AMC Stock’s Failure to delivers have once again spike huge in the month of January. We recently cover the fact that AMC Stock had failed to deliver shares in the multi millions back in December and we are seeing more or less the same in January.
FAIL TO DELIVER (DEFINED)
Things to note with failure to delivers (FTD) *Source Investopedia*
- Failure to deliver (FTD) refers to not being able to meet one’s trading obligations.
- In the case of buyers, it means not having the cash; in the case of sellers, it means not having the goods.
- The reckoning of these obligations occurs at trade settlement.
- Failure to deliver can occur in derivatives contracts or when selling short naked.
According to Stocksera there are multiple reports of massive amounts of shares failing to deliver in the first few weeks of 2023. Retail investors suspect something nefarious is going on in regard to the high amount of FTDs and AMC stock like Naked short selling.
NAKED SHORTING
A fail to deliver is a situation in which a seller is unable to deliver the securities that they have sold to a buyer by the settlement date. This can occur for a variety of reasons, including a lack of available securities, a mistake in the settlement process, or a failure to transfer the securities in time.
Fails to deliver are closely tied to the practice of naked shorting, which is the illegal sale of securities without first borrowing or arranging to borrow the securities. Naked shorting can create fails to deliver, as the seller is unable to deliver the securities that they have sold. This can drive down the price of the securities and potentially harm the company whose stock is being sold.
To address the issue of fails to deliver, regulators have implemented rules and regulations designed to prevent naked shorting and other forms of illegal stock sales. These include the “uptick rule,” which requires that a stock must be sold at a price above the previous trade before it can be sold short, and the “locate and close-out” rule, which requires that short sellers must have a reasonable belief that the securities can be borrowed before selling them short.
Overall, fails to deliver are closely tied to the practice of naked shorting, and regulators have put in place rules and regulations to prevent this illegal activity and protect the integrity of the stock market.