Nasdaq says they will halt trading if a stock has unusual social media chatter | Hacker News Reader

Nasdaq says they will halt trading if a stock has unusual social media chatter

markets.businessinsider.com

62 pointsthe-dude40 comments

For pointers to the many other threads on this story, see https://news.ycombinator.com/item?id=25933543.

This is ridiculous. The SEC should add a new rule to the game: no more than 100% of a stock can be shorted. I think it’s fair enough, and it should have been already illegal since a long time. Why the wall street guys can ‘chat’ whenever they want but normal people can’t?

One of Matt Levine's footnotes from a recent column, about short interest being over 100%:

"This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine."

But what happens when they all need to cover? regardless of who lent to who, all the parties who borrowed are looking to now buy the same 90 shares? I don't know the answer and am asking.

I also wonder what happens when a cycle happens?

The 90 shares presumably have to be bought and sold twice or more, heavily incrementing the price for the last buyer.

They have to buy the shares on the open market, and have to raise their bids until sellers appear. The ramp up in price -- and the consequences for the shorts -- is known as a "short squeeze".

Or we could simply ban short. This has been discussed regularly since they were allowed in the 30s.

Shorts have pretty much no legitimate use after all. They are only useful to speculate and speculation itself is mostly a useless by-product of the way markets operate.

People like to argue that speculation helps with price discovery and brings liquidity. I would answer that the marginal improvement it brings would be pointless if markets were solely focused on their original goal: allowing people to trade voting shares into companies they want to invest in. The premium speculators are allowed to extract on the economy for what they do speaks volumes about how rotten the whole system is. Let's never forget that by its own rules the whole thing should have crashed and burned during the 2008 crisis.

It should all be banned because its a pyramid scheme and a scam. A concept that would only work in a video game. They had 100 years and the economy is still a scam. You literally can not just wake up and invest in some industry you like. 95% is snake oil and the other 5% volatile due to manipulation. Somebody should find the amount of tickers issued, meaning every company that ever appeared on the stock market, then how many of these companies made it to dividend (the entire point of investing).

I totally agree with your vision. My proposal was a compromise. Yours is plan A.

There are definitely good things about shorting, like giving an incentive to expose frauds through careful research (see Nikola).

On the other hand it also incentivizes making companies fail, thus destroying value.

I'd be interested in an analysis of which side outweighs the other.

There are other mechanisms for profiting off stocks losing value (eg put options) that don’t impact pricing like shorts do.

Does this sound reasonable, but yet ripe for abuse? "yeah, it didn't become unusual chatter until it started to negatively effect my buddies."

If your position is sound, there is absolutely no amount of "chatter" that should cause you any concern.

If your position is easily undermined by anonymous posters on reddit...

In any case, it will only delay the inevitable. If NASDAQ halts trading on an equity, they just prolong the agony of a bad short position. How would Citron have been helped by a delay? Its a loan, the longer its open, the more you pay! So a trading halt is actually counterproductive for short hedge funds, what they really need is the quickest exit possible

The issue is retail and even institutional traders aren't investing, they're just gambling and riding waves, which are susceptible to chatter and why just investing in low-cost funds will beat out most in the long-term.

If people are willing to pay short-term cap gains instead of long, what concern is it what their time horizon is?

Once again, even HFT, chat mobs, etc won't take down a sound position...at best they can only create temporary disruptions. If someone wants to try their hand at trading those disruptions, go nuts.

Let's translate:

- Unusual: causing the sorts of valuation distortions institutional investors and funds consider their domain of control and their ground to mine

- Social Media: rather, a changeable set of loosely defined communities' use of any medium, to engage in coordinated rational activity we deem inconsistent with institutional interests

- Chatter: any communications assignable to the above

The terms used are ridiculous and essentially are cover for attempts to deny access to the market for people who aren't Their Kind of People.

I'm not participating in WSB or a fan per se,

and mostly consider this one of the other corners of the same Hypercube of Dicontent MAGA and Q also inhabit,

But this sounds like grounds for oh class action law suit or some other mass action.

It's also shouting an invitation that it's Game ON by enemies of my enemies like the K-Pop stans.

Does the Bloomberg terminal have a chat/social function? Is it monitored?

https://www.bloomberg.com/professional/product/collaboration...

How about Nasdaq halt trading when they detect unusual trading by industry and company insiders?

Preposterous. They can't just permanently cancel trading!

The do https://www.investopedia.com/terms/c/circuitbreaker.asp

I feel this is the appropriate place to mention the unusual prescience of The Economist's parody article on banning "naked longs" (in response to the bans on short selling temporarily enacted in the 2008 crisis):

https://www.economist.com/finance-and-economics/2008/09/25/a...

What if the chatter is just chatter? With this halting policy, Nasdaq can be assisting denial of trading attacks ...

Cool, now those with the means can manipulate securities with bot farms.

They already could. And despite what most comment on this thread is asserting this is probably a net positive for the average joe. I used to work at a small futures exchange and this hardly strikes me as a self serving move but rather a way to avoid a bunch random Joe’s from getting screwed by the powerhouse companies and bad actors out there and avoiding more regulation when it starts happening regularly.

Good. The people that do this arent “innocent nobody redditors”, they just use reddit as a shield. It’s exactly what they did with the chans, they astroturfed trump and turned an anti corruption community into a pro mafia cult. Every single thing done here was planned by that Cohen dude. Random internet commenters were only there for extra juice during the pump.

My guess is both sides of this, shorts and longs, are people who lost a fuck ton of investing money due to 401ks getting cut off from tens of millions unemployed, so they just switched up the games they play with peoples money. Pyramid schemes dont last long when money stops coming in.

I will add that I observed sites like stocktwits/webull this last year, the fraud that takes place there was so painful to watch that I just pulled out of the market completely. Literal trash information is used to justify a new pump and dump every day and it was disgusting how the SEC did nothing (To their friends) before.

Full title : Nasdaq CEO Friedman says the exchange will halt trading in a stock if they link unusual activity to social media chatter

this seems ripe for abuse

"We will halt trading if too many wealthy investors are effected."

It was already happening at the broker level today.

Who is the Nasdaq CEO looking out for with this move? (hint: not you)

Only the usual insider trading and market manipulation allowed can be allowed.

I wonder if this will impact StockTwits

The regulation of the underclass.

Good

And pray, kind sir, what exactly is "unusual" chatter?

The capitalists will abandon all rules once the "system" begins to work against them. A system they put in place.

So sure, >100% borrowing is legal, but god forbid people highlight the absurdity of the system by gaming it, then everything is "unusual" !

Just for your information, all these regulations are the complete opposite of capitalism.

What you're seeing are the effects of its opposite, a centralised and corrupt economy.

"It's not real capitalism!" is the Right's equivalent of "it wasn't real socialism!".

Our society have both elements from capitalism (eg. property rights, voluntary exchange, competitive markets) and from socialism (eg. collective taxes, social redistribution, centralisation, market regulation).

What the parent is complaining about is coming from the ability of a central body to regulate the economy and it's complaining more about socialism than capitalism.

We don't have an unregulated market.

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