Hacker News Reader

Comment by kart23 | Hacker News Reader

Can anyone tell me why SEC won't just step in, suspend trading, and force some kind of resolution? Its obvious that the market has been effectively broken by the short sellers. It might just make the redditors more angry and likely to hit other shorted stocks, and possibly cause markets to decline, but its the best applicable solution i see.

https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_tr...

View on HN

The forced resolution will be to force the shorts to cover. Screwing people that took the other side of the trade because the short sellers screwed up doesn't really make any sense to me.

Also the short-sellers are not being fooled into taking risks and neither are the call buyers. Everyone should know what they are doing.

Though regulatory bodies “picking a winner” can happen, as unfair as it sounds. I would hope they wouldn’t in this situation though.

yes, the resolution would entail that. its not about screwing people, its about fixing something thats broken. Isn't that what happened in 2008? Banks made stupid decisions, and government bailed them out for it. Obviously more complicated and probably higher stakes, but the crisis essentially boils down to that. Don't see why it can't happen here.

It's not like this is the first time a short squeeze has happened. Has the SEC stepped in for other squeezes? If they were gonna step in, it should have been when naked shorting was occurring, not now.

It looks like there was a listed short squeeze fund, SQZZ [1], which closed in 2018 only for lack of investors [2], so the SEC doesn't seem to have a fundamental problem with the strategy.

[1] https://www.sec.gov/Archives/edgar/data/1559109/000089109215...

[2] https://www.etfstrategy.com/active-alts-closes-contrarian-sh...

They only interfere when the amount of magical floating stock that would need to materialize to fulfill all the contracts and pay back all the loans is too much to actually break down the market. That is not the case yet. As long as the only consequence of a squeeze is that people that made bets loose all their money the SEC is not going to do anything. No one is being fooled into buying something that's riskier than it looks here.

Of course if GME asked to be delisted they could also help, but that also hasn't happened yet I think.

GME can make money from the short squeeze so why should it help those who short it and just accelerate its demise?

Short sellers illegally borrowed more stock that actually existed. They are the criminals here. Not the people discovering this and taking the criminals for everything they have.

Is it actually illegal to do this (not should it be, is it)?

Not at all.

Wrong. https://en.m.wikipedia.org/wiki/Naked_short_selling

After someone has setup a covered short, the stock they borrowed and sold is again on the open market, is it not? And thus could be lent out by the new owner, enabling a second covered short?

I understood “this” to mean “borrowing [more stock that actually existed] and shorting”.

As your link explains “Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing [...]”

Yes. It’s called naked short selling. It’s been illegal since 2008. https://en.m.wikipedia.org/wiki/Naked_short_selling

No, your link is about selling shares you didn’t borrow first. What’s going on here is perfectly legal, as explained in that very same link:

https://en.m.wikipedia.org/wiki/Naked_short_selling#%22Norma...

Correct.

GME was heavily shorted at ~148% and the institutional shorts got too greedy and /r/wallstreetbets caught them as they failed to close their shorts.

Now they are forced to buy back the stock to cover their positions whist everyone is buying and holding GME as the stock price goes higher; rinse and repeat.

If anything, the hedge-funds over-shorting these stocks are the criminals which have manipulated them (GME) for years with other hedge-funds bailing them out and the media covering their asses for their illegal activities; as usual.

Then they cry and lie with the media: 'ThiS is mAnIpulAtIOn' to /r/wallstreetbets.

All I can say is: /r/wallstreetbets is literally robinhood.

It's entirely possible for short sellers to have legally borrowed more stock than is actually outstanding. There is no evidence that I've seen that they've done so illegally.

Can you explain how it's possible to borrow more stock than is outstanding?

I have one stock in GME, and borrow it to you. You then sell it on the market to somebody. That somebody can subsequently borrow it again to a short seller who will again sell it on the market. Repeat.

If a shorter lends his one borrowed stock to another shorter there will be a chain of shorters for the one stock. Isn't that what happened?

That is already happing people basically sorted stocks by % of shorted float and are piling on. AMC, SPCE etc

so heads I win, tail you lose?

why would the SEC step in? I think if they step in they need to put in stronger rules from the wall street shamans not inhibit the retail traders.

the stock market is not gonna get in trouble if a bunch a people are buying an overvalued stock. it is gonna get in trouble when you short 140% of the float and b*tch moan for more restrictions when you get called on it

Reply on news.ycombinator.com