Thread by @live2beingu

#AMC #GME #TSLA #KOSS Alright, Good Evening Everyone and welcome to The Recap. I hope you all have had an amazing day thus far and I hope that you’ve been able to relax and enjoy all of the green we’ve had. Tonight, on the recap we will go back over “Skin-in-the-game” if you

remember from the video, I posted it talked about section 10 of the advanced notice. Now I’m going to help blow your mind a little bit as I talk about how the SR-OCC-2021-003 and the SR-2021-801 rules are 1 in the same. How the 003 fits into our “Skin in the game model.” Buckle

up and strap in as we take a dive into these rules. When we covered the SR-0CC-2021-801 rule a few months ago we talked about section 10 of the overall section of the SR-OCC-2021-801 rule. We said that the rule was to do each of the following:
1.Establish a persistent minimum

level of skin-in the game that the OCC would be able to contribute to cover default losses or liquidity shortfalls by doing each of the following:
a.Define the Minimum Corporate Contribution
b.Revise OCC’s default waterfall rules
c. To provide for how OCC would calculate any

LNAFBE “Liquid Net Assets Fund Balance Equity.”
d.Provide for how they would replenish the minimum corporate contribute after each chargeable default loss.
e.Make amendments to the default management policy, clearing fund methodology policy, and RWD plan

First redefining the minimum corporate contribution – to be the minimum level of OCC’s own funds maintained exclusively to cover credit losses or liquidity shortfalls. To establish this minimum the OCC’s board would have the discretion of setting up the initial minimum corporate

contribution that sets the OCC’s total persistent skin in the game. This would be at 25% of the OCC’s Target Capital Requirement (Sum of the Minimum Corporate Contribution and OCC’s Current EDCP unvested Balance).
Second, we discussed the waterfall rules and how order matters in

terms of how we get paid. We discuss how rule 1006 was invariably tied to this rule as it discussed the purpose and role of the clearing fund. We stated that in order for the clearing fund to be triggered HF would have to go through 1 of the following scenarios:

-Failure of discharge duly any obligation on or arising from any confirmed trade accepted by the corporation
-As a result of failure of any Clearing Member or of CDS to performs its obligations under or arising from any exercised or assigned option contract or matured future or

any other contract or obligation issued, undertaken, or guaranteed by the corporation with respect of the corporation being liable.
-Failure of any clearing member to perform its obligations to the corporation in regard to stock loan and borrow positions of the clearing member

-Liquidation of a clearing members open positions
-Protective transactions
-Failure of the any clearing member to make any other required payment or render any other required performance.
How do the waterfall rules change? Why does order matter?

Remember I said in the video it’s about PEMDAS…you know our old algebraic phrases our teachers begged us to learn “Parenthesis, Exponents, Multiplication, Division, Addition, and Subtraction” Why is that important well waterfall rules changing will allow us to decide and figure

out how we get paid.
Well, here is how the OCC would make its payout:
Default or Loss
+ Default Clearing Members Margin
+ Clearing Fund Deposit of default member
+ Minimum Corporate Contribution (Skin in the Game”)
+ LNAFBE greater than 110% of the OCC’s target capital

Requirement
= Residual.
If the Residual < 0 then do the following:
(Residual) (number from above)
+ Clearing Fund non default members
+ EDCP (Executive Deferred compensation Plan) unvested balance

This shows how the OCC will pay us out should they experience a member defaulting on their watch from either losses or liquidity issues.
I hope I still have you because we haven’t gotten to the 003 rule just yet.
Let’s talk about how the LNAFBE (Liquid Net Asset Fund Balance

Equity) are calculated – well the 801 rule sets out to discuss how the 1006(e)(iii) would calculate the LNAFBE greater than 110% of the target company very similar to how it calculates its current earnings. But it takes the rule a bit a further by saying that it will use the

unaudited financial statements from the calendar month preceding the loss less an amount equal to the total of all refunds authorized during the year of the loss. Additionally, how would this replenish the minimum corporate contribution? Well, it would provide a 270-day time

frame for the OCC to accumulate funds necessary to reestablish the minimum corporate contribution (Skin-in-the-game). This time frame would restart if there was another member default. Finally, within the Default Management Policy the OCC would delete the passage regarding

“Current and Retained Earnings” to Minimum Corporate Contribution (MCC) and LNAFBE greater than 110% of the target capital requirement. Additionally, it would include change the definition of the financial resources to include the MCC. It would also include the MCC as apart

of the Clearing Fund Methodology Policy and add Pre-Funded Financial Resources for the purpose of seizing or measuring the clearing fund to include the MCC. Finally, it would replace all current earnings and retained earnings with “Skin in the Game."

I know that I went through

that quite quickly…you can check out an in-depth video here that you a further blow by blow analysis as to how the 801 rule works and what to look out for on the options market.

As I mentioned earlier the SR-OCC-2021-003 and SR-OCC-2021-801 rules are one in the same. Meaning that one was an amendment to the other. Now SR-OCC-2021-801 rule was already passed on April 7, 2021, without objection by the SEC that would mean that the 003 rule is the amendment

to the 801 rule. Here is why.... SR-OCC-2021-801 was section 10 of the overall rule change meaning that it was the advanced notice rule that was going to be enforceable. The SR-OCC-2021-003 rule is the amendment to the 801 rule to discuss the following topics:

1.Self-Regulatory Organization’s Statement of the Purpose of, Statutory Basis for, the Proposed Rule Change (Section 3)
2.Self-Regulatory Organizations Statement on Burden on competition (section 4)
3.Advance Notices filed pursuant to section 806(e) of the payment, clearing

and Settlement Supervision Act (Section 10) is your SR-OCC-2021-801 rule. Looks like I'll have to add part 2 as I'm out of space. @threadreaderapp unroll. #MEMES #STONKS #RULES #STOCKS