Clearing Houses, The Too Big to Bail Vulnerability Revealed by GME

clearing house abstract

The shocking events unfolding whereby financial service providers suddenly deny entry to a market while still allowing sell orders, has politicians on both sides of the divide united in condemnation with courts to have their say too, though no urgent injunction has yet been filed as far as we are aware. One can however have an interpretation of the events that go beyond ‘powerful funds rigging the game mid-play’ because clearing houses most likely do have very good reasons to be worried about a potential short squeeze to infinity. Clearing houses are the little known pipeline that makes trades possible. We’re all familiar with the double spending problem. Bitcoin solves it through a global collective where at least 51% is honest. In the analogue world, it is solved by brokers and the like together owning a trusted entity called a clearing house that somewhat manually moves ownership from one to…

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