UBS inherits Credit Suisse’s toxic swaps quietly. No margin rules triggered in hidden derivatives dump. CFTC bends rules to avoid systemic quake

by

via BossBlunts1:

WHY THE CFTC NO-ACTION LETTER MATTERS
It allows UBS to absorb toxic Credit Suisse swaps quietly — no clearing or margin requirements kick in.

It shields these legacy exposures from public scrutiny.

It suggests the risk is so large or complex, that the CFTC believes enforcing margin and clearing rules now could cause chaos.

In short: This is a regulatory pressure valve release, and not because the trades are fine, but because they’re too explosive to unwind all at once 🌋🌋🌋

Archegos shorted Gamestop & AMC through the use of TRS = Bullet Swaps.

It bankrupted them AND ALSO their prime broker, Credit Suisse.

Now UBS is left with the legacy costs aka = UBS are the bag holders

UNDERSTANDING SWAPS & THEIR ROLE IN SHORT POSITIONS
🔁 What is a Total Return Swap?
A total return swap allows a hedge fund to gain synthetic exposure to a stock without owning it directly.

Instead, the prime broker / bank owns the stock and gives the fund the economic performance (gain/loss/dividend).

Example:
Hedge Fund A enters into a swap with Credit Suisse.

Credit Suisse buys 10 million shares of GameStop.

Hedge Fund A gets the gains/losses from that position.

Credit Suisse hedges their exposure — often by shorting the same stock (creating market pressure).

👉 End Result: Synthetic short interest is created without any short sale being reported to FINRA.

THE “HIDDEN SHORT” PROBLEM — WHY DISCLOSURE IS DANGEROUS
🧮 Public Short Interest Is Incomplete
Traditional short interest only reflects reported short sales.

Synthetic shorts via TRS, options, and swaps aren’t included in those figures.

If the public knew the real scale of bearish bets — especially in meme stocks — it could trigger market panic or frenzy.

🔦 Disclosure Would Reveal:
Size of legacy positions in GME, AMC, BB, BBBY, etc.

Who holds them (which hedge funds and prime brokers).

How deeply some banks (e.g., Credit Suisse pre-merger) were entangled with these toxic exposures.

CHAIN REACTION: SYSTEMIC RISKS FROM DISCLOSURE

🔄 A. Forced Unwinds and Liquidity Crisis
If counterparties are revealed to be heavily short or synthetically exposed, they could face:

Margin calls from their clearing firms or banks

Rapid forced buybacks to close positions, spiking stock prices

Collateral shortfalls, triggering liquidation of unrelated assets

🔥 This is how Archegos imploded — swaps weren’t properly collateralized, and when prices moved, banks were caught flat-footed.

Contagion Across Institutions
If one big player (say UBS via Credit Suisse legacy exposure) is forced to cover:

Other banks with similar swap exposure may also start covering.

Market makers may pull liquidity, widening spreads and fueling volatility.

Systemic exposure in thinly traded or volatile names could blow out pricing.

Re-Ignition of Meme Stock Volatility
Public realization of real synthetic short interest could send meme stocks parabolic again.

Retail would re-enter in droves.

Volatility would spike. Options dealers would delta-hedge aggressively.

It’s 2021 all over again — on steroids.

MOASS! WGBSMFR!

Full video explanation on livestream begins now: