Comments
flash654 t1_jbkanoj wrote
This is such a basic accounting concept, it's no mystery at all with even a basic understanding.
Say I'm an importer that sells widgets and you want to buy 100 of them from me. You don't need them all right away though. You need 10 a month to make your product.
In order to get a better deal, you go ahead and pay me for all 100 up front.
I have 50 in my warehouse so I go ahead and ship those to you. I need to order 100 more. I haven't done that yet. You don't need them yet, and won't need them for 5 months. I could potentially wait 4.9 months and you wouldn't know the difference. Eventually I'll buy those other widgets and then ship them to you, but there's no reason to do it yet.
I've sold you an asset, but I haven't bought it yet.
Being that this is Citadel though and not a widget importer, I assume this just means they have a net short position on something which they haven't covered yet.
FoolioDisplasius t1_jbkd2g7 wrote
They have $60B net short position, and being that they are also the biggest market maker in wallstreet, it is suspected that they internalize trades that go against their shorts in a market manipulation scam that is truly awe inspiring. Just 2 years ago, 3 stocks were shorted at over 100% of the float. And when the squeeze was about to happen, Citadel ordered Robinhood, the largest retail stoke broker, to disable the GME buy button.
Or to put it simply: it is currently impossible to know if the $60B worht of shorts are on stocks that simply *do not exist*.
flash654 t1_jbkwwq7 wrote
There is nothing illegal about shorting over 100% float. We could argue about whether it should be illegal (probably should) but there's nothing saying they couldn't do it right now. Option volume on many stocks also adds up to more than the sum of the shares they promise. Should that be illegal?
If anyone is to blame, it's probably Robinhood. They should not have disabled buying.
That being said, again they didn't do anything illegal. They're allowed to change their offerings at any time and for any reason, and people using them agreed to that when signing up for the service. If you want a broker that doesn't fuck you over, then you're going to be paying commissions.
I say all this as someone who was there for the whole GME debacle and pulled a significant amount of money out of RH as a result. There very likely is nothing illegal going on here. Why cheat when you can make money without cheating?
things_U_choose_2_b t1_jbm3cou wrote
It goes a little deeper than Robinhood, or even Citadel. IIRC it was DTCC who made the order to set multiple different tickers to 'position close only'. Someone made some really big, bad bets and the clearing house had to step in.
It's crazy that this happened, but discussing it is painted as conspiracy theory.
Drewy99 t1_jbkohst wrote
So who owns the remaining widgets if you go bankrupt after the first 10?
flash654 t1_jbkulzt wrote
The purchaser would have a claim against the bankruptcy for the value of the widgets, but would likely take a haircut on the value.
This type of account isn't odd, it's absolutely the norm. Selling promises for future delivery is baked into our economy at a very basic level. Sure, companies going bankrupt happens - but it's part of the cost of doing business and the likelyhood of it happening is low. If the buyer is big enough to hold sway or the order is large enough, they might have specific language about cases of failure to deliver. They might even buy insurance on the delivery if it's something gigantic. Say McDonalds pre-purchasing 200 thousand tons of next season's potato harvest. I'd eat my hat if a delivery contract like that doesn't carry insurance.
Drewy99 t1_jbkx3gh wrote
>This type of account isn't odd, it's absolutely the norm.
Right I understand that, I'm just wondering what happenes in the reverse where you order 100 widgets and the supplier takes your money then goes bankrupt after only shipping 10.
You will still end up in bankruptcy held responsible by your creditors, right?
flash654 t1_jbl3t3a wrote
I answered that, but I should have been a bit clearer.
The person who ordered the 100 but only received 10 takes a loss on the value of 90 widgets on their books. They will not receive the product and can write off the resulting loss. Additionally, they have the right to make a bankruptcy claim against the seller for the value of 90 widgets and may recover a portion of that value. Making this claim may or may not be worth it based on the time and effort required, the likelihood of being paid, and the value of the contract.
Everything else I mentioned is created specifically to hedge against the likelyhood of this happening.
Businesses like known costs, even if those costs are sub-optimal. That's why businesses might buy insurance for contract fulfillment on large orders like like I mentioned. If the value of that contract is $500 million and they take delivery over time, a business would much rather pay a 3rd party say $750k to insure the small percent chance of losing most of that value from non delivery and simply not take the risk of losing that 470 million in product, or whatever it is.
But the short and most basic answer to your question is that the buying business just takes a loss.
Drewy99 t1_jbl5afg wrote
Thank you. Final questions -
What happens if you order 100 widgets with a pay -on-delivery agreement, pre-sell 100 widgets to other party, and those widgets don't ever get delivered by the time specified in the contract?*
Because that's what's going to happen in the case of these shorts, right?
*In this scenario the other buyer has plenty of stock and this was just a 'top-up' order for the warehouse. Because of the billions of widgets this company goes through they have a steady flow from multiple suppliers so they are not make or break counting on you.
flash654 t1_jbla455 wrote
If we dispense with the metaphors, when a company goes bankrupt generally the value of everything goes to 0. Options values are zeroed out - so if you're short puts you'd lose and if you're short calls you'd win. Visa versa if you have a long position.
Similarly, if you're long shares then the value of the shares you have drops to zero. If you're short shares, then there is no longer anything to cover and you keep the money you received for selling your shorts minus any premium you might have paid to borrow the shares.
Theoretically you still have to "buy" the shares back to return them to who you borrowed from. but since the value of all the shares is now 0 most brokers are just going to write this off.
Lots of people have a fundamental misunderstanding of what shorting a stock is, and think that there's some theoretical limit to how much stock you can short. There isn't; If I short a stock by selling it to you, you can then lend those maybe-existent shares to someone else. This is how you can short over 100% of existing shares.
The whole market is mathematically built on the assumption that you can sell a promise to something you don't have. All the tinfoil hat folks thinking there's some huge conspiracy are barking up the wrong tree and are making the wrong argument. Everything being done is both legal and mathematically sound. The argument that everyone should be making is whether or not this is an ethical practice, and whether firms should be allowed to leverage to this extent (especially when it involves consumer money, where the customers may not be fully aware of the amount of leverage a firm is using). Tighter regulation is needed to reign in practices like this or at least make what's going on clearer, but I personally find that unlikely in the current political environment.
Combatmuffin62 t1_jboxa4i wrote
Tell me you took economics without telling me you took economics, I haven’t heard the term widget since I completed my degree 🤣
2BFrank69 t1_jbkvapo wrote
You work for Citadel?
giraffe_life t1_jbk2ms5 wrote
found the ape
Nummylol t1_jbk30nx wrote
Is it true Kenny's nuts have a hint of mayo 🤔
FoolioDisplasius t1_jbkdpiz wrote
Buy, Hold, DRS.
[deleted] t1_jbk6go6 wrote
Not to mention the only other time in history anyone on Wall Street made that kind of money during a recession was... Madoff. Something fucky is going on over there with Citadel and Ken Griffin.
Hopefully someone, somewhere is able to bring it to light.
HanaBothWays t1_jbj732b wrote
Honestly if I were in the financial sector I would not do a thing like this until OpenAI comes out with versions of the product that are certified for use with regulated data, the way there are cloud computing products that are certified for use in the financial sector, healthcare sector, etc.
“Certified” is not exactly the right word, but basically they meet certain baseline requirements so they are safe to use with particular kinds of sensitive information/in secure environments with that kind of information.
habichuelacondulce OP t1_jbjastp wrote
If they don't use it for trading they can used it for copy/editing news/blogs/articles to frame a narrative for their algos to pick up and trade on such information
andylowenthal t1_jbjsaf4 wrote
More specifically, and immediately, they can use it to post comments on social media, including Reddit, to shift narrative based on a false majority consensus. It’s already happening now, they just pay people minimum wage for the comments, this would just make creating those false narratives cheaper and faster.
DebateGullible8618 t1_jblbhcc wrote
yeah and the bots will eventually be able to respond just like people to reinforce certain views onto people. AI is going to be the biggest evolution in tech since the smartphone.
HanaBothWays t1_jbjbc44 wrote
No I mean if you were a financial company you would not even want to let it inside your internal network at all, no matter what you did or didn’t use it for, unless it was a version made to keep your confidential/regulated data safe.
Right now ChatGPT is not allowed on government agency networks, for example, for any reason because it might pick up on sensitive but unclassified (SBU) data in those network environments.
thecookie93 t1_jbkzru6 wrote
Yeah, I don't think they would let it touch their systems. They just buy the license and run it on an off-site server where it can do it's thing to write targeted blog posts and "news" articles.
HanaBothWays t1_jbl07ni wrote
Something like that. They just shouldn’t let it near the financial and transaction records or correspondence.
stuffitystuff t1_jbkh5m6 wrote
They can afford to get a copy of the model and run it on their own systems, though. Just like Microsoft.
Touchyuncle45 t1_jbjqouz wrote
Well looks like this is a race , the more you wait the more money and power you will lose.
Who would have thought google could become less relevant as a search engine? Ai powered search engines are the future , imagine reddit using AI to filter posts and results ...
HanaBothWays t1_jbjtj4n wrote
It’s a race to develop better Large Language Model tech, but if you are in a sector that deals with sensitive data and these tools pose a risk of inadvertently disclosing that data (because the tools send everything back to “the mothership” for analysis), being an early adopter is maybe not such a good idea.
NoSaltNoSkillz t1_jbkm19o wrote
If you localize the instance within the company, or more specifically, within the teams with access to that data already, and run different instances for those outside of that group, its less of a problem. The model being local, and only allowing input local should limit the risks, although if it is still scrapping current data, who knows, could be a risk poin
HanaBothWays t1_jbko8au wrote
Yes, but to ensure you have a model that’s behaving in that way, with standardized controls, you need to first established what those standardized controls are and then figure out some kind of auditing and certification framework for saying “this version of the tool works that way and is safe to use in an environment with sensitive information/regulated data.”
These organizations shouldn’t be trying to roll their own secure instance of ChatGPT (they wouldn’t even know where to start) and I bet they don’t want to.
seweso t1_jbkb2eh wrote
OpenAI isn't going to be the only one with this tech. You can't lock it down...
venustrapsflies t1_jbkdce8 wrote
I’m sure they’re not using it to make any sort of meaningful decisions. There’s a lot of big game being talked about ChatGPT, but it’s not going into anything critical at any place serious about making money. It’ll be used for like, internal utilities to save their people time.
HanaBothWays t1_jbkk58h wrote
That’s not the problem, the issue is ChatGPT piping things from their network back to OpenAI.
DevAnalyzeOperate t1_jbjxbuy wrote
Same this is the one of the few industries I think ought to hit the brakes until they can run their own server.
HanaBothWays t1_jbjxtfv wrote
Also healthcare and the government.
They probably don’t need to run their own server (that may not be possible), but they may need the equivalent of an industry-specific virtual private cloud service.
Disastrous_Ball2542 t1_jbkl1uo wrote
Armchair hedge fund manager lol
HanaBothWays t1_jbkoejc wrote
I know nothing about managing a hedge fund. I know some things about having novel technology in networks where you also have sensitive data - mostly, that you don’t want to be the first one to do it.
Disastrous_Ball2542 t1_jbktata wrote
Would it be crazy to think that the hedge fund who posted the best return in history with resources in the billions has qualified IT expertise who has considered and mitigated this risk?
drgrubtown t1_jbmyamj wrote
You realize some of the highest paying and most competitive engineering positions are at hedge funds, right?
Disastrous_Ball2542 t1_jbna59i wrote
The sarcasm in my comment has escaped you
drgrubtown t1_jbpl5h1 wrote
I actually meant to respond to the other guy. my mistake.
[deleted] t1_jbqezi9 wrote
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forksporkspoon t1_jblzjkh wrote
Best return but worst customer response?
HanaBothWays t1_jbkyz2k wrote
Let me put it this way, would you hire a hedge fund manager to manage your network security operations, configure your firewalls, set up your intrusion detection systems, etc.?
Disastrous_Ball2542 t1_jbl0oen wrote
Let me put it this way, the hedge fund no doubt hired qualified IT specialists who know much more than you and get paid much more than you to handle their security (not saying this to attack you, just making my point)
Like the guy that played 1.5 years of college football then thinks they know better than Bill Belichek lol
HanaBothWays t1_jbl5u0i wrote
> Let me put it this way, the hedge fund no doubt hired qualified IT specialists who know much more than you and get paid much more than you to handle their security
I am one of those kinds of specialists and I get paid pretty well LOL
Disastrous_Ball2542 t1_jbna2yu wrote
Cap. You doing IT for a schoolboard doesn't mean you're on the level of Citadel
HanaBothWays t1_jbns68c wrote
I don’t do it for school boards. You already stepped in it pretty good. You should stop now.
Ground2ChairMissile t1_jbjcq4t wrote
Good for them. I guess they can afford to blow money on bullshit.
cartsucks t1_jbjg84w wrote
The literal definition of what hedge funds/private equity does
fourierbees t1_jbjkq02 wrote
Yes, ChatGPT will enable informational campaigns and help them "write better code".
drgrubtown t1_jbmydj6 wrote
What’s an informational campaign?
Ok_Champion6840 t1_jbj8wdw wrote
They should change the company name to: Open for hedge funds AI.
idkwhychai t1_jbkau9v wrote
Ugh Citidel
throwaway_goaway6969 t1_jbkfqyk wrote
Did someone say ken griffin lied to the federal government under oath?
JonesoftheNorth t1_jblabu0 wrote
If only there was a video or something so we could be sure.
WeekendCautious3377 t1_jbkl68a wrote
Fucking Citadel.
Ill-Resort-926 t1_jbkhu3i wrote
The company that steals billions from everyone each year, has stolen the most in history.
JonesoftheNorth t1_jbl9k4e wrote
Didn't he commit perjury a little while ago?
/rhetorical
[deleted] t1_jbln4dr wrote
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nyaaaa t1_jbmt8f3 wrote
Thank you for confirming that its BS
things_U_choose_2_b t1_jbm2lht wrote
The hedge fund which also runs the biggest market maker. Definitely not a giant conflict of interest or a risk to global financial markets. Too big to fail, right?
There was another hedge fund guy who was making record profits, inexplicably. Turned out to be a giant ponzi scheme.
grondfoehammer t1_jbnver1 wrote
Maybe they are just lonely and needed something to talk to.
tickleMyBigPoop t1_jbouod6 wrote
bruh how to you get OpenAI to be compliant with SOCs? uggghhhhhh. I can't imagine the possible headaches.
FoolioDisplasius t1_jbjvhck wrote
Citadel (the record breaking hedge funds) is likely involved in the largest fraud in the history of mankind, eclipsing Bernie Maddoff. They currently have, on their balance sheet, $60B worth of "assets sold, not yet purchased". What the fuck that means is an exercise left to the reader.