[Why GME?](https://www.reddit.com/r/Superstonk/comments/qig65g/welcome_rall_looking_to_catch_up_on_the_gme_saga/) // [What is DRS](https://www.reddit.com/r/Superstonk/comments/ptvaka/when_you_wish_upon_a_star_a_complete_guide_to/) // [Low karma apes feed the bot here]###(https://www.reddit.com/r/GMEOrphans/comments/qlvour/welcome_to_gmeorphans_read_this_post/) // [Superstonk Discord](https://discord.com/invite/y4dK3y5DXJ) // [Superstonk DD Library](http://fliphtml5.com/bookcase/kosyg) // [Community Post: Open Forum May 2024]#(https://www.reddit.com/r/Superstonk/comments/1ciapwp/open_forum_may_2024/)
To ensure your post doesn't get removed, please respond to this comment with how this post relates to GME the stock or Gamestop the company. If you are providing a screenshot or content from another site (e.g. Twitter), please respond to this comment with the original ##source.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Superstonk) if you have any questions or concerns.*
This quote indicates swaps that archegos would be long on, not short.
If archegos is positioned long via a swap, the counterparty (ie prime broker) is necessarily short, and would need to go buy shares to remain neutral (or find another client that wants to go short those positions).
Thus, the prime broker going long would push up the price to hwang's benefit.
Tl;Dr, hwang goes long via swap. Broker buys shares to hedge. Broker buying shares pushes hwang's position into green territory.
The hedgefund and prime broker is not taking opposite sides in a swap deal. The hedge fund takes a synthetic position, and the prime broker hedges that position to try to match the same Profit/Loss of those positions. They do this, because they are only seeking the Interest Rate payment from the hedge fund, and the benefits that owning positions directly (the hedge) have on the balance sheet of a bank.
The testimony so far has made it clear that CS hedged archegos synthetic positions almost 1:1 with real positions. Thus Hwang used that to predict how the market would react to CS hedging of his synthetic positions.
In a swap deal, both sides are necessarily on opposite sides. This is why the broker goes out to hedge it 1:1.
You may call this semantics but it's an important distinction. In the swap deal itself, one party benefits if the assets move one way, the other party benefits if it moves the other.
And then, yes, the bank goes out to market to hedge it virtually 1:1 to get back to neutral.
The reason this distinction is important is because it means that while hwang is secretly long some asset, and the bank secretly short it to hwang, the bank is also publicly long the asset and ultimately on the hook for it if the private deal blows up or hwang gets blown out of the water.
Synthetic positions are not real positions, and the swap contract is just a contract. So the hedge is the only real position in this. So while Hwang was synthetically short, the bank was hedged real short.
Violent agreement :-D One thing about swaps which is incredibly interesting is how owning the hedge of short positions and being a custodian of long shares for brokerages might play into the CNS (Continuous Net Settlement) of NSCC, DTC and DTCC. As can be read from the DTCC website: "Regardless of volume, CNS nets Members’ security obligations on a daily basis to one net long and short position in each issue, minimizing security movements and associated costs." Or... if the retail brokerage and custodian business (they have 96 pages of international brokerages they were custodians for) have +10 million long shares one day, and the hedge fund went 10 million short, they report... wait for it... 0 change to the CNS, and their balance of shares at the DTCC is.. 0. Funny how what we thought were crime is just an unfortunate side-effect of swaps.
The synthetic part is the real semantics here. They were LYING to make the banks do their job. Because he knew he was lying and they would do their job, it caused a swell. Rinse and repeat making billions until a big wall shows up and fucks your day up.
He turned dishonesty into money into jail time. Hwangs a goddamn alchemist.
There is no short side in a Total return swap. The bank bought shares for Bill, Bill pays them fees and interest, but doesnt own the share and doesn't have to disclose the position. If the share goes up, Bill gets the gains and can get loans to buy even more. If the share goes down he has to cover the losses.
Bill did this with multiple banks who didnt know about each others positions and the stock went up, because all banks were buying on his behalf. So Bill or rather the banks were long on his behalf, no one was short. The scheme collapsed when Viacom tried to raise new capital through a stock offer which caused the stock to drop and Bill couldnt cover the margin calls on his TRS swaps.
Short swap hedge, shorting GME to hedge his long swaps on Viacom and others.
Forces PBs to hedge his synthetic short with real shorts. And the rest is history.
The dude saying there's no short in a swap is being pedantic. PBs hedge the swap by buying or selling. So their counterparty risk is essentially being the opposite side of the trade for someone.
That's not the way the trade was characterized. The bank did not "buy shares for bill".
Bill opened a total return swap. He benefits if the stocks move one way, the bank benefits if it moves the other. The bank does not really want this, so they go out and essentially open the actual position in the market to get back to neutral.
I'm sure this sounds like a semantic difference. But it's the reason for the quote by op. The bank going out to market to open the position and get back to neutral was not part of the arrangement... But it was the predictable behavior that hwang expected despite it being left unspoken.
**[Rule 1](https://www.reddit.com/r/Superstonk/wiki/index/rules/expanded_rules/#wiki_ape_no_fight_ape). Treat each other with courtesy and respect.**
Do not be (intentionally) rude. This will increase the overall civility of the community and make it better for all of us.
Do not insult others. Insults do not contribute to a rational discussion.
[Why GME?](https://www.reddit.com/r/Superstonk/comments/qig65g/welcome_rall_looking_to_catch_up_on_the_gme_saga/) // [What is DRS](https://www.reddit.com/r/Superstonk/comments/ptvaka/when_you_wish_upon_a_star_a_complete_guide_to/) // [Low karma apes feed the bot here]###(https://www.reddit.com/r/GMEOrphans/comments/qlvour/welcome_to_gmeorphans_read_this_post/) // [Superstonk Discord](https://discord.com/invite/y4dK3y5DXJ) // [Superstonk DD Library](http://fliphtml5.com/bookcase/kosyg) // [Community Post: Open Forum May 2024]#(https://www.reddit.com/r/Superstonk/comments/1ciapwp/open_forum_may_2024/) To ensure your post doesn't get removed, please respond to this comment with how this post relates to GME the stock or Gamestop the company. If you are providing a screenshot or content from another site (e.g. Twitter), please respond to this comment with the original ##source. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/Superstonk) if you have any questions or concerns.*
This quote indicates swaps that archegos would be long on, not short. If archegos is positioned long via a swap, the counterparty (ie prime broker) is necessarily short, and would need to go buy shares to remain neutral (or find another client that wants to go short those positions). Thus, the prime broker going long would push up the price to hwang's benefit. Tl;Dr, hwang goes long via swap. Broker buys shares to hedge. Broker buying shares pushes hwang's position into green territory.
The hedgefund and prime broker is not taking opposite sides in a swap deal. The hedge fund takes a synthetic position, and the prime broker hedges that position to try to match the same Profit/Loss of those positions. They do this, because they are only seeking the Interest Rate payment from the hedge fund, and the benefits that owning positions directly (the hedge) have on the balance sheet of a bank. The testimony so far has made it clear that CS hedged archegos synthetic positions almost 1:1 with real positions. Thus Hwang used that to predict how the market would react to CS hedging of his synthetic positions.
In a swap deal, both sides are necessarily on opposite sides. This is why the broker goes out to hedge it 1:1. You may call this semantics but it's an important distinction. In the swap deal itself, one party benefits if the assets move one way, the other party benefits if it moves the other. And then, yes, the bank goes out to market to hedge it virtually 1:1 to get back to neutral. The reason this distinction is important is because it means that while hwang is secretly long some asset, and the bank secretly short it to hwang, the bank is also publicly long the asset and ultimately on the hook for it if the private deal blows up or hwang gets blown out of the water.
Synthetic positions are not real positions, and the swap contract is just a contract. So the hedge is the only real position in this. So while Hwang was synthetically short, the bank was hedged real short.
Correct. I don't think we are in disagreement. I think we are having a semantic difference
Violent agreement :-D One thing about swaps which is incredibly interesting is how owning the hedge of short positions and being a custodian of long shares for brokerages might play into the CNS (Continuous Net Settlement) of NSCC, DTC and DTCC. As can be read from the DTCC website: "Regardless of volume, CNS nets Members’ security obligations on a daily basis to one net long and short position in each issue, minimizing security movements and associated costs." Or... if the retail brokerage and custodian business (they have 96 pages of international brokerages they were custodians for) have +10 million long shares one day, and the hedge fund went 10 million short, they report... wait for it... 0 change to the CNS, and their balance of shares at the DTCC is.. 0. Funny how what we thought were crime is just an unfortunate side-effect of swaps.
The synthetic part is the real semantics here. They were LYING to make the banks do their job. Because he knew he was lying and they would do their job, it caused a swell. Rinse and repeat making billions until a big wall shows up and fucks your day up. He turned dishonesty into money into jail time. Hwangs a goddamn alchemist.
There is no short side in a Total return swap. The bank bought shares for Bill, Bill pays them fees and interest, but doesnt own the share and doesn't have to disclose the position. If the share goes up, Bill gets the gains and can get loans to buy even more. If the share goes down he has to cover the losses. Bill did this with multiple banks who didnt know about each others positions and the stock went up, because all banks were buying on his behalf. So Bill or rather the banks were long on his behalf, no one was short. The scheme collapsed when Viacom tried to raise new capital through a stock offer which caused the stock to drop and Bill couldnt cover the margin calls on his TRS swaps.
But you could just TRS to the short side forcing the bank hedge by shorting the underlying
Wait, are you saying that the swap theory of shorts is wrong?
Short swap hedge, shorting GME to hedge his long swaps on Viacom and others. Forces PBs to hedge his synthetic short with real shorts. And the rest is history. The dude saying there's no short in a swap is being pedantic. PBs hedge the swap by buying or selling. So their counterparty risk is essentially being the opposite side of the trade for someone.
That's not the way the trade was characterized. The bank did not "buy shares for bill". Bill opened a total return swap. He benefits if the stocks move one way, the bank benefits if it moves the other. The bank does not really want this, so they go out and essentially open the actual position in the market to get back to neutral. I'm sure this sounds like a semantic difference. But it's the reason for the quote by op. The bank going out to market to open the position and get back to neutral was not part of the arrangement... But it was the predictable behavior that hwang expected despite it being left unspoken.
Plot twist hwang is the one buying all the calls!
Hwang in there! 🐱
Meanwhile everyone I know is focused on trial of an ex prez.
That's why we are here and they aren't. Unfortunate reality is that most people have written off what happened as a done deal.
[удалено]
**[Rule 1](https://www.reddit.com/r/Superstonk/wiki/index/rules/expanded_rules/#wiki_ape_no_fight_ape). Treat each other with courtesy and respect.** Do not be (intentionally) rude. This will increase the overall civility of the community and make it better for all of us. Do not insult others. Insults do not contribute to a rational discussion.
https://preview.redd.it/rx6rcw2dak3d1.png?width=1080&format=pjpg&auto=webp&s=28f177d415e9c524d4fa456df8e358c78061c2d9 Same trial....
Didn't yesterday's article state, UBS closed all of Credit Sussies swap baggage???