Found SEC comments made about insane shorting of XRT (link in description, multiple images)


From: https://www.reddit.com/r/Superstonk/comments/s7zo6k/found_sec_comments_made_about_insane_shorting_of/

Per the SEC GameStop Report

SPDR® S&P® Retail ETF (“XRT”) saw its position in GME increase from 1.5% of its portfolio as of December 31, 2020 to 19.98% of its portfolio on January 27, 2021. That same day, XRT experienced net redemptions of $506 million, representing 76.3% of its net assets, which was the second largest net redemption in the fund’s history.

This means that an ETF can have its position in an asset, involuntarily, increased by an AP/Market Maker.

[–]DerJogge🦍Voted✅ 45 points 

They basically borrowed ETF shares, dissolved them, into the underlying securities and sold the GME shares to the markets which allows them to go short on GME. They keep the rest of the underlying securities or sell them too and after t+3 this becomes an FTD.

Then they either bought back GME and the other stocks that they sold out of the dissolved ETF shares or if they only sold GME, they bought back GME. They have time until t+6. If they open up put positions they can actually delay it even more to t+35.

After another 35 days they either bought back the necessary shares to create ETF shares which they need to turn back because they borrowed it OR they just just borrow new ETF shares dissolve them again. Take the GME shares and fill up the old FTDs with them and close those old FTDs while creating new ones.

OR they simply do not return the GME shares and fill them up with other stocks or a cash equivalent as the SEC allowed ETF MM (APs) to not be that accurate when it comes to balancing out the weighting of the underlying shares if some underlying securities are hard to find or very illiquid (https://www.ft.com/content/a9d04b8a-feea-4e4a-8bb8-d7681b8bcc52). Returning other shares or cash instead of the actual required shares requires the authorisation of the people that manage the ETF. But I would bet both my nuts that the people that manage XRT don’t give a flying fuck about the correct weighting and distribution of their ETF as this thing is completely rigged since more then 10 years. There once were 77 million shares of XRT in existence while only 10 million shares should be outstanding. That’s nearly 7 ETF share owners that claim the same ETF share.

After days of reading myself into this shit I’m starting to believe that the people that short GME use XRT as a loophole for naked shorting as ETFs are completely unregulated and short positions created through this fuckery don’t have to be disclosed per any file or report.

[–]michaellargent⚡️2 ♾ 24 points 

ETF’s are definitely the current method used to short (I sincerely believe this). As of today (2022-01-19) XRT holds 35,152 shares of GME, but an AP/MM can short XRT creating more ETF shares, then use redemption to unwrap the underlying securities. The telling thing about the SEC report (that I didn’t know) is how the AP/MM can adjust the weight of Gamestop in the ETF.

So while the publicly displayed short interest of XRT is 471.91%, the actual number of Gamestop shares created through….1) shorting the etf….2) redeeming the shares….3) selling GME. Can be substantially higher that the 35,152 shares that the fund originally owned.

I would guess GME wouldn’t be the only one the AP/MM is selling, which would give credit to the basket theory. A side note. FTD’s got reported for the 2nd half of December and while XRT had an accumulated FTD value of $1 Billion (12,462,956 shares), another ETF, VTI, had a noticeable FTD value of $582 Million (2,510,213 shares).

[–]DerJogge🦍Voted✅ 29 points 

As you said it doesn’t matter how many GME shares the ETF contains. They simply use the creation/redemption process for shorting that isn’t reported anywhere

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