and accused him of claiming her $51 million Mega Millions ticket as his own, putting millions in accounts out of her control, and buying 10 cars and four homes. They reached a confidential settlement in the matter one year later.

Gloria Mackenzie of Florida filed a lawsuit against her son in 2019, when she was 90, for allegedly mismanaging her $278 million score, which supposedly resulted in a $10 million loss. When Mackenzie won in 2013, it was the largest jackpot in Powerball history at $590.5 million. She claimed her son, who had power of attorney over her finances, had enlisted a host of a financial talk radio show to invest her money.

Pennsylvania state lotto winner William “Bud” Post III was also bedeviled with litigation and even an attempted hit job by his own brother. “Everybody dreams of winning money, but nobody realizes the nightmares that come out of the woodwork, or the problems,” Post said just five years after his lotto bonanza in an interview with the AP.

“I wish I’d torn that ticket up.”

Post, who’d worked as a circus and carnival driver, cook, and painter, had $2.46 in his bank account when he purchased his winning ticket worth $16.2 million in 1988. He decided on annual payments of roughly $500,000 rather than a lump sum.

After cashing in, Post faced a stream of misfortunes, including a lawsuit from a landlord who obtained a third of his jackpot, an assault conviction, and bankruptcy. His brother, Jeffrey Post of Sarasota, Florida, was arrested in 1993 and later convicted of trying to enlist a hitman to kill Bud and his wife and make it look like a murder-suicide.

“The apparent motive for the (attempted) deaths was monetary gain,” police said in a statement, according to a Pittsburgh Post-Gazette report. “(Jeffrey) Post’s brother won a Pennsylvania lottery and apparently was reluctant to share it.”

For Florida winner Abraham Shakespeare, the lottery ultimately cost him his life.

The Lakeland sanitation worker, who was reportedly illiterate and dropped out of school in eighth grade, was 41 when he won a $31 million state jackpot in 2006 and took home a nearly $17 million lump sum. Soon after, a coworker claimed Shakespeare stole the winning ticket and sued him but a jury sided with Shakespeare in 2007.

Following this victory, Shakespeare told the Tampa Tribune he might finally get some peace. “I want to be able to turn the phone completely off and not have to worry about any phone calls,” he said. “My goal is to be able to wake up in the morning, get a fishing pole and go fish. Or go hunting. Or golfing. I ain’t never golfed before.”

Shakespeare would squander his funds over the next couple years, paying off friends’ and relatives’ mortgages or otherwise giving his money away—until he vanished in 2009.

A cousin reported him missing that November, though he was last seen in April, according to The Ledger, a daily newspaper in Lakeland, which reported that Shakepeare’s $1 million home and other real estate holdings or mortgages had been sold or transferred to a medical staffing company owned by a woman named Dorice Donegan “Dee Dee” Moore.

She quickly became a person of interest in Shakespeare’s disappearance. Moore told reporters Shakespeare was hiding out because acquaintances were often begging him for money. She also claimed to be writing a book about the lotto winner.

In January 2010, Polk County Sheriff Grady Judd told the media that he feared Shakespeare was dead, noting, “There are a lot of odd and bizarre circumstances in this case.”

Cops found Shakepeare’s body later that month, buried under a concrete slab in a rural backyard of a property Moore owned. He had been shot twice in the chest.

Moore was arrested that February and later charged with first-degree murder. A jury convicted her in connection to Shakepeare’s death in 2012.

Robert Brown, Shakespeare’s brother, told the Associated Press that his sibling regretted buying his golden ticket.

“‘I’d have been better off broke.’ He said that to me all the time.”

[Don Green] Old debate but still an issue [youtube video]

Don Green — 7/31/2022 2:35:16 PM

[Don Green] Lessons learned from Flash Boys Following the recent dismissal of the so called ...

Don Green — 7/29/2022 8:56:32 PM

Lessons learned from Flash Boys
Following the recent dismissal of the so called ‘Flash Boys Case’ made against exchanges for favouring high frequency traders, Annabel Smith explores how Michael Lewis’ original novel has shaped the market... and why it drove asset managers to take legal action.

By Annabel Smith

The idea that high frequency traders were using speed to take advantage of ordinary investors was first brought to the world’s attention with the release of Michael Lewis’ 2014 novel, ‘Flash Boys: Cracking the Money Code.’ A story that follows the epiphany of former RBC electronic traders Brad Katsuyama and Ronan Ryan as they come to realise that the electronification of the market had opened the door for a new ‘predator’ so to speak that used speed to nip in ahead of slower and larger traditional institutions. Its release emphasised the importance of speed in trading and increased the amount of attention paid to how it can be utilised to take advantage of the unequipped ordinary investor.

Beginning with the launch of Spread Networks – a company that at a cost of $300 million laid an ultra-low latency fibre optic cable connecting Chicago and New Jersey, in a bid to sell speed to HFTs and Wall Street banks – Flash Boys tells the story of latency arbitrage and market manipulation. Through high-speed connections – either through co-locations or access to enhanced proprietary data feeds – HFTs and proprietary traders were accused of taking advantage of oblivious traditional institutional and retail investors, using information gathered on the public markets at a faster speed or through access to banks’ private dark pools. According to the book, in 2011 roughly 30% of all stock market trades were occurring off-market, with most of these taking place in dark pools.

It was on Reg NMS in the US that Katsuyama and Ryan based their claims that the market was systemically rigged. Reg National Market System (NMS) was brought in by the Securities and Exchanges Commission (SEC) in the US in 2007, inspired by front-running charges against participants from 2004. It requires the broker to find the best price for the investor in the National Best Bid and Offer (NBBO) meaning the broker must first buy however much of that stock is available at the best price. To gather the picture of the NBBO, exchanges created Securities Information Processors (SIPs) – consolidated data feeds including all bid/ask quotes from every trading venue, however, the IEX founders claimed the system offered a loophole to those firms that were willing to build enhanced SIPs nearer to the exchange’s systems to harvest the information faster.

The aftermath

As the first window into the secret underhand operations of the market, the publishing of the novel has had a significant and lasting impact on how some participants choose to trade and has encouraged regulators to pay greater attention to various practices including payment for order flow in a bid to protect ordinary investors.

“Culturally the novel being published was a milestone at a large US asset manager – especially as we had just reached an inflection point in the industry where electronic trading was being universally being adopted as an efficiency tool and there was an acceptance that this was ‘good technology’ and would allow the industry to scale even more rapidly,” says one buy-sider.

“The ‘Flash Crash’ a few years earlier [a rapid stock market crash that lasted for approximately 30 minutes in 2010] introduced better risk controls, better systems and better oversight of the electronic functions which had been adopted in a limited manner by the larger asset managers. Akin to the recent run on $LUNA [a crash in the price of the digital asset at the start of June that caused $500 billion in losses in the broader crypto market], the event shed light on possible industry weaknesses such as the formation of negative feedback loops due to the fragile interconnectivity of fragmented markets and venues that had appeared as a consequence of the introduction of Reg NMS in the mid 2000s,” they continue.

“I was surprised at how little people knew about what was happening with their orders and how they interacted with proprietary trading activity operated by major banks and the book did at least force people to ask more questions and understand more about what was happening in a complex marketplace.”

Several court cases were immediately spawned based on allegations broadcast within the book: including investigations from the SEC into the dark pools of both Barclays and Credit Suisse. Ultimately, however, the blame fell at the doorstep of the exchanges for allowing the alleged behaviour to take place. In 2014, just a month after the book hit the shelves, five lawsuits were launched that eventually boiled down into a single action against the accused trading venues.

The case – now dubbed the Flash Boys Case – put forward by institutional investors claimed that the exchanges (including Nasdaq, the New York Stock Exchange and BATS global Markets – now part of Cboe) had created a preferential trading environment for high frequency traders (HFTs) that put other investors at a disadvantage. Included in these favourable trading conditions were co-location services that allowed firms to place their servers in close proximity to the exchange’s servers, superior data feeds allowing participants to create a better and faster picture of the market, and the National Best Bid and Offer (NBBO) and complex order types, all offered for a fee.

These latency-focused solutions were designed to improve the speed at which firms could access valuable information and move in and out of orders on venues – which enabled them to get ahead of other investors and profit from the tiny gap in time when they were privy to information that the rest of the market was not.

The case was thrown out in 2015 on the grounds that the exchanges’ self-regulatory status protected them from private damages lawsuits. However, it reared its ugly head again in 2017 when it was found they in fact had no such immunity. The seven exchanges moved to have it thrown out again in 2019, but this was denied. It was only in March 2022, eight years later, that the Federal Court concluded that the institutional investors could not prove they had suffered harm at the hands of the exchange’s actions, adding that the expert witness testimonial of Dave Lower was not a reliable methodology.

“The problem was that the institutional investors really didn’t have any proof that harm was occurring. While there have been some fines here and there I wouldn’t say there is any systemic proof that the markets are ‘rigged’. Electronification was supposed to put the buy-side on an even keel with the sell-side and enable people to trade from anywhere. Theoretically, you didn’t need to be standing on the floor of the New York Stock Exchange to have as much of an advantage as anybody. The problem with that theory is the laws of physics and the issue of speed,” says head of market structure research for Bloomberg Intelligence, Larry Tabb.

“The job of an exchange is price discovery and so they’re less worried about volume and more worried about the tightest possible price that they can provide. They’re also interested in transaction flow because exchanges get paid by the SEC in terms of market data in two ways, one being the number of shares they execute and the other being the aggressiveness of the bids and offers on their market. They’re going to get a larger rebate if the price is tighter versus whether the price is lower or wider and so while I don’t think there’s a collusion to make the markets worse for institutional investors, there are incentives in the exchange infrastructure to try to provide a fast, tight, efficient market.”

Co-location and proprietary products are offered to all institutions and are approved by the SEC, explains one HFT. “The buy-side connects to exchanges via brokers and one of the first questions they usually ask them is do your algos connect to proprietary data feeds,” they say. “Everyone has access to the same thing.”

According to some voices in the market, the court case relating to the publishing of Flash Boys was not driven by feelings of aggrievement from institutional investors but instead at least in part by a set of proactive law firms looking to encourage participants to take part in presumably lucrative lawsuits.

Earlier this month, retail broker Charles Schwab was asked to pay $187 million to settle charges with the SEC that it had misled its robo-advisor clients with regards to fees. The SEC found that from 2015-2018 Schwab did not reveal to clients that the service was directing funds “in a manner that their own internal analyses showed would be less profitable for their clients under most market conditions”.

“If you looked at Bloomberg, there were law firms popping up asking for elite plaintiffs to represent in similar cases to what had happened with Schwab. It’s the same thing for the Flash Boys case, law firms looking for plaintiffs. It’s a uniquely American and uniquely annoying problem,” says the HFT.

Widening the field

While legal action has been somewhat unsuccessful, the publishing of the novel has been effective in driving evolution in the industry. Bringing the events of Flash Boys to the wider market’s attention increased demand for transparency from investors and expanded the range of trading venues available in the market. As Lewis so eloquently put it, the problem was not about removing the hyenas and the vultures from the food chain, it was about giving them fewer chances to kill.

Among the new venues to come to market is US-based Investors Exchange (IEX), co-founded by Flash Boys stars Katsuyama and Ryan in 2013. In light of what they thought they had discovered, the pair wanted to foster a marketplace that would allow high frequency and traditional institutions to co-exist more harmoniously. Alongside various speed bump mechanisms, the exchange has introduced what is referred to as a D-Limit order or “discretionary limit order”. Limit orders allow an investor to buy or sell a security at a specified price or better. IEX’s order predicts when the market is about to move and then moves limit orders at the bottom of the orderbook – usually belonging to the buy-side – out of the way so they are not run over.

“Things like the D-limit order are not only looking at how to slow trading down, but also to see if venues can protect limit orders that are already existing on the exchange,” says one industry insider. “To their credit the general concept for most exchanges is to maximise liquidity because if you don’t trade, you don’t get paid, you don’t get to get tape revenue and you don’t get all of the market data benefits. In this instance, they’re actually putting an order type in that says when the flag goes up we’re going to move your order away from trading.”

However, the D-limit order is not without its own controversies. It has come under criticism from some who claim it only offers IEX members a delay and therefore puts non-IEX members at a disadvantage to the rest of the market.

“If IEX was on a fair footing with everybody else who could take a look at the order book and move then it wouldn’t be that controversial,” adds Tabb. “The controversy lies in that moving those D-limit orders does not go over the speed bump for IEX clients, so they have a 350-microsecond advantage over everybody else.”

IEX’s market share hit 3% for the first time in August 2019, although has been somewhat overshadowed by independent Members Exchange (MEMX) which launched into the market in October 2020 with the goal of increasing competition, improving transparency and reducing costs. MEMX entered the market with 0.1% market share only to reach 3% in April earlier this year. IEX declined to comment.

“That gets back to this issue about speed and market making. MEMX is fast and cheap. They also have a high rebate,” says Tabb. “The ability to be fast and have a high rebate means that MEMX is paying people to trade there and so because they pay you to trade there you can quote more aggressively as well because they’re fast you can quote more aggressively.”

Also launched in 2013 was the Aquis Exchange which, following the same philosophy of IEX, does not allow HFTs to cross the spread in order to prevent them using certain trading strategies on the exchange. Instead, the exchange only allows them to use a specific post-only order type.

“We’re not anti-HFT but there are certain strategies that we believe are done by proprietary trading firms that change the profile of the liquidity pool. If you don’t have HFT and prop traders on your market it’s going to take longer to get your order filled and a lot of people want immediacy,” says Aquis chief executive, Alasdair Haynes. “If someone is always the winner you don’t get competition. We believe there should be several markets out there. Ones that have everybody and others that are specific for the longer-term investor. They can co-habit.”

The events that followed the novel are also most likely the stimulus for European regulators to take more prescriptive action against broker crossing networks (BCNs) scrapped as part of Mifid II in 2018 and to encourage more volumes towards agency matching venues and periodic auctions.

Payment for order flow

Another practice on which the publishing of Flash Boys shone a spotlight was the controversial process of paying for order flow (PFOF), whereby retail brokers channel their customers’ flow to banks and market makers in return for a fee. Not only do firms have the opportunity to channel this flow to where it might suit them – the US exchange rebate system means some venues charge pay you for providing or taking liquidity – but it also gives these firms access to the information within each order that could then be traded against in the wider market.

The retail market in the US has swollen in recent years on the back of the pandemic, and the events surrounding the GameStop saga and the meme stock explosion, and the increased attention has brought PFOF into the crosshairs of the regulators. In a recent speech, SEC chair Gary Gensler warned that PFOF presented conflicts of interest and distorted routing decisions. He also suggested it may incentivise brokers to encourage the gamification of the markets as seen with GameStop in a bid to increase trading volumes.

“Exchanges give rebates to traders. High-volume traders benefit more from these arrangements, and retail investors don’t directly benefit from those rebates,” said Gensler. “Just as payment for order flow presents a conflict of interest in the routing of marketable retail orders, exchange rebates may present a similar conflict in the routing of customer limit orders.”

According to 606 reports gathered by the SEC, Citadel Securities forked out the most in payment for order flow in 2020 and 2021 at $2.6 billion, followed by Susquehanna (G1X global execution brokers) which spent a $1.5 billion and Virtu which spent $654 million in the same period.

Tagged: Aquis, Bloomberg Intelligence, HFT, SEC

[Don Green] All-In-One Indicator for Exponential Moving Average Crossover Strategy SUPERALG...

Don Green — 7/7/2022 9:28:45 AM

All-In-One Indicator for Exponential Moving Average Crossover Strategy

SUPERALGOS DATA MINING
A beginner trading system to discover trading, indicators and Superalgos

Photo by Markus Spiske on UnsplashEMA crossover trading system is the simplest trading strategy to step in and start a trading activity.

On its own, this trading strategy offers poor return and requires a favorable fees scheme to be profitable. We have already shown ways to improve the return over time by an algorithmic process of systematic compounding but it does not consider optimization on entry and exit point. In this article we will explore the process of creating an all-in-one indicator that will allow to find the safest entry and exit points of the EMA crossover strategy by combining several indicators in a simple parametric equation.

Prior to this article, I strongly advise to read my EMA crossover article for an insight on the basics of Exponential Moving Average and the crossover strategy.

All the data in this article are obtained using the Superalgos Platform backtesting and indicator computing capabilities. Statistical analysis and graph generation have been done using Knime Analytics.

Building the All-In-One EMA Crossover Strategy IndicatorA composition of weighted signalsThe underlying idea of a fully integrated indicator to use the EMA crossover strategy is to build an indicator that will integrate basics and more advanced signals for trading stage opening / exiting and confirmations. When we seek for confirmation of a trading signal, the best practice is to use non-correlated indicators, i.e. using different processing principles or different data sources.

Each indicator will have its own outcome, giving its own trading signal, buy or sell, depending on the market conditions. The combination of the different indicators can then be simply done with an equation summing the signals weighted by factors chosen as a function of the importance we want to give to the respective signals.

Considering we use 5 indicators, 3 trend related indicators and 2 non-correlated, the equation of the all-in-one indicator is described by:

Where S… is the signal given by each indicator as -1 for a sell signal and +1 for a buy signal; a, b, c, d and e are the weighting factors defined as:

A =a + b + c

For the EMA related indicators, and:

B = d + e

For the non-correlated indicators with the condition:

A + B = 1

The weight of each parameter can then be adjusted on a 0 to +1 range; thus, the all-in-one indicator will vary between +1 and -1, generating buying and selling signals respectively for positive and negative crossing.

EMA related indicatorsAmong the multitude of trend indicators, those based on moving averages are the most common. Since the strategy is based on the EMA crossover pattern, we will of course choose the relative position between a short term and long term EMA as the first indicator. Our goal is to have a good overview of how the trend is going to behave, if we will have a strong bullish trend and the potential of the price to explode in the right direction. To that extent we chose to combine the first one with the Trend Intensity indicator and the Mean Break Out.

EMA periods

The calculation procedure for EMA will not be described here. You can find more information about EMA in a previous article.

As already reported the most efficient couple for short term and long term EMA is 13–48. So, this is what we are going to use to identify the relative position.

We will then have +1 for the short EMA above the long EMA, and -1 for the opposite.

BTC/USDT at 01-hs chart with Exponential Moving Averages using Superalgos and Sparta Data mineTrend Intensity

The Trend Intensity indicator is a measure of the accumulation of the number of periods the price is above the EMA against the price is under the EMA. Given a number of periods equal to the number of periods of the EMA it gives an information on the trend strength and if the trend will tend to reverse.

To calculate the trend intensity indicator, we analyse the position of the price against the EMA :

if a candle closes above EMA, we add 1 to the pool “up” of the above candles and 0 if the candle closes belowif a candle closes below the EMA, we add 1 to the pool “low” of the below candles and 0 if the candle closes aboveThe trend intensity is then described by the formula :

BTC/USDT at 01-hs chart with Trend Intensity 13 (green) and 48 (red) periods using Superalgos and WEMA Data mineAn upward trend is spotted if the indicator cross the 50 line in an upward direction, giving a +1 value to the trend intensity component of the all-in-one indicator. -1 is attributed to the trend intensity component when the indicator cross the 50 line in and downward direction, describing a downward trend.

Mean Breakout Signal

The Mean Breakout (MBO) compares the difference between the closing price of a candle and a moving average over N periods to the difference between the min and max value of the closing price over the same N periods. It is described by the formula :

BTC/USDT at 01-hs chart with Mean Breakout indicator over 13, 48, 96 192 and 384 periods using Superalgos and WEMA Data mineThe MBO indicator is centered around 0. A crossing to the positive zone indicates and upward trend and will give a +1 to the MBO component of the all-in-one indicator and a -1 will be attributed at a downward trend signal, MBO crossing to the negative region.

Non-correlated indicatorsThere is also a big diversity for confirmation indicators independent from the different moving averages. When seeking for confirmation traders often rely on momentum indicators. For our study we will use a powerful indicator called the Ratio Momentum. To select the second confirmation indicator we will pick something really original and look toward signal processing inherited indicators, more especially to the Even Better Sine Wave indicator from John Ehlers.

The Ratio Momentum

The Ratio Momentum (RM) is actually no more than the ratio between two RSI calculated at different periods, on long and on short term.

The RSI, Relative Strength Index, is a momentum indicator indicating if an asset is oversold or overbought. In such cases there is a high probability the trend will reverse, going upward after an oversold momentum, and downward in an overbought momentum. It measures the direction and the strength of a movement according to the formula :

Where RS is the Relative Strength calculated as the ratio of the mean gains to the mean losses over a certain number of periods.

We will then use RM as the ratio between the 13 periods RSI and the 48 periods RSI

BTC/USDT at 01-hs chart with Ratio Momentum indicator using Superalgos and WEMA Data mineSince it is the ratio of 2 RSI, the Ratio Momentum is centered around 1. An upward trend is spotted when RM is above 1 (13 periods RSI higher than 48 periods RSI), giving a +1 for the Momentum component of the all-in-one indicator and the trend is downward when RM is below 1, -1 is then attributed to the Momentum component.

The Even Better Sine Wave

The Even Better Sine Wave indicator has been created by John Ehlers and is described in his book Cycle Analytics For Traders. It is the ratio of the wave component of the Band Pass Filtered price over the power of the resulting wave of the Band Pass Filtered price. The Band Pass Filter is build by applying a low pass filter to a single pole High Pass Filtered price. It works intensively well in trending market and avoid most of the whipsaws.

BTC/USDT at 01-hs chart with Even Better Sine Wave indicator at 36/6 using Superalgos and Quasar Data mineThe EBSW indicator give an upward trend confirmation when wbove 0.85 and we attribut +1 to its component in the all-in-one indicator. -1 is attributed in all other cases.

The all-in-one indicatorFor this study we chose equilibrated weighting factor, i.e. the two groups of indicator share are at 0.5, each group equally distribute the weight to its members.

BTC/USDT at 01-hs chart with all-in-one indicator using Superalgos and WEMA Data mineThe indicator is plotted with 3 reference lines at -0.5, 0 and +0.5. We observe very interesting potential entry signals when the signal crosses above or below the 0 line and the +/- 0.5 lines seem to give exit signals. A low pass filter is applied to the signal to have a better readability.

Backstesting With the All-In-One IndicatorOur study will be divided in two parts. In a first time we will address and intensive calculation process with Knime Analytics to identify what could be the most promising parameters of a trading system. In a second time we will use Superalgos to paper trade the strategy with the parameters calculated previously.

Extensive parameters study with KnimeWe built a Knime workflow to simulate a perfectly reactive trading system using the all-in-one indicator to find the best entry point, the best exit point and the optimized stop loss level. We also performed a short study of the effect of the fees. The knime workflow is considered to simulate a perfectly reactive trading system since it will simulates instantaneous opening and closing of the positions at the 01-hs chart, like if we used a bot able to react instantly at the signal detection.

SImulation of the return as a function of the exit level after 1.8 years on BTC/USDT pair at the 01-hs chart (trading fees at 0.075%)The best entry point (data not shown) has been determined at the crossing of the 0 line in the upward direction. The exit point study seems to reveal 2 points of interest at +0.5 and -0.3, giving a return between 5 and 6 (500% and 600%) including symetric fees of 0.075% per trade.

Effect of the stop loss level ont the return (fees at 0.1%)Studying the effet of the stop loss level on the return show an optimum value of 1%.

Return over time of the simulated strategy on BTC/USDT pair from 1st of january 2020 to 14th of november 2021 (0.1% fees)If we compile the first results to simulate trading over 1.8 years, we observe a total return about 4.9.

The fees level chosen in this study is quite fair and we could eventualy expect slightly lower fees with fidelity programs or the use of the native token of the trading platforms. If we look at the effect of fees, it shows en exponential decreasing return as the fees level increase.

Effect of fees on the total return after 1.8 years simulated tradingThe orange line on the last graph shows what a simple buy and hold of BTC/USDT pair would have achieved on the same periods. Considering everything is optimized, beating this simple strategy would have required fees lower than 0.05% per trade. Actually, the performance is the same as a simple EMA cross strategy on the same period.

Backtesting in SuperalgosA strategy based on the all-in-one indicator has been implemented in Superalgos. We use the EMA13/EMA48 crossover and crossunder as trigger ON and OFF. Once the stage is opened the bot will fire a set of 20 market buy orders, each market order will be placed when all-in-one indicator will be higher than or equal to 0.5. Once all the orders will be placed, and if the strategy is not triggered off, 20 market sell orders will be fired and each order will be place as soon as the indicator is inferior to 0.5. Stop loss is set at 1% of the balance, and the whole balance will be used each time. We eventually placed take profit at 17% of the total balance.

Backtest has been performed at the 01-hs time frame over 1.8 years from 1st of january 2020, using the candle close rate, i.e. the orders will be placed at the close point of the candle next to the candle the conditions will be met. This is actually a huge difference with the perfectly timed system simulated with Knime and we expect lower performances. This is actually the reason we chose to give a little advantage to the backtested strategy with multiple orders firing. It will average the global order rate and hopefuly dampen the effect of the order timing as compared to the simulation.

Backtest at 01-hs time frame for BTC/USDT pairThe results show a profitable strategy. We achieved a 2.631 return with a 53% hit rate. As expected we are a bit lower than the ideal execution of the last simulations. This is of course less than what a buy & hold position would have achieved on BTC but it proves to be a good trading system for educational purposes.

A more realistic test could have been achieved using the Paper Trading option but would have requiered to wait for several months to have significant results using the 01-min time frame to scan the indicators calculated at the 01-hs time scale.

ConclusionWe have shown we can build an indicator to integrate 5 different signals in order to execute the EMA crossover strategy with confirmations. The simulation and backtest show modest but profitable results and the trading system is a good candidate for educational activities on trading and indicator/strategy building in Superalgos

[Don Green] How An SEC Trading Rules Proposal Could Be A Game Changer For GME And AMC For y...

Don Green — 6/13/2022 8:42:02 AM

How An SEC Trading Rules Proposal Could Be A Game Changer For GME And AMC

For years now, retail investors have pleaded for more transparency in market structures. Finally responding to those pleas, the SEC now says it plans to increase competition between firms that execute retail trades, increase the efficiency of the equity markets, and deter conflicts of interest.

Activities heavily criticized by GameStop ( GME) - Get GameStop Corporation Report and AMC Entertainment ( AMC) - Get AMC Entertainment Holdings Inc. Class A Report retail investors, such as payment per order flow, would be affected by the SEC's plan. Here is a deeper look at how meme stock investors may benefit from this development.

(Read more from Wall Street Memes: Short Sellers Increased Their Bets Against GameStop Stock. Smart Move?)

PFOF Under SEC ScrutinyPayment for order flow (PFOF) refers to the compensation received by brokerage firms from other parties (usually market makers) for brokerages’ execution of trades. In effect, market makers will pay brokerages - usually in the ballpark of a few cents per trade - to direct their orders through them.

PFOF is quite controversial, however. That’s because it inherently involves potential conflicts of interest. Indeed, some traders claim that PFOF causes some executable orders to be turned into non-executable orders when brokerages decide to reroute an order to a market maker that is willing to pay a higher order flow fee. The upshot is that traders may not be getting a fair market price when they buy or sell securities.

PFOF is forbidden in several other countries, including Canada and the UK. And the practice doesn’t have a particularly strong endorsement track record either. One of PFOF’s biggest early proponents was market maker Bernie Madoff, who later pleaded guilty to several federal felonies, including securities fraud.

According to recent revelations by SEC Chair Gary Gensler, the SEC is putting in place a plan that will require trading firms to compete with each other to execute trades originating from retail investors. The SEC Chair also noted that "Ninety percent of retail orders are routed to a small percentage of wholesalers." Thus, practices such as payment-per-order flow would come under scrutiny by the SEC, while new order-by-order competition proposals, if enacted, would provide the markets with a more transparent view of trades.

In addition, new measures would heighten SEC requirements for brokers regarding the data those brokers keep on order execution. Much of that data (e.g., monthly summaries of price movements) would be made available for the benefit of individual investors.

Many commission-free brokers, such as Robinhood, derive the majority of their revenues from payment per order flow. According to Robinhood's Chief Legal Officer Dan Gallagher, the SEC's efforts to tinker with stock market rules are "misguided." Gallagher claims that today’s status quo trading still works very well for ordinary investors.

How does PFOF Affect Meme Stocks Trading?GameStop's trading boom during January 2021 and AMC's successive boom in the months that followed caught markets' attention. During that period, more and more people became aware of retail investors’ concerns regarding a lack of transparency in the markets.

Many believe that, through payment for order flow, market makers are manipulating retail traders’ and investors’ orders for their own benefit.

There are also concerns that a large chunk of orders going through market makers are destined for dark pools. Dark pools are like private exchanges that are off-limits to the public. Dark pools are legal and were created to facilitate block trading by individual investors who do not wish to impact the markets with large orders and lower transaction costs between brokers and clearinghouses.

However, the main disadvantage of dark pools is their opaque nature. High-frequency trading firms can take advantage of this opacity to engage in predatory practices - e.g., hiding orders that should be going straight to buyers.

According to Urvin Finance CEO Dave Lauer, almost half of the trades that take place in the U.S. take place over-the-counter (OTC), and many other countries have rules to prevent internalization and off-exchange execution of small orders. But in the U.S., no such rules exist.

How This Could Affect GME, AMC, And Retail Investors In GeneralThere is no hard evidence of irregularities or illegal behavior when it comes to market makers feeding orders through dark pools. Nevertheless, offering competitive alternatives to PFOF trading would provide more transparency as to what happens off-exchange and would help discourage any nefarious behavior.

Order-by-order competition would mark a major improvement to the market’s overall transparency. The SEC’s new rules would require that all wholesalers and market makers compete for orders, which would tighten spreads, minimize conflicts of interest, and maintain price and size improvement of retail orders.

All those improvements should be a boon to those trading or investing in high-volume, meme-y stocks such as GME and AMC.

(Read more from Wall Street Memes: Why Bank of America Expects 50% Upside for AMD)

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)

[Don Green] Payment for Order Flow Payment for order flow (PFOF) is the compensation paid ...

Don Green — 3/24/2022 3:29:47 PM

Payment for Order Flow

Payment for order flow (PFOF) is the compensation paid by venues like Citadel to brokerage companies like TD Ameritrade in exchange for routing client orders to the venue instead of sending them directly to the stock exchange.

This article reveals the payment for order flow details for the top 10 brokerage firms, explains the concept and provides insights into the PFOF methodology.

The first 606 disclosures with venue details were officially published for the first quarter of 2020. Our current database includes 122,538 data points and covers all data from January 2020 to December 2021.

Brokers are required to publish their statements by the end of January, April, July, and October for the previous quarter. As a result, these statistics will see the next update with Q1 data 2022 by the end of April 2022.

If you use the data provided as a source for your story, please cite daytradingz.com as a reference.

Payment for Order Flow: Key FactsPayment for Order FlowDetail

?? Required by	U.S. Securities and Exchange Commission
?? SEC Rule	606
?? Release Dates	Apr. 30, Jul. 31, Oct. 31, Jan. 31
?? Paid by	Venues
?? Received by	Brokers
? Acronym	PFOF

StatisticsIn 2020, $2.75 billion were paid to the 10 leading retail brokerages TD Ameritrade, Robinhood, E*Trade, Charles Schwab, Fidelity, Webull, TradeStation, Ally Invest, Bank of America and Wells Fargo. TD Ameritrade and Robinhood made the most money by selling order flow to venues like Citadel Securities, Global Execution Brokers, and Virtu Americas.

The newly released data reveals that the payment for order flow grew by 32% compared to 2020 to $3.62 billion in 2021.

TD Ameritrade further extended its market leadership in this segment to over 1 billion (+24%), while Webull saw the biggest percentage gain (226%).

Brokerage1-12/2020 (in $)1-12/2021 (in $)Growth in %

TD Ameritrade	1,148,550,502	1,421,044,615	24%
Robinhood	687,094,992	974,166,848	42%
E*Trade	402,493,959	454,431,992	13%
Charles Schwab	245,463,984	319,998,932	30%
Fidelity	134,314,911	161,850,777	21%
Webull	63,853,903	208,448,408	226%
TradeStation	41,844,854	58,203,831	39%
Ally Invest	15,270,053	13,762,279	-10%
Bank of America	8,640,784	3,328,754	-61%
Wells Fargo	5,159,316	6,107,099	18%
Grand Total	2,752,687,260	3,621,343,534	32%

Show more

The detailed quarterly split per broker provides further insights into the quarterly results.

Broker Statistics1. TD Ameritrade Payment for Order FlowThe annual TD Ameritrade payment for order flow income in 2020 was $1.15 billion, with a monthly average of $96 million. TD Ameritrade continues to have the highest revenue among all brokers in this list. The monthly average 1-12/2021 grew to $118 million for a grand total of $1.42 billion.

2. Robinhood Payment for Order FlowThe Robinhood payment for order flow saw significant growth in 2020 to $0.69 billion with a monthly average of $57 million. The trading app is more popular than ever before. New mobile trading apps like Webull may take some market share, but Robinhood leads the segment of mobile trading apps. The monthly average 1-12/2021 grew to $81 million for a grand total of $0.97 billion PFOF.

3. E*Trade Payment for Order FlowThe E*Trade payment for order flow is the third-largest in the list, with a total of $0.40 billion in 2020 and a monthly average of $34 million. The monthly average 1-12/2021 grew to $38 million for a grand total of $0.45 billion PFOF.

4. Charles Schwab Payment for Order FlowThe Charles Schwab payment for order flow is the 4th-largest in the list, with a total of $0.25 billion in 2020 with a monthly average of $20 million. The monthly average 1-12/2021 grew to $27 million for a grand total of $0.32 billion PFOF.

Charles Schwab acquired TD Ameritrade and concluded the acquisition for $22 billion. The deal was announced in November 2019 and completed in October 2020. Therefore, TD Ameritrade and Charles Schwab payments for order flow go to the balance sheets of Charles Schwab (SCHW).

5. Fidelity Payment for Order FlowFidelity belongs to the top 5 brokerages receiving the highest PFOF compensation from venues. The PFOF income in 2020 was $134 million with a monthly average of $11.2 million. In 1-12/2021, the monthly average increased to $13.5 million and a total of $162 million in 2021.

6. Webull Payment for Order FlowThe Webull payment for order flow is low compared to the competitors, but it shows the strongest percentage gains compared to the previous year. The PFOF 1-12/2021 is 226% higher vs. 1-12/2020. June 2021 was also the strongest PFOF month in the history of Webull, with a total of $20 million received. With this steady growth, it is most likely that they will outrank other brokers in the mid-term.

7. TradeStation Payment for Order FlowIn 2020, TradeStation received $41.8 mn PFOF with a monthly average of $3.5 mn. The payment for order flow income 1-12/2021 grew significantly by +39% compared to 1-12/2020.

8. Ally Invest Payment for Order FlowAlly Invest is the 3rd-smallest brokerage company on the list and received only $15.3 mn PFOF from venues in 2020, and $13.8 mn in 2021.

9. Wells Fargo Payment for Order FlowWells Fargo received $5.2 mn PFOF from venues in 2020, and $6.1 mn in 2021.

10. Bank of America Payment for Order FlowIt seems that Bank of America now pays more money for order flow to stock exchanges than they receive from venues for routing order flow to them. The cause for this could be a strategic change for order routing principles or the higher demand from Bank of America clients to route the orders directly to a specific stock exchange instead of using smart routing. 2022 will show if the trend continues.

Venue StatisticsThe venues are those who pay the brokerage houses for their order flow. Looking at the per venue statistics paints a clear picture of the market leaders. Citadel, Global Execution Brokers and Virtu Americas dominate from the venue side with about about 65% of the overall business. The payments made through Wolverine and Two Sigma Securities grew most significantly in 2021 vs 2020.

Venue1-12/2020 ($)1-12/2021 ($)Growth (%)

Citadel	$ 1,122,990,199	$ 1,423,975,903	27%
Global Execution Brokers	$ 447,128,821	$ 640,126,586	43%
Virtu Americas	$ 311,970,264	$ 329,811,280	6%
other	$ 243,999,928	$ 237,609,202	-3%
Wolverine	$ 199,868,910	$ 418,246,526	109%
G1 Execution Services	$ 195,365,545	$ 147,008,781	-25%
Dash Financial Technologies	$ 111,849,476	$ 204,153,712	83%
Two Sigma Securities	$ 63,545,982	$ 140,906,710	122%
UBS Securities	$ 55,968,134	$ 79,504,834	42%
Grand Total	$ 2,752,687,260	$ 3,621,343,534	32%

Show more

Payment for Order Flow by Asset CategoryThe categories Options and NON-S&P500 stocks dominate the payment for order flow revenues. It is not a surprise since the spread, which is the baseline for the income, for S&P500 stocks is small since the liquidity is immense. Therefore it is hard to generate price improvements for clients or meaningful income to be shared between venues and brokers. The payment for order flow is dominated by the options trading category.

You can also see that various venues are specialized in one or the other asset category. Venues like Citadel pay for order flow in all three categories, from S&P 500 stocks to NON-S&P 500 stocks and options. Global Execution Brokers and Dash Financial Technologies are specialized in options, while Virtu Americas focuses on stocks.

Payment for Order Flow by MonthIn 2020, we saw significant growth in order flow payments, mainly affected by the global challenges. With more people working from home, and higher demand to make money trading the stock market because of zero interests, the online trading industry sees news highs quarter by quarter. Another reason for the growth is the zero commission. That’s an interesting situation. Zero commissions boost payment for order flow revenues since retail investors trade more because it is free to trade.

In January 2020, the payment for order flow was $116.3 million. In June 2020, we saw a temporary high at $293.6 million. 2020 ended with a record breaking payment for order flow of $295.4 million in December.

In 2021 we saw the highest payment for order flow month in February, with $367 million paid by venues to the 10 leading online brokerages. The strong uptrend was mainly caused by the meme stock fancy initiated by the WallStreetBets Reddit forum. The demand in trading stocks like GME, AMC and BBBY decreased, but the overall trading activity is still on a high level.

Brokerage MappingSome brokerages used different company descriptions within the brokerage 606 disclosures, and some also have different company divisions where the payments for order flow are allocated. Here is our brokerage mapping:

Venue MappingThe list of venues is long, and in some cases, they are also differently mentioned within the brokerage 606 disclosures. Therefore, we mapped the venues and focused on the key players. Here is our venue mapping:

Payment for Order Flow ConceptYou may ask yourself why a venue does pay money to the brokerage firm if the venue does all the work. The answer lies between the bid and ask; the so-called bid ask spread.

Let’s say you are interested in buying stock of company XYZ. The order book shows a national best bid of $105.50, and the best ask is $106.00. If you send a market order to buy 100 shares for the best possible price, your order would probably be executed at $106.00 (I want to keep this example simple, and things like hidden orders, market depth etc., are left aside.)

If in the next moment the best bid and ask are still at $105.50 and $106.00, and you hit the sell market button to close your position immediately, then your order would probably be executed at $105.50.

In that case, you lost 50 cents per share, which equals a total loss of $50.

If you allow your broker to take care of the order routing, they route the retail order to third party firms like Citadel Securities or Two Sigma Securities, called venues.

They receive thousands of buy and sell orders for hundreds of stock symbols every minute. An algorithm matches the client orders if possible. Since not all orders with exact the same order size arrive at the venue’s system at the exact same time, proprietary algorithms average down the order flow and evaluate the potential of price improvements. The venue always has the option to route the order further to the stock exchange.

Back to our example, your buy market order for 100 shares of company XYZ arrives 10 milliseconds before another trader wants to sell 100 shares of company XYZ by using a market order. Typically you would get filled at the next best ask at $106, and he at the next best bid at $105.5. But the venue now maps both orders using their algorithms and shares the profit made.

A significant portion of the benefit of $0.50 per share goes to the retail traders by providing them with a price improvement. Let’s say the buyer gets a fill at $105.8 instead of $106.00, and the seller receives a fill at $105.7 instead of $105.5. Both traders are happy, they did not pay commissions, and both got a price improvement of 20 cents.

The remaining 10 cents (the difference between $105.7 and $105.8) is the profit for the venue. But the venue shares this profit with the brokerage business, so they pay for order flow. This profit split is the Payment for Order Flow, where the venue pays the retail brokerage firms for sending liquidity to them, based on the order flow arrangements and conditions.

Now you may legitimately ask yourself how a venue or broker could make money if the most significant portion of the benefit goes to the investor via price-improvements. Until the end of 2019, you could only guess how much money was made via payments for order flow.

In the past 6 months, 32,600 people ask search engines every month “How Does Robinhood Make Money.” Thanks to the SEC’s revised requirements in SEC Rule 606, U.S. brokerages must list the exact paments received within the 606 disclosure every quarter since 2020. Now we can answer the question of how much money do retail brokerages make by selling order flow.

Zero Commissions via Payment for Order Flow vs Direct Access Broker Order RoutingMarket PotentialJanuary 2021 was a month that we would remember for a long time. Robinhood, Wallstreetbets, Hedge Funds, Citron Research, GameStop, AMC Entertainment, Nokia, BlackBerry dominated the street news.

The Reddit forum r/wallstreetbets grew from 1.8 million members on January 1, 2021, to 7.6 million on January 31, and 10.0 million in April 2021. From April to July 2021, the forum member count grew to 10.7mn, but only by 300,000 more until October 2021. The Robinhood app downloads skyrocketed to new highs, some of the mentioned company stocks explode with temporary gains of over +1,000% and fell 90% after that.

One could only guess how this media presence would affect the payment for order flow revenue.

A controversial discussion already began if payment for order flow is beneficial, transparent, and fair. We may see some regulatory changes in the future.

Latest News and Interesting Reads on PFOF:

If brokers are not allowed to receive payments for order flow anymore, a major source of income for them will disappear. Then, the chances are that commissions per trade have to be re-introduced.

Official statistics clearly show that most client orders see price improvements if the orders are routed to the venues. Therefore there is no clear right or wrong.

ConclusionSelling order flow has become one of the primary sources of income for U.S. Brokers. TD Ameritrade and Robinhood dominate the market, while Webull shows the most significant percentage growth.

Charles Schwab bought TD Ameritrade for $26 billion, and Morgan Stanley acquired E*Trade for $13 billion. We may also see further consolidation activities in the brokerage sector. Depending on how the mergers are executed and which entities remain, the market share per brokerage may change 2021 and beyond.

Payment for order flow became the primary source of income for Robinhood. In 2020, Robinhood had a total net revenue of $958.8 mn and thereof, $687.09 was received via payments for order flow. That means that 71% of total revenues came from PFOF.

Robinhood is listed on Nasdaq with the ticker symbol HOOD since July 29, 2021. The Robinhood stock price will primarily depend on the further development of PFOF income, while other brokers like TD Ameritrade and Charles Schwab have other primary sources of revenue.

The quarterly 606 disclosures are the first step in the right direction. The current media presence shows that even more transparency would be beneficial to the industry.

Investors involved in day trading should keep in mind that zero commissions brokers limit the order routing flexibility. At the same time, direct access brokers allow day traders to choose the order routing ECN and exchange directly.

FAQWhat Is Payment for Order FlowPayment for order flow means that venues like Citadel Securities pay money to brokerage businesses like TD Ameritrade for routing retail buy and sell orders to the venue system instead of sending it directly to the stock exchange.

Payment for order flow is typically beneficial for all parties involved.

Back in the days, brokerages had to pay fees to stock exchanges like NYSE and Nasdaq if a trade took liquidity, and they charged commissions of typically $5 per order from clients for each trade. Today, brokers do not pay fees to the stock exchange for taking liquidity if retail orders are routed to the venue. Nearly all leading retail brokers offer zero-commission trading for stocks and options.Besides the benefit of paying zero commissions, now traders and investors often receive a better execution price if they are using market orders since the customer orders get mapped in the venue’s system, which often leads to price improvements compared to the NBBO (national best bid and offer). In Q4 2020, TD Ameritrade stated that 96.9% of all orders improved.Venues also benefit from the order flow since they keep some of the profits made from matching orders within their internal systems. The spread between the bid and ask is the source of income.How Do I Know if My Broker Receives Payment for Order FlowYou can check the public 606 disclosure of your broker to see if they receive payments for order flow. Unfortunately, it is not that easy to find the statements on a brokerage website. Use your favorite search engine to look for your brokerage name and add 606 disclosure to find it faster.

Alternatively, you can see it like this: If you are in control of the order routing, then your broker probably does not receive any PFOF. But if you are using order routing methods like “smart” or “intelligent,” then your broker probably routes the order to one of the venues and receives PFOF.

The U.S. Securities and Exchange Commission Rule 606 requires U.S. registered brokers to publish a “Public Order Routing Report Under Rule 606”. You can find further details in this SEC document at sec.gov.

Does It Make Sense to Use a Direct Access Broker Instead of a Retail BrokerA direct-access broker specializes in providing day traders with high-speed order execution and the full range of order routing options. Traders can send orders directly to the NYSE, Nasdaq or Electronic Communication Networks like ARCA.

Low-latency servers with near-stock exchange locations ensure fast order executions. Direct access brokers require traders to fund their account with a minimum of $30,000 and charge commissions of about $0.005 per share. Higher trading volume may reduce the commissions. Keep in mind that exchanges may charge or pay for placing orders on their exchange network.

Is the Concept of Payment for Order Flow NewThe concept of payment for order flow is not new. Since the rise of exchange networks, all stock exchanges and ECN’s try to make their network attractive to traders across the world.

The logic goes like this; if a trader removes liquidity with a market order, he needs to pay a fee. But if he provides liquidity by using a limit order, he may receive a payment if the order gets filled. The fees and payments (so-called liquidity rebates) differ from exchange to exchange.

Some order routing constellations let traders receive higher liquidity rebates than the commissions paid to the broker. Therefore, in certain situations, a direct-access broker can be cheaper and faster than a retail broker.

Would It Be Better to Have One Single Order Routing OptionIf all liquidity would go to one exchange, the bid ask spreads should become much tighter. The liquidity would increase, high-frequency algorithms would be stopped from trying to make fractions of a cent by using price differences between ECN’s and exchanges.

However, having only one exchange is equal to having a monopoly, which is usually not a good idea since, without competition, the fee structure might develop in an unfavorable direction for the investor.

Day traders monitor the bid ask spread and use stock order types like limit orders to reduce potential slippage since the order improvement only reflects a potential for a better trade execution but is no guarantee to get better fill prices.

Updated: February 07, 2022

[Don Green] Largest U.S. Pension Bought AMC, GameStop, and Berkshire Hathaway Stock. Here’s ...

Don Green — 2/22/2022 2:32:38 PM

Largest U.S. Pension Bought AMC, GameStop, and Berkshire Hathaway Stock. Here’s What It Sold.

Barron’s Feb 18,2022

The largest public pension in America recently loaded up on some volatile stocks, invested more in Warren Buffett’s firm, and trimmed a position in a slipping software stock.

In the fourth quarter, California Public Employees’ Retirement System more than quadrupled investments in AMC Entertainment Holdings (ticker: AMC) and GameStop (GME), two high-profile “meme stocks,” and dramatically lifted its holdings in Berkshire Hathaway ( BRKb), Buffett’s investment firm, and probably the polar opposite of a meme stock. Calpers, as the pension is known, also sliced off nearly 11% from its stake in Palantir Technologies (PLTR), a provider of data-analytics software. The pension disclosed the trades, among others, in a form it filed with the Securities and Exchange Commission.Calpers declined to comment on the investment changes. It manages $480 billion in assets, more than any other public pension in the U.S.

It may seem strange that Calpers embraced both the more-volatile names among growth stocks, and one of the most staid in value stocks, but the pension has made unconventional investment choices in the past. In 2000, Calpers sold its positions in tobacco stocks and imposed a limited ban on investing in tobacco-related companies, but it has investments in marijuana producers. Consistency has been an issue, as well—the Calpers has seen six different chief investment officers over two decades, when the average tenure for the post is six to seven years at pensions.

But Calpers is below average by one important measure. Its latest actuarial annual report showed its funded ratio stood at 70.6% as of June 30, 2020, meaning it had 70.6 cents on hand for every dollar of obligation. A study by The Pew Charitable Trusts found the average state pension had a funded ratio of 71.3%, using 2019 data. Calpers’ funded ratio was little changed from 70.2% in both 2019 and 2018, and 70.1% in 2017.

Calpers, one of the first public pensions to tie investments to social activism has estimated that it missed out on $3 billion in returns through 2014 because of its decision on tobacco. Recents steps made by the pension include gaining more control over its private-equity investments, and its board voting to use borrowed money and alternative assets to meet its investment-return target. The latter decision was made in November, around the time Calpers was buying up more meme stocks.

The pension bought 503,000 more AMC shares in the fourth quarter to lift its stake to 619,400 shares of the movie-theater chain. AMC stock rocketed nearly 13 times in price in 2021, while the S&P 500 index managed to rise 27% by comparison. So far in 2022, shares are down 34%, while the index has slipped 9%.

AMC stock benefited in 2021 from investors on social media and trading platforms encouraging others to buy share, though many meme trades faded in the new year. In January, AMC preannounced a strong fourth quarter, and made moves to reduce debt.

Fellow meme stock GameStop has also gone cold this year. Last year, GameStop stock rose nearly eight times in price, but so far in 2022 shares have slid 18%. Calpers bought 70,600 more GameStop shares to end the fourth quarter with 85,400 shares of the videogame retailer.

GameStop in December reported widening losses in its fiscal third quarter. The company announced a deal in February to develop a nonfungible-token marketplace. GameStop is also exploring cryptocurrency partnerships, although crypto is seeing the same challenging environment in 2022 that GameStop stock is.

Buffett’s right-hand man, Berkshire Hathaway Vice Chairman Charlie Munger, lambasted Bitcoin at the company’s annual meeting last year. “I think the whole development is disgusting and contrary to the interest of civilization,” said Munger. Crypto speculators may say the same about value investing in general, and Berkshire Hathaway in particular.

Nonetheless, Berkshire Hathaway stock is a Barron’s pick for 2022, and so far this year, class B shares (the more-affordable ones) are up 5.3%, following a 29% surge in 2021. We like that Berkshire Hathaway has ramped up its stock buybacks, and the company could repurchase more than 4% of its shares in 2022.” Last week, Berkshire Hathaway disclosed that it purchased a large stake in Activision Blizzard (ATVI) ahead of Microsoft‘s ( MSFT) offer to buy the company.

Calpers bought 1.7 million more class B Berkshire Hathaway shares to end the fourth quarter with 5.6 million shares. The pension sold 382,239 Palantir shares to end the quarter with 3.2 million shares of the software firm.

Palantir stock has dropped 39% so far this year, after a 23% dip in 2021. Third-quarter sales, reported in November, were strong, but Palantir shares slid after the news. Palantir’s fourth-quarter report last week also sent the stock lower; the top line was strong, but adjusted earnings came up short.

Inside Scoop is a regular Barron’s feature covering stock transactions by corporate executives and board members—so-called insiders—as well as large shareholders, politicians, and other prominent figures. Due to their insider status, these investors are required to disclose stock trades with the Securities and Exchange Commission or other regulatory groups.

[Don Green] Jim Simons' RenTech fund nearly doubled its AMC stake, reinvested in GameStop, a...

Don Green — 2/15/2022 4:15:41 PM

Jim Simons' RenTech fund nearly doubled its AMC stake, reinvested in GameStop, and trimmed its Tesla bet last quarter

Jim Simons.AP Images / Jason Decrow

Renaissance Technologies grew its AMC stake, bet on GameStop, and cut its Tesla wager last quarter.Jim Simons' hedge fund boosted its AMC position by about 800% in the nine months to December 31.RenTech appeared to sour on Tesla, trimming its stake after quadrupling it in the third quarter.Renaissance Technologies nearly doubled its AMC Entertainment stake, reinvested in GameStop, and trimmed its Tesla position in the fourth quarter of 2021, a Securities and Exchange Commission filing revealed this week.

RenTech, one of the biggest and best-performing hedge funds in history, was founded by Jim Simons, a former NSA codebreaker and MIT math professor. The quantitative fund trusts algorithms to decide many of its trades, resulting in significant changes to its portfolio each quarter.

Simons' fund ramped up its AMC bet by 87% to 4.7 million shares last quarter. It tripled its stake in the movie-theater chain in the second quarter of 2021, then boosted it by almost 40% in the third quarter, meaning it has now increased it nine-fold in the space of nine months.

AMC's stock price dropped 28% last quarter, meaning the value of RenTech's stake rose by only one-third to $127 million in the period. The fund's 4.7 million shares would have been worth $339 million at the cinema chain's record intraday high of $73 last June, when the hype around the meme stock was at its peak.

RenTech also disclosed a holding of 2,600 GameStop shares worth about $400,000 at the end of December, after exiting the stock in the third quarter. The fund previously owned 5.1 million shares of the video-game retailer at the midpoint of 2019, which would have been worth upwards of $1.5 billion for a brief moment in January 2021, when a short squeeze catapulted GameStop shares into the stratosphere.

Simons' fund reversed course on Tesla last quarter. After quadrupling its stake in Elon Musk's electric-vehicle company in the third quarter of 2021, it trimmed its position by 9% to about 743,000 shares last quarter.

However, Tesla stock surged 36% in the three months to December 31, boosting the value of RenTech's position by 25% to $786 million despite the fund's share sales. The automaker was its sixth-most-valuable holding at the end of December, up from 12th on the list three months earlier.

The overall value of RenTech's US stock portfolio climbed about 4% to $80 billion last quarter. Its biggest holdings included a $2.1 billion stake in Novo-Nordisk, roughly $1 billion stakes in Atlassian and Verisign, and almost $800 million positions in each of Kroger, Microsoft, and Tesla.

[Don Green] Inside AMC’s Crazy, Bonkers, Upside-Down Year of Apes, Memes and Shorts A rowdy...

Don Green — 12/18/2021 1:01:04 PM

Inside AMC’s Crazy, Bonkers, Upside-Down Year of Apes, Memes and Shorts

A rowdy group of investors saved the movie-theater chain—and then made CEO Adam Aron play by their rules

A mob rescued the world’s largest movie-theater chain from the edge of bankruptcy. It turned out to be only the first act in an improbable story that made this year in American business like none other.

Even AMC warned against entering its latest stock offering in June “unless you are prepared to incur the risk of losing all or a substantial portion of your investment.” By then, individual investors, locking arms on social media, had buoyed AMC shares to a high of $72.62 from $2.20 at the start of the year. The offering sold out in a day, and the new investors ended up owning more than 80% of the company.

The AMC rescue and takeover sprang from a serendipitous gathering of mostly amateur investors sharing tips on the internet. Their mass participation was empowered by Robinhood, Webull and other apps that for many users made online trading cheap, easy and as thrilling as a night at the casino.

At the start of the year, these traders went from niche social group to a market force, making investment decisions not guided by research reports from Wall Street banks, but by what online pals and personalities were saying.

AMC and videogame retailer GameStop Corp. emerged as crowd favorites. Many of these amateur investors believed buying the stocks amounted to a populist revolt against finance predators who had bet on the companies’ fall. Some swore they would never sell their shares.

“It was the 99% against the 1%. It was us going against the hedge funds,” said Katherine Larsen, a 40-year-old bartender from Oceanside, Calif. She put her life savings into AMC stock.

“I love the movies, we used to go every week. It was a huge thing for us to fight, and I knew there was a bunch of people coming together for this battle,” she said. “I wanted to be in this war for sure.”

Ms. Larsen and other AMC shareholders call themselves the apes, a reference to the 2011 film “Rise Of The Planet Of The Apes,” an installment of the movie franchise that showed how a raucous mob of primates came to brutally dominate mankind. The apes made AMC their personal cause, hiring planes to tow promotional banners over Hollywood and renting billboards in Las Vegas and New York’s Times Square, all paid for with crowdsourced funds.

Photo: Matthew Scott Granger for The Wall Street Journal

In trying to keep AMC alive, Chief Executive Officer Adam Aron embraced the ape movement. He adopted some of its ideas, accepting cryptocurrencies such as bitcoin and Dogecoin for movie tickets and screening mixed-martial arts matches from Ultimate Fighting Championship. He also surrendered to the apes on one of AMC’s biggest decisions.

The company had raised more than $2 billion, but with the pandemic dragging on, Mr. Aron wanted twice that to ensure AMC outlasted Covid-19. The CEO sought shareholder support to pad the company’s war chest by issuing more new shares. After taking control, the new investors shot down the idea, believing it would dilute the value of the shares they already owned.

“It’s their company,” Mr. Aron said in August at AMC’s headquarters in Leawood, Kan. “Any professional management team has to marry what they think the company should do with the reality of what the owners of the company think it should do.”

Tremayne “Trey” Michael Collins, a 24-year-old Army officer in Oklahoma, is a leading voice of the ape movement. He says to forget about AMC’s business fundamentals and instead put trust in the ape collective.

“This isn’t a trade about fundamentals. It’s just not,” he said in July. “The moment you mention the word fundamentals, you don’t get the trade.”

Such advice has won Mr. Collins nearly 400,000 YouTube subscribers to his show “Trey’s Trades,” where he promotes unproved conspiracies against the apes and urges AMC shareholders to hold on to the stock. Contrary views aren’t welcome.

Financial analyst Rich Greenfield of Lightshed Partners cited AMC’s pre-pandemic losses, a $5 billion debt load and changing consumer habits to conclude the company was unlikely to ever be profitable again. The stock, he said in a March 10 report, would eventually decline to a penny.

Apes responded with menacing online messages. “There were obscene sexual attacks on me and my wife, attacks on my kids, it was just inhumane,” said Mr. Greenfield, who started his career at Goldman Sachs. One AMC shareholder wished him a slow and painful death.

The stock price has since fallen by more than half from its June peak. The company continues to lose money, and streaming services are still growing. AMC senior executives have sold tens of millions of dollars worth of shares this year, benefiting from the investors’ lingering fervor.

Mr. Aron, 67 years old, has stuck close with the apes, making repeat appearances on Mr. Collins’s YouTube show and applauding the faithful.

“It’s like a you-scratch-my-back-I-scratch-yours sort of thing,” Mr. Collins said of Mr. Aron scrapping more stock offerings. “To some extent, he’s gotta feel like he kinda owes it a little bit to people, just like we owe it a little bit to him for helping out the apes.”

Mr. Collins and other ape influencers exhort AMC investors to hold their shares, predicting the stock will skyrocket again soon.

Wall Street investors, attuned to traditional business measures, largely see financial trouble ahead. Only one side will be right.

Adam Aron, chief executive of AMC, the world's largest movie-theater chain.Photo: Whitney Curtis for The Wall Street Journal
Opening creditsThe birth of AMC stretches back a century, to a vaudeville act that performed in small towns around the U.S. After the group disbanded, its founder, Edward Durwood, moved his family to Kansas City, and in 1920 he bought a theater to get a foothold in the emerging moving-pictures business.

Mr. Durwood’s sons took over Durwood Theatres, which remained a family business. In 1961, Stanley Durwood became chief executive and renamed the company American Multi-Cinema, now known as AMC. Over the years, the company pioneered stadium-style seating and armrest cupholders. It popularized the multiplex theaters that anchored malls and shopping centers across suburban America and later spread to Europe and the Middle East.

AMC went public in the early 1980s, riding the success of the Hollywood blockbuster boom that delivered such hits as the “Star Wars” trilogy and “Raiders of the Lost Ark.” But by the 1990s, AMC and its competitors overbuilt and got trapped under the weight of too many screens, as many as 20 under one roof.

AMC was taken over by Wall Street institutions and private-equity firms, including J.P. Morgan and Apollo Global Management in the early 2000s. It was acquired by investment firm Dalian Wanda Group in 2012 for $2.6 billion. At the time, the deal was among the biggest U.S. acquisitions by a Chinese company.

Wanda Group’s cash helped AMC add comfy recliners and other theater improvements intended to boost stagnating ticket sales. The firm took AMC public in 2013 at $18 a share. AMC acquired two smaller chains, Odeon and Carmike, in 2016—acquisitions that made it the biggest exhibitor in the world.

The expansion also saddled the company’s balance sheet with underperforming, fixer-upper movie houses while facing new competition from streaming services. By the end of 2016, Netflix Inc. had 94 million subscribers. At the start of 2020, it had more than 180 million.

Hollywood studios, the lifeblood of the theater business, invested in keeping more viewers at home, seated on comfy couches, fixed on 65-inch TV screens and immersed in multi-speaker surround sound. By 2020, every major studio but one had a streaming service.

AMC started to look like the pony express well before Covid-19. Earnings declined 17% in 2019, and the company lost $149 million.

$60

$2.48 per share

Theaters close nationwide

0

2020

2021

In February 2020, the share price dropped to a low of $6.26. A couple of weeks later, Disney announced its flagship streaming service had topped 100 million subscribers. When the pandemic forced AMC to shut its theaters, shares fell to less than $3.

Sam Rappold, 34, who was working as the manager of an AMC theater in Huntington, N.Y., recalled the day he told his staff the location was closing. He and his employees unplugged food freezers, divvied up perishables to take home and emptied beer kegs down the drain.

“Today, we have to throw out the beer. Tomorrow, it will be the zombies,” Mr. Rappold said one of his colleagues had joked.

Under attackAMC screens went dark, but it still had to pay interest on its debt, as well as some rent. The company strung together a couple of debt-financing deals, but as the pandemic continued, lenders, including its former owner Apollo, pushed AMC to consider filing for bankruptcy. They offered a $1 billion loan to finance chapter 11 proceedings.

Mr. Aron rejected the overture. In August 2020, AMC reopened around 100 theaters. By then, Hollywood studios had either shipped their biggest releases to streaming services or delayed movie debuts by months or years.

Desperate for cash, AMC tried a long-shot play in September last year—selling new shares in something called an “at-the-market” equity offering, which was open both to institutional firms and individual investors.

It went better than expected. AMC raised about $55 million. Still, it wasn’t close to what it needed. Most of its U.S. theaters had reopened but attendance was so sparse that the company was burning money even faster. In October 2020, AMC was on track to run out of cash by the end of the year.

AMC’s troubles drew short sellers—primarily hedge funds and other Wall Street institutions betting on the stock to fall. By December 2020, roughly 60% of AMC’s shares were tied to these bearish bets, mostly by hedge funds, said Ihor Dusaniwsky, of S3 Partners LLC, a technology and data-analytics firm for the financial services industry.

AMC executives began preparing bankruptcy contingency plans, and the company hired Alvarez & Marsal, a consulting firm known for advising companies headed into chapter 11.

Moviegoers lining up at the concession stand at AMC Studio 28 in Olathe, Kan., on Dec. 11.Photo: Whitney Curtis for The Wall Street Journal

A tub of popcorn sold at the AMC Studio 28 movie theater in Olathe, Kan.Photo: Whitney Curtis for The Wall Street Journal
Call to armsA group of amateur investors who gathered on the Reddit forum WallStreetBets to trade memes and stock trading tips decided hedge funds were wrong.

They saw GameStop as a worthy buy after Chewy.com entrepreneur Ryan Cohen and two of his associates joined the GameStop board on Jan. 11, raising prospects for a digital transformation. Hedge funds were betting on the decline of the retailer as gamers shifted to digital streaming. Many on WallStreetBets felt a personal connection to the stores and took offense.

Around this time, amateur investors also became interested in AMC. Tony Naughton said his friends and people he followed on social media talked so much about AMC that he could “feel a wave building.”

Mr. Naughton, 39, put his entire 401(k) savings, roughly $54,000, into AMC stock, he said, buying shares at an average price of $4.11. He didn’t consider the company’s business footing.

“Sometimes it’s not about what the fundamentals are,” said Mr. Naughton, at the time a sales representative for British-American Tobacco, selling cigarettes and other tobacco products to gas stations in Virginia. “It’s who the other shareholders are. It was clear that there was a group mentality around this effort.”

By mid-January, GameStop shares were soaring, driven by the social-media frenzy on WallStreetBets. To the delight of the traders, the accelerating stock price trapped short sellers in a costly bind.

$60

$19.90 per share

AMC spikes with fellow meme stock GameStop

0

2020

2021

In a short sale, a trader borrows shares from a broker and agrees to return the same number of them later. The trader then sells the shares and waits. If the stock price falls, the trader can buy shares back for less money, return what he owes the broker and pocket the difference.

But if the stock price goes up, it becomes more expensive for the trader to buy the shares he owes the broker. With GameStop stock accelerating upward, short sellers faced immense losses. Many decided to buy back shares before they suffered further losses. The buys pushed the stock still higher in what is called a short squeeze.

In the middle of the GameStop run-up, AMC announced on Jan. 25 it had raised $917 million from a combination of stock sales and debt raises. An imminent bankruptcy was “off the table,” Mr. Aron said.

Two days later, traders who had been focused on GameStop crowded into AMC, hoisting the stock price. #SaveAMC trended on social media.

By the end of January, GameStop stock hit an all-time high of $483 from $17 at the start of the year. AMC went to $19.90 from $2.20 over that time.

Photo: Parker Michels-Boyce for The Wall Street Journal

Sell and holdAMC stock dipped in the weeks after the January rally, and Mr. Naughton, the Virginia tobacco salesman, feared it would continue to fall.

The apes voiced a determination to hold the stock, but his gut told him it was time to bail out. In March, he sold shares at an average price of $14.15, he said, netting a profit of roughly $70,000.

He used the money for a down payment on a new house in Mechanicsville, Va. His goal was to persuade his ex-wife to return to him with their two sons.

“I don’t think I deserve to be called an ape because of what I did. I made a lot of money and left the stock,” Mr. Naughton said. “I wasn’t going to hold until $120 or whatever.”

Mr. Collins, the ape influencer, said his passion for AMC is partly sentimental. He shared his first kiss during a screening of the 2005 film “The Adventures Of Sharkboy and Lavagirl in 3D.” But he is mostly interested in keeping the apes united. “I’ve never seen people have such a unified love and respect for a cause,” he said.

AMC shareholder David Dumas, a 34-year-old operations manager at a moving company, has his own dream: financial security.

“I’ve got three little girls, four dogs, three cats, a duck, a bearded lizard and a fish in an 1,100 square-foot home,” said Mr. Dumas, who lives in Dacono, Colo., about 30 miles north of Denver. “I work freaking 40 to 60 hours a week and I live paycheck to paycheck. What the hell?”

A co-worker told him about cryptocurrency and investing in stocks. After joining online chat boards, Mr. Dumas began using his tip money—$20 here, $50 there—to buy AMC shares.

At a job moving boxes and couches for a wealthy family in the Boulder exurbs one day, Mr. Dumas joined two repairmen on the elevator. As he stepped on, one of the men joked about charging a toll, saying Mr. Dumas could pay in crypto.

“I’m in AMC,” Mr. Dumas said.

“So is he!” the repairmen replied, pointing to his co-worker.

In June, Mr. Dumas messaged Mr. Aron on Twitter asking if AMC would get into nonfungible tokens, or NFTs, which enable ownership of unique digital assets such as images or video. Four weeks later, he suggested AMC get into bitcoin. “Thank you for sharing your thoughts with me! Adam,” Mr. Aron wrote to Mr. Dumas.

“Absolutely. Thanks for doing a great job as CEO,” Mr. Dumas said. “I’ll come work for you any day.”

Mr. Aron got the company into NFTs—given in one instance as promotional prizes to ticket buyers for a coming Spider-Man release. He said the company also was exploring AMC’s own cryptocurrency. The theater chain is updating its payment system to accept various forms of cryptocurrencies to buy tickets, drinks, popcorn and other snacks.

So many of the apes are fans of the UFC that Mr. Aron has started screening the mixed-martial arts matches in select AMC theaters. When Mr. Dumas wrote Mr. Aron to say he was attending a match between Conor McGregor and Dustin Poirier, the chief executive replied, “Enjoy the show!”

Mr. Dumas had about $11,000 worth of AMC shares on the day of the match, but he stretched to buy the $28 ticket. Once inside the auditorium, he yelled, “Got any apes in here?”

“Holding since January, buddy,” a voice responded.

“To the moon!” yelled another, echoing a popular investor battle cry.

Mr. Dumas said his wife believes AMC is a foolish place to park money that she and their children could use now. He sold some shares this year to make a mortgage payment only at her urging.

Now, he said, he will lose the house before selling any more.

AMC investor David Dumas stopping by one of the theaters in Brighton, Colo.Photo: Theo Stroomer for The Wall Street Journal
Fake plotMany of the apes believe they are in an existential struggle against a cabal of powerful Wall Street institutions. Mr. Collins is one of the prominent boosters of an ape belief that hedge funds and others are circulating synthetic shares intended to topple the company.

Officials from the Depository Trust & Clearing Corporation, or DTCC, and Financial Industry Regulatory Authority said the synthetic-shares theory not only isn’t true but makes no sense.

The officials said it was impossible to sell fake shares in a company such as AMC, which is registered with the Securities and Exchange Commission, because the trades must be conducted by authorized broker-dealers. The transactions go through the DTCC, the SEC-approved clearinghouse.

In a May 21 YouTube video, Mr. Collins alleged there could be as many as 500 million synthetic AMC shares, about as many as legitimate ones, putting downward pressure on the stock price. The fake shares were created and sold to unsuspecting investors by hedge funds so they can short AMC stock without borrowing any shares from brokers, his theory goes.

Even worse, Mr. Collins said in the video, “the majority of synthetic shares are likely being held by us, the apes.” Government agencies dispute his theory, and Mr. Collins hasn’t offered evidence.

Like all public companies, AMC periodically details its share count. On June 3, it announced the company would have 513,330,240 shares, following its latest stock sale. AMC confirmed the number in subsequent quarterly reports.

The DTCC officials said that if extra shares entered the system beyond the 513 million shares currently registered, they would be immediately detected.

“As to the existence of so-called fake or synthetic shares, or the naked short selling of AMC shares, we are unaware of any information validating these theories,” Mr. Aron tweeted on July 30.

“It’s like, what do you say to someone who says that a UFO visited his garden last night?” said Arnaud Vagner, founder of the short selling firm Iceberg Research. His firm has taken short positions against AMC.

New bossFrom May 13 to May 18, AMC’s largest shareholder, China’s Dalian Wanda Group, sold most of its 30 million shares for more than $400 million, leaving the apes firmly in control.

In the last week of May, AMC stock rose again as the ape movement flooded social media with gorilla memes. On June 1, AMC announced a deal to sell 8.5 million shares to Mudrick Capital for $27.12 apiece. The stock reached an all-time high of $72.62 around midday on June 2.

$62.55 per share

Stock closes at an all-time high

$60

0

2020

2021

The following day, AMC launched another stock sale for most of its remaining shares. It posted the unusual buyer-beware note in the prospectus, saying the price volatility didn’t reflect its underlying business or industry fundamentals.

The offering sold out at an average of $50.85 a share, netting the company $587 million. The company created an online portal, AMC Investor Connect, to communicate with the apes and other individual investors. AMC also promised shareholders free popcorn.

In the wake of the June stock spike, Jim Chanos, the billionaire founder of hedge fund Kynikos Associates, was ready to make a move against AMC. He was known for betting against overvalued companies and had twice shorted AMC in the past three years.

In his view, the prospects for AMC and the movie theater industry had grown even more bleak. Movie studios were now willing to simultaneously release films on streaming services and in theaters, shrinking ticket sales.

The arithmetic doesn’t pencil out for AMC’s share price when compared with Cinemark Holdings Inc., Mr. Chanos said. AMC operates roughly twice the number of screens as Cinemark—10,600 versus 5,900—but its market capitalization is more than seven times Cinemark’s—nearly $15 billion compared with a little less than $2 billion.

“There should be no reason for that,” Mr. Chanos said of the wide market cap differential, “which is why I believe the stock is egregiously overpriced.”

AMC’s sole comparative advantage, he said, was the support of individual investors who seem to view investing as entertainment.

“The problem with betting on the ape mentality is that if the crowd should ever decide that it’s sick of them, they have a long way to fall,” Mr. Chanos said. “You’re completely betting on crowd psychology in your favor.”

Mr. Collins, one of the apes’ social-media influencers, said in July that AMC stock price didn’t properly reflect its business performance. It was around $45 at the time. “But I think there will come a day when the fundamentals will catch up to where the stock is trading now,” he said.

Mr. Chanos said CEO Mr. Aron had made a Faustian bargain. “By embracing the apes he’s now at their mercy,” he said.

The executive saw the limits of his power when he sought permission to issue as many as 500 million new shares as an additional financial bulwark against the continuing pandemic. The apes blocked it, fearing a hit to the stock price. In June, Mr. Aron returned with a proposal enabling AMC to sell 25 million new shares, which also failed to get traction.

If there was a Faustian bargain between AMC and the apes, it has paid off for many of the company’s senior executives.

Around the time the stock peaked in June, AMC’s chief human resources officer, chief content officer, two of its vice presidents, several board directors and other executives sold more than $13 million worth of their shares.

Photo: Whitney Curtis for The Wall Street Journal

Big squeezeThe ape movement believes its faithful will be rewarded in MOASS, the “Mother Of All Short Squeezes,” according to Mr. Collins and others. It will generate riches like those in the short squeeze GameStop investors pulled off in January.

Mr. Dumas, the moving company manager, is convinced such a short squeeze is coming. He said he told his bosses he might quit when it happens and his Fidelity account reaches $100,000—not because he can retire but because the MOASS will require his full attention.

Mr. Dusaniwsky, managing director at S3 Partners, said ape predictions of a huge AMC short squeeze reflect a belief that the win over short sellers by GameStop shareholders can be replicated by the AMC faithful.

The circumstances with AMC are different, he said, because GameStop had a much higher concentration of short trades in its shares.

When the price of GameStop stock rallied, many of the hedge funds shorting the stock covered their bets, and the percentage of GameStop’s shares outstanding that was shorted went from 141% in early January to about 25% in early February, creating one of the biggest short squeezes of all time.

The proportion of shorted AMC shares currently stands at around 16%, Mr. Dusaniwsky said, a weak prospect for a short squeeze.

Many of the apes say AMC’s stock is being manipulated by hedge funds, allegedly creating dips in AMC share prices by increasing their short positions.

Messrs. Chanos and Mr. Dusaniwsky say that is baloney. While AMC’s stock price has substantially declined since hitting its peak in June, short interest in AMC’s stock has also fallen, they said, meaning short sellers aren’t bringing down the stock price.

The only explanation for the stock decline is that AMC investors, no matter what they say on social media, are selling shares and cashing out, they said.

“It will fall like a knife, just like any equity that’s overvalued,” said Mr. Naughton, who left the ape movement with his winnings in March. “It’s only a matter of time before it ends badly.”

Jim Chanos, founder of hedge fund Kynikos Associates.Photo: Misha Friedman/Bloomberg News
‘Really smart idea’A group of apes showed up at the July shareholder meeting in AMC’s Kansas headquarters. They wanted to see firsthand the company commanding so much of their savings and attention.

Among the last to arrive was David Norphy. The 38-year-old diesel mechanic at a nearby FedEx freight location wore an ape T-shirt under his company uniform. He had taken an hour off his 3 p.m.-to-1 a. m. shift for the meeting at the AMC office building near a suburban shopping plaza and multiplex.

“I have a meeting,” he said he told his boss.

Like many of his online compatriots, Mr. Norphy has goals. He wants to give his young son a sound financial footing, he said. He earns between $60,000 and $80,000 a year, but he has bills and a former girlfriend asking for child support. “I do good, but at what expense?” he said.

He watched AMC executives in suits saunter by in the midday heat.

Mr. Norphy worried that because of his late-night shift he might sleep through the market opening on the morning of the Mother of All Short Squeezes. He instructed a friend to call if MOASS emerged. If he doesn’t answer at first, the friend has been instructed to keep calling until Mr. Norphy wakes up.

On a Nov. 8 earnings call, Mr. Aron reported attendance figures steadily rising in the third quarter with more moviegoers returning to AMC auditoriums, though still far below 2019 attendance figures.

Shareholders who submitted questions for the call had more pressing concerns.

Would AMC accept the cryptocurrency Shiba Inu?

“We are now figuring out how,” Mr. Aron said.

Would AMC invest in NFTs?

“A really smart idea,” he said.

During the call, Mr. Aron said he planned to sell some of his AMC stock.

“I can only imagine that naysayers and others who wish AMC harm will try to spread fear, uncertainty and doubt in this regard,” he said, noting that he will still have an enormous personal stake in the company, amounting to more than two million shares.

Two days later, Mr. Aron disclosed that he was selling roughly $53 million worth of his shares. So far this year, AMC directors and senior executives have sold more than $80 million in company stock.

[Don Green] AMC Continues To Be The Most Shorted Stock In The Market DECEMBER 4, 2021 / FRA...

Don Green — 12/16/2021 2:53:13 PM

AMC Continues To Be The Most Shorted Stock In The Market
DECEMBER 4, 2021 / FRANK NEZ / franknez.com

Related: Bank of America Has Been Illegally Shorting AMC Stock
DECEMBER 4, 2021 / FRANK NEZ franknez.com

AMC stock continues to be heavily shorted

AMC Entertainment stock has caused havoc for short sellers shorting the stock.

Hedge funds have proven to lose billions of dollars from the ongoing ‘meme’ stock frenzy.

Momentum stocks, as I like to call them, are more than just plays for money.

Retail investors have conjured up a real movement for change.

And although mainstream financial news platforms say it’s over, it’s far from it.

Hedge funds betting against AMC just borrowed more than 4 million shares to short the stock.

They just dug themselves a deeper hole.

Welcome to Franknez.com – the best blog for new and seasoned retail investors. Today we’re discussing AMC Entertainment stock.

Lets get started!

Is AMC Stock Shorted?

Short sellers just borrowed more than 5.5 million shares to short the stock.

Although AMC has had major buying pressure all year, shorts continue to attack retail and the company.

The community wants to see chairman of the SEC, Gary Gensler, take action towards banning activities such as naked shorting, dark pool trading, and PFOF.

The SEC was created in 1929 after the infamous Stock Market Crash of 1929 to protect retail investors against the manipulation from hedge funds and short sellers.

However, it was established in 1934 with the passage of the Securities Exchange Act, a law formerly governing the trade of securities.

Overleveraged positions in the markets have been the cause for economic meltdowns resulting in significant losses for the American people.

Our government has always had the power to fix the biggest problems retail investors currently face.

Why no real regulation has truly protected retail investors is the big question.

Talks of ongoing investigations have risen but actions will have to speak louder than words.

AMC’s stock price continues to be suppressed through overleveraged means only hedge funds and short sellers have access to.

The ape community has sparked a movement towards fighting for a fair market and aren’t going anywhere until real change has occurred.

How Can We Appoint New Leaders in The SEC?

Members of the SEC are appointed by the President of The United States himself.

The SEC is headed by a five-member board of commissioners.

Members are appointed by the president with the advice and consent of the United States Senate.

The president does not have the authority to remove members once they are confirmed.

No more than three commissioners may belong to the same political party.

The president appoints one board member to serve as chair.

Change will only happen if we the people voice our concerns publicly.

We have the right and the power to overthrow any form of incompetent government.

We must let these powers know that we see them and understand that they have the power to make things right.

There are more than 4 million of us in this community.

Our voice is our strength.

Will AMC Continue To Run Up?
I’ve been in this community since early February and the sentiment has not changed.

80% of AMC’s float is now owned by retail investors and the movement keeps growing.

The stock market is based on supply and demand, and so retail investors are in command.

Although AMC’s share price is being suppressed by heavy shorting in the market, AMC Entertainment stock will continue to run up as long as retail investors continue to buy the stock.

Which isn’t going to be a problem by the way.

AMC is more than just a stock, it’s a movement.

Hedge Funds Will Continue To Face Mounting LossesThere are no signs of retail letting off the gas pedal.

Investors in the ape community continue to buy the dips and hold their stock no matter the pressure.

Short sellers have already lost billions this year and continue to mount losses in liquidity and debt.

Betting on this stock, the company, and its massive community has been a terrible financial decision.

What Financial Institutions Are Shorting AMC Stock?
AMC Entertainment is currently being shorted by numerous hedge funds and financial institutions.

Here’s a list:
Simplex Trading LLCSusquehanna International Group LLP Citadel Advisors LLC683 Capital Management LLCAnchorage Capital Group LLCGroup One Trading LPWolverine Trading LLC Bank of America Corp DEMillennium Management LLCPiction Mahoney Asset Management

SourceRelated: Bank of America has been illegally shorting AMC stock

AMC Has Changed Millions of Lives

AMC Entertainment has changed the lives of movie goers through the theatrical experience we’ve all missed since the lockdowns.

The company has unintentionally sparked a movement greater than us, resulting in the resurrection of the movie theater industry during the process.

And it’s changed the lives of millions of retail investors, netting significant profits to majority of its shareholders.

Whether you’re holding for a short squeeze or to be part of a community with a movement, you cannot deny AMC is a beacon for change.

How Soon Will We See An AMC Short Squeeze?December 15, 2021In "Community"

Media Tries To Scare People Out of Their Money: AMC SagaSeptember 20, 2021In "Community"

What The Fool Isn’t Telling You About AMC Could Hurt YouJuly 12, 2021In "Community"

[Don Green] Citadel’s Ken Griffin calls being at the center of meme stock saga a ‘bad comedy...

Don Green — 12/12/2021 8:30:04 PM

Citadel’s Ken Griffin calls being at the center of meme stock saga a ‘bad comedy joke’
November 10, 2021 6:38 PM EST
Ken Griffin thinks U.S. stocks are "real frothy."

The Chicago billionaire, who runs hedge fund behemoth Citadel and owns market-making giant Citadel Securities, expressed concern on Wednesday while speaking at The New York Times DealBook conference about the seemingly never-ending ride upward in equity markets that has taken place since the COVID-19 pandemic invoked a sense of terror in investors 20 months ago.

"Let's be clear, it has been a one way street since the start of the pandemic straight up," Griffin said. "We're seeing a market that is showing signs of real frothiness, where you've had some pretty significant stock price moves on relatively small events."

Stocks have indeed been on a tear since bottoming out in March 2020, with the S&P 500 climbing more than 100% in that time.

Driving the surge has been an unprecedentedly helpful Federal Reserve that has kept interest rates near rock-bottom levels and has only recently begun drawing back its support from the bond markets. The measures created a nearly two-year-long period of easy money for companies and extreme risk taking by investors in everything from cryptocurrencies to the very same meme stocksthat put Griffin's market maker into the national spotlight for its role in executing individual investors' orders on behalf of popular trading apps like Robinhood. On the conspiracy theories that bubbled out of the GameStop saga, Griffin described it like being at the center of a "bad comedy joke."

For Griffin, the growing divide between share prices and fundamental values is a point of rising concern, though, as "any form of either policy error or a company having a bad spell is going to result in a pretty dramatic repricing of equities," he said.

Just take Tesla as an example, Griffin said.

The electric car maker's stock had been battered by investors following CEO Elon Musk's Twitter poll on whether he should sell 10% of his stake to pay more taxes. The survey results said Musk should sell. So, investors responded accordingly, driving Tesla shares downward and evaporating hundreds of billions of dollars worth of market value from the stock in the process.

"I never thought we'd let our stakes be dictated by a poll on Twitter," said Griffin, who added he has known Musk for a long time. "We live in a whole different world."

Crypto valuationsEquities are not alone in their precipitous climb, of course.

After a band of individual investors piled into meme stocks like GameStop and AMC earlier this year, many found their way to the cryptocurrency markets. Crypto has also become a hotbed of interest for Wall Street financial giants in recent years, including both hedge funds and speedy trading shops—both of which fall under Griffin's umbrella with Citadel and Citadel Securities.

But Griffin is still trying to make sense of the space.

"We have a variety of asset classes where the ascertaining of values [is] very difficult," Griffin said. "If you and I think about a bank, we might say, it should trade at 12-times earnings. We could debate it should be 13 or 14. But when you have to value cryptocurrencies, what it the basis that you use for valuation? And it really comes down to, 'Do I think somebody will pay me more for it tomorrow?'"

Ultimately, Griffin says there are a number of questions that crypto still has to address for it to become truly formidable like its fans believe it can be. Among them are who makes a consumer whole when their crypto wallet is stolen, how will Bitcoin reckon with its environmental footprint, and what are the "solid commercial use cases" for blockchain technology, Griffin said. Today, the Citadel CEO does not yet see any.

"People are very focused in a world of new ideas and new creations. I love that part of America," Griffin said. "I worry that some of this passion has been misplaced when it comes to cryptocurrencies."