My critique of the academic analysis is the absence of discussion regarding the role of ETFs, such as XRT, in the events of January 2021. These ETFs could have influenced the behavior of other stocks within their baskets.
This omission is particularly surprising given that the SEC has addressed this aspect. Ignoring the impact of ETFs like XRT overlooks a crucial element of the market dynamics during that period.
The paper should consider including the findings from The United States House Committee on Financial Services on the meme stock episode. democrats-financialservices.house.gov/uploadedfiles/…
On January 28, 2021, the Depository Trust & Clearing Corporation (DTCC) waived $9.7 billion of collateral deposit requirements. This decision was significant given the heightened market volatility during the meme stock events involving stocks like GameStop and AMC.
The DTCC, however, did not have detailed, written policies and procedures for such waivers, raising questions about the transparency and consistency of its risk management practices during periods of market stress.
The paper should also explore the possibility of the impact of Total Return Swaps (TRS) and bullet swaps, as seen in the Archegos collapse, which significantly affected major players like Credit Suisse and Nomura. credit-suisse.com/about-us-news/…
The CS report on the Archegos collapse mentions GameStop in the context of the broader market volatility during early 2021. It referred to Credit Suisse's capability to raise margin quickly due to market volatility, as evidenced by events like the events of the GameStop saga.
The document references GameStop in discussing Credit Suisse's challenges during the January 2021 short squeeze, which caused major market volatility and impacted the bank's portfolio, leading to losses exceeding $800 million. (pgs 110-111).
Credit Suisse's position during this period noted that they were fortunate to have more than $900 million in margin excess, which prevented a margin call.
This situation underscored the risks associated with concentrated exposure to a single stock's idiosyncratic movements, which could lead to substantial trading losses.
On a side note: MuddyWatersResearch x.com/muddywatersre/…
On a side note: MuddyWatersResearch x.com/muddywatersre/…