/biz/ - Business & Finance

Apex Clearing Corporation - picrel.

inb4 go back Reddit spacing used for readability, let me explain.

https://investorjunkie.com/stock-brokers/clearing-houses/

"Once a trade is executed between two parties, the clearing house steps in. The trade title is transferred to the firm using a process known as novation. This process means that the clearing house takes on the legal counter-party risk associated with the transaction. The clearing house can help ensure that the trade goes through since it is now responsible for it. If one of the parties fails, it's not as big a deal because the firm is now responsible."

Zoom in, enhance.

"...THE CLEARING HOUSE TAKES ON THE LEGAL COUNTER-PARTY RISK, ASSOCIATED WITH THE TRANSACTION".

So regarding the short squeeze... if the open short positions available cannot close (which currently appears all but certain), they will be forcibly liquidated out of all their other positions. If after total and complete liquidation, they STILL can't cover the short position, who is liable? Ah, yes, I see it in the apple of your eyes now - the clearing house. The next step up the institutional ladder leading straight to the molten core of Wall Street - the Big Six.