There’s No Gas Left. Trends in four months of OTC Data. Game’s About To Stop.

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MAJOR EDIT: This post has been debunked. After a significant amount of discussion with several other users (including u/dlauer) an assumption I made about a section of the data has made both this post and a previous DD (the FINRA Veil) I worked on yesterday incorrect. It sucks to be publicly wrong when both of these posts got a lot of attention, but when you do DD’s sometimes you will be wrong. I am changing this now as I am (unfortunately) not able to reconcile that error. I made the post, I should have done a better job of checking the data. Rather than letting this sit overnight as I am about to head to sleep, I would implore a moderator to switch the flair and have put in a request to have this done. I will leave the post up as it is though, as failure helps us apes improve.

I know the title is clickbait. I don’t apologize since what I have to share today I feel is important as it helps to add some evidence to how much gas is left in the tank to kick the can.

So, on June 3rd (yesterday) I posted about all of the different companies involved in OTC trading from January to end of April. But I had more good info that I had come across to send out for scrutiny and analysis by other apes, but it was too big for one post. They are from the same dataset and loosely related so I could have said this was a Part 2 maybe. Anyways, I removed the blank share count amounts from the data for this post, as after completing the other post and some feedback, it is not completely clear which parties those are or even what the blank areas are even recording. This DD helps point in the direction of the firms that have been burning gas like mad trying to keep the lights on. I suspect they are about to run out and back it up with data.

None of this is financial advice.

TLDR

OTC volume decreased from January to end of April. I argue it is because the shares that were being traded off exchange have been sold on the exchange to mitigate buying pressure. Trade size decreased for some firms, but not others. Using the data and graphs here, I argue that the firms that decreased their trade size significantly are likely the ones in the most trouble. Scroll to the bottom to see the firms that are probably in the hottest water. Based on these two facts and the steady price increase in May that followed this four month period, the data and the price show that the gas is running out, so HODL.

There are some firms doing weird 1-share OTC trading, so I just recorded them as well. Not worth a separate post.

TLDR DONE

The full list of involved parties is relisted in this post here with some graphs to display their activity. Check the other post if you want to read how it was determined these groups were involved at some level or grab the data I used. It DOES NOT necessarily mean that every group here has a short position since they aren’t required to report those, only that they traded GME consistently in the OTC market from the months of January to end of April.

Given how the price since the beginning of May has been steadily rising, I have a theory that uses the previous data from January to April. Interestingly, when you aggregate this data by week a few interesting anomalies emerge. Though I am making use of it here, I would suggest taking data from FINRA with a grain of salt, but that applies to any financial data for retail nowadays. It’s the best we’ve got, so let’s dig in.

Anomaly #1

Hypothesis: Decreasing OTC volume needs to go somewhere and since retail isn’t selling based on OBV, I suspect that volume is heading to the exchange to be sold to keep the price down.

OTC trading declined significantly over this period for GME. Not much to argue about here. Volume went DOWN.

OTC Volume Decreased

Total GME volume decreased during this period as well.

GME Volume Decreased

But we knew that. But that massive price dump in February down to $40 likely came from a combination of paper hands and OTC shares being moved back onto the exchange.

If retail isn’t selling their shares, where do the daily shares come from? Probably some institutions, but it’s always felt like the “bad players” are consistently dumping shares into the market quickly using HFT and that’s the spiky downward behavior that’s been experienced. I’ve suspected for awhile that they aren’t necessarily rehypothecating new ones into the open market, but instead are moving counterfeit shares that were being previously trade off exchange back on to the exchange to help mitigate buying pressure. What better place to hide this massive pool of shares than in your own back pocket and keep it off the exchange? Anyways there seems to be a ton of shares that don’t correspond to the daily borrowed amounts that end up sold every day, but more recently (i.e. in May) the price of GME has slowly but steadily marched upwards.

Conclusion: OTC volume from these groups was being forced onto exchange (for selling pressure) as the groups struggle to contain the price. Gas is just about empty now that we are into June though.

Either they are directly moving this off-exchange volume back to the exchange, or are rehypothecating shares into the market, then covering them with the off-exchange shares after the rehypothecated share was sold on the market. The benefit is that each of these strategies would buy them additional time since there are T+ delays for delivering the shares and they can FTD them anyways until the T+21 and T+35 force them to deliver. Regardless, OTC volume decreased significantly from January to April, just like regular volume did.

OBV was fairly stable or skewed towards the buying side for most of this period as well – retail wants to buy, not sell – so who is selling the shares.

OBV Graph

Another OBV Graph (different value but similar pattern)

Based on the data above, I think it is the groups in trouble moving their volume from OTC back onto the exchange to suppress the buying pressure.

Anomaly #2

Average Trade Size OTC seems to have decreased for many of these firms, but not all of them.

Their gas seems to be getting short and they are likely juggling shares around between each other to reduce FTDs. But they can’t stop them from spilling out as indicated by some of the large spikes. They also can’t help but have some “spent”/sold in the open market to keep the price down. But the tank is just about out of gas. I didn’t cross examine all of the data here together or do statistical tests since the volumes are different between firms, but visually firms seem to fall into two groups – decreasing trade size or stable trade size.

Hypothesis: A change in trade size indicates a forced change of behavior due to market conditions.

They also need to trade smaller amounts since they have less shares to work with as detailed in Anomaly #1. You can click on each of these for the graph.

Conclusion: Groups with stable trade size in current market conditions are in less trouble than the ones that decreased their trade size. I’ve highlighted the firms at the end that seem to be in more trouble than others.

Some trade size spikes seem to happen, but whether than implies trouble or benefit for the firms with spikes is unknown.

Anomaly #3

Some companies are conducting small (mostly 1-share) trade sizes OTC for GME Robinhood, National Financial Services LLC, Stockpile Investments, and Wolverine Securities all seem to hover around 1-share trades for GME. They do not do large ones when they trade OTC. Strange.

Robinhood and National Financial Services LLC were doing this for EVERY TICKER they were involved in the FINRA data. Stockpile Investments did this for most of their holdings (AAPL, MSFT, TSLA, and GME) but had larger trade sizes in AMC and NOK while also increasing their trade size in GME during this period a small amount. Wolverine Securities ONLY did this for GME (the highest total of this group with an average of around 3 shares per trade for GME), but traded a wide range of other tickers including AMC, AAPL, TSLA, GM, NAKD, NOK and KOSS with larger amounts.

Both Stockpile Investments and Wolverine Securities stopped trading GME in the OTC markets after the end of March. Exactly why this is, I am not sure – but all of these firms are small compared to the big dogs in the ring.

Hypothesis: 1-share orders have some specific impact/advantage that these smaller firms are exploiting. I am not sure what this is, but wanted to record it.

SUMMARY

OTC volume decreased from January to end of April, and as I argued, that volume was being sold on exchange to suppress the price, particularly by the groups in trouble. Massive decreases in OTC volume correspond to massive selling in February as some paper hands left and diamond hands loaded up on cheap tickets.

The groups that I suspect are in the most trouble as they have decreasing trade sizes OTC are Citadel Securities, Coda Markets, Comhar Capital, Credit Suisse, (potentially) some De Minimis Firms, G1 Execution Services (Susquehanna owns them), Interactive Brokers, Intelligent Cross, Jane Street Capital, Two Sigma Securities, UBS Securities, and Virtu Americas. BIDS, JP Morgan and Morgan Stanley could be in some trouble here.

For reference, the NYSE Designated Market Makers include Citadel Securities and Virtu Americas. No wonder this has been such a clusterfuck and they’ve been kicking the can so hard.

Their problem, apes benefit.

Barclays, Deutsche Bank, EBX, Goldman Sachs, Instinet, ITG, and Merrill Lynch are playing some role here, but I think they are making money off the others being in hot water. They may be in hot water as well, but the data seems to be inconclusive for these firms. Stockpile and Wolverine are not trading OTC after March, but they may have got back in after the end of April.

Robinhood and National Financial are doing some weird 1-share trading OTC (Robinhood especially since they do this will all tickers, not just GME). I don’t think either firm is really in trouble due to this debacle, but Robinhood will lose one of the big teats they’ve been sucking at when Citadel goes down.

I don’t think there’s much gas left and the price/data show it. HODL on baby.

MAJOR EDIT: SEE TOP OF POST.

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