Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop
twitter.com
twitter.com
As for this thread, it's got 1500+ comments. If you want to see them all you'll need to click through the More links at the bottom, or like this:
https://news.ycombinator.com/item?id=25941431&p=2
https://news.ycombinator.com/item?id=25941431&p=3
https://news.ycombinator.com/item?id=25941431&p=4
(Use your imagination after that.)
Why do Robinhood, Reddit, Discord, etc feel like they have to respond to this? Whether the investments being made are responsible or not, it doesn't seem like it should be their place to intervene.
If the hedge funds over-shorted GME and WSB recognized that and traded against that bad analysis, then that's great! If the pendulum swung the other direction and WSB is trading into some momentum, how is that any different than the hedge funds doing the same with shorts? Why should Robinhood pick a winner (siding against their own customers)?
Probably just a coincidence.
They're insane (or self-interested) to pretend the same doesn't happen in cryptocurrencies.
https://www.coindesk.com/coinbase-redoing-infrastructure-to-...
> During the recent bitcoin bull run, Coinbase has struggled to keep itself up during stretches of heavy volume, leading to snarky comments on Twitter and Reddit that it’s only news when the exchange doesn’t go down during peak periods. Given the exchange has filed preliminary documents for a public listing of the company’s shares, fixing its infrastructure has undoubtedly taken on an even greater urgency.
What side do you think wins given the huge hole left in Citadel after propping up Melvin?
Discord, not so. Looking at the financial backers of Discord, you can pretty quickly draw a link to the short sellers. Presumably some phone calls or dinners were had last night and strings were pulled to shut the discord down.
I've struggled with this in some friend groups, particularly after having a child diagnosed with an autism spectrum disorder.
Can you elaborate this some more? Are you saying that you've struggled with this because people take that 4chan attitude they grew up with into their IRL lives and are assholes to your son with ASD?
The royal "you", not you specifically.
I didn't ask out of a sense of voyeurism. More like a, "dang, is this something I need to watch out for when I get older?"
Strong moral backbone ya got there.
Growing older and realizing in general that things you did when you were younger are bad is fine and dandy, and indeed is "growing up".
But only deciding things are bad when they personally effect you has nothing to do with growing older and is not a good look. It's just selfish myopia.
Being an adult with a consistent moral framework is about being able to say "this is right or wrong", regardless of if it effects you personally or not. If you only notice something is bad when it happens to you, then that's basically what kids do automatically.
Consider this: you read this anecdote and thought “I’m going to belittle this guy.”
Says a lot about _your_ morals.
> ...particularly after having a child diagnosed with an autism...
Which to me says the dichotomy in particular is "before autism personally affected me" and "after autism personally affected me".
Calling people "autists" as a joke is either problematic and worth calling out or it isn't. You being personally affected doesn't change that. At least that is what I would argue is required from a consistent moral framework.
Don't think that says much about my morals, just that I like them to be consistent / not myopic.
Think about the thread we're posting in. This is basically about a company/industry that was like "these retail investors don't need protecting, they're adults and can make their own decisions, even if it means losing money", until those retails investors started costing them money with their adult decisions, at which point they change their mind and decide "actually they need protecting from themselves".
The way you phrased your comment, it sounded like you did the same, just swap out financial shenanigans for name-calling.
That's one theory. Another would be that the gaining media attention caused an influx of users to join a group that equates itself to 4chan, causing moderation issues.
The problem there is that the above people are already likely quite busy, and don't want to take on an additional (unpaid) burden by trying to clean up a sub they don't really care about.
I'm not personally associated (not a member on the boards) but I've seen a lot of discussions float my way over the years and if it became that way now it's unlikely to be from 4chan itself (or a community like it).
But your insinuation here gives credence to many that the internet is eating itself, when it's much more likely to be manipulation from those who stand to lose.
I say this as someone who frequented both communities at one time or another: they are very very very alike. I wouldn't be surprised if this who thing is a charade to take money from 'normies' as much a wall street.
Stop moving goal posts its a bad look.
I think that it's a bit of a stretch to say that the language they use means they're mocking people with disabilities or homophobia. Using words ironically just to be edgy is completely different from believing others to be inferior or an invasive entity to be defended against. That's very apparent when you talk to, say, an angsty teenager versus an actual ethnonationalist or even just your garden variety civic nationalist.
They might use the same words, but mean them in completely different ways, and actually be expressing very different things. I think that as it pertains to the internet, certain dialects of edgy, slang filled english are as close to a global lingua franca as can be considered possible. You can't paint all of these people with the same brush. Aside from speaking the same dialect of english, they use it to express very different thoughts, no less diverse or varied as those who speak other ones. This nuance will get missed if you overliteralize what they say and take it at face value.
They do make a lot of autism jokes (mostly pointed at themselves) and plenty of f bombs, but neither of which is generally seen as ban-hammer-levels of problematic (whether or not it is is up to you)
Mind elaborating on this?
Quote:
Discord has had significant investment from private equity funds including FirstMark Capital, Greenoaks Capital Partners, Index Ventures, IVP, Greylock Partners, Benchmark, Accel, General Catalyst, Ridge Ventures, Spark Capital, and Tencent Holdings. At least one of these firms has invested with Point72 Ventures, which recently helped Melvin Capital.I think discord probably made some calculations on its own as opposed to pressure from Melvin/Point72. Though in this day and age it seems that the truth ends up being stranger than fiction.
Well, yes...?
this is essentially saying "discord has investors, and the stock market also has investors, so they're colluding". there isn't a real connection here
I'm on the fence whether someone influential actually called the CEO of Discord and asked to have it shut down. I'm 99% certain these people know each other. It's not a could the call be made its more of a was it made.
practically, short selling hedge funds and silicon valley investors don't run in the same circles. yeah, they're socially connected but they have separate networks and cultures. conflating the two because they both involve investing isn't accurate
Behind all of these nefarious entities is CALPERS, etc. just trying to keep your pension fund solvent.
That's a stretch. I think the point here is that some parties can save billions of dollars in losses, and makes them a little more likely hypothetically. Im all for dealing with the facts, but the facts are just looking at the '08 crisis a lot of Wall st funds have a track record of bending rules for profit. It's not out of this world to imagine 12 years later that the same culture exists
Is what RH doing legal for a brokerage?
At this point, nobody cares - Reddit found a repeatable distributed exploit that cannot be patched, and the financial system's self-preservation instinct kicked in.
Similar to Google or Facebook, if I get the service for free, the service-providers' incentives may be aligned against me in favour of their paying customers.
It seems plausible to me that some of Robinhood's real paying customers have asked them to tame their unruly product.
However, and here is the problem - when the price does come down (likely after the shorts capitulate) , it will literally be a stampede to finally get out. It is unknown how sell orders will be processed... if at all at that point. So the later you get in the more likely you are to be burned, in the disordely unwinding scenario.
Early adopters will be ok. Holders and latecomers will not.
The idea behind these trades is that they will not in fact suffer any losses because they bought in after the naked shorts brought the stock down to a low valuation. If they keep the stock high enough, long enough, the naked shorts will have to buy back the stock at much higher prices than the price was when this short squeeze was started. That's why short squeezes are a thing in the first place. This is no different than what Carl Icahn did to herbalife and Bill Ackman.
When companies keep these people from implementing their strategy, they expose these individuals(their own customers) to potential huge losses.
It's not a loss until you sell, and a key date to sell (tomorrow, when tens of thousands of 1/29 calls expire) hasn't happened yet.
And... The price is in freefall in the last minutes of trading today.
Fog of War is the important bit here. The big difference between this and a pump and dump is that the FOW here is retail investors not having great SI data. In theory, a retail investor could still make this work in a "safe" way (safe used very liberally); it would be a hell of a maneuver for everyone with a short position to somehow close their position in a single day before Joe Retailer is able to get any word on what the outstanding SI is. In a pump and dump, your FOW/missing information is when the party working to pump the price decides the gig is up, which is effectively impossible to know unless you are that party.
A lot of retail investors with four days of experience under their belt are going to lose their ass by trying to suss out their exit intuitively, but for those that did their homework, this could work. For many, it already has. The argument that this needs to stop because uneducated retail investors can get burned can be reduced to absurdity -- "retail traders can vaporize their life savings by going long on a company facing imminent bankruptcy, so they shouldn't be allowed to trade with even the most rudimentary of instruments."
Price being in freefall doesn't affect the huge number of people that were in well under that, the way this strategy is working, or that people somehow still think that going short on this is anything other than a lottery ticket play because of "muh fundamentals."
If you buy 10 shares at $200, that's $2k out of your bank acount, and it's gone, just like if you bought a car.
How do you lose more than that? I'm not talking about shorting and stuff, just buying shares, hoping it goes up, and selling it later.
Indeed. There's a lot of talk about Section 230 lately, and how "precious" it is to freedom of speech. That law protects them from culpability against hosting legally-dubious things like this market move -- and any malfeasant commenting about it -- but none of the big platforms are acting like it exists. They're just censoring anyway, because they are either embarrassed, or are getting their strings pulled. Either stand behind Section 230, or admit you're just censoring things for duplicitous reasons of politics, money, or the rabble.
This is a short squeeze: the stock is shorted to the limit, and from the stock price, the shorters entered their positions "uncovered", so their risk is extremely high, and their losses are potentially infinite.
The WSB crowd and probably others noticed this, and bought the stock, knowing that it was going to become more valuable over time once the shorters had to close their positions.
They were right, and the shorters are loosing so much money that they are willing to buy back the stock at astronomical prices to limit their losses, which drives the price up even more.
The WSB crowd just need to hold until the stock is at the maximum price that the short sellers can pay, right before the short sellers default. That's the actual value of the stock right now.
If the stock climbs too much, and the short sellers default, the stock is worthless.
TBH, this is the short sellers own fault. They made the assumption that the market was "fair", and that they were going to buy back the shares for cheap when they needed them as a consequence.
That assumption was wrong.
In particular, I've seen a lot of speculators spreading the idea that margin calls will force everyone shorting Gamestop to buy stock at market price on Friday. This is wrong, and pretty unequivocally so, but I've had multiple friends come to me and explain that this is why they bought some.
This is simply not true at all.
I've had my trading on RH restricted specifically because of the PDT rule. As in, I was about to make a trade, and the site told me that the trade would cause a restriction because of pattern day trading.
This is a small part of the picture but RH lost a lot of money due to WSB advertising and exploiting the 'infinite money glitch' so it likely didn't take much convincing to act against WSB.
Though ironically it took them months to close the glitch which was their fault and a day to stop the action on WSB's picks.
https://markets.businessinsider.com/news/stocks/robinhood-fi...
“It is not uncommon for us to place restrictions on some transactions in certain securities in the interest of helping mitigate risk for our clients,”
from Massachusetts secretary of the commonwealth
“It is very clear to anyone looking at the numbers that the whole marketplace is being manipulated here,” he said.
I imagine Robinhood's thinking is similar
I don't get this.
I didn't know anything about short selling a few days ago and maybe now is a bad time to learn... but my understanding is that short selling is only legal because it disincentivizes bubbles caused by artificial overestimation of a company. Investors took it too far and short sold over 100% of the stocks in a company, ironically creating ideal conditions for a bubble. As soon as GameStop's stock turned upward, the rampant short selling resulted in a demand for more than 100% the supply of GameStop's stock, resulting in a meteoric rise in price.
But how is this market manipulation? The rise in stock price has nothing to do with an artificial overestimation of GameStop's value. It's just fundamental supply and demand. If anything, the short sellers are the ones who manipulated the market when they started shorting over 100% of the stock supply.
Like I said, I'm a complete noob when it comes to the stock market. Maybe I'm misunderstanding something?
The only issue comes if someone notices that you've done this, pushes the price up to the point where you have to exit your position because your broker won't let you hold this short position that you can't afford to pay for. At that point you must exit, which drives the price up even further because you're creating demand for the stock.
What's important to notice about this is that the second you're no longer short the stock, no one has any incentive to hold the stock. So it'll return to $20 and all those super smart boys on WSB who were holding out for $2000 have thousands of shares of a worthless retail stock that they probably bought on margin and are going to lose everything.
But in the meantime, there are 70M short shares that need to be rebought from the 140M original+loaned shares. The idea is that forcing closing out the short position will allow you to sell some at sky high prices, hopefully enough to cover the loss from the rest of the shares that must be inevitably bagheld.
100% of float or 100% of outstanding are not super significant inflection points, just very large ratios.
Of course the above depends on the short holders to: be right; have the capital to not have to cover their shorts; and be willing to hold on for the ride. I'm not making bets on any of the above.
The "problem" here, is that the little guys noticed. Michael Burry and some unknown YouTuber saw this over a year ago and started buying GameStop, and making a case for people to buy GameStop.
This is very easy to understand. The wrong people are losing money. And that can't be allowed. That's all you need to know for this to make sense.
It's fine to have lots of people buying something, but if they discuss how they can coordinate to hurt short sellers or something like that, particularly on a public forum, despite not being a lawyer I am fairly confident this is prosecutable.
Market trading regulations are full of fine lines where the wrong side can land you in jail. For instance the difference between front-running and pre-hedging / anticipating market liquidity is basically the intent and the information the trader has. The actions are indistinguishable.
It's cute when they phrase it like that, though everyone understands that it should be "chosen clients that make us most money"
"The Verge meanwhile noted one hedge fund suffering amid the GameStop surge was Melvin Capital Management, which another hedge fund, Citadel, has since bailed out. Citadel's founder is Ken Griffin, who also founded Citadel Securities, a big investor in Robinhood that also works with TD Ameritrade and Charles Schwab."
I suspect they sell them the trading data just like Robinhood does, to help them front-running the retail traders.
https://theweek.com/speedreads/963627/robinhood-halts-tradin...
But the crazy part is that they only halted one side of the trade... the buy orders. That is manipulation.
Personally, this cost me £1k on Nokia. I went from +£700 to -£1000 over the course of about 30 mins, because the market was pulled from under me.
>But the crazy part is that they only halted one side of the trade... the buy orders. That is manipulation.
Exactly, I mean you could make the argument to stop selling: "The current price is being manipulated and is too high so we stopped our customers from selling if they mistime the market. We will resume selling when prices return to normal."
Edit to add from /wsb:"If you try to sell you will get fucked because who are you going to sell it to if nobody can buy it?"
I hope there is some meaningful action by the SEC. It would be interesting to have all the trades reversed to the point when buying was stopped.
You can make a good argument that WSB are engaged in market manipulation. RobinHood don't want to be the broker for that for a whole myriad of reasons.
Where are the fraudulent statements causing price pumps? None of the prominent due diligence the community has provided that started this run has been found to be untrue. Their thesis still stands: GME was undervalued and shorts were vulnerable to a squeeze.
That said, WSB have been really clear that they're cornering the market to drive up the price. The fact they've done it by coordinating 1001 little retail accounts makes no difference. Short squeezes are always pretty dodgy. This one is openly a conspiracy to move a market.
Shorters got themselves in a dumb position. It seems to me someone is rigging the market to get them out of it. But that doesn't change the core action here: let's conspire to corner the market and force an artificially high price.
First, I recommend you look up the meaning of conspiracy in the dictionary: "a secret plan by a group to do something unlawful or harmful."
Tell me, where was the secret plan? Everything on WSB happened in the open, in plain view of millions of people.
Second, the market is not even what's cornered here. It's the hedge fund owners who shorted gamestop (fully understanding the risks this entailed), who are cornered. They are the ones who are driving the price up as they try to cover their short positions.
https://en.wikipedia.org/wiki/Conspiracy_(criminal)#United_S...
One of the dodgiest things in English Common law is the low low bar for conspiracy (see also Joint Venture).
I think we actually agree about the cornering part don't we? I say the shares are cornered, you say the hedge funds but it amounts to the same thing. I definitely agree the hedge funds are looking fucked and deservedly so.
I think we agree on this.
> an agreement of two or more people to commit a crime, or to accomplish a legal end through illegal actions.
Are you saying, though, that publishing advice or suggestions on a forum to buy a certain stock is a crime, or is illegal? That kind of stuff happens all the time in newspapers and television shows. Wall Street insiders have coordinated buying and selling for generations.
So did giving the advice become a crime by virtue of the fact that so many people decided to act on it?
Offering financial advice is a regulated activity. You should have a license and qualifications and insurance and whole crap of other stuff. You may need to declare conflicts of interest.
Advising others to buy a share you hold in the hope the price will go up (or to sell something you're short etc) is a crime. This is why you'll see or hear disclaimers from all sorts of outlets either stating the comments are not advice or declaring holdings etc. The A16Z podcast is a good source of this.
So advising people is not in any way a safe, legal activity for random commenter. "it was advice" isn't a defense here unless you're registered, qualified, insured and declared your holdings and intent to trade.
I'm not saying people don't do it anyway, or that the sec actively hunts ever reddit account that says "I like tesla". They don't. But the SEC gets to choose what it pursues so if it wants to make an example of this or to quash WSB influence or to help its friends in hedge funds, who knows?
Such is the murky nature of financial regulation.
That was the "yes" part. I would add this as "and then some":
Advise or comentory is saying "we should buy GME because its a good company, well run, profitable, undervalued, due for a change in fortune" etc. That's just an opinion or a statement of certain facts.
Saying "if we all buy it, we can break the market and force the price up" goes beyond advise. It is explicitly intended to change the price. In this case, the commenter isn't discussing whether the company is good or not. The company the shares are in doesn't matter. Instead, they're using their size to bully others and drive the price in the direction they choose rather than on reflecting the companies prospects.
That's what WSB (or rather some of its users) explicitly said they were doing. That's what they then congratulated each other on doing. We even sort of agree on this point: they cornered it. It didn't happen by accident, people didn't say "GME is a great buy". They were explicit from day 1: "GME doesn't matter, but we can form a group and coordinate to change its price and make a profit".
Now again, maybe the SEC don't care. Maybe they're too lazy to pursue it or they also think hedge funds do it (much more covertly) so fair is fair. Maybe they don't want the political blowback that comes with this. I don't really care to be honest with you, good luck to the little guy.
But it seems pretty easy to me to make the case at least that this is market manipulation, that it succeeded, that it was intentional etc
When 1 big hedge fund does this, or a few work together, it's just as bad. But they're at least quite about it. They'll discuss it offline in unrecorded meetings. They do it slowly. They're careful not to do it too often. WSB have posted about it and blasting the market. That makes it harder to ignore.
The core concept here is that you should buy or sell stock because you believe the company will succeed or fail going forwards. Doing it to drive the price is an abuse of size. It doesn't matter really who you are, how many you are, or whether someone else is shorting the stock etc.
It also doesn't matter if others are manipulating the price, you don't get to "manipute it back".
Again, I think it's hilarious they did this. I admire it in a dumb way. I'm not calling for prosecutions. I think it's very concerning that execution only brokers took it upon themselves to step in (I'd like an inquiry there).
Im just saying, they did conspire and they did manipulate the stock price. <shrugs>
Thanks for reading this and the other comment. I hope I haven't ranted too much. It's been a pleasure reading your comments!
Do we need market makers to let us always take a position in every single option when no real market for that option exists? I would argue no. It's completely artificial and they profit from it. If companies want to be market makers and profit from every single transaction, they need to be prepared to take a loss when the math doesn't swing their way.
I am not a finance professional but I thought RH is just like a custodian and facilitator of trades. It's not on the other side of any of these trades. It never holds any positions. Why does it have to manage its risk and why does a GME event create extra risk for RH?
I thought this kind of risk is only for the MM's like Citadel.
At some point the word will go out that it’s over—“we won”—and everyone will rush to sell their GME and take profits.
It’s not possible for all those people to succeed. Broker apps like Robinhood will be absolutely overwhelmed with sell orders, many of which will run into technical problems and/or no counter parties. A lot of people are going to be pissed off and blame the brokers.
People buying in late will have the most to lose and maybe the least understanding of what is going on. I mean, this story was a “breaking news” red banner on WashingtonPost.com yesterday. Not everyone buying GME today understands the social movement /r/wsb angle.
Ultimately brokers are worried about getting sued by people or companies who lose a lot of money in ways that will look preventable in hindsight.
Edit to add: the 2008 financial crisis was caused by financial firms selling a lot of crazy mortgages to people who could not afford them unless housing prices went up forever. When the crisis hit, the firms got the blame, not their customers. Companies learned that helping their customers shoot themselves in the foot can come back to bite them, even if it was all legal and what customers wanted at the time.
If a broker has a technical problem processing a trade, they deserve to be blamed.
It’s one thing to handle “a trade.” It’s another thing to handle everyone trying to trade at exactly the same second. We already saw broker apps have issues this week just on handling the buy volume. The sell volume will be far higher.
And I mentioned counterparties too. Even if the technology works, you can’t sell if everyone else is selling too.
The risk of not finding a counterparty to which to sell is different - and real - which is why I did not disagree with that aspect of your post.
If we hold a social media company liable for not being able to scale fast enough shouldn't a company offering financial services be held to at least that level of standard?
Shouldn't be possible. Most of the messages to the orderbook, by orders of magnitude, would be market makers doing add/cancel, which isn't something that comes from RH anyways.
How often is one particular user going to send in an order? 10 times a day if they're particularly busy? Doesn't touch the sides. The internet facing gateways can be scaled up easily if that's even needed, they aren't latency sensitive. The inside towards the exchange can be made extremely fast.
I've built systems that do this.
[1] https://www.cnbc.com/2020/03/09/robinhood-app-down-again-dur...
I mean read the top comments in the top WSB posts today. It ain’t about sticking it to the man. It’s about making money, fast.
That is a pretty gross oversimplification and completely dismisses the variety of "companies" that had a hand.
Subprime lending was just the foundation, but it took investors to investors to buy those securities, and ratings agencies to assign favorable risk ratings to those securities.
This is not totally correct.
2008 was caused by banks giving out extremely risky mortgages (the banks knew they were risky mortgages) and then packaging them up into giant bundles and magically calling them AAA stable real estate investments and selling them forward to other banks/pensions/401ks.
Banks are responsible for assessing the risk on a mortgage, not the customer.
What a dismissive, awful, terrible way to phrase this.
Having parents that were nearly the victims of one of those upside down mortgages, it's not that simple. They didn't ask for a 400k mortgage. They asked for a home they could afford. When the bank, that they have trusted their entire life, says, 'you can afford this much per month', they had no reason to question that.
They're unsophisticated people, who trusted the system not to fuck them. And that's precisely what it tried to do.
While I get that people need to take control of their own money, when the people responsible for looking after your money, the actual, literal bank tells you you're good, why wouldn't you believe them?
The bank doesn’t have a fiduciary duty to mortgage customers.
If someone wants someone responsible for looking after money and large purchases, they need a fiduciary financial advisor, not their bank.
The fact that people think the bank is supposed to look after money is part of the problem. The bank is just a vault. Not only are they not responsible for helping someone pick a mortgage and house, they aren’t even competent to do so.
I can’t imagine some retail bank even employing people who could competently assess individual debt/income ratios.
The training is that individuals should have financial literacy enough to know what banks do and don’t do well. And to recognize cross-marketing.
I knew tons of people who made dumb decisions in the 00s and bought way too much house. The bank letting them was part of the problem. But people being stupid was a big part too. I knew families making $50k/year buying $400k houses and refinancing every six months for cash out to pay the mortgage. The bank shouldn’t have done that. But people were really stupid to do this once much less multiple times.
But some banks thought they could lower their underwriting standards and get away with it because they could shift the risk to larger financial entities by selling the mortgages. And a lot of non-banks got in on the mortgage underwriting game for the same reason.
And bank customers liked it. Who doesn't like to be told that you're in better financial shape than you thought? That should be good news.
My point above was not to defend what banks did, but to point out that, even though banks were in the legal right to lower their underwriting standards, it did not work out well for them or their customers (or anyone else, really). And a lot of the downside came later, in the form of bad reputations, burdensome regulations, etc.
Maybe there were lots of hapless old people who were misled by some bank they mistakenly trusted for years.
I don’t think so, the many examples I personally knew from that period were getting loans from specialized banks that set up mortgage shops, like Washington Mutual.
The book (and movie) The Big Short digs into this how regular people were overextending.
To clarify, the banks were bad actors by offering and participating. But reasonable people were avoiding the situation until the whole system tipped over. Someone borrowing at 40% debt to income or higher should never have done that, even if they trusted their local banker who was saying it was fine. Finance requires personal responsibility and people need education to help make these decisions (and they shouldn’t get this help from someone with a vested adversarial financial interest).
They would have terrible sales numbers and get fired in the first month. Wells Fargo's training was that the more financial instruments a customer had with the bank the better.
Maybe it wasn't intended, but this comes across as particularly harsh victim-blaming.
Yes, the firms got some blame (and a bailout), the customers lost their homes.
Edit: I now see the retraction/clarification you just posted to another commenter. Cheers.
Actually that is impossible. This is a short squeeze. If you forget to sell your share then the short sellers are fucked because they still have to buy yours.
1. SEC is protecting the little guy and being paternalistic
2. Institutional collusion
However, 1. could be likely because this GME frenzy is reducing confidence in the overall market. S&P500 lost 100 pts this week. By stifling buys, they
As others have pointed out, Citadel's market making arm is their largest source of revenue + Citadel's hedge fund recently invested a large amount in Melvin Capital to help shore up Melvin's capital base after their loss.
Unfortunately unless Robinhood insiders leak or post their rationale behind this decision, we'll never really know what happened behind closed doors.
https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
Their platform is probably inundated with open orders on these few names, as the price is all over the place. They had outages back in March 2020 and presumably there's a risk of the same if everyone tries to close their positions at the same time (eg, if u/deepf**ingvalue announces that he has exited).
It's users are the product.
I'm sure this started with a call from a "concerned" board member.
There are people literally investing their rent money into GME, and it's almost inevitable that the price will come down at some point, the only question is when and how far.
Robinhood is a margin-lending options-trading broker. If a customer falls down on a trade, it is ultimately liable. If a retail customer loses money and makes a FINRA complaint that Robinhood induced them to buy through its gameified interface, it is liable. Risk and compliance likely made this call.
Also, Robinhood makes its revenue from market makers. They are the customers. Clients are not. So when trading these equities gets unprofitable, they will pull the plug. (Though anecdotally, everyone I know on the sell side in equities and equity derivatives is making a killing on this.)
What I can guarantee is nobody shorting GameStop got Robinhood to pull the plug.
The answer is no.
No, people / pundits / the media were widely proclaiming that the healthcare system would be overrun and the next great economic depression was upon us. Most people assumed the stock market would continue to fall.
There could is also the concern about new accounts trading in GME with funds that might be suspect. It's a risk you don't want to take if you don't know your customers and the bubble is ready to burst at any moment.
Interactive Brokers hiked the long margin to 100% (and short to 300%) which is a reasonable way for a broker to behave.
Killing the ability to buy is not.
If their customers - the firms that pay them, not app users - see the RH platform as a threat to their business they could pull the plug[0]. Or if this prompts regulators to examine RH and similar products.
The risk isn't in the outcomes of options/trades; its risk to their business model.
[0] RH's customer are actually market makers, who by and large will be profiting heavily off of this.
This point has been made repeatedly elsewhere but it bears repeating. Market makers are getting rich off this trading. Robinhood's customers are not hurting from this.
Still, as far as risk to RH is concerned - if this kicks off a change via their customers, regulators, or legal action the change is probably not in their favor.
FINRA arbitration, and the FINRA complaint process, is highly sympathetic to retail clients. When these clients lose money on GME et al, there will almost certainly be a class-action lawsuit for some fraction of their collective losses. And Robinhood's lawyers will almost certainly recommend they settle. That is the risk, beyond margin lending and options settlement, they are seeking to mitigate.
(Also, when that money is lost, there is a decent chance Robinhood will be fined by half the regulators on this planet for inducing people to overtrade through its gameified interface or something like that.)
On one hand, you could say RH shouldn't let people buy options if RH doesn't believe those people can pay up when the option expires. On the other hand, you have people buying options who maybe don't understand that you need cash to buy the shares if the option expires in the money.
Additionally, other retail brokers selling to Citadel Capital have done the exact same (Schwab comes to mind, but not only).
Other brokers however (fidelity), have not. If the short squeeze is to happen tomorrow, this seems an unlikely coincidence that those retail brokers affiliated with Citadel Capital tool positions that would ultimately deflate the stock.
I don't see how GP can assure that no short sellers is behind those moves.
Market makers buy order flow. Hedge funds don't. The only major hedge fund affiliated with a market maker is Citadel.
Melvin and Citron placing shorting GME is an anomaly in the hedge fund world. Most institutional short views are expressed through options and structured products. (Market makers convert those options into shorts, the same way they convert calls into stock purchases.)
Market makers are making tonnes of money on this. It's the low-information non-directional trading their models are built for. (Source: former options market maker. My former colleagues are making annual targets in a week.)
Some hedge funds are getting screwed. But that is mostly over. Few funds' risk tolerances let them extend a 10x loss on an outright short. With respect to their puts, their maximum loss is the premium. That's generally baked into the risk model ex ante.
The only sophisticated parties holding the bag are brokers. Margin loans at risk. Uncovered options sales at risk. Most significantly, when the scheme inevitably crashes, almost-inevitable class-action lawsuits from clients claiming to have been misled by their interfaces.
Aren't these market makers sitting on a ton of stock to cover call positions?
They may have picked up a lot of pennies these last two weeks, but the bulldozer is getting bigger and faster. This is a truly unprecedented situation and I doubt they have confidence that their models can handle it.
> Aren't these market makers sitting on a ton of stock to cover call positions?
The whole purpose of delta hedging is to make them immune to the first-order effects of market moves. The first-order derivative of the value of everything they hold with respect to price moves in any one stock is constantly kept near zero.
In the old days, many options traders would put off hedging their books until near the closing bell. Smart equities traders would watch the options market to see which way the traders would be rushing to hedge in the cash equities market. These days, there are systems that automatically hedge out the positions throughout the day.
How many shares of Melvin Capital were bought by Citadel when they injected $2.75B? Is there a way to know how exposed they are?
Isn't there a conflict of interest in them floating a hedge fund losing money due to flow orders they are buying (or, potentially, not buying anymore)?
I can assure you there are very few cattle, bison, or caribou near the exchange.
While writing, I was thinking of the thundering herd problem and imagined that individual users is more literal (than many processes), more like the thing for which the problem was named.
If I'm not not mistaken, I think you can also refer to a group of humans literally as a herd. But I very rarely think such prescriptivism (saying one should not use terms inappropriately) provides value, especially on a word that is so far past being used correctly with any consistency.
Not sure how you could possibly gaurantee that. Also given that Robinhood edit got a huge chunk of cash from a shorter makes that pretty weird to "guarantee"[1]
[1] https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%2..., https://news.ycombinator.com/item?id=25945258
Market makers always win.
I'm seeing one tweet from Adam Hackney claiming this [1]. Do we have a real source?
[1] https://twitter.com/mindmeld_me/status/1354807424998281217
https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%2...
But Citadel MM is more likely to pull the plug on making markets in a name for risk reasons than to benefit a hedge fund position. To say nothing of the fact that Citadel got to bail out Melvin Capital, which is traditionally a profitable trade.
In particular, I believe Citadel would gain more from continued trading on Robinhood than they would lose from their hedge fund positions.
Why would robinhood be any more liable than other online traders like Fidelity or etrade?
> What I can guarantee is nobody shorting GameStop got Robinhood to pull the plug.
How can you guarantee that? Robinhood likely routes most of it's trades through citadel, which has informed partners it will not be fulfilling GME or AMC or BB trades.
And it turns out Citadel is also a hedge fund that has massive short positions on GME.
Corporate risk controls are also not a hard science, different risk teams can and do come to different conclusions on the same issue.
Every brokerage house ultimately vouches for their clients.
Robinhood has extra exposure because clients could claim its interface induced them to overtrade.
> Robinhood likely routes most of it's trades through citadel
Do we have a source for this?
Also, Citadel just made money bailing out Melvin Capital. The short squeeze let them buy assets at dimes on the dollar. Assets which do not include GameStop shorts.
> which has informed partners it will not be fulfilling GME or AMC or BB trades
Former market maker. When trading got crazy we'd take profits. When it got inexplicable, we'd pull the plug. If we didn't, risk would. In this case, there is the additional factor of political risk--you don't want to be making millions of dollars off GameStop at its peak when that's going to cost you tens of millions of legal fees in front of Congress.
A simple explanation for Robinhood's behavior might be that their customers, the market makers, backed away from paying for this order flow.
All this said, I'd be highly pissed if my broker did this to me. But Robinhood customers have known since the beginning they weren't the customer.
>Do we have a source for this?
Yes.
https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%2...
I find it nuts how this has transformed into a populist thing.
Normally, a market maker might then close it by buying a share from someone trying to sell. But in a massively one-way market like GME, it's quite likely that they build up a large enough unhedged massive short position that they say "no, we're not taking on any more risk" and communicate that to Robin Hood.
> they say "no, we're not taking on any more risk" and communicate that to Robin Hood.
Maybe, although they would probably do that when their ability to hedge started breaking down, not when they'd already acquired massive short positions.
More likely, to me, is that they would just increase the bid-ask price spread continuously as their ability to hedge degrades.
This assumes continuous liquidity. Dangerous assumption to make in choppy markets.
It is not uncommon for markets to gap up or down discontinuously. You look at the market and see bid 899 at 901, buy some shares for 898, offer them at 890 and find the market is now 125 at 901.
a) most of the platforms are doing the same
b) it's hard to imagine that with half of RH currently holding GME they're not going to come out of this having gained more in users than they lose over trust issues
This is a very tenuous argument. By law, options customers in the US have to receive an information packet and accept an Options Agreement, wherein it's clear that they could lose 100% of their premium outlay (or more). Options trading is approved based on levels; not every account can buy options, and not every options account can sell naked options.
If we are assuming good faith from RH, maybe they are trying to prevent margin-call suicides. But I don't assume good faith from RH.
Not to mention that they turned off all opening trades -- not just large trades, margin trades, or options trades.
However why not just disable margin trading on these stocks instead of shutting them off altogether? I don't really know enough to say. Maybe there are additional risks somewhere unrelated to margins? Or maybe the upstream market makers are forcing their hand. Or maybe it's some combination of reasons, including pressure from people who are on the losing sides of these bets.
> Why should Robinhood pick a winner (siding against their own customers)
As others have often pointed out, Robinhood is in some ways analagous to social media companies. Their end users are not their customers, because it's a free service. The customers are the businesses on the other end, in Robinhood's case the market makers who are paying for the right to front-run trades. If this is no longer profitable for them due to crazy volatility, they can apparently stop allowing trades at any time.
I'm not a lawyer, but to me, that seems like it would be very very illegal.
Yes... or simply increase the margin.
Front-running is super illegal. You're referring to payment for order flow (PFOF), in which a sell-side party like Citadel pays Robinhood for the right to route your order to the exchange. But there's a catch: Citadel is allowed to take the other side of your trade without routing it to an exchange, but it legally has to match the exchange price or cut you a discount. If Citadel can't do either, your order MUST be routed to an exchange.
PFOF makes up a somewhat negligible source of revenue for no-fee/discount brokerages. The bulk of revenue comes from a much more mundane source: interest rate spreads. Earn X% interest on customer cash deposits while providing customers less than X% interest on their deposits.
If your order isn't making its way to an exchange, PFOF isn't your problem, and you shouldn't be day trading. Your real problem is that the professionals think you over-bid/under-asked to such an extent that they're willing to cut you a deal just to take the other side of your trade. Unless you're a professional options trader, betting against professional market makers will cost you a lot more money than the imaginary transaction costs would have.
(This is just a summary of an old HN favorite: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...)
Robinhood operates a lot like Facebook. The "Gold" subscriptions and margin interest are tiny portions of their actual revenue. We are not their customers, we are the product. They offer free trades in exchange for selling order flow data to hedge funds, which in turns allows them to manipulate the markets. Of course they would protect their actual customers.
If you thought free brokerage accounts with no-fee transactions was too good to be true... you were right! There was a catch, and this is it.
So I think in Robinhood's POV, hedge funds are the poor.
Robinhood did not act against its customers. Its users are their product, which it sells to Citadel. As you see now, this is way more than an edgy quip: when its free you are the product.
This is a hedge fund's game as it is for WSB.
It is the regular traders that have shorted via option that are losing money just the same. They are the most likely bag holders because they they don't hedge.
Don't assume all parties are truthful.
Doing this way ensures that retail loses, 100%. Only a retail app was blocked.
It is the asymmetry, I can't see a valid reason for unilateral action from RH here.
A couple funds with large short positions have popped, but short interest hasn't budged; they were just quietly replaced by other funds. At this point probably every hedge fund who trade equities is short GME. If your position is not too large and you have enough cash you can just keep meeting the margin calls and collect your free money when the bubble bursts.
(And stop loss orders don't save you if the crash happens fast enough.)
I agree. Anybody who doesn't think that the algorithms have locked onto GME is stupid or hopelessly naive.
You're not punishing Wall Street, they've already priced you in and are waiting to take all your money.
Suckers.
"One of these days in your travels, a guy is going to show you a brand-new deck of cards on which the seal is not yet broken. Then this guy is going to offer to bet you that he can make the jack of spades jump out of this brand-new deck of cards and squirt cider in your ear. But, son, do not accept this bet, because as sure as you stand there, you're going to wind up with an ear full of cider."
You misunderstand who their customers are. Who you're calling customers are users. Their customers, the ones who pay them, are the dark pools and other trade routers, or whatever they are called, who pay RH for routing trades thorough them.
Robinhood doesn't actually execute any trades. They sell user's trade orders to Citadel, a trade executor. Citadel then buys the shares on the market, and sells them to Robinhood for a slight markup. It's how Robinhood offers trades for $0 fees. You pay pennies more per share, but don't have to spend $5 per trade.
Citadel, and other trade executors, are refusing to buy shares for retail traders. Coincidentally, Citadel also bailed out Melvin fund for their short position in GME. So, Citadel has an interest in not letting the price go up any further. And citadel controls trade execution for dozens of firms.
This is definitely illegal. But Citadel is betting that the resulting SEC fines from this illegal manipulation will be less than the loss they would get if they didn't suppress the price.
Melvin Capital closed out their short position yesterday with a large loss - and Citadel helped cover that loss.
As far as I know, Citadel and Melvin Capital no longer are holding any short positions in Gamestop. So what do they have to gain, by your narrative, from suppressing the price?
Citadel is probably making bank off of this actually, like a lot of other sell-side firms.
If it's true they refused to process for certain securities for their downstream clients, then I believe "When?" and "Why?", specifically in relation to other actions, become legally relevant questions.
If you have to buy by EOD Friday and the price starts skyrocketing Thursday, you might want to buy a little earlier even if it means eating a huge loss, because you don't know if that skyrocket will continue into the next day.
e: Why is that downvoted?
Put options do expire, but the worst case for puts is that they expire worthless. Regular shorts can have unbounded losses.
https://www.investopedia.com/ask/answers/05/shortmarginrequi...
Melvin Capital's short position was in the form of puts, I think.
Since they would expire worthless, better to sell them when it is skyrocketing than to wait and see it skyrocket further and lose all of your money.
This is incorrect.
[1]: https://www.institutionalinvestor.com/article/b1q8swwwtgr7nt...
If it were just puts, then their exposure to a run-up would have been 55 million, not billions. Puts can only go to zero. The filing merely hinted that they were shorting the stock because they also had some puts on it.
Think about it, if you buy a $9 put for $10, the most you could lose is $10 when the stock goes way above $9. The unlimited loss scenario with options is writing (selling) a naked call, where you receive a premium but if the stock price rises above the strike price your loss rises.
Melvin's position must have been mostly short equity. Perhaps only a few million shares of a $3 stock.
You don't need an "emergency infusion of 3 billion dollars" if you just bought put options that are now deep OTM. As you mentioned, the total downside is capped at 100%.
They clearly had real exposure and serious panic. If they were using put options they were leveraged or had non-standard terms (not the same as typical retail investors)
But honestly I doubt it was even possible to be short so much with options alone on such a low cap company (as it was before this blew up)
There is no ambiguity in what "closing the position" means. Stating on CNBC that you have closed the position when in fact you only bought shares to cover 1% of your short would put you in jail.
Your mental model for how the world works is wrong.
Is it equally illegal to say on CNBC that you closed it out, but to email your investors and tell them you didn't?
Is the legal issue that you're misleading your investors or that you're manipulating the market? Both?
And despite how it seems from outside Wall Street, hedge funds are definitely scared of the SEC. Banks worry less because their money is sourced differently. Hedge funds have to worry about legal action not just for the fines but also for scaring their investors. When individual investors are so large it only takes a few redemptions to significantly impact AUM.
If this is accurate then your question makes sense. Why? But how do we know this is real though? They could play games as well and I'm sure they do. Stock trading is gambling.
Melvin Capital has already stated they have closed out their position, think it would probably be fraud if they hadn't.
Maybe, the problem was just transferred to someone else so they can remove it from their statements. And now that someone is trying to deal with this. Unless we have trustable source with all the details on how that position has been closed, I don't think it's safe to assume anything.
Sure, there is some risk in liquidity provisioning, but I think you are really not understanding what market makers do and conflating it with hedge funds.
IANAL but I doubt this would be fraud -- they arent a public corporation making statements about themselves. They did have LPs, but i'm not sure what restrictions there are around speaking -- would anyone know?
You wouldnt communicate to your LPs via CNBC or Twitter.
You recall incorrectly. I encourage you to Google before commenting your recollections, it's quite easy to find.
"Melvin Capital has repositioned our portfolio over the past few days. We have closed out our position in GME (GameStop)," the spokesman said in a statement. [1]
[1] https://www.usnews.com/news/top-news/articles/2021-01-27/hed...
this stinks.
Two points:
1. As I understood it, they closed *A* position, not their whole position, and announced that in the hopes it would deflate the stock price so Melvin doesn't crater.
2. And what, exactly, would be the punishment for this fraud, assuming they even get prosecuted and convicted? Can you put a dollar figure on it? Now put a dollar figure on how much they would lose if they didn't make that announcement, and compare the two numbers.I am not trying to conspire, genuinely curious.
Source?
Also potentially new shorters getting in? I shorted AMC yesterday and have made quite a bit today.
Today, there is still a 122% short position on Gamestop. There are still many funds hedged against GME. Melvin might have had one of the larger positions, but there are many more funds with this position. Source: https://finviz.com/quote.ashx?t=GME
As you say, they would make money by running the orders, regardless if GME goes up or down. So - why would they stop? It is most likely that Citadel is still exposed to other funds holding short positions in GME.
There is literally no evidence that Citadel has stopped serving GME orders. That is entirely the conjecture of this thread and ignores the much more likelier option that it was Robinhood that limited the stocks.
Why wouldn't you short GME after the price has risen so high? I'm sure there are plenty of hedge funds shorting now at a much higher price.
Hell, I shorted AMC yesterday and have made quite a bit off of that already.
Because the stock is already over 100% short and an army of retail investors is purchasing it
Because that is also often when it is a good time to make money.
It's entirely unsurprising to me that short pressure on the stock would increase after this.
The risk to a company that processes trades is that many of these retail investors accounts would turn negative and the company that processes the trades would take giant losses they did not plan for. To prevent that, they stop processing trades.
This is something many people are claiming is false. As far as I can find, Melvin have not issues any formal statement on the matter - this claim is purely based on a CNBC "source".
I'll be closing my RH account soon. For now, I'll be holding the line on GME.
Not only hedge funds and brokers colluding against the retail investors, but the government as well. Yeah...sounds about right.
Citadel bailed out Melvin Capital. Not its position. Melvin doesn't have a short position anymore.
Melvin made a stupid bet. Citadel bailed them out. Private sector bailouts aren't free: Citadel got its pound of flesh. Even if they bought the entire portfolio, that portfolio no longer includes GameStop shorts.
If Citadel's asset management and market making arms are colluding, that is illegal. But it's the most complicated and stupid explanation of the bunch. Market makers stop quoting for all kinds of reasons. If I were still on my options market making desk, I'd be pulling the plug on this. My traders would yell at me. This is what you make money on in market making! But the risks of loss go up with volatility, and the costs of gamma getting away can be nasty.
The chances that a fund the size of Citadel has any strong opinion on the direction of GameStop stock is vanishingly low. The chances that they stopped quoting in the name, as did almost every other market maker, and thereby broke Robinhood's system, which doesn't--to my knowledge--directly interface with exchanges to any significant degree, is high.
This is a much bigger deal, some (not hedge fund!) people are going to lose a crapton of money on it, and people are probably going to sue them once that happens.
You can see this discussed elsewhere in the thread.
For trying to get some positive media coverage, after being constantly bashed and blamed by them for the uneducated retail trader boom.
People after the financial crisis liked to talk about fat tails. Risk models assuming narrow tails, reality having a taste for extreme events. This is a fat-tail event. We don't have great models for stocks as volatile and as correlated as GME is right now. Which means for even cash equities trading, we don't have a great sense around what the appropriate spread should be.
Market making has sometimes been described as vacuuming up nickels in front of bulldozers. These are bulldozin' times. You don't want to fill a bunch of sell orders in GME right before it gaps down 80%.
On exchanges. Those are buyers and sellers as well as market makers. Robinhood connects to a subset of the latter.
Nope, pretty much just market makers.
If this is coming from Robin Hood, they could make the (very weak) argument that they are protecting their retail customers from themselves, but if it's coming from Citadel, it just looks like market manipulation to me.
Given that it's not just RH, but nearly all, if not all, brokers that outsource order flow like RH...I think it's safe to assume it wasn't RH decision.
Normally internalizers have no problem competing with spreads on the exchanges, because retail flow is much less toxic than the sophisticated traders in the public venues. But with GME, the retail investors are running the show.
Therefore it no longer makes sense for internalizers to pay for this order flow.
I didn't touch this in the first place, but once it was clear it was a short squeeze, nope, not gonna play that game. Just sit back and enjoy the show.
Source? If I was caught in a short squeeze, this is exactly the kind of announcement I would circulate to prevent the price from going any higher.
Citadel probably gave them the cash to avoid a margin call, knowing they can later manipulate the market and the shorts would payoff in the end, and Citadel would get their share of the spoils.
Otherwise a bailout makes no economical sense, Citadel is not the FED, they can't print money just to cover someone elses losses.
What? No it wouldn't.
Melvin faced cash calls. To raise cash fast they could (a) get it from their LPs (fat chance), (b) raise it from someone else or (c) sell other assets. The last option is a fire sale. You figure out what the fire sale discount would be, say it's 50%, and then use that to get (b).
I don't know what the terms of the bailout were. If I were structuring, I'd make it a loan with a super-high interest rate triply collateralized by their remaining assets. If they pay it back, I get the super high interest rate. If they default, I get the rest of their assets for 33¢ on the dollar. Between those two, the latter is frankly the higher-payoff scenario. (I would also require all short positions be closed out within N days, with the borrower's investors bearing the losses.)
That's what I was pointing out! Melvin did not close their shorts(as they said they did), they just got more rope from Citadel, and Citadel was willing to do just that knowing they can manipulate the market.
The narative of Melvin was "Citadel gave us 3 billion dollars, we closed our shorts at a loss, you won wsb, aren't you happy, you won, now leave us alone and stop buying".
Yes. Those other assets are presumably uncorrelated to this short position. If they were fire sold, depending on the assets, they could have gotten 20¢ or 30¢ on the dollar.
That discount gives Melvin the incentive to borrow, even at exorbitant rates. It protects the rest of the portfolio. With the bailout, the GameStop loss is capped and eaten by LPs. That sucks. But it sucks less than eating that loss and selling off the rest of the portfolio for peanuts.
> Melvin did not close their shorts(as they said they did)
You're alleging securities fraud. This may be the case! But we have zero evidence of it. And if Citadel and Point72 invested $3bn to aid and abet securities fraud, that would be quite stupid.
"[Melvin] was rescued with a $2.75 billion cash infusion from two other hedge fund titans, Steve Cohen and Ken Griffin. Cohen was Plotkin's former boss at SAC Capital Management. SAC shuttered after the firm pled guilty to insider trading and paid $1.3 billion in fines. Cohen was not personally charged. Griffin runs Citadel LLC ...
In exchange, Citadel and Point72, the successor firm to SAC, own an undisclosed stake in Melvin Capital Management."
I stare at this crap all day and I've seen no indicator that Melvin has closed a large percentage of their position, let alone all of it. I will 100 percent allege securities fraud.
And what is the likelyhood Melvin had such a significant proportion of their portfolio in such assets?
@hanklazard best me to it
The answer is they didn't close it, they were trying to get the mob to back off.
And no, it technically wouldn't be fraud, they were very careful with their words...
That would be securities fraud.
Lots of people are short? I know at least half a dozen people who bought puts over the last few days. Those puts hedge into shorting the same way calls turn into buying.
I'd say most of the wallstreetbets traders still believe Melvin has their position, but you're saying otherwise. Though the still extremely high short interested doesn't seem to make sense if the big losers already exited...
I do. This will make partners out of a solid suite of securities lawyers around the country. But we won't have clear answers for at least another 6 months.
Also, from what people are saying on WSB, there's no liquidity left in the market which is why some platforms halted trading for $GME.
If the early shorts were all out I wouldn't expect a lack of liquidity, since more recent short positions wouldn't be under as much pressure.
I'm a complete noob, but it seems like literally no one can agree on what's happening and why even though there seem to be valid arguments on all sides.
https://www.reddit.com/r/wallstreetbets/comments/l642ms/upda...
Naked shorts at this scale are gonna have to go away and no one will have more incentive to reach that goal than main street wall street ... ideally they can and should do this in a way that simply involves making more information public ...
Doing this all in such a publicly-coordinated way on Reddit means you're wide open to people trying to directly play against your goals.
So much of the "proof" of things around this seems to be making big assumptions about who is on the other side that the aggregate numbers don't seem to indicate one way or another.
Tens of billions of dollars of GameStop have been bought and sold over the past few days. If you can buy GameStop to go long, you can buy it to cover a short.
Note that there isn't a limit on rehypothecation. A share sold short by Bob can be used by Anna to cover her pre-existing short.
Yes, at prices that are several multiples above the price they shorted at.
I hope you have a better reason why that's not likely than "but that's illegal." Them actively committing securities fraud seems to be the most likely occurrence from where I'm sitting.
Especially when they're staring at billions of losses and maybe all it takes to save them is a carefully worded public statement that they think they can later argue is technically truthful.
Who would save billions? For how long?
Let's assume the statement is fraudulent. Before the statement was made, Melvin's LPs were set to get hosed. Melvin's general partners, the ones making the statements, have a lot of egg on their faces. But they didn't do anything wrong. They keep their money and houses and yachts. And in all likelihood, after a few months, craft a lessons-learned pitch and raise more money.
After the statement, they have engaged in fraud. Not only is criminal prosecution a risk. All those deep-pocketed LPs can now sue the general partners, personally, for breach of fiduciary duty.
Add to that the Citadel bailout, which removed the risk of the fund going under, and there is no reasonable explanation for lying about closing out the short. If you wanted to show resilience, you'd say something like "we've fully hedged our shorts with long-dated puts, reducing our expected profit but capping our losses."
Selling a stock short is NOT illegal. It is a perfectly valid type of investment according to the SEC:
“D. Are short sales legal? Although the vast majority of short sales are legal, abusive short sale practices are illegal. For example, it is prohibited for any person to engage in a series of transactions in order to create actual or apparent active trading in a security or to depress the price of a security for the purpose of inducing the purchase or sale of the security by others. Thus, short sales effected to manipulate the price of a stock are prohibited.”
Basically – you can’t short sell a stock to manipulate the price down so you can buy a lot more of it later. If you believe a stock is overpriced and short sell it, that is legal. That is exactly what tons of retail traders and hedge funds do every day, including on Gamestop.
On the other hand, manipulating a stock price upwards to cause a short squeeze IS illegal according to the same SEC article:
“Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.”
Unprecedented numbers of people on Reddit, Twitter, and elsewhere collaborated to intentionally create a short squeeze on GME in the last week. No one talked about a fundamental case why Gamestop the company was worth a lot of money and would be successful in the future; instead everyone made the argument that due to a very high short interest of 100%+, that a short squeeze would send the price “to the moon”. That is illegal according to the SEC.
Multiple brokerages, especially Robinhood, probably had their attorneys tell them that “Hey, you are aiding and abetting illegal activity by enabling a short squeeze and could be liable criminally or civilly if you continue to allow this blatant illegal activity on your platform”. So they decided to stop it by only allowing people to close their positions rather than open new ones in support of the short squeeze.
Another strong reason is that if the short squeeze caused the GME stock to go to 5000 in a sudden leap, tons of traders (both retail and professional) could instantly go broke, and then the brokerage (Robinhood) would be left holding the bag. For example, picture a retail investor with a Robinhood account had sold call options in the amount of $100,000 and their account was worth $200,000. If the price gapped from 300 to 5000 and those options were exercised, that trader could have a loss of $10,000,000. He would lose the value of his account, $200,000… but the brokerage would have to make up the rest of the settlement and take a loss of $9,800,000. Now multiply that by thousands of accounts…. no brokerage wants to take the risk of being bankrupted, so they shut it down.
The two strong reasons Robinhood and other brokers stopped trading was to prevent legal liability from enabling illegal activity on their platform, and for wanting to avoid potentially massive banktuptcy from traders unable to cover their losses.
All of this started on Reddit because someone made a case for their fundamentals.
Here is their Reddit account: https://www.reddit.com/user/DeepFuckingValue/
Here is their YouTube account: https://www.youtube.com/c/RoaringKitty/videos
He is considered a legend by all of the people on WSB (of which I am not one) for it and kicked the whole thing off.
My question is.. how does a guy on Reddit and YouTube giving a fundamental analysis of why he valued a stock, and millions of people seeing value and buying it, differ from something akin to Mad Money?
In the last week though, after the massive increase in GME's stock price, the arguments on WSB have all been about the planned short squeeze and gamma squeeze to convince people to hold on or buy more.
You're missing a party in that analysis. For this party, maybe it was a stupid idea for them to try and short sell in a market where the fed had pumped trillions into the economy and market activity, retail and otherwise, is at an unprecedented level of froth. But with that said, they are supposed to be professionals. It seems to be within reason to expect them to be able to hedge against the risk of a bunch of amateurs deciding to protest buy a piece of their childhood against being raided by Wall Street, no?
After all, "irrationally" holding assets that have sentimental value and allocating a large portion of whatever surplus earnings you have to it is a well known American tradition. Whatever the socioeconomic bracket, people have traditionally found ways to support causes and brands that they hold dear. Shouldn't large institutional clients be asking these fund managers why they're poking a beehive right now, and whether it might just be a little unnecessarily risky?
As the price goes up more people started to believe the thesis and piled in. At some point this just becomes momentum training which last I knew was legal.
It seems like you have taken a very narrow and biased view of the law that fits the narrative you like.
There's no announcement, just a sourced rumor, and no proof they closed their trades when they said they did.
Naked shorting to drive down the price is also securities fraud. And yet...
And I am quite certain that there is no obligation that you have to truthfully tell the world your position in any one security.
So, I’d like someone with legal training to make a case for security fraud.
(It might still be market manipulation or some such).
Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management - WSJ [0]
Read As: Melvin no longer has a short position. Citadel (edit: or like someone else said, a 3rd party) does. Citadel will handle this. Melvin is in time out.
We'll figure out who holds the chips in a few weeks time when filing deadlines are due. Thus it's dark.
Thus explains the perfectly executed short ladder today - could only be pulled off by someone with more dry powder than Melvin - but if you look at the Level II data, this is going to take a long, long time.
[0]https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...
I missed this. What's this referencing?
Yes which could be called the crime of these brokers
That's not at all verified. Short interest is still well over 100% of float. The only thing you are going off is a poorly sourced CNBC report with wishy washy language from Plotkin.
how long can citadel and/or other entities hold?
So many people here who have no idea what the hell is going on, and yet are so confident.
1. https://web.archive.org/web/20070228050751/http://www.alphat...
2. https://www.level2stockquotes.com/market-makers-m-list.html
Retail did nothing to Citadel securities.
Even the amount of billions being transferred here are not interesting.
This makes no sense, if gme isn't shorted then why then break the law and restrict buying it?
And it does feel like they are restricting buys. Seems unlikely that all the trading platforms that rely on citadel coincidentally decided they wanted to hedge against volatility by restricting user buys.
Citadel "bailed out Melvin Capital" because Citadel essentially owns Melvin and so their loss is our loss sort of situation. Melvin Capital stated they had closed out their short position on GameStop, but those are huge losses to cover no one knows how true that is. There is a lot of rumor that Citadel/Melvin Capital re-bought short positions yesterday before Citadel restricted trades to manipulate the market. If this is true it is highly illegal, but this effectively allow Citadel/Melvin to make back their losses if they can force market prices down.
TL/DR, Citadel/Melvin are breaking the law, all the retail traders are getting fucked, but when this is done Citadel/Melvin ends up having more cash than ever.
Untrue, the number of shares short is still 70 million. Nothing changed.
I’ve no dog in this race; just thought I should point that out
I find it exceedingly unlikely that Citadel has no opinion on the value of a stock that could make or break a firm they just lent massive amounts of money to.
It's also very unlikely that Melvin didn't have a short position anymore. I think that was a lie, knowing the SEC fine would be less than what they otherwise would lose. We'll see - maybe. Or maybe TPTB will cover this up.
The question I have is, can this be prosecuted criminally and can those in charge be threatened with actual jail time from this?
I assumed Citadel would actually be cleaning up market making GME with all the trading and volatility, but maybe the trades are too coordinated. What they're paying for is order flow from unsophisticated investors; they don't want to deal with hedge funds and the games they play. Maybe these trades are close enough to something a hedge fund would do, so the orders aren't worth it?
There is nothing but the market makers.
> I assumed Citadel would actually be cleaning up market making GME with all the trading and volatility, but maybe the trades are too coordinated
I suspect they are still making bank. The demand for liquidity has increased, so there is a higher premium on liquidity provision.
I think there must be laws that say the CEO and the board must get prison terms (preferably life, with no possibility of parole) for these crimes.
No, I will not listen to hogwash like "you shouldn't be responsible for the actions of people you hire". BS. They report to you. Even if they did it on their own, why didn't you reverse it? If you are not responsible for the actions of your employees or contractors, don't hire them. Close down. See if I care.
The war on drugs sucked, but it was still mostly a war against dealers.
I just don't think it is accurate to say that people are getting super long sentences for possession anymore and I don't think it is right to use that as justification for longer sentences for other people.
#2: I completely agree.
three strikes laws still exist, it is still possible to push possession into felony territory. if there's a gun anywhere near the arrest you can probably tack on firearms charges, etc.
if you're reasonably white and middle class those extras will be ignored for a lighter sentence. if you're black or for whatever other reason they just don't like you then they'll tack those extras on and three strikes you.
there is a lot of "prosecutorial discretion" still, and if you dig into it hard enough that's a code word for racially biased prosecution. the fact that they we reasonable with you or your college buddies who got busted with some MDMA or something is not the same experience that lower income black people get.
That all said, for all of the negative PR Nixon has received over the years he was a rather progressive and surprisingly egalitarian executive who has been praised by Indian Country Today[2] and appears to have stuck pretty close to his quaker upbringings. I think a lot of people conflate Nixon and Regan - which is pretty ridiculous when you look at the policies those two presidents actually pursued during their terms... And even more folks are getting second hand vibes from Nixon's infamous presidential debate[3] which pitted a rather uncharismatic man against JFK and led to a pretty obvious outcome.
1. https://www.vox.com/2016/3/22/11278760/war-on-drugs-racism-n...
2. https://indiancountrytoday.com/archive/barack-obama-and-rich...
3. https://www.youtube.com/watch?v=-9cdRpE4KKc Just FYI - if you've never seen this I'd suggest giving it a go sometime. Given recent politics it's almost fantastical to listen to two folks come into a debate focused on the issues and minimizing the ways they attacked each other.
We can be as cynical as we like about boomers and then going on to be Reagan voters, it doesn't change Nixon and Kissenger's status as unprosecuted war criminals.
I'm not overly familiar with Quaker orthodoxy, I'd be surprised if dropping bombs killing 500k Cambodians is consistent with it. Nixon wasn't all bad because no human is, even he who must not be named was kind to (some) children, we're told.
Not all bad can still be utterly horrific.
Hard to laud Nixon in my view, he was pretty clearly a racist man and was the originator of the "welfare queen" rhetoric (and the corresponding cuts in SNAP, etc.).
Your objection doesn't even make sense.
If I had a billion dollars and could get 2 billion dollars but I'd go to jail for 5 years, I would absolutely NOT do that thing.
Fines can mean something, if scaled correctly:
Like. I understand your point but a lot of people really don't think that is punishment really
These people who are gambling with peoples lives and livelihoods just to get richer need to start going to jail.
Nothing will change until proper punishments are handed out that makes people reconsider being a greedy, selfish, morally reprehensible piece of shit.
Here's my perspective.
I spent my childhood around kids from broken families, most of whom had parents in prison on long sentences for nonviolent drug charges. I saw lots of my friends lose their houses in the 00s. I entered a job market that treats just about everyone as disposable; unworthy of training, investment, benefits, time off, bathroom breaks, ppe, or a livable wage.
Wall sts focus on the short term has been like napalm on these issues and made fixing them political suicide. I don't say this lightly; wall st has enslaved America for profit.
>The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90% [1]
The proletariat is showing their heads and nipping at the ankles of everyone. Some are misguided, but beating a hedge fund at their own game, trying to convince boomers that black lives matter enough to not be executed by police, or Medicare for All or forgiving student loan debt are all extremely well studied solutions to systemic issues in America that will not be meaningfully addressed until the root problems are addressed: money in politics, racism, trickle down economics, class inequality, asset inflation, health care, employee rights, war on drugs, etc, etc, etc.
This specific incident was a fluke of luck that required ridiculously overpaid bros in cushy hedge fund jobs to count past 100% while shorting gme/nok/AMC which is playing with the lives and livelihood of the people that work in each of those companies. Needless to say, but watching billionaires repeat '08 with gamestop, amc, and Nokia ruffled a lot of feathers. Gme especially brought out some whales with money to burn in the chase of infinite gains.
Maybe this was an elaborate psyop to manipulate people into doing things they wouldn't. If so, great job, if not, well maybe the fat cats on wall st and in Congress should come around my hood and experience the hopelessness for themselves, that's an open invitation for as long as this account is active for any billionaires or US politicians not already arguing against the same issues I am to come and walk in my shoes.
Hopefully this incident spurs some change in wall st and the culture there. Congress certainly doesn't have the courage to.
[0] http://www.darklyrics.com/lyrics/bloodforblood/outlawanthems... [1] https://time.com/5888024/50-trillion-income-inequality-ameri...
Because nothing ever happens to the rich when all you do is take a bit of their money away. They have so much that they will get it back merely for being wealthy, and as we just saw with the recent pardons, they won't even serve their entire sentence even when they're stealing the life savings of hundreds.
To clarify: you will never pay more than market price (i.e. you will never have to pay more than the best order sitting on the book). Citadel or whoever will only internalize your order if they're willing to offer you a better price than market price. Otherwise RH is obligated to match your order with the best price currently available.
They are willing to do this because they would prefer not to leave orders sitting on the books, and there's a fee for taking orders off the books which they would prefer not to pay.
Most clearing firms aren’t clearing GME or AMC anymore. It’s not just RH.
They sure made it sound like it was their choice. https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
the best financial advice I ever got was to never ignore conflicts of interest.
This would be front running and is fundamentally not how citadel or other MM function.
So, more or less as described, but the order is a little different, right?
What Citadel and others are doing is they are saying to RH "your order flow is uncorrelated and we'd like to make markets for it, we will charge your users slightly lower bid-ask spread (price improvement for user) and we will also give you a slice of the bid-ask spread we do collect, in return the uncorrelated nature of the orders will ensure that we won't have to do much trades in order to maintain a neutral position."
This proposition is actually good for
1. RH users (they get price improvement relative to NBBO)
2. RH (they get to make money and get a user base)
3. Participating market makers (they get much steadier cash flow from MM activity).
It is bad for
1. Big institutions, they get to pay larger spread than they would if the market was more diluted by retails
2. Non-participating MM (they increase the bid-ask spread to make sure it's still worth their time but there is more volatility and it's a competitive market so mis-pricing the spread is a real problem).
Also, current GME shenanigans are net good for MM since MM is a business that makes money on volume, not direction.
IMHO, I'm concerned about this because this is a 1st amendment problem. Let grown adults gamble. Let them be responsible for their dumb actions (hedge and retail alike). If someone is 'too big to fail' then they are 'too big to exist'.
It makes a perfect kind of sense. Nonsense.
Gambling isn't even legal in most states. Good luck arguing that.
What States are you not allowed to short or long? Using your logic, this is cognitive dissonance. How free people spend their money is an act of speech, PACs and SuperPACs are emboldened by this current legal fact.
Maybe you need explicit help to understand my position. If hedge funds can short/long stocks, there should be nothing preventing a retail investor from doing the same.
As for it being speech, well, corporations are people and PAC/SuperPAC political donations (read: blackbox donations) are speech. These are current USA facts.
From there, I extrapolate that it would be unfair to regulate Main Street instead of Wall Street. This wouldn't be such a massive problem if Wall Street wasn't allowed so much leverage (and short 140% of the company shares...how is that even legal. That's literally fraud). I can't sell you 100% of my property and then sell 40% to someone else.
It's that simple, stop obstructing discourse.
Any evidence on this? RH said the opposite:
>To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to. We’re beginning to open up trading for some of these securities in a responsible manner.
It's not really a bet when they're 50% certain they can get away with no fine, 99% certain the SEC fine will be < 10% of the profit, and 100% certain the fine won't be > 100% of the profit.
Plus time in prison.
Even if there had been some kind of illegal collusion, it doesn't seem likely that stopping trading would have helped Melvin to cover their short position, which they ended up doing.
There is probably no conspiracy here.
They're not siding against their customers. The median Robinhood trader that buys in at $350 is going to be left holding the bag when the price drops back down to $10. You can argue whether or not the paternalism is good or bad, but this is obviously going to on net stop more people from losing money than making money.
The entire history of the retail investing is unsophisticated investors shooting themselves in the foot and then turning around and suing everyone who allowed them to shoot themselves in the foot. It's obvious to everyone watching that for every retail investor who buys in at $10 and cashes out at the top there are going to be 20 other traders who FOMO in at $300 or $500 and then hodls all the way down to $10. People have a stated preference for Freedom to take risks but a revealed preference for paternalism (they start suing everyone around them for not "protecting" them from themselves when risks go bad). You can't blame companies for rationally responding to the legal liability they think they will incur if they let more retail traders pile onto meme stocks.
Or is the platform assuming that its clients are doing market manipulation by coordinating on reddit to push the price up, and wants no part to a crime being committed.
Just speculating, but can think of some reasonable reasons.
Translation: big business interests and wall street hedge funds win out. Of course, lots of retail guys and gals and r/wsb folks are losing their shirts today. It would have been next week if it didnt happen today.
You are a mall owner and 25 000 people are stampeding through your mall causing a ruckus which will in the end create no value for anyone.
This is speculative mania with no basis in any kind of market reality, people are actively acting against the best interests of the participants, especially the companies themselves.
The lack of understanding here is what is 'shocking'.
BlackBerry, Robin Hood, Citadel, NASDAQ - nobody wants to be part of this.
It's ridiculous that people think they are somehow 'doing good' or even have some kind of inalienable right to own shares in a company on whatever terms.
This is a 'market riot' nobody wants to be involved but the rioters.
CFOs are all very nervous right now and I wouldn't doubt if some of the target companies have asked for protection.
One is that most Robinhood users probably under-estimate how quickly they can sell if the price turns around quickly. There might not be enough willing buyers for all of the Robhinhood users who might be looking to get out at the same time.
Another thing is that I'm not a lawyer, but they could be worried that if the SCC finds the discussions on Reddit constitute a conspiracy to manipulate the market, and it's primarily being executed through their platform, and they're aware of the conspiracy and take no action...
But in my opinion the rationale is obvious: you buy a stock, that means you provide that company with liquidity that they can use to operate and grow their business. I guess especially in the startup scene VCs and investors are in high regard since they believe in the future value and perhaps also the product of a company.
Example: imagine I'm a hedge fund and put so much money into company x that the stock moves up. The company probably thinks I gonna fund their business for a few years (remember, stocks are long-term investments). Stock rises, they do a few risky choices. Suddenly I pull back my money. That would suck.
I think options and futures have reasonable functions, especially to stabilize investments and raw material purchase. But speculation can easily get unreasonable, you basically speculate with the liquidity/credit of other companies that actually care what they do. The irony is that futures have been invented to stabilize food production, I think since almost 1000 years. But probably you don't want a large hedge fund play with this stuff.
Also to put on another perspective. People are crazy about fairness on markets, even the super free US market has strict cartel laws. On the other hand large funds like Blackrock are so large, they have government-like powers. They even have the power to decide whether companies should stay or steer away from coal energy. That's even worse than a monopoly.
https://www.spglobal.com/marketintelligence/en/news-insights...
This is the natural evolution when censorship as we've recently seen is given a pass.
The ACTUAL different is that since it doesn't cut across political lines, you want to treat the situation differently.
https://twitter.com/justinkan/status/1354853920762253315?s=2...
Someone please correct me if I am (or how I am) wrong with the following:
Bob is a broker.
Jack comes along buys 100 shares of X.
Bob lends those 100 shares of X to Amy to sell short.
Amy sells it short. Price shoots up.. Amy says “oh crap.. Sorry bill. Simply cannot buy back those shares. I am bankrupt. I physically do not have the money to do so.
Jack will still expect Bob the broker to make sure his 100 shares of X are there one way or the other.
Bob the broker has to buy back those shares it lent out to Amy so that Jack the account holder is still able to sell/trade their shares.
Because Robinhood's actual customer is Citadel, not the retail people making the trades.
Citadel gave $2.7BN to Melvin Capital a couple of days ago. It stands to lose that money if Melvin (and Citron etc.) can't fully cover their short positions.
A good way to make the stock price go down and allow Citadel to make money, is for RH to only allow selling and not buying of GME.
It's utterly appalling market manipulation.
If you consume a free product you aren't the customer, the person who pays the provider money is.
https://news.ycombinator.com/item?id=25950191
Link to the video from the OP. https://finance.yahoo.com/video/heres-why-robinhood-restrict...
I'm all for "let 'em play" in general but this is not going to end well for a lot of folks...
Is it so hard to believe that at this point buying GME is more about activism than making profit?
“When you ain't got nothing, you got nothing to lose”
I think that people should be able to spend their money however they want. I also don't mind when regulators say "liquor stores are blocked from having one-day specials the day that welfare benefits are paid."
If Robinhood believes that their customers are better served by blocking certain transactions, I trust Robinhood to make that call (and suffer the goodwill or ill-will that results).
My investment firm required time to set things up, and it won't be ready in time for this game.
If Robinhood can shut down trades for 24 hours, that's enough to have a huge impact, not just on the market, but on people's individual finances, as they move elsewhere.
Footnote: If I had been successful, I'd be up $200 right now based on the strategy I planned. But I'm not naive enough to think that's anything beyond luck and volatility.
Screenshot lists floating around the internet yesterday pointing out exactly what buttons in your app to hit in order to buy GME options is the first piece of evidence that makes me that thing, perhaps, a large number of people don't know (or understand) what they're actually doing.
I am pretty much in like with the OP in that this is definitely paternalism, and I have no idea if it's good or bad. People were going to get screwed because of this, but I don't think Robinhood or other online trading apps stopped buy's to protect these people.
Go read the top comments in the top WSB threads and tell me which it is.
This is all about getting rich quick with a thin veneer of activism slapped on top.
That might not have been the case a few days ago, I don’t know because I only got into the loop yesterday... but if it was 90% activism on Monday... is probably 10% activism today.
I wouldn’t touch that stock using “for real” money with a 50 foot pole.
No one holding GME is having their holdings seized.
No one holding GME is prevented from selling (by Robinhood; periodic circuit breakers do inject halts for everyone during periods of high volatility/price movement, which are rules set in place before [this] play began)
No one is prevented from opening an account at the many dozen other brokerages who are happy to transact in GME.
And the simple fact that millions of people on RH are locked out of buying totally fucks the people holding the stock. "You can sell but not buy"?
Who is buying? The institutions.
Do not attempt to justify this.
I promise a ton of people are convinced this is their ticket and throwing in far more than play money.
Of course, those retail investors who got in on Thursday, Friday, or Monday; that seemed like a bad purchase. So bad that Melvin double-downed on their naked short position. There's no way the stock could go up. The fundamentals aren't there. But it did. A lot. And those retail investors made a ton of money.
So, we're at today, where you're saying that it would be a bad time to invest because it won't end well. You, and to some degree Robinhood, are making a prediction on the stock market. You may be right; you may be wrong; but you're definitely not certainly right or certainly wrong. You're making the same mistake anyone who tries to pick stocks does; you're just doing it in reverse.
At the same time, parabolic moves like this have never once in the history of markets been sustained over a long period of time. It's possible that this will be the first one ever, but I am indeed making a prediction that it will not be. You are correct that I might be wrong about that.
* - All this assumes that my clearing firm would continue clearing the orders, which is uncertain at the moment. If my clearing firm won't book the orders, I literally can't do anything except cajol, plead, or sue them.
A few that got in early and have liquidated their position made a ton of money.
Those HODLers? They might have paper profits now, but long term not so sure.
this is stock investing 101. don’t invest what you cannot afford to lose. i find it condescending and insulting that they are claiming to protect the users.
And that's really what this is all about.
It doesn't get more obvious than this.
Someone high up at RH got their arm twisted to help their buddies close their shorts.
There are like 30 comments getting this confused in this thread.
No, they don't. It's not pedantic - Citadel literally does not have a short position or exposure to a short position in GME.
[0] https://www.bloomberg.com/news/articles/2018-10-15/robinhood...
[1] https://fortune.com/2020/07/08/robinhood-makes-millions-sell...
[2] https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%2...
[3] https://www.businessofapps.com/data/robinhood-statistics/
Two snippets:
>In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK.
Also:
>We fundamentally believe that everyone should have access to financial markets.
Cognitive dissonance to the hilt :)
[1]https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
I opened a TD Ameritrade account this afternoon and bought a few shares of $GME on principle.
Limiting it so you can't buy, you can only sell... Very clearly helping the hedge funds here.
Elites: better leave some safety valves in the system. People have been getting angry in the last year.
I definitely feel I'm getting squeezed, even though I've increased my salary quite a lot since 2005, including moving continents to pretty good jobs in Europe. I can feel the squeeze in society, with friends that even in a rich nation with a good salary still don't look very brightly into the future. Climate disasters incoming, also propelled up by the elites (or at least delaying action against, inaction is an attack in this case).
People were tired, now a lot are tired, bored, unemployed and angry.
And practically a halt doesn't _really_ affect the prices.
Citadel could also be absolutely fucking themselves if they end up in discovery over this. It could mean the end of this era of funds. Many would be glad to see them go.
They could face lawsuits from investors in Melvin and other hedge funds, who will allege that the brokers knew they were facilitating intentional financial harm. It doesn’t matter if these are likely to fail; they are expensive lawsuits to defend against and therefore may result in settlements.
And they could face class action litigation from trial lawyers representing retail investors who lose money when the bubble finally bursts. Again, maybe the brokers will win these suits but they are expensive and bad for the brand. “I used Robinhood and lost my life’s savings” is not the news story they want to see 2 months from now. (Edit to clarify: class action litigators have PR strategies to feed these stories to reporters, hoping bad press will convince their target to settle.)
Wait until Robinhood sees the class action lawsuit
Is it possible to make such an allegation in a way that doesn't also plausibly describe parts of the everyday behavior of a hedge fund?
That'd be a gutsy move from a firm that takes a big short position and then publicly bashes a stock.
There's nothing here that's illegal. Insider Trading, Pump and dump schemes, etc all require coordinated distribution or communication of false and/or non-public information. What's happening with GME is happening in the public, in full view of everyone, with a goal of exploiting a hedge fund that overexposed itself through a short squeeze. Short squeezes are legal, and have a large storied history over the last couple decades.
WSB was the very definition of public information, open social media.
Even if they didn't, a "short squeeze" is perfectly legal. If the short sellers think the stock is overpriced, and there's others that think its underpriced, then both sides are placing their bets and will deal with the result, either by making or losing a lot of money.
This is not a "pump and dump", this is an unco-ordinated short squeeze. A bunch of people decided to take the short sellers on.
Whether everyone involved understands the risk of a short squeeze to them by going long is a prime case of "caveat emptor". They're not even buying calls, they're actually buying the stock.
The short sellers are being squeezed mercilessly and will eventually have to bail out. At that point the stock will tank back to a more realistic position and the people that went long too late and didn't exit will also lose lots of money.
Of course, they won't crystalize those losses until they sell.
I don't think it's really a case of people disagreeing on the real value of GameStop stock. Framing it like this ignores important facts.
This stock was trading around $4 in August, around $20 in the beginning of January, and is almost at $400 right now. People can have legitimate disagreements about what the true value is: $5 per share? $10? $20? $40?
But no way anyone sincerely believes GameStop is worth $400/share. People who are buying right now at (or near) that price point are either doing so because they believe the short squeeze will drive the price up even further (Redditors), or because they have to deliver stock they sold short (investment funds). So all parties agree that the stock is overpriced, and people have been buying knowing this fully well.
One side was selling short because they believed (not unreasonably) that GameStop's core business is in trouble and is likely to go bankrupt (or at least more likely to lose value than gain it).
The other side was buying long not because they believed GameStop was likely to reinvent itself, but only because they noticed a lot of funds had sold it short and saw a short squeeze coming. They wouldn't have bought at the current stock price if the other guys hadn't sold short.
In February 1997 AAPL was worth 15 cents per share. You could have overpaid by 100x at the time and you'd still be up 9.4x after 24 years (not counting dividends), which is an annualized gain of almost 10%.
Maybe Ryan Cohen taking a big stake in Gamestop is their Steve Jobs moment, who knows?
Disclosure: long GME
The motivations for buying are different.
https://www.npr.org/2019/12/05/785099705/aluminums-strange-j...
Edit: A better example @ https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
Robinhood may be wanting to keep their name out if the papers but unless every brokerage does this it will just move elsewhere. Just like the US was going to limit oil futures because they thought institutions were driving up gas costs - then Dubai announced they would continue to trade without restrictions, US dropped that idea like a hot potato because they would rather have high gas prices then have Dubai become the world hub for oil trading.
Edit: Class action lawsuit was just filed for loss of opportunity - https://news.ycombinator.com/item?id=25945052
This whole thing is such bullshit.
Seriously, if a fund did this, they'd be patting themselves on the back, and would have had little to no backlash from their brokers.
Thesis: Suppose a sufficiently large number of people believe that the market is going to crash one day. Robinhood has just shown us that it will consider locking up everyone's accounts and prevent a sell off while the rest of the market cleanly exits after cutting their losses.
Robinhood investors will be left holding the bag once Robinhood reopens trading for the plebians.
The problem here is that game theory completely mess the incentives, everyone needs to play chicken (or buy out the ones selling) or everyone loses on potential profit. But if just a few people trigger a sell out, everyone loses.
It's a very strange Mexican stand-off and my take is that is held, for now, by anger and excitement to see what happens when the shorts have to cover. When the shorts start buying and driving the price up we will see how many are able to hold (and up to what point).
This is quite fascinating to me, game theory would predict this shouldn't have happened with so many different players with conflicting interests.
Long story short, the clearing house (similar to when you buy a house) assesses risk and assigns terms based on that. The risk got so high that RobinHood couldn't cover it or their clearing house couldn't cover it anymore.
Whether or not the clearing houses are in bed with these brokerages remains to be seen.
I was also pitchforks out earlier today, and willing to move to webull all my stocks, but then I did more digging and this seems more reasonable. RobinHoods press release was garbage tho.
https://news.ycombinator.com/item?id=25950191
Link to the video from the OP. https://finance.yahoo.com/video/heres-why-robinhood-restrict...
Robinhood halting trading tanked the price in afterhours immediately, and it will likely crash further on opening because of this. As a result, I too will lose money.
Sure that's what you get with market gambling and speculation but I find it ridiculous that this company now singlehandled crashed the stock and results in losses for global independent investors like myself.
Being able to only sell shares and not buy is directly playing towards the hedge funds. It will drive the price down and positions might get closed. If what reddit did was market gambling and manipulation, what robinhood is now doing is the same, just in the opposite direction.
On the other side, Robinhood is asking for account to be funded with cash to execute the calls at expiration, or else they will liquidate your position :|
Info: Market was closed so the order wasn’t executed but it was accepted by the order system before i cancelled it.
Tried it twice, did the same thing each time.
Some more info:
If this is true, then this is a Bernie Madoff level crime and I hope that those responsible get similar sentences. Tens / Hundreds of thousands of retail investors were involved in the WSB long, all of these people potentially suffered damages, some of them significant. Its fine to say only invest what you can lose but in your risk analysis I am sure that the market maker intentionally committing fraud to force you to dump your shares probably did not factor in.
I think you answered yourself, but you may want to consider that RH is not the only trading platform out there.
Could you explain how it's possible to stop buying and allow selling? In order to execute a sell order, there would have to be a corresponding buy order? Do they do this by allowing new buy / sell orders, but only if they're at a lower price?
The companies blocking buy orders are all in the indirect access business.
The unsaid part here is "and we'll probably make a ton of money during this since the retail investors were all buying". There's a rumor that Citadel doubled down on shorting the stock today and made a killing when it dropped from $450 -> under $200 today when trading was blocked. That could probably outweigh a good deal of the losses from Melvin today, though it's unclear who is still holding the bag on shorts.
That's why this ban for retail traders is so crazy and blatant...
Sign me up for the class action...
https://www.nytimes.com/2020/04/06/business/arbitration-over...
And we know what happened to DoorDash when they tried to play that game: https://www.reuters.com/article/us-otc-doordash/this-hypocri...
The buy UI widget under GameStop's stock symbol has been replaced with: "This stock is not supported on Robinhood."
It seems the ability to buy the stock has been completely removed, however they left in the ability to sell.
That is much different than "limited" because other platforms only prevented options trading but still allowed purchasing it with funds you already have.
And all this with no explanation whatsoever. It would be one thing if they put out a press release or something to explain themselves but the fact that they did it on the sly stinks to high heaven.
If you work at Robinhood and you continue working at Robinhood I don’t know how you’ll continue to sleep at night.
RH has been a scam since day one, the very principle of it is virtue signaling to the common man to sell his data to front run his trades.
I'm sure none of these people will lose a wink of sleep.
RH is making it so you can ONLY sell the stocks. You can't buy them.
So who is on the other side of the trade? Definitely not anybody on RH. But the thing is: a lot of the retail buy side of this is coming from RH. Like RH just gutted the buyers and handed them to the sellers. It's unbelievable how corrupt this looks.
They are not "allowed to control what happens on their platform." in the sense of Twitter. They have a fiduciary responsibility to their clients and the reliability of their platform is actually part of their ability to operate as a brokerage.
The service being free or not has NO impact on the rules they operate under as a brokerage.
Given they are currently arguing in court they have no such duty, but only to act in their customers best interest, perhaps this isn't sufficiently clear to them.
Read section 16.
1) There’s a deep irony in calling yourself Robinhood - literally a guy who stole from the rich to pay the poor - and taking a move like this.
2) The 2008 financial crisis continues to have deep reverberations and has played a role in a lot of the upheaval over the past decade.
3) The Medium is the Message. This one probably deserves an essay, but if McCluhan were alive today he’d probably say that what’s really happening is society is getting buffeted against the waves of new mediums.
Just another case of "If you are not paying for it, you're not the customer; you're the product being sold".
I'm not defending business models built upon selling their users' data. I'm just saying that this is no surprise, and it was pretty inevitable to happen sooner or later.
Do we have any evidence Citadel is materially net short GME?
They bailed out Melvin Capital. But Melvin Capital announced that they closed out their short position. And bailing out Melvin Capital isn't the same thing as assuming their positions.
If you want to take what they say at face value, go for it, but I don't believe them.
Yeah, arm's length transactions are a means of providing truth to falsity, and perfectly crafted statements are in the same category.
The only thing missing from these press releases is "to the best of my knowledge"
Bailouts aren't arms-length transactions. They're highly involved.
Melvin Capital isn't just a GameStop short. It has billions of other assets. But not all of those are liquid. Margin calls require liquidity, and Melvin didn't have many options other than fire selling the rest of their portfolio and taking a private bailout at exorbitant terms (but less egregious than the losses they would have incurred in a fire sale).
From Citadel's perspective, why on earth would they assume the short positions? They're in the red. That is Melvin's investors' problem. The second-order problem, that of avoiding a fire sale of remaining assets, is what the bailout prevented.
With respect to Melvin, I'm blown away that these trades were executed as unhedged shorts.
Because:
> With respect to Melvin, I'm blown away that these trades were executed as unhedged shorts.
Because that ^ will take down a prime, and if it's your prime because you're buddies with your mentee... no sir. And to cap it off, dominos fall everywhere because of the Index Fund phenomenon if there's no longer 'liquidity' from these guys.
Side note: You're smart as hell, I can tell from the few times we've interacted on this forum, and I appreciate the thoughtful responses. We need to figure out a way to trade info and get a beer.
Edit: this could become a run on the banks, but instead it would be a run on equities... which is equity cost of capital worse than just withdrawing your dollars.
Is a user expected to tolerate illegal activity because the businesses customer demands it of them? If you have any doubt what Robinhood is doing is illegal (setting aside that it's clearly morally reprehensible), then I encourage you to read the suit that was just filed https://www.courtlistener.com/recap/gov.uscourts.nysd.553175...
Is this a reference to margin calls?
Still not sure if this is across the board or just the larger shareholders. I'd imagine robinhood is trying to limit their risk vs. the risk of the investor.
There's outrage about both. This story wouldn't be submitted and upvoted if this was common knowledge and accepted practice.
There's a difference between preventing someone from buying a stock and telling them you're not going to assume the risk of making a market for them, which is what's going on here. You cannot force Citadel to make a market for your orders.
They happen to result in the same situation, but the implications are completely different.
That depends on the market maker contract Citadel has with the brokerage(s) and the exchange(s). Although, I don't think the contracts with exchanges are very tight; I don't know about the contracts with brokerages. IIRC, Nasdaq had (has?) a special order type for market makers who didn't want to actually make a market that would put in bid and ask at exactly the maximum contractually allowed spread away from last trade, and withdraw and replace them when any trades did occur; making it much harder to actually trade with the market maker.
As a retail investor, I'm a little squeemish that firms want to pay me to trade with me, but given the National Best Bid and Offer requirements, I don't see what the downside is for me. It's like accepting a deal at the electronics store that's listed as 'no resellers.'
For the smaller guys like RH though your point still stands.
• There was 443k shares sold in a single batch at $120 at 11:24:36 AM EST. • There was 347k shares sold in a single batch at $140 at 11:19:09 AM EST.
Someone took a total loss of $300M from the price an hour prior OR that is a $100M short sale.
Justin Kan (YC) just posted this: https://twitter.com/justinkan/status/1354861575916515330?s=2...
Still, if that's what happened the tweet is still inaccurate and likely made-up for attention
Citadel is financing Melvin Capital's GME short. The financing terms are private but whether they just lent them funds to cover the margin calls or actually hold their short positions until the storm passes for a fee, it is absolutely in their interest to prevent GME from continuing to skyrocket. Drawing a collusion between Citadel and RH isn't that far-fetched but I obviously have no insider knowledge of this.
Most brokerages sell their order flow and Citadel trades 25% of the equities market in the US, from memory. Schwab, which also sells order flow to Citadel, requires 200% margin to go long GME which makes no sense since at most, you can lose 100% of your bet.
This is not what free markets are supposed to be like.
He said something interesting “My advice to those CEOs would be that, at times like this, your company is not your stock and your stock is not your company”.
Another things we need to realize is that there are people who will be losing their life savings or getting into debt. It doesn't matter if someone with high networth loses 1% of their wealth, but it does matter if someone in middle class loses 100% of their savings or worse bought these stocks with debt and now need to pay high interest on the losses. There have been painful situations where losses like these have caused people to have heart attacks, mental health issues and suicide.
Brokers, apps, platforms don't want their names associated with such painful situations.
basically its a shitty company that sells your orders so hedgefunds (citadel etc.) can then buy the same stocks at a lower price[1] and you always end up paying more, they were fined 65M for doing this see here[1]. A total scam and hopefully congress and the SEC come down hard on this company.
[1] - https://modernconsensus.com/technology/robinhood-high-freque... [2] - https://www.cbsnews.com/news/robinhood-sec-fine-65-million/
Steal from the poor, give to the rich :)
And all the while the poor where believing it was the other way around.
Rule 606 disclosures enumerate each brokerage's arrangement: eg. https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%2... from https://robinhood.com/us/en/about/legal/
Fidelity: https://clearingcustody.fidelity.com/app/literature/item/990... from https://clearingcustody.fidelity.com/app/item/RD_13569_21696...
Robinhood claim that they are protecting investors assumes that they don't understand the risks of stock investing. Did the shorts understand the risks of shorting a stock over 100%?
I guess the simultaneous outage wasn’t coincidental. Fidelity did not suffer and outage. I could be wrong but Vanguard was fine too
EDIT
Robinhood's customer(s) are hedge funds like Citadel. I believe it was Citadel who offered Melvin Capital a lifeline. I wonder what the rationale is for TD Ameritrade, and the others?
In that light, I'd always seen the stock market as purely descriptive - the price of a stock can be completely detached from the valuation or profits of a company, it's purely the price that someone in the market is willing to pay.
This feels like an attempt to make the stock market prescriptive - "we know that these retail traders are wrong for trading at such lofty prices, we need to fix this".
Spoiler alert: Descriptivism always wins.
Step 1: RH's customers and WallStreetBets start manipulating $GME. This is happening in the open.
https://twitter.com/matt_levine/status/1354129838806872073?s...
I’m gonna go with Matt Levine over a Twitter rando, especially since the step 0 notes something that is explicitly illegal (front running)
https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
> If you are interested in opening an account where you do not receive recommendations or advice about whether to buy or sell investments or investment strategies or account monitoring, and you make all of your own investment decisions, then a self-directed brokerage like ours could be the right fit for you. Robinhood Financial does not have account minimums for any brokerage accounts. Robinhood Financial does not provide recommendations. We are not subject to a fiduciary duty to you and do not monitor or manage your account, including the monitoring of brokerage account investments, unless we state otherwise in writing. Since we do not provide recommendations and you must make all of your own investment decisions, the licenses, education and other qualifications of our financial professionals will not be relevant to your investment decisions. Robinhood Financial professionals are available only to provide account support through an online email system. If you choose our services, you must be comfortable with investing your assets on your own.
“Here let us help you” — closes down exchanges, panic sell — “isn’t that all better?”
People with their money stuck and unable to cash out... so much better eh?
I smell a huge class action lawsuit
For example Interactive Brokers and Revolut have followed suit. I believe Ameritrade is also restricting trading.
You see?
Under Settings > Account Information > Deactivate Account you're just sent to a customer service email form. They say it takes 1-3 business days to process.
As a side note, you have to close out all of your positions and transfer out all of your money before you're allowed to close the account. This seems unusual to me from experiences with other brokers.
From my understanding the average retail broker will allow you to transfer you assets out to another brokerage. You can do this as part of closing your account.
While just transferring money out separately and keeping the account open longer isn't a big deal, there's tax and other financial implications to having to close your positions instead of transfer them. You'll have to realize capital gains. You'll also have multiple banking days in which the price could move up while your money is transferred to another brokerage to re-buy the shares.
https://robinhood.com/us/en/support/articles/transfer-stocks...
I can't find a history that shows when they added this, but it appears they at least added transfers in a few years ago:
https://www.reddit.com/r/RobinHood/comments/6tre6o/transfer_...
This Citadel-Melvin-RH triangle looks super sketchy. The sort of thing that might show up in anti-corruption training at a company that does government or especially defense contracting. In fact if I still worked at a particular employer, this would have been the breakroom and lunch topic for today.
And what is pretty amazing is that some folks think that if they just stamp out this one, they can go back to (big) business as usual: money made by a select few, and the small fry can hope that some crumbs might trickle down to them, if only by accident. My bet is that this is going to happen again -- perhaps not exactly the same way, but it will be another nasty demonstration of the self-protection that has managed to be the sign of the entrenched.
If you have a system that is beating the house (or appears to be), the house will immediately shut you down.
You can't win. Not only because the bets are stacked against you (here in favour of the wealthy), but also because the system only exists in the first place to benefit the powerful.
With capital markets...there absolutely is a goal, and it’s not speculation/gambling. The goal is to have a place where corporations can raise capital and investors can hold them accountable for how they return value to them...and then a billion rules to make that as fair and functional (not equitable) as possible.
I don’t get the argument that what these guys are doing is somehow noble, or to be encouraged. Completely unregulated non-purposeful markets are not helpful....we did that 100 years ago...thats why we have all the rules we do to make markets function to the end.
What is short selling if not speculation? It's speculating that an asset will be worth less than it is now.
Short sales can be good. Downward pressure can be healthy. If you think a company is overvalued because its fundamentals are misjudged, the short is a corrective force in an overly optimistic market
You mean what they already have been doing for decades? Are you seriously in favor of clamping down on retail investors??
You may disagree with the outcomes of short pressure, or private equity actions etc., thats fine, but I think there is an important distinction between actors in the market doing something profitable because they actually believe it, and the hysteria of a mob just randomly committing financial mayham because they can.
I don't think we want to live in a world where markets are increasingly led by irrational forces simply amplified by media and misinformation...its not good in media right now, I shudder to think what happens if that behavior gets a foothold in markets.
And for all those that say "well Wall St has been doing that for years"...fine, let's address that too. Financial regulations are essentially a history lesson of past failure we've tried to correct. Let's be consistent.
Judging this as a policy decision from a 1 sentence tweet and some screen shots seems premature.
One explanation is that this is a systematic behavior, part of their software is seeing market conditions it can’t execute into and hitting this case. If it’s not sustained or is happening only during particular microbook states the best thing to do is let the software behave as designed and let it stabilize.
Meanwhile, Kelly Loeffler and other senators insider traded before the pandemic market crash. Nancy Pelosi holds deep ITM Apple and TSLA calls.
These are the corrupt and insane people who should be punished not the people who sussed out their bullshit!
What Robinhood and other platforms are doing is market manipulation which is illegal.
The legal and reasonable thing would be to allow trading these stocks with additional "e-signs" letting the individual know that there are additional risks here.
That would actually help the retail investor.
But these brokers and buddies are happy to help their hedge fund buddies!!
Sure short selling sounds weird and dodgy. But how is this different from shilling penny stocks in year 2000?
People on Internet forums find stocks that are easy to move for whatever reason; generate hype and price hike and then watch gullable speculators pile in while the core group of manipulators exit their positions.
In a short squeeze, the hedge funds that hold the shorts will be the ones who lose money. Although, to be fair, some gullable speculators probably will too, but the point is to make money off the hedge funds' poor trade.
The SEC can step in for pump and dump schemes, no reason for Robinhood to have taken the initiative (AFAIK).
Likely to the benefit of institutional investors-- the same ones that lost money on the squeeze-- to make money on shorts they places at the top.
Doesn't smell right. It might even just (relatively innocently) be from soft pressure from the SEC to limit a perceived market manipulation, but it will still induce losses in positions that users might have sold at higher prices.
https://news.ycombinator.com/item?id=25949669
Hacker News needs a way to mark the best comments when there are 1600 comments to read. Years ago, HN used to publicly show karma score of every comment. They eliminated that (and probably for good reasons), but it was useful to find the best comments. Some other way to find the most incisive comments woud be great.
Maybe one of these newly-minted millionaires can cash out and use their gains to sue.
[0] https://www.bloomberg.com/news/articles/2019-11-05/robinhood...
Can anyone with more knowledge than me comment on what Robinhood's exposure is in all this? My understanding is they do not have any direct financial exposure, only reputational risk (and of course downsides from their users potentially losing a lot of money, but that should be part of the game). Is that correct?
And does blocking specific trades today open them up to future liability?
Edit - related comment (about "margin requirements"): https://news.ycombinator.com/item?id=25942150
Chamath Palihapitiya of Social Capital is becoming one of my heroes, LOL. Last year he criticized the trillion dollar bailouts of Wall Street, now he comes on to defend the right of retail investors to share information publicly and coordinate a short squeeze against overleveraged short positions by shadowy hedge funds.
When organized people take on organized capital, we get this kind of situation where the organized capital tries to call for government to add additional rules to protect their existing ways of making money. What happened to wanting a free market and less regulation? What happened to welcoming innovation?
Technology empowers people and unites communities. Sometimes those communities can start to organize in new ways. That’s why we started Qbix.com and Intercoin.org - to build the tools for them to do so, without relying on the Big Tech oligopoly.
The future is decentralized. You can’t keep shutting down people’s speech on platforms. And here we are shutting down people’s transactions. Even if you don’t like what they are doing or saying.
> Our mission at Robinhood is to democratize finance for all. We’re proud to have created a platform that has helped everyday people, from all backgrounds, shape their financial futures and invest for the long term.
> We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities.
> Amid significant market volatility, it’s important as ever that we help customers stay informed.
> We fundamentally believe that everyone should have access to financial markets. We’re humbled to have helped many people invest in the markets for the first time.
GME was up over $100 pre-market when I got up this morning, so someone somewhere is buying.
The variations are extreme, in the morning it was hitting 500 USD in the morning, and now 400 USD.
I feel like the history of my personal financial life has been the increasing awareness that nobody with any power cares one whit about me or anyone like me.
The billionaire class is made to look bad with this, and billionaires must stop this reaction in order to restore the faith and trust in the Ancien regime of the markets.
Those are the brokerages I use, can't check in the others.
Initially I had thought, "hey, there's this Interactive Brokers place that seems a bit further removed from places like Robinhood or Fidelity/Schwab/TD/ETrade." But apparently they're now blocking trades too.
What is the right way to ensure you're able to trade? I know there's the StockBrokers.com review site, but it doesn't seem they're going to have this kind of information.
Very much an example of how only "certain people" are allowed to win in our society and the system will intervene to ensure that established wealth retains its preferred status.
If the SEC wasn't neutered by the last administration and was doing their job, people would be hauled in for market manipulation on both sides.
Real marketplaces need to be free from gross manipulation or else people lose faith in them for legitimate commerce.
The lists of companies that are absolutely shitty to their customers and are making billions is never ending. They don't need our approval.
> If this is true, Ken Griffin and the Robinhood founders should be in jail.
> This is class warfare.
See https://twitter.com/justinkan/status/1354856228661334017.
Namely, should a brokerage—especially one like Robinhood that brands itself with an anti-Wall Street Everyman gloss—be selling its customers’ trades?
What's the proposed alternative, because it seems like that would take us to a full circle. In previous years, the brokerage dealing directly to the clients was fraught with problems: conflict of interest between the brokerage and their clients because the brokerage holds offsetting client positions, and the market risk held by the brokerage.
Auditing "best execution" is pretty straight-forward for a brokerage and regulators (really anyone with the data). If Brokerages are "cheating" and dealing against their clients best interests, then that's exactly the role of regulators.
Edit: Also, their rewards card dumps 2% of your usage into your brokerage. It's a nice combo.
https://play.google.com/store/apps/details?id=com.robinhood....
> We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG. We also raised margin requirements for certain securities.
Of course they were caught and of course they turned out to be regular nobodies. Everything is normal and banal in the end.
If WSB doesn’t turn out to be a regular ole pump and dump then I’d be very surprised. The only thing that’s weird about it is that not even the current cohort of pumpers realise that’s what they are doing.
Could it be that the original pumpers have closed out already leaving behind a crowd of meme spewing parrots that collective display malicious sentience while individually being regular joes?
A hedge fund bought short position futures contracts for 120% of the available stock on the market. That's the underlying reason the price is going up: because they're forced to somehow buy more than 100% of the available Game Stop stock because they agreed to sell it to the people on the other end of those contracts for a set strike price.
it is ancillary that a short squeeze might be an attendant and inciting event. you could do this with any stock as long as the supply is limited compared to the demand created by the manipulation of trader sentiment. the short squeeze just amplifies the effect
WSB is legally sharing trading information and making informed investing decisions based on public information. What happened with Game Stop is completely predicated on large investors, who should have known better, buying positions that exposed them to an infinite amount of risk.
The short squeeze is the reason this is happening and not "ancillary." The hedge fund took these positions because they thought they were a form a free money. A better analogy would be "The Producers." The audience just walked out of "Spring Time for Hitler" for intermission and they're humming the songs and laughing.
150% moves would be maybe a rough estimate.
Markets need to be protected from manipulation.
Not allowing purchases from robinhood does not punish retail traders more than institutions.
There was NO legitimate reason for the price on these stocks. By limiting purchases they are preventing their clients from getting into a trade that will almost certainly result in losses.
"the short sellers" could very well be other retail investors. I personally shorted GME & AMC when they hit ridiculous prices (I lost money on these trades when they became 2x ridiculous)
FWIW Fidelity lets you buy GME....
0. https://markets.businessinsider.com/news/stocks/robinhood-fi...
They say this move is to protect their customers, in fact it's to protect themselves. As others have pointed out, Robinhood lends margin to some accounts and if those accounts cannot pay for losses purchased on margin, Robinhood is responsible. This is a real risk, and they should have made the margin requirement 100% for GME or cash only as other brokers did. They did not have to limit buys to de-risk their own portfolio.
However, the whole point of Robinhood is to allow people to buy the stocks they want.
Would they also have stopped people buying Tesla a few years ago? This has proven to be right bet. However given r/teslainvestorsclub strongly pushing for the stock, could be interpreted as the same thing.
Robinhood seems to just decide who can be a winner.
Unfortunately the tweet has already been deleted. There seems to be quite a lot of pressure.
"Committee investigators should examine any retail services freezing stock purchases [...] especially those allowing sales, but freezing purchases."
Apparently she would prefer that people were blocked from selling their holdings.
"We now need to know more about @RobinhoodApp’s decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
Of course, in reality, the only services freezing stock purchases are those allowing sales but freezing purchases. Because freezing sales in addtion to purchases would be much more problematic, not less.
A brokerage NOT allowing buys, sells, margins, options on a security is well within their right to do so. It's only when they start to take positions that limit an investor's ability to manage their own risk that it gets a little fishy...
But then from a price action perspective, - If GME goes up, people are going to have the sentiment that Robinhood stopped them from making money to protect the fat cats - If GME goes down, people are going to blame RH.
Actually politics has been a part of entertainment for some time already - but I don't like it like that and I am afraid capital markets will also be worse.
For once this done by multiple broker is pure market manipulation because it is going to have a huge effect on the blocked stocks... and will leave big fish with direct access dictate the direction.
I didn't research this whole situation a lot but I know brick and mortar game selling is almost dead and everything moved online especially to Steam which basically has monopoly on digital online video games selling.
I don't agree with Chamath when he said paraphrasing this is the move against financial establishment, this is the result of transparent and open stock market research. For me this is public and collective pump and dump scheme.
The narrative of going against current financial establishment is the same one that motivated criminals and drug sellers to embrace Bitcoin because they thought it was meant to be anonymous and anarchist but in reality it was meant to be everything opposite; to establish decentralized trust, transparency, enable micro transactions and to eradicate fraud and financial mischief.
[1] https://www.sec.gov/news/public-statement/joint-statement-on...
Also: thinkorswim just let me submit an order to buy more NOK anyway. Heh, this is what you get for using robinhood.
I fear they are about to get a harsh lesson in what happens when the mob you are leading turns against you.
We totally live in a simulation
Imagine being the first one to bend to big money with that name hahaha
The former would be entirely understandable and justifiable, the latter not so much.
https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
While this GME/AMC run will not end well for many people, restricting people from buying those stocks - whether it is through actions of trading platforms or governing agencies - smacks not just of paternalism, but downright favoritism. Only certain parties benefit from this.
There was a followup round of reach-out "hey, you might want to take this quiz again and maybe we'll let you play" (meaning go answer the questions and lie that you're an experienced investor) to try and get the disenfranchised back into the game.
We're not likely to see an economic crisis due to a Gamestop short squeeze, but it is a bit of a worrying sign.
And governments often do restrict other forms of gambling associated with more problematic losses. There are those who would like them more restrictions on it, and those who would like fewer, but at least the latter group don't argue that without loosening gambling laws, the little guy doesn't stand a chance of wealth improvement.
That's demonstrably false. There are literal ads on TV that show how wealthy you can become if you just buy a lottery ticket.
> that they should borrow money to buy as many of them as possible because they will make a nice easy profit
You clearly haven't read any of the GME threads on WSB. Pretty much everyone is saying to only invest what you can afford to lose. Most people are buying small amounts just to f##k with the hedge funds, and they are outspoken about it.
> but at least people playing don't think they're doing arbitrage.
Buying a lottery ticket for a dollar, hoping they make much more? Isn't that the whole point of a lottery?
> And governments often do restrict other forms of gambling associated with more problematic losses.
That's the whole point of the criticism that you're missing. These restrictions are completely arbitrary and don't follow any rules.
You can go to a casino and lose your life savings.
You can buy 1 million lottery tickets and lose your life savings.
You can buy one of thousands of penny stocks and lose your life savings.
The government won't stop you. The brokers won't stop you.
But suddenly, when a big hedge fund is caught with their pants down, people like you come out and pretend like what's happening is a big problem, and we have to stop the trading "because some people can lose money".
Sorry, I'm not buying your narrative at all.
I think the funniest part about this is that it is rationally irrational.
It's irrational from a market perspective, Gamestop really isn't fundamentally worth this much, everyone who invests ought to lose the money. Short sellers ought to make bank on it.
And then comes WSB and offers a different reason: Buy a couple of shares and hold just to punish the short sellers. It's irrational in the market sense, but it's completely rational from an internet mob sense. They're not out to make money, which is the normal rational decision-making process that all the big players are accustomed to. This mob is out for blood, and they're doing it for shits and giggles. Of course the big market players are upset, because the mob has money and are wielding it "wrong"!
That's because you truncated my sentence to pretend I made a claim I didn't make. What I did say is that nobody is marketing lottery tickets as an investment or (or posting screenshots of how much they've spent on lottery tickets to encourage others not to cash out). They're literally not allowed to in those ads you mention.
> You clearly haven't read any of the GME threads on WSB. Pretty much everyone is saying to only invest what you can afford to lose. Most people are buying small amounts just to f##k with the hedge funds, and they are outspoken about it.
All the top threads are people encouraging others not to take their money out because it'll hold its value, honest, and the specific stakes people are sharing range from thousands to [options on] millions. You don't see people make those kind of bets on lotteries, and people with financial upside from lottery ticket sales certainly aren't allowed to encourage them to.
I mean, the whole reason we're having this discussion about Wall St versus the common man is because people here are treating entering the market at this stage as an opportunity rather than a negative EV gamble for people looking to join the action. If a vendor stops selling tickets for a particular lottery, nobody acts like wannabe customers or ticket holders dreaming of bigger jackpots are victims.
> Buying a lottery ticket for a dollar, hoping they make much more? Isn't that the whole point of a lottery?
The point of buying a lottery ticket for a dollar for what even the dumbest lottery player knows is an tiny chance of winning isn't very similar to the point of buying what used to be $20 stocks starting at $200 after reading an "AT THIS RATE $5,000 IS GOING TO BE NOTHING FOR GME" post.
> But suddenly, when a big hedge fund is caught with their pants down, people like you come out and pretend like what's happening is a big problem, and we have to stop the trading "because some people can lose money".
Casinos block people from some gambles all the time (especially if something funny's going on or they think they might get sued). Nobody cares. Some brokers stop people from some gambles on their platform and people gnash their teeth with rage at how unfair it is, before flipping to arguing that it's just a game people are playing with what they can afford to lose. The double standard here isn't mine.
And yes, most people buying today would lose money (with or without broker intervention). That's not a reason to for Robinhood to stop the trading, it's a simple observation which is hard to square with arguments that stopping the trades is some monstrous imposition on the common man.
As for the hedge funds and investment pros, some of the longs would have loved to see more retail investor action today, and some of the shorts are already out.
There were lines outside the ticket shops (semi social distanced and with masks). Street vendors of tickets were walking around asking people “don’t you want 200 million Euros?” Or whatever the number was, I didn’t win so I forget.
Point being, with the Christmas lottery all but personally endorsed by the Pope and the King, and with millions of poor and poorly educated people watching this spectacle, I’d be shocked if some people didn’t cause themselves real trouble as a result. Just one more ticket...
(My friends there treat it mostly as a joke but still do buy one ticket each, every year, on principle.)
This is just wrong. Where was this power before? Stock trading platforms have been around forever. And, why to assert this power only on some of the stocks? It's just sheep chasing sheep
It's fairly interesting to see the cultural response to this, and it doesn't seem to divide down the usual left/right political lines which is a relief after years of constant fighting. I wonder if this might be a driver of more political harmony in the coming months.
I also wonder how much of all this is due to a social media vacuum created by the end of Trump's tenure and his removal from social media. The timing of this GME episode lines up pretty well with that hypothesis.
Restricting retail from buying the stock is a good idea. There is no legitimate reason to buy these stocks. They are doing naive investors a favor.
People who own the stock can either hold or sell. You sell if you think the current price exceeds the value.
I can guarantee that also no institutional investors are buying the stock. They just don't really need someone to tell them that.
Brokers are attempting to limit complaints by limiting their user's losses. They have done this in self interest.
Today I started to take it seriously.
Robinhood whistleblowers can hit us up at veritastips@protonmail.com or on Signal 914-653-3110
They temporarily shut down the market, banned the discord server, and are now preventing people from buying stocks on the most popular app used by small time investors.
All of these moves hurt the small time investor trying to cash in on the next bitcoin-like bubble. This just creates more division, more disgust, and more of a class war than already exists. So sad to see.
Maybe you shouldn’t use USD either.
More money = more mining power, more trading power, ICO pumps and dumps that rose the overall crypto market volume, raising the hype and earned millions in the process for the early buyers/minters. The game was never equal.
Want to buy BTC? Get your ID ready, or do a local exchange which is quite inconvenient.
The revolution died as soon as you could a profit out of it.
KYC and government regulations are a pain, but the core decentralized, limited supply, secure nature of Bitcoin will remain fully intact.
Rich and powerful people have already tried to take it over, they ended up with their own forks and you can judge how those have done.
>decentralized How much of BTC is owned by large miners?
>Limited supply If we can't mine more, those with the larger supply have control.
>secure
For now.
Blockchain as the idea will propagate and is great, but bitcoin has failed.
>Please do not confuse Bitcoin with “the overall crypto market”
But it's value is quite tied to the crypto arket, isn't it?
Bitcoin doesn't solve any of our problems. It just shuffles around who's in power.
Aren't most crypto coins set up so that mining is only getting harder with time? The ones ending up rich are the old money, the guys that invested into it in its early days.
Source: I was a miner and would be a lot richer if I had just started purchasing coins earlier. :) Also any history book on cryptocurrency such as The Age of Cryptocurrency by Paul Vigna and Michael Casey from WSJ. The miners profiled in it are just trying to keep the lights on in 2015 and nothing has changed to the hamster wheel.
Fractional lending isn't possible because you can't make bitcoin out of nothing then charge interest on the nothing you lended.
Inflation is out of government control and no longer works as an unofficial tax. Related, money can't be printed at-will.
Large banks and corporations can't outright prevent transactions from happening.
The money can have value as a universal reserve currency without any specific political ties.
Removing big banks from the equation takes their hands at least partway off the politicians.
Seems like at least a decent upgrade to me.
Bitcoin currently inflates slightly. I think it should target a 1-2% steady inflation forever both to encourage spending and to replace lost coinage.
At the same time, inflation should not be a spending power advantage. By distributing inflation among miners, you don't give disproportionate advantage to any one group like governments currently enjoy. I view this as more fair and it removes the incentive to attempt to change inflation rates in the future.
interestingly, the page I got was cached from Cloudflare. I wonder if the twitter chatter / thread unrolling is up enough during all this nuttiness that it's brought the site down.
Baked into the exchanges (NYSE, Nasdaq) are circuit breakers which halt all trading on certain volatility conditions. The intent is to stabilize prices. This is not what happened here.
What happened here is a broker (Robinhood) decided to not accept certain kinds of orders. It wasn't a market shutdown, it was a specific manipulation to stop the purchase but _not_ the sale of an instrument, causing the price to drop.
Onto the next one.
/s
how is this any different?
basically the system is telling us to do what they want of fuk off
A Trump admin would have done the same but at least we could get some angry journalists yelling at them. See what we get now? A bunch of a* lickers.
But Trump supporters have been telling everyone for years that journalists are all a*lickers for corporations and the left. Why would they suddenly have integrity today if Trump were in office now? Surely they would just toe the line of their corporate masters of find some way to blame Trump for everything, as we're told their extremist left-wing pro Democrat agenda required them to.
This is not a source but.
The problem with huge power is that one loses control of the size of one’s decisions.
https://news.ycombinator.com/newsguidelines.html
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
https://news.ycombinator.com/newsguidelines.html
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
<rant>
I rarely emote but this stinks to high heaven, corporates and politicians doing anything to keep necks under boots.As upsetting as it is to see folk fighting back capped at their knees, the broader issue is that of censorship, of the soft or hard variety, and coordination across firms to limit movements.
</rant>
Or is it normal for brokers to independently halt trades on stocks they deem too risky?
Is it anything but rational to buy something you know someone is willing to pay any price (at this point in time) with the intention of selling it later?
I honestly hope not, and that RHb etc are in the wrong. But it’s sure to be informative anyway.
> But on the flipside, imagine w
Due diligence and disclosing your position is not "market manipulation". Mainstream media wants it to look like that. Even the DFV, who spearheaded the GME position got a lot of flack early on.
There's no actual group consensus, no agreements, no negotiation, none of the processes that are required to actually "cooperate".
What happens is a a leader throws a bet at the wall and says "FOLLOW ME!". But no one is compelled or committed to any kind of action. This is the same thing as any analyst or short seller publishing their thesis and disclosing that they have a position. Its protected as freedom of speech.
Now, if the discord group or elsewhere have private circles about which stocks to raid and when, that is obviously a different matter. But I don't think that is the phenomenon that is occurring. This is a broader social movement.
Yes. It is exactly normal.
One. Brokers are required to act in the best interests of their clients. What is that? Well...
"A broker who becomes a fiduciary of his client must act with utmost good faith, reasonable care, and loyalty concerning the customer’s account, and owes a duty to keep informed regarding changes in the market which affect his customer’s interests, to act responsibly to protect those interests, to keep the customer informed as to each completed transaction, and to explain forthrightly the practical impact and potential risks of the course of dealing in which the broker is engaged."
— Rupert v. Clayton
Two. Robinhood is already under scrutiny already for trying to gamify trading, on the premise that it encourages people to treat things like a casino and lets them get hurt in the name of their own profit. They are on thin ice as it stands.
Three. This whole thing is going down like the Pequod, complete with the impassioned revenge monologue. "To the last I grapple with thee! From hell's heart I stab at thee! For hate's sake I spit my final breath at thee!"
If Robinhood didn't do something, they would soon learn what the true wrath of the regulators really looks like. Much, much better to drop Gamestop like a hot potato.
Some recent examples of similar actions: https://www.reuters.com/article/us-tvix-brokerages/schwab-co...
What they will do is protect their capital over yours by raising margin requirements and initiating special rules to limit their risk. They don't care if you blow up your account, as long as you don't owe them at the end.
Absolutely not, and I almost typed "LOL" in front of that because your question - while genuine and sincere - is so ridiculous in the context of the stock market that it actually made me laugh out loud.
Brokers are more than happy to allow unsophisticated investors to buy or sell any stock. They won't let you use sophisticated products like options, etc., but simple buying and selling? Absolutely. What's happening here is simple. The wrong people are getting rich. The wrong people are losing money. That cannot be allowed.
There is something called the "pattern day trading rule" wherein someone buys and sells the same security several times and their ability to buy and sell gets restricted, but that's not what's happening here. People wanting to buy $GME are wanting to buy and hold. Not sell.
https://www.sec.gov/rules/other/2013/34-69013.pdf
SEC has already started providing guidance on that loophole. They're not a fiduciary, but there's a want from the SEC to have their operation start to be more in line with if they were one ("harmonization")
After all RH does advertise popular stocks, they put out news branded digests of the market, it does show users gamified views of things like options, they have an entire "learning platform" meant to guide you through the market.
It's not an investment advisor, it doesn't have a fiduciary duty but the SEC wants broker-dealer behavior to better reflect the fact that retail investors assume that the platforms they use to trade are aligned with their financial goals
----
So disclaimer: I was holding large amounts of GME and AMC and sold this morning as a direct result of this news.
But I really don't get why people are so shocked.
People who started this wanted to buy and hold until shorts are kill.
Then people who heard about this plan after it started working joined, they still wanted to hold but their reasoning was starting to get a little removed from the original goal. This group is slightly bigger than the first
Fast forward a few days and suddenly this stock that just keeps going up by hundreds of dollars a day is in the news, people don't quite get what's happening, but it looks like a magical money fountain. And as a bonus this magic fountain is a big FU to the man? Sign me up! This group is exponentially bigger than the first, and exponentially less understanding of why this is happening.
-
At this point retail money is flooding into this stock left and right, and people are starting invest money they cannot afford to lose.
The problem for these brokers is when this musical chairs dance stops, retail investors will be holding the bag. Full stop.
But more importantly, those clueless people just buying GME because they have some vague idea of "it goes up" and "we're rebelling" are going to lose their shirts. The people in the first group who were doing this for the principle of it and as a YOLO don't really care, it's "fuck Melvin" all the way...
But the people in the last group are going to feel blindsided.
-
This feels like damned if you do, damned if you don't. The action of trying to insulate these people from losing their money will actively make people lose money. The dip to the low $130 was directly caused by the actions they're taking.
But on the flipside, imagine what would have happened during the rally to $400 this morning. We likely would have seen another breakout that puts all options ITM...
The fact is, the dance will end. The idea is buy and hold... but for the newest cohort there's an implied "until the money fountain stops".
And the higher the share price is when that happens, the more it will hurt. (and make no mistake, some hedge fund might be hurting, but the big guy can navigate this. If it takes making Congress halt these stocks they'll do it)
This has been a fun ride, and thrust the insane inequality of our financial systems for normal individuals and cash flushed "institutions" into the spotlight... but I can't pretend I don't understand why it's happening.
I disagree with your assessment, these brokers are preventing purchases of these stock, there is no risk for the broker in this regard.
I don't even have a Robinhood account and it is now guaranteed that I will never use Robinhood in my entire life because they are total scumbags.
I don't have a Robinhood account either. They are plenty of reasons why I would avoid doing business with that company. I still don't think this is as bad a business move as some people here are claiming.
-
Something insane is happening, claims of market manipulation are flying, Congress is saying they're going to investigate, what started as a meme is suddenly picking up more daily volume than SPY...
There's going to be a bloodbath, and their options are:
- do absolutely nothing, watch people get slaughtered. This is what they normally do!
- start removing yourself from the blast radius and pop the bubble, watch people get slaughtered.
The second case still hurts people, it's not some benevolent thing they're doing! They're doing it because it covers their asses a bit.
Because this time with all the tricky stuff happening with claims of manipulation, the insane volatility, the insane publicity, and most importantly the insane volume, they're afraid they might be opening themselves up to some sort of liability.
sec.gov/rules/other/2013/34-69013.pdf
Broker-dealers aren't supposed to hold your hand, but there is guidance that they should provide some meaningful sort of hand rails for retail investors.
Usually they make money either way and sit back, but this time the same way the masses have been concentrated at a stock ticker, the masses (and Congress) could end up concentrated at their door step asking why they let this happen...
They'd rather have AOC threatening to ask why a stock that's been spiked %1,400 in a month was deemed too high volatility for clients than the SEC asking why they let so many people take a bath on a meme gone wild...
Yes, lets do them a favor by destroying the value of their life savings they just invested.
>The problem for these brokers is when this musical chairs dance stops, retail investors will be holding the bag. Full stop.
Are you new? That's the entire reason wallstreetbets exists in the first place. It was always about losing money on purpose.
Comment pointed out that this hurts retail investors badly. I literally attributed an almost 50% drop to their actions.
But it covers their asses, and it reduces the number of people who can lose their life savings with them. Note the "with them" part
> Are you new? That's the entire reason wallstreetbets exists in the first place. It was always about losing money on purpose.
Are you new? WSB has always had clueless people trying to ride it's coattails, there's the "As and the Rs" for a reason. That's why it used to go private even more often than this.
My comment explains like 3 different ways that the people who did this made a YOLO with "fuck melvin" in mind don't care.
But there's suddenly an entire clueless public trying to clutch onto it, and they don't really know or care what Melvin and yolo and WSB are, they just see a ticker keeps going up because of those reddit guys
-
You should read comments before you reply. It's a lot of words but if you're willing to take the effort to reply, take some effort to read.
I didn't talk about any actions of any brokers yesterday or hedge funds yesterday, and besides, do you think a hedge fund has a HN account?
-
Also, hate rationale discussion much? You couldn't refute a single thing I said, the brokers can do something that: I don't like, was self-serving, and good for shorts... but was also the least damaging call for retail... all at the same time.
It sounds like you're taking a bath because you didn't respond to the most blatant sell signal I've ever seen in my life and looking at someone to lash out at...
Pro tip for next time: If your plan works because people are buying and holding... if they can't buy it's probably going to go south.
It was a lose lose situation, the point of halting buys is to stop the pump... if it didn't stop the pump they would have halted the stock.
In fact if GME breaks out and doubles again count how long until it gets halted period for an "investigation".
Everyone was playing musical chairs and the music stopped. Don't get mad at me because you didn't try and find a seat.
I think "the wrong people are losing money" is right on point, and to be clear, I don't think Robinhood has any business stopping people from buying stocks if they want to. But I am really wondering about how many people are getting rich from this stock pop. When the dust from all this settles, aren't a lot of the folks buying the stock over the last week or so going to end up underwater? My assumption has been that they saw that as an acceptable price for a jolly time Sticking It To The Man. And, back in the long ago (e.g., last week) when the stock price was $20 or $30 a share, that makes sense if you have the money to burn. But at $200+ a share, what's the rationale for holding on?
The people getting rich are the market makers. This is the hole in the Wall Street vs. the Rebels argument the media seems to be trying to pigeonhole this into.
The first-order losers are the hedge funds who, for some stupid reason, expressed their short view through actual shorting versus through puts and the retail investors who bought at inflated prices. The second-order losers will be the brokers, who will likely face margin losses, options-settlement losses, investor lawsuits, regulatory fines and Congressional attention for enabling the pump and dump and then ham-fistedly trying to stop it.
Second thing -- I think there were many things going on and many cohorts on WSB.
- Cohort 1: possibly pump and dump (though, this happens all the time with hedge fund managers also trying to move their position...)...or perhaps 22yos excited by GameStop, not that hard to imagine. GME has been a huge discussion on WSB for months.
- Cohort 2: 22yos YOLO'ing their weekly stipend and stimulus check. No real though about pump and dump and more so just silly gambling.
- Cohort 3: Intelligent investors seeing an opportunity, not manipulating any more than a hedge fund manager does (see: Infinite Gamma Squeeze notice: https://www.reddit.com/r/stocks/comments/l3e54f/gme_infinite...)
- Cohort 4: Downtrodden retail "investors" looking to stick it to the man: https://twitter.com/inactivist_/status/1354537152445521923/p...
- Cohort 5: Onlookers on WSB (im a frequent reader, never post) looking to hitch a wagon to the runaway train.
Maybe someone at RH ran the numbers on how much they stand to lose if things go sideways and decided it poses an existential threat.
It's the only reason I can think of because halting GME when more than half of their customers hold GME seems like a company ending event.
This is incorrect. See the correction at the bottom of the article that originally reported that figure [1]:
Correction: An earlier version of this article stated that 56 percent of Robinhood users hold GME stock. This is incorrect, based on a misreading of a statistic on Robinhood. Motherboard regrets the error.
Also, I am fairly certain that no broker is under obligation to provide you trading access to any specific stock or futures contract. There are many futures I would like to have access to trade but are unavailable at retail.
If you have an existing position, they are likely obligated to allow you to close out.
Without such regulation what would stop any bad actor from colluding with brokers to halt trading a moments that benefit themselves? Pretty hard to enforce or prove in practise but the idea that brokerages can prevent groups of users from accessing markets willy nilly is absurd. This is for cash products no any futures/options, even for those once they grant access it should not be taken away
As to your second point, it would not be in a broker's best interest to change access to certain securities 'willy nilly' as they will lose business and clients. Whap happened today was not an arbitrary decision.
Would you be arguing if these brokers raised the margin requirement on Gamestop, etc to 99%? That is within their rights to do so, the SEC only sets a regulatory minimum margin req, not (to the best of my knowledge) a maximum.
People seem to forget that many people "trading" Gamestop and the like are doing so on margin. As such, the broker dealer has financial risk that you will not be able to pay your loan back, ie by a close out of positions. Is it reasonable or unreasonable to expect that the eventual decline in these stocks will be rapid with sizable gaps? How many of the Robinhood traders are going to cry bloody murder when they are automatically closed out 10s, perhaps a hundred points lower from when the call was triggered?
The NASDAQ CEO, Anna Friedman has already said they will stop trading on a stock if they match chatter from social media with a stock's movement. Her justification is to allow them "time to investigate" the situation.
SEC lawyers have stated also that justification for investigation come when "volatile trading fuelled by opinions where there appears to be little corporate activity to justify [price movements]".
It's a ridiculous assertion since several banks and funds use alternate data sources to inform their buy and sell decisions. These alternate, or non-traditional, sources of data are usually many steps removed from corporate company announcements and news headlines.
Saying all that to say that legal positions are shoring up on the side of the exchanges and professionals.
The way it's panning out now they probably won't go down the regulatory route. They already have levers that they can pull if the behaviour happens again, through the platform (Robinhood and the like) limiting trading or having Reddit or Discord ban or suspend groups on spurious grounds such as hate speech.
Why go down the legal route when you can give a soft nudge to board members and still get the desired outcome?
I call BS. I mean you might be right that they are on the side of the institutions, but it's not because retail is unusual, it's because it's a big old boys club and they don't want the plebs getting uppity. MM's exposed themselves by massively naked short selling into very risky territory, which is illegal and what the regulators should be more interested in, as it is what enabled all this to happen in the first place!(1)
It's well known that the SEC is a toothless wonder that doesn't go after the malfeasance right under it's nose but loves to go after middle and low end people, with maybe a smattering of high profiles just for the optics (come to think of it, very much like the IRS). The legal system is part of that corruption. So you may be right that the legal positions are shoring up on their side (though I think its very possible you are wrong), but that doesn't make it the right, or just, state of things!
I think we are living in a moment of history that will lay bare just how abusive and illegally manipulative the whole system is against retail and there is going to be a backlash that isn't inconsequential.
There will probably be some hearings for show, but nothing more.
When the people are causing Wall Street to lose billions on their absurdly large short position, suddenly they are concerned for the "amateur" investors. The "unsophisticated" investors. "We need to save them from themselves, we have to do something, they don't know what they are doing! How could they possibly be responsible adults taking this position that is hurting us financially? I know! Let's strap on these training wheels for their own good so they cannot hurt themselves cough or us cough. "
I remember seeing something similar during Tesla's run up, where firms would force individual investors to sell their call options because the investor would have tax liability once their call options were profitable.
Course, it also had the effect of reducing the amount they would have made by forcing them to sell early.
Tails we win, heads you lose.
> “For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price.”
I find it interesting that folks feel empowered to call out the BS even when they've got a pretty big spotlight on them - instead of being shushed to quiet by monied interests.
If by "they" you mean WSB - for now, they just nuked RH's app in Play Store, but they're already calling for a class action lawsuit.
All the discount brokers sell order flow.
> Schwab earned 1.4% of revenue from payment for order flow, TD Ameritrade about 8.4%, and ETRADE about 6.1%.
They all make half or a lot less of their revenue from commissions.
> The contribution to revenue across the discount brokerages is minimal: 6.8% at Schwab, 28% at TD Ameritrade, and 17% at ETRADE.
> Interactive Brokers is the one standout, largely because it caters to high-volume professional and semi-professional traders; it makes 49% of revenues on commissions.
All RH did was run a tight ship on costs and cut commissions to zero. In theory, commissions could go less than zero.
https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...
Like all darling start-ups, Robinhood has a section of its terms of use whereby users give up their right to sue.
Because courts are only for the rich and those with the power to negotiate. The rest of us clicking on take-it-or-leave-it contracts can pound sand.
Section 38: https://cdn.robinhood.com/assets/robinhood/legal/Robinhood%2...
It's illegal to dump products on a market (physical products) below price... yet some a-hole can force their plaform into "sell-only" mode and it's all cool.
Exactly how is it legal to forego your right to a fair trial on an "agreement" between two parties who for any intents and purposes do not know each other?
https://www.reuters.com/article/us-blackrock-investment-game...
Robinhood's real customer, the paying customer isn't the users of its app, which they offer out for free. It's actual paying customers are HFT firms, and specifically Citadel, the same Citadel that on Monday bailed out Melvin Capital with a 3 billion dollar loan.
Wouldn't surprise me one bit to find out Citadel called up Robinhood and said either shut this GME trading down or they're pulling the plug.
We won't know what Melvin Capital did until they submit their next 13F filing.
This is some anticompetitive bullshit, plain and simple.
A broker is yiur fiduciary/agent; their discretion at refusing your order should be limited to well defined circumstances, and I would be surprised if this is one of them.
(I would not be surprised if the EULA lets them do what they want, but I would be surprised if it would actually be found legal in court —- though it will likely take ages to test because it likely contains a binding arbitration clause)
I strongly disagree with this. Nobody can know beforehand what is a good investment or not. The omnipresent disclaimer applies: "All investments involve risks, including the possible loss of capital."
The idea that the professionals know something that the rest of us don't, is quite controversial and there are many articles giving evidence to the contrary.
https://www.researchgate.net/publication/234025489_The_Activ...
This idea is also quite condescending (my own opinion, no references given).
Are you crazy? Robinhood just sent a message to retail investors (it's entire customerbase) that they are going to crush you at any given time. By using Robinhood your are exposing yourself to extreme risk of losing your investments no matter what stock you trade.
>Also, by making trading so easy RH has a responsibility to protect amateur investors from making terrible financial decisions.
WSB is about making terrible financial decisions as a sport. That's the entire point.
The house(Citadel) always wins.
https://www.crunchbase.com/organization/robinhood/company_fi...
https://www.bloomberg.com/news/articles/2021-01-28/dan-sundh...
I'm sure there are other investors on that list losing money from this whole thing too.
That said, even if the SEC does rule against Citadel I wouldn't expect the fine to be anything that bothers Citadel. The message time and time again is that the fees are way less painful than not cheating in the first place.
I just shutdown my Robinhood (they have the audacity to use that name while stealing from the poor) account
I think Citadel is winning this war, but people are moving in masses to Fidelity now that they learned why Robinhood is ,,free’’
Getting absolutely wrecked by irrational market behaviour is a rite of passage for small traders, and it's only fair that some bigger hedge funds should learn that lesson too.
If this is true, Ken Griffin and the Robinhood founders should be in jail.
This is class warfare.
I have no idea if any of this is true.
I argue economy/bailouts & anger had a large role. But obviously Obama, Obamacare, & racism played big role too.
It's palpable and poll-able how pissed off everyone except the top top % is.
I work in Democratic politics, am a relatively good earner, clearly engaged, and I'm pissed. I have a hard time understanding the other side (MAGA) but they seem even more angry all around - enough to attempt to murder Congress.
Maybe the best hope we have is the 'working class' (at this point I would categorize that as anyone making under $500k) getting pushed so far that we see real change to redistribute wealth and power back down.
I'm skeptical though because the other type of political polarization doesn't help; half these voters identify more for Trump / religious issues than their own interests.
Even more with some irresponsible newspapers blaming the whole thing on GamerGate and Alt-Right, effectively pushing away people that previously could be on their side.
Brokerages can, and do all the time, set specific margin requirements for volatile securities. There’s no reason they can’t do that here as well. (unless they literally can’t because their tech stack doesn’t support it which would be pretty funny)
Why would anyone use a trading platform that now has a history of picking and choosing what trades you are allowed to make?
This will be very disruptive to Robinhood. I think today they made a poor business decision that will affect their valuation and potentially the company itself.
I don't do much trading on Robinhood, mostly for learning or experimenting with small amounts of money but this move has left a sour taste. I'll be closing my account, while recognizing that other brokerages are doing the same (though not all).
edit
Retail investors are locked out, $GME is still going up. What's the fucking excuse now?
Well, they're gonna lose millions of customers over this I predict. How is that not killing their business?
Some interesting reading:
Professor Walter Scheidel examines the history of peace and economic inequality over the past 10,000 years - https://news.stanford.edu/2017/01/24/stanford-historian-unco...
Revolution and the Rebirth of Inequality - https://www.jstor.org/stable/2777764?seq=1
Mike Duncan is an entertainer, not a professional historian.
Police can and will provoke non-violent protests to violence. In a few cases (see the UK's "spycops" scandal) police infiltrators will organise protests so they can arrest dissidents.
Yes when executed by a single coherent entity.
This is not it, unless you believe there is a powerful cabal controlling twitter, facebook, robinhood, discord etc.
They are all doing it independtly to limit the legal and/or financial risks for themselves. Getting people to "strike first" is not the intent, saving $ is the intent here.
Only intent here is ass covering.
There is no intent on the part of the GAFAs to force the lower class into a revolution to get a pretext to squash them or any bigger "art of the war" plan behind those decisions than money.
Assuming no bad intentions doesn’t change the outcome of their actions.
The closest thing to criminal activity we see here is people betting more than a company's stock. When hedge fund managers see this and buy all the stock to squeeze the shorters it's normal. When it's people like you and me they say it is illegal.
No different from somebody on CNBC providing stock picks.
We give that a free pass but suddenly a loosely-organized internet forum is a problem.
1. If Cramer said "Hey, let's all buy this stock because there is a potential short squeeze.", then that would be illegal because it's attempting to create an artificial market pump through short squeezing.
2. Cramer is LICENSED to give investment advice. A licensed doctor can go on TV and make medical recommendations. Reddit specifically bans subs that try to do that.
Read matt levine's twitter: https://twitter.com/matt_levine/status/1354129838806872073
and newsletter if you want to inform yourself.
And as it turns out, people are very angry about that. And since violence gets you thrown in jail, the next is financial violence in bankrupting these country-destroying fintech scabs.
And look who comes to their rescue, but not for the masses.
Of course, if someone went above that and invested an amount, where losing it would hurt, that's different.
- Rebates from market makers and trading venues
- Robinhood Gold
- Stock loan
- Income generated from cash
- Cash Management
https://robinhood.com/us/en/support/articles/stock-order-rou...
[1] https://www.sec.gov/fast-answers/answersbestexhtm.html
Robinhood publishes their execution numbers (as required by the SEC), along with other brokers. At a quick glance, there is nothing out of the ordinary. It's also worth noting that you cannot directly compare numbers as different platforms have different trading behavior.
https://robinhood.com/us/en/about-us/our-execution-quality/
In fact, they were still seeking "best" execution; they just didn't beat other brokerages because of high payments for order flow and misled customers about that.)
Legally not, illegally... yes, and try to prove that.
There's Citadel Asset Management, the quant hedge fund (which is probably the one that lent money to Melvin, though I'm not sure about that), and Citadel Securities the HFT / market-making show (they have the same owner).
HFT market-making using retail order flow isn't front-running - the price the customers get is the same regardless ("Best Bid Offer" as brokers are legally required to provide in the US). The difference is, once that the HFT market maker holds the stock, they can get rid of it more easily (i.e. they can close the trade) because (the assumption is that) the retail flow is "noise" (uncorrelated with future price movements) as opposed to professional/institutional traders (e.g. other hedge funds executing their strategies), where a big problem is negative selection (i.e. you're more likely to execute a trade with someone that has better information than you).
For instance the bid side may say
Alice wants to buy 50 shares at $20 (order added at 10:37)
Bob wants to buy 30 shares at $20.1 (order added at 11:18)
Citadel wants to buy 35 shares at $20.1 (order added at 11:17)
David buy 10 shares at $20.1 (order added at 11:01)
The bids are ordered by price, and ties are broken by who placed the order first.
If Evelyn (Robinhood customer) shows up and wants to sell 5 shares at $20, then the exchange will say, oh nice 20 is less than $20.1, lets get some trades going! $20.1 is the highest prices, and of those orders David's were entered first. So Evelyn's sell order is matched with Davids buy order. The price is determined by the order which was in the book. So Evelyn will get a better price than she hoped for!
If Evelyn had requested to sell 100 shares, then she will first sell to David for $20.1, then Citadel's for $20.1, then Bob's for $20.1 and finally some of Alice's shares for $20.
Ok but what happens if Citadel is paying for order flow?? Now the order book (from Evelyn's perspective) looks like
Alice wants to buy 50 shares at $20 (order added at 10:37)
Bob wants to buy 30 shares at $20.1 (order added at 11:18)
David buy 10 shares at $20.1 (order added at 11:01)
Citadel wants to buy 35 shares at $20.1 (order added at 11:17)
So if Evelyn (Robinhood customer) shows up, and again wants to sell 5 shares at $20, then she will sell to Citadel, even though their order is later than David's.
So to sum it up
Evelyn (Robinhood customer) is unaffected
Citadel wins
David loses.
What's even more concerning to me is that, to platforms looking for an excuse, your comment could be painted as trying to "incite" violence, and used as a justification to ban you.
Given the track record Reddit has of keeling over to public pressure, there is no way they are going to stand up to the SEC.
On one hand, the rise of meme stocks is shining light that one of the central conceits of capitalism is wrong (i.e. that the stock market isn't a good arbiter of the value of companies).
But as a member of the public, I'm concerned about what happens when the meme stocks come crashing back to earth. When that happens institutional investors will overreact, doom and gloom will reign, and CEOs of public companies will use that to lay off people and cut worker benefits.
The common person always loses when bubbles burst.
In a crazy way this is probably saving a lot more jobs than it's jeopardizing.
In this case, it's not really saving any jobs, since GameStop employees (excluding higher ranked employees) probably don't have any part of their compensation that's stock based.
Toys R Us was a leveraged buyout, which is definitely a much more ethically dubious strategy, and that can cause jobs to be lost. This won't cause any jobs at GameStop to be lost, although there probably will be some unhappy traders and people left holding bags of GameStop stock.
Out of curiosity, has that actually happened to a public stock? I'd assume the minority shareholders would have standing for a lawsuit if someone were to do a hostile takeover of a stock and liquidate the assets of the company.
That is a tautology, because you define the "common person" as the person who loses.
I'm sure there were people who made good money in the 2008 housing bubble. Didn't they all live like kings for a while, because they could borrow arbitrary sums against their houses?
Similarly, some people may make good money on that GameStop thing now.
The "common people" who didn't participate in this will probably never even notice. At most they'll notice that their favorite shopping mall is closing, but that is part of a larger trend. And they can now shop on Amazon instead, so their quality of life probably remains the same or gets improved.
The common person is the majority of Americans who live paycheck-to-paycheck and don't invest in the market.
Those who don't participate will be negatively impacted if this causes another recession, which is likely as investors get spooked by another bubble burst. Which means standard of living, job benefits, and salaries will continue to stagnate.
This also ignores the fact that we've moved from guaranteed pensions to 401ks, which are heavily dependent on hedge funds. If hedge funds lose their shirts, they'll get a bailout from the government because we didn't learn our lesson about too big to fail last time. Which will mean government austerity in other areas, typically starting in social welfare programs.
The "central conceit" is not that the market is a "good arbiter" of the value of a company. Just that it's the least bad one.
The central conceit of every alternative to capitalism is that there's such a thing as a singular, coherent definition of "the value of a company" and that it's consistently, accurately measurable by some central authority.
Jimmy Cramer pumping stocks every evening to his boomer audience which ultimately has some effects (not sure how much though) on stock prices seems fine but a group of people discussing stocks seems like a threat...
The question is, will the creators of these communities trust cloud providers where the platforms are hosted to not de-platform them, or will we end up with P2P, distributed networks instead?
I want an anti-authoritarian internet. The past year has been surreal.
And it will thrive and will be a better place to make more money that SV for 5-10 years, until it gets censored like any public space.
You will want a data mesh layer that multiple apps run on top of probably.
Network effects drive a lot of adoption of these things, which is a huge headwind against an "explosion" of them lasting that long.
Robinhood doesn't like us? We'll start out own.
Reddit doesn't like us? Let's just kickstart and crowd-source another.
This idea that the common man needs to be protected from himself is paternalistic and condescending. Private equity is the means of collective action and the rich people don't want us to organize without their blessings.
Not enough liquidity. WSB has very little to do with long term investing. It's just about using the stock market as a casino.
Technically the JOBS act is supposed to allow this (crowdfunding). May not be as easy as buying stock but at least it's legal now.
Interesting word choice. Conservative wording of "common man", but liberal wording of "paternalistic". I don't mind the former but I do wonder how a father would be more inclined to protect a child from itself than a mother; if anything, I would find maternalistic a more fitting descriptor.
There's Ruqqus which is already a working alternative to reddit. However, what I found going there is that there are a lot of anti-left memes being shared. Some amount of toxicity. I'm all for freedom of speech, but I wish the platform was a bit less political, a more neutral alternative to reddit... but hey, if enough people leave reddit, maybe it will become just that.
https://ruqqus.com/+Commentary/post/74iv/lol-you-thought-tha...
This is probably because reddit is quite clearly a left-leaning platform. Due to the lack of healthy balance, the refugees from reddit are mostly people who feel their views and voices are being silenced by aggressive moderation. In my opinion this state of affairs is only reddit's fault.
That’s a pretty long-term bet, though, and I don’t think WSB is usually into those.
Then payment processors ban you. Then you start your own visa. Let's start our own visa. Banks ban you. Let's start our own bank. Your hosting service bans you. Host your own. Your ISP bans you. Start your own ISP. Other ISPs don't peer with you. Start your own internet. Then the feds shut down your bank.
The answer to censorship is not "start your own".
By the way, the Reddit WSB "shutdown" was done by mod admins to clean up the page a bit. It was private for an hour or two and back up.
Now I doubt Reddit has huge contracts with the government, but I’m sure the government could find something to harass them with if it wanted to. Drive long enough and a cop will eventually find a reason to pull you over.
https://www.theguardian.com/media/2010/dec/01/wikileaks-webs...
http://scripting.com/stories/2010/12/28/usGovtABigUserOfAmaz...
This chapter in WSB has brought forth substantially better communication with the admins than we'd ever had in the past, including a direct line to Alexis.
Edit:
Thank you all for the outpour of support!
Our main challenges thus far have been technical (hitting API limits, automoderator backlog, etc.) however, those issues have now been resolved and our bots are running better than ever before.
We largely owe our success in handling this to the Reddit engineering team who has routinely stepped up and fixed things. As chaotic as the scene has been for us moderators, I'm sure they have been under much more pressure. If you know a reddit engineer, please give them your thanks as they have done a phenomenal job.
For those curious, the surge in activity broke a number of things. Here are just a few:
> modmail surpassing 80,000+ messages resulting in modmail going down
> constant threads hitting 100,000 comments resulting in slow loading site-wide
> automoderator getting backlogged and taking 30+ minutes to parse comments leading to terrible comments getting through.
All these issues are now resolved, so once again, big thanks to the Reddit engineering team!
To be honest, I think the recent restrictions on trading specific stocks (on Robinhood etc.) is absolutely dumb. Apparently, the sort of crappy market manipulation that led to the 2008 Volkswagen "short squeeze" or the 2010 "flash crash" is absolutely fine because it was driven by traders. But an amateur mob performing the short squeeze must be stopped at all cost? What bullshit. Either the "casino" should be open to all, or rules that apply to the "amateur mob" should apply to the HFT and derivatives market as well.
Market manipulation. Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Buying stock with the intention of causing a short squeeze can be interpreted to fit that definition. I believe that WSB is creating artificial demand to try to "screw over" certain institutional investors. I am not a lawyer; this is not a legal interpretation.
> Apparently, the sort of crappy market manipulation that led to the 2008 Volkswagen "short squeeze" or the 2010 "flash crash" is absolutely fine because it was driven by traders.
How were they "absolutely fine?" You do know that regulators attempted to prosecute the traders/executives responsible for the 2008 VW short squeeze [1], and successfully prosecuted a trader for the 2010 flash crash [2]? For the VW short squeeze, regulators were not able to find evidence that the traders involved intended to cause a short squeeze or engaged in any artificial demand; they actually demanded the stock because they sought to take over VW. This is also evidenced by the fact the Porsche sold stock on the open market once they released that a squeeze was happening [3].
[1] https://www.ft.com/content/ad782326-ed02-11e5-888e-2eadd5fbc...
[2] https://en.wikipedia.org/wiki/2010_flash_crash
[3] https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39...
Every purchase influences the market, and results in gain, otherwise people would not be buying, and selling things.
Every purchase, is a market manipulation by the definition.
Well, I don't think this would hold up in court. Both the SEC and courts have made a distinction in the past between "real demand" (i.e. demand motivated because you think the stock is undervalued) and "artificial demand" (i.e. demand that is not based on any underlying analysis, but instead motivated because you intend to trigger other market mechanisms, including coverings of short positions). Like most legal definitions, the actual definition is hazy, and courts may have established legal tests. Read Matt Levine for a nuanced analysis [1].
Again, not a lawyer, this isn't legal advice.
[1] https://www.bloomberg.com/opinion/articles/2021-01-26/will-w...
They should not be.
These guys have full understanding how laughable it the attempt to judge somebody by pretending the judge/bureaucrat can peer into somebody's mind, and yet they do it.
But historical cases don't peer into people's minds. They look at evidence, such as texts in chat rooms that show clear intent to manipulate. See the Libor scandal chats [1], where one trader wrote "its just amazing how libor fixing can make you that much money" and "its a cartel now in london."
I think it's unlikely that the SEC will be able to successfully prosecute WSB traders, though, due to lack of evidence. It's also probably not even worth their time.
[1] https://www.buzzfeednews.com/article/matthewzeitlin/why-bank...
Bill Ackman went on CNBC last year in near tears saying the end was coming, helping stocks continue their nose dive...all the while he was buying tons and tons of stocks which he turned into billions. How is that allowed but people on a message board sharing positions and high number of short floats isn't? There is literally, and has been for a long time, a website that tells you the short interest in a stock. It's sole purpose is to help people find short squeezes. That's why you have stats like "days to cover."
It shouldn't be allowed without proper disclosure on their actual positions. The SEC has prosecuted people in the past for making public statements while taking the other direction without proper disclosure.
I believe that this should be investigated by the SEC, but it likely may not since, at the direction of the Trump administration, the SEC has instead focused their efforts on other financial crimes.
There a difference between "This stock is going down. (I buy long because I know something I'm not saying)" and "This stock is going down. (I buy short because I believe what I say)"
This is essentially Reddit saying "This stock is going up, so buy options to exacerbate that and to profit." No misrepresentation.
If the SEC doesn't like this, they should fix the underlying market structure that makes this action possible. Effectively: what allows the traders to create leverage by abusing / forcing brokers to take specific actions.
Or just give up and accept that by digitizing markets we're past the rubicon to smart trading and predatory pack algorithms being successful.
> This is essentially Reddit saying "This stock is going up, so buy options to exacerbate that and to profit." No misrepresentation.
I see threads where WSB is saying "This stock is going up, and if we make it go up more, hedge funds & market makers will have to buy more stock to cover their short positions, and therefore it will go up even further [and we will make more money]." That's the manipulative part — creating artificial prices to induce even more demand.
Is it manipulation if you're so predictable that an action by me causes you to always act a certain way? And I profit when you take that action?
If hedge funds refused to cover their shorts (I'm probably using the wrong terminology) and left them open, this wouldn't be an issue, no? Or, conversely, if market makers refused to sell options on overly volatile stocks / stocks being manipulated?
It depends, but approximately, yes if there was any intent to exploit that fact. See spoofing, other prosecutions for creating short squeezes, etc.
https://dealbreaker.com/2012/06/phil-falcones-alleged-piggis...
The rationale is that markets are better for participants when their prices are accurate and reflect true supply and demand. Price manipulation subverts that, so the SEC disallows it (except in some cases where manipulation is explicitly allowed for historical reasons).
> refused to cover their shorts (I'm probably using the wrong terminology) and left them open, this wouldn't be an issue, no?
This is imprecise; hedge funds might cover short positions to hedge further losses, or because their prime broker might require them to maintain a certain margin (to reduce counterparty risk). I have no experience in institutional investing, so that's a guess.
> Or, conversely, if market makers refused to sell options on overly volatile stocks / stocks being manipulated?
Market makers will increase a premium for options on "overly volatile stocks." If the risk is too high, then they may stop selling the options altogether. But the problem is — it's difficult to predict which next stock WSB might start manipulating. That's another issue. If regulatory agencies don't step in and prevent this type of manipulation, the premiums on all retail-adjacent options will be higher because of the increased risk and fear that a capricious WSB crowd might turn on a MM. That's bad for people who use options "correctly" — not for gambling, but as a way to hedge and reduce risk.
It's called activist investing. His fund did not buy stocks, but bought Credit Default Swaps to the tune of $27 million USD. In the event that the markets dropped, they were awarded massive gains if they exit position. They gained $1.3 billion.
Prior to exiting the position which was publicly released, he went on media outlets and promoted the idea of shutting down the economy. This is what activist investors do. They actively spread rumors that will help their positions.
https://assets.pershingsquareholdings.com/2020/03/26122842/P...
I'd be really interested in learning more about the Olympic level mental gymnastics one has to go through to write this off as O.K. but then turn around and say that a bunch of random people on an open public forum saying to buy an over-shorted stock is market manipulation. They don't even have the purchasing power to make a difference here.
Again, I am not a lawyer, I am not your lawyer, and this is not a legal interpretation or legal advice; just my personal opinion.
Motivation and intent are the main factors in determining manipulation. So there are two cases:
1. A trader buys stock, seeking to profit, because they believe that a short squeeze may be incoming soon.
2. A trader buys stock, seeking to profit, because they intend to drive the stock price up, thereby causing a short squeeze.
(1) is legal (in my understanding; see the disclaimers above). (2) is not. They differ in their intents. The first one is "legitimate" demand, the second is "artificial."
Now, it's difficult to prove intent in court. And clearly, many people in WSB legitimately are buying the stock because of (1). But there are some who are doing (2). They have plausible deniability, though, and that's why it's unlikely that anyone in WSB will be successfully prosecuted without more concrete evidence.
> The US Securities Exchange Act defines market manipulation as "transactions which create an artificial price or maintain an artificial price for a tradable security".
It is my opinion that this demand is not artificial, it is genuine, although caused by factors other than the inherent value of the stock itself.
If this is considered to be 'creating an artificial price', I don't see how a position where 140% of the shares of a company are shorted could not be, meaning significantly wider implications than just a single subreddit.
https://law.stackexchange.com/questions/683/usa-is-i-am-not-...
Also, are you a lawyer, and is that legal advice? :)
There are no repurcussions for not having that antiquated disclaimer. Which wouldn't hold up even if there was some magic that allowed a case to be brought
Most likely this will be like accessibility to poker online and in casinos which don't profit off the game directly interestingly in the 2000s. A lot of people got involved. A few made a lot of money and the rest went to do other things after a while.
And I did, because I'm a registered investor. But this isn't available to most people, only the top 10%.
I'm not sure I'd call it keeling over to "public" pressure.
Furthermore, this comment is offensive. Let's please not pretend that Facebook and Twitter were "looking for an excuse" before deplatforming Trump. They were entirely justified and would have been justified in doing so many years before they eventually did so.
Let's also not put the word "incite" in dick quotes barely three weeks after an insurrection and attempted coup. There was actual incitement of violence in that case.
No, that doesn't follow.
Very similar to 9/11 except less casualties thankfully. Just an interesting observation of how much control screens can exert then vs now. More are connected with constant access. We need better screen diets.
Or this one: BLM hasn't caused any deaths, to date; the Capitol (capitalized, btw, and with an "o") insurrection caused 5 and could easily have resulted in the assassination of various senior government officials.
Or this one: BLM protests involved tens of millions of citizens across all walks of life and were prompted by very real social problems with police murdering black people; the Capitol riot was prompted by fascism and white supremacy.
Do I need to go on?
Isn’t declaring part of the sovereign territory of the United States to be an autonomous zone sort of similar?
If you're proud to be a fascist and white supremacist then this doesn't make someone not want to be one. If you're not then you'd be offended by that accusation that you are one. It's a polarising statement that target's an individual's identity, not their actions. It was an ad hominem attack.
Had you made reference to the disinformation campaign surrounding the election results or the President's remarks that actively fanned the flames of their outrage (outrage that they certainly perceived as legitimate but the rest of us know was misguided) then that would be a very different argument. It would be one that forgave regular people for being people and targeted those truly responsible. It's an argument that invites people to agree with you rather than making them the enemy.
Your statement is dense with issues:
1. You're comparing a single "protest" to a protest movement. Also, where did you get a figure like "12-19"?
2. There are documented and confirmed cases of capitol-riot-type people using the BLM protests as cover for violence (e.g. https://www.nbcchicago.com/news/local/illinois-man-accused-o... and https://www.theguardian.com/world/2020/oct/23/texas-boogaloo...). The attempts to blame the capital riots on "antifa" are groundless.
3. The capitol rioters deliberately struck at the democratic process itself (e.g. process of conducting a fair election) because they rejected the results of that process, which is a far more serious thing than any traditional protest, no matter how violent.
2) So you seriously believe all violence at BLM riots was solely because of false flag white supremacists? Really?
3) Bullshit. Riots are not "democratic process" either - it's people rejecting the established laws (like property rights) and proceeding to do their own thing. I mean they installed an "autonomous zone", how is that not an attack on democracy?
No, there wasn't just a single incident. Just to give some examples off the top of my head: large groups of III%ers participated in both the Capitol Attack and Unite the Right rally in Charlottesville, and the BLM counter-protests were arguably part of the same phenomenon (and one of them shot three people in Kenosha).
> 2) So you seriously believe all violence at BLM riots was solely because of false flag white supremacists? Really?
That's a sloppy reading of what I said. I merely pointed out a fact that makes attribution of violence that occurred at the protests difficult.
> 3) Bullshit. Riots are not "democratic process" either - it's people rejecting the established laws (like property rights) and proceeding to do their own thing. I mean they installed an "autonomous zone", how is that not an attack on democracy?
It's pretty obvious that it wasn't an "attack on democracy" because they made reform demands to elected officials and were cooperating with the government:
https://www.nytimes.com/2020/06/11/us/seattle-autonomous-zon...
> The protest zone has increasingly functioned with the tacit blessing of the city. Harold Scoggins, the fire chief, was there on Wednesday, chatting with protesters, helping set up a call with the Police Department and making sure the area had portable toilets and sanitation services....
> The demonstrators have also been trying to figure it out, with various factions voicing different priorities. A list of three demands was posted prominently on a wall: one, defund the Police Department; two, fund community health; and three, drop all criminal charges against protesters.
In comparison, the capitol attackers setup a gallows and were chanting things like "Hang Mike Pence," because he wouldn't unconstitutionally override the election (https://www.snopes.com/fact-check/hang-mike-pence-chant-capi..., https://www.cnn.com/videos/politics/2021/01/15/mike-pence-cl...). The sloppy false equivalences to deflect away from that are getting old.
2) In the same vein, there seems to be only one actual victim of protester violence at the capitol, and that one also looks more like an accident (got hit in the head with a thrown item, which is of course a stupidly dangerous attack, but also common at BLM riots)
3) That's not CHAZ cooperating with authorities, but authorities cooperating with CHAZ. Just because "your people" welcomed the secession, doesn't make it any more democratic.
Also, there are videos from the capitol of security staff chatting with the protesters. So I guess they were also cooperating, and hence, by your logic, democratic.
Anyway, let's end here. There really is no point. It is just always interesting how warped people's perceptions can be.
We'll see about that when he goes to trial.
> And if you arbitrarily lump things together, you can probably find an arbitrary number of victims.
Which is what you're doing. Why arbitrarily lump together BLM and looters, when it could make more sense to consider them different groups that happen to be in the same area reacting in their own ways to the same circumstances?
> 3) That's not CHAZ cooperating with authorities, but authorities cooperating with CHAZ. Just because "your people" welcomed the secession, doesn't make it any more democratic.
The point is it's not a succession if you continue to recognize the government by calling on it to reform.
> Anyway, let's end here. There really is no point. It is just always interesting how warped people's perceptions can be.
Yep.
Lee Keltner
Aaron "Jay" Danielson
Garret Foster
Tyler Gerth
David Dorn
Victor Cazares Jr
Secoriea Turner
....
And that's just a small sampling.
Do I need to go on?
Lee Keltner - Killed in Denver by the hired security guard for a journalist.
Aaron Danielson - Killed at dueling protests by self identifying anti-facist (antifa)
Garret Foster - He was a BLM protestor killed by an active Army sergeant.
Tyler Gerth- he was a protest photographer killed by a guy with a grudge over an argument.
David Dorn - Not killed by BLM The protests were several miles away and had disbanded a few hours earlier near the Metropolitan Police Headquarters downtown after clashes between police and a few remaining agitators turned violent
Do I really have to go on?
You make it sound like those on your list were killed BLM mobs and a modicum of investigation makes it obvious you lack perspective. Those that marched on the Capitol were indeed a mob.
When: 2 people died as a result of strokes. No participation in the riot.
1 person trampled by the rioters. 1 unarmed person shot by the police. 1 police officer dead due to being struck in the head.
So clearly, only 2 people died as a consequence of the riots, per your logic.
CHAZ was even one step further.
In Atlanta BLM protestors set up an armed road block. Several people were shot there culminating in the shooting death of a 9 year old girl.
Calm down, Bud.
I appreciate your clarification, however. I withdraw my assertion that you were trying to minimize what happened on January 6th. And I apologize.
I was going to say "Calm down, Francis," as per the old movie Stripes, and then changed it, but neither would have been helpful. I apologize too.
That's bullshit.
The principle, and thus the the right to free speech is the fundamental value of a free country. Hiding behind the "they're a private company, they can do what they want" is nonsense when the vast majority of communication flows through them.
I'm wondering though what happens if section 230 was modified to only allow for filtering and removal of spam (I'm expecting wiggle here in how it's abused) and illegal content.
Look at Visa going after porn and private sex work.
This entire culture of trying to control what others can say via deplatformization is neoliberal fascism.
Bad things get said. But free speech protects all of us from tyranny, and we have to defend it. Because they'll come after you and your ideas next.
Americans have thick skin, or at least most of us do. It's a consequence of our liberty, and it's a defining trait of our system.
If you leave the responsibility of Free Speech to the Free Market then you end up having freedom of press only for the people who own one.
That's how things have traditionally been in the US, is it not? As far as I know there was never any law that would force me to allow someone else to use my (literal) printing press.
The exception is the FCC fairness doctrine, but the basis for that was that the "printing press" (RF allocations) is actually a common good, and was only granted to private interests in exchange for certain concessions.
The hard part is getting that corp to own anything of value, since it starts with just the money you put in. But this is still a viable path to wealth for people with time horizons measured in years rather than days. (And all the people who want immediate gratification provides a fairly large market to trade with.)
E.g: I run a stock newsletter. I hire a boxer, Evander Tyson, to hype a biotech penny stock, Scampill Co.. Tyson says to his followers and to my newsletter subscribers that Scampill is about to get a drug approved by the FDA that will cure cancer. I and my friends at Scampill make sure that the patsies have enough stock to buy when I put out my first email blast. When the stock goes up 900% we sell our shares. At that point there are no more large lots on the market, the spreads widen, and the price collapse occurs.
The SEC then sends their feds after me, the boxer I hired, and my friends, the insiders at Scampill. If they can catch me, I do some time in club Fed and have to pay some fines.
In this instance, there is no insider collusion, there is no single promoter with an interest, and there is no commonality to build a class among the redditors etc. who participated in the manipulation. You have a mixture of people who may have said illegal things and people who had totally licit (in the eyes of the law) motivations and actions. You have a big mixture there of mens rae and its absence and a big mixture of types of actus reus and the lack thereof. It is a big mess as compared to making a case against the typical P&D mob scheme.
Yet, you have an outcome that is somewhat similar to a classic P&D, and on a regulated marketplace, whereas most P&Ds happen on less regulated over the counter markets.
They're using the "terrorist" word already in many cases.
I am genuinely interested in the physicality of how that would play out. A mob with pitchforks makes a run at a Facebook HQ. Do they kidnap employees until they find one with the access to re-initialize the account? I guess they would have to keep the hostages forever, else the accounts be disabled again the next day. Do they setup a camp outside with the declared intent to launch an attack should certain accounts not get enough likes? How long could that last? Or do they break into a datacenter and attempt to do it themselves? I'm reminded of that iMac scene in Zoolander.
― Warren Buffett
What?
It doesn't really anymore, but it's an understandable mistake imo
it signifies a small loss of financial liberty and flexibility on behalf of the citizenry, which is enough to spark upset.
meanwhile large groups are allowed to systematically abuse in-place systems in a semi-visible public fashion without backlash or repercussion from regulators in most cases, exacerbating the perceived difference between 'Us and Them', fueling outrage and divide even further.
It's easy to consider why this might upset people.
Do you honestly believe this? Somehow we'll go from not being able to buy certain stocks to violence?
Banning collecting rain water on your own property didn't do it. Abject failure of politicians keeping drinking water clean didn't do it? Not being able to buy cheese from unpasteurized milk didn't do it. Can't grow a plant in your own backyard for personal consumption. But this is it, this is the impetuous. Not being able to buy GME stock.
Let's be real. This is small potatoes.
A lot of the established press was against it and they did constantly published “hit pieces”.
History is written by the victors if the American Revolution didn’t succeed the US would likely eventually gained independence but it would’ve been a commonwealth nation. The Revolution isn’t the reason why you have freedom today, Canada is free so is the UK. The world would look quite different than it is today but not as different as you might think.
> An Ohio farmer, Roscoe Filburn, was growing wheat to feed animals on his own farm. The US government had established limits on wheat production, based on the acreage owned by a farmer, to stabilize wheat prices and supplies. Filburn grew more than was permitted and so was ordered to pay a penalty. In response, he said that because his wheat was not sold, it could not be regulated as commerce, let alone "interstate" commerce (described in the Constitution as "Commerce... among the several states"). The Supreme Court disagreed: "Whether the subject of the regulation in question was 'production', 'consumption', or 'marketing' is, therefore, not material for purposes of deciding the question of federal power before us.... But even if appellee's activity be local and though it may not be regarded as commerce, it may still, whatever its nature, be reached by Congress if it exerts a substantial economic effect on interstate commerce and this irrespective of whether such effect is what might at some earlier time have been defined as 'direct' or 'indirect.'
Then it was misinterpreted in Wickard to permit nearly limitless power to Congress.
So yes, in a new Constitution we would want a commerce clause, and we would want it never to be interpreted in such a manner.
There are no divisions on this board, everyone is against the Power that is being exhibited right now. TD, Interactive Brokers and Robinhood have bent the knee to enrich the rich at the expense of many.
"What. the fuck. are you talking about?!"
Tesla's price-to-earnings ratio is 1660.
Why didn't TSLA buying get shut down? OH yeah, because a shitload of institutional investors have shares.
Hedge funds have treated the stock market like their own personal casino for decades. When the house starts to lose at their own game, due to their own greed, it's suddenly a problem?
Don't know what you're on about the house losing here. Brokers make a killing on any trade action. Heavy retail day trading inevitably falters and ends up creating tons of poor while money flows into the pockets of a few. See: the year 2000.
Bending the knee is not right, there must be some sanity in the market. They're trying to protect mom and dad from losing their shirts.
I'm happy to change my phrase, what would you call it when brokerages unilaterally help their market makers by changing trading terms to ones that favor one side. Halting trading is usually done by an exchange.
> Market makers have no interest in owning the stock. They have no interest in being long or short. They're like a furniture or electronics store. They match buyers and sellers, and for this, they make a slim profit margin. This profit margin is known as the spread. The reason they make a profit is because risk is involved. If they sell stock to you, but the price is so volatile that it moves up and up before they can find a buyer and equal out their book, they can lose a lot of money, and they can lose it fast.
> This is why discount brokers (Robinhood, Cashapp, Webull, etc...) have stopped allowing people to buy GME, and AMC, among others. They can't find a market maker to take your order. It sucks because retail made a lot of dumb moves, and bought a lot of shares they shouldn't have bought, and they're going to lose a ton of money, but it's not a conspiracy. [1]
[1] https://www.reddit.com/r/neoliberal/comments/l6qhhg/discussi...
[2] https://www.reddit.com/r/neoliberal/comments/l7bo3r/the_game...
Short selling absolutely is a zero sum game.
https://worldwaterreserve.com/rainwater-harvesting/is-it-ill...
Is it no longer rainwater if it touches a ditch? Maybe it's no longer rainwater if it touches a barrel. "Haha no States have laws against harvesting rainwater, only barrel water, you fools!"
* Increasing wealth inequality for several decades now
* older generations holding onto more wealth and power in society than ever before - with a large share of their wealth in the stock market
* Wall Street is seen as entirely unaccountable due to 2008 bailout
* Pandemic this year has basically been a huge wealth transfer from normal people and small businesses towards large conglomerates and the wall street hedge funds who back them
* Institutional trust is at historic lows, while online spaces become more and more regulated by those same institutions
So maybe GME stock is small potatoes in the grand scheme of things, but it seems like all of this has to reach a boiling point eventually. I'm not sure what that will look like, but violence wouldn't be surprising.
Everything I’ve seen from how the media covers it to how our financial institutions are forming ranks to condemn retail investors sickens me. It’s making obvious the informal lines of control the investor class use to maintain their wealth and their anger to have the average person attempting to play their game.
It’s like a giant metaphor for how screwed up our society has become.
We're pretty much there. Just try driving through the Midwest, or West in areas not subsumed by the mega-cities. It's sad.
I'm pretty lucky, I happened to like computers and got into a field that pays decently well for now. I have no illusions that that I'm not working class though. I watched my parents nearly get crushed in 07/08. I graduated into a economic war zone. Watching the banks get bailed out as I went to parties hosted by kids whose parents were losing the house. Seeing the kids who used to live in the house encourage everyone to punch holes in the drywall because fuck the bank.
I haven't forgotten what Wall Street did to us. The wealth inequality in this country is insane. The elites have been treating the working class like dirt for decades now.
With that context... those CNBC clips made me livid. Fuck the Wall Street propaganda. I'll chip in my little piece if there's a remote chance of taking down one or two of the vultures who are destroying this country with their greed. Much of the finance class that runs this country builds nothing, provides nothing, and tears down communities so they can shake a few coins out of the wreckage.
In talking with my friends who voted for Trump, this is the first time I've been able to feel on the page as them in a long time. There is class rage at play here. People are sick of this system.
When it gets to that, it seems to me that there's some serious anger built up.
> Increasing wealth inequality for several decades now
TV talking heads bemoan about this, but billionaires still remain the most admired people in this country (Trump, Musk, Gates, etc).
> older generations holding onto more wealth and power in society than ever before - with a large share of their wealth in the stock market
If there was anger at the older generation, we wouldn't have so many sacred cows regarding older people (social security and medicare). Average age of senator and house member has been growing over time. Hell, we just elected a 78 year old as president. How about before the revolution we just start with voting for younger people
> Wall Street is seen as entirely unaccountable due to 2008 bailout
Most people don't remember this. I'm surprised how rarely its actually discussed
> Pandemic this year has basically been a huge wealth transfer from normal people and small businesses towards large conglomerates and the wall street hedge funds who back them
This is mostly true but people don't see it that way. They're too busy yelling at people that refuse to wear masks or people that are forcing others to wear masks.
> Institutional trust is at historic lows, while online spaces become more and more regulated by those same institutions
Again, we elected a 40+ year veteran politician. House and Senate re-election rates are still 85%+ and we're ceding ever more of our authority to the [health] experts.
[0]https://www.washingtonpost.com/news/wonk/wp/2014/04/01/yes-c...
Okay, now include Jeff Bezos, George Soros, and the Koch Brothers :)
But in all serious, I'm not talking about anecdotal "admiration" of billionaires. I'm talking about literal wealth gaps[1]. The Bottom 50% of the US held 21% of the wealth in 1970, and the Top 1% held 11% of the wealth. 21% to 11%. By 2014 this had changed to 13% to 20%. Meaning the top 1% doubled its share of the wealth while the bottom 50% lost 38% of its share of the national wealth.
> If there was anger at the older generation, we wouldn't have so many sacred cows regarding older people (social security and medicare). Average age of senator and house member has been growing over time. Hell, we just elected a 78 year old as president. How about before the revolution we just start with voting for younger people
There is massive systemic momentum keeping these programs in place untouched as they are because of gridlock in the national government, I'm not really sure how their existence supports or rejects my point. I agree younger people need to be more active in the voting process and to elect younger people. I'm optimistic about several state-level voting reforms gaining momentum in the coming years to help this.
But at least at the presidential level, our arcane primary/caucus and electoral college systems give a huge advantage to older people living in rural areas. There has been increasing consolidation of young voters in urban areas which are severely under-represented in choosing the president.
And of course campaigns are financed by large wealthy interests that are mostly controlled by older generation who have an incentive to maintain the status quo. As long as we don't have congressional term limits, poor campaign finance regulation, and a massively gridlocked Congress, it's difficult for the state of things to change from what we have, which is domination by those lobbyists and a federal government which doesn't accurately reflect its populace.
> Most people don't remember this. I'm surprised how rarely its actually discussed
What is your definition of Most People? This comes up every time I've ever seen wealth inequality, accountability and government bailouts discussed (A lot in 2020, naturally).
> This is mostly true but people don't see it that way. They're too busy yelling at people that refuse to wear masks or people that are forcing others to wear masks.
It's concretely felt among those who have lost money, jobs and opportunities. Twitter arguments about masks can be present at the same time as the literal felt effect. Anyone who has followed economic news this year has seen the repercussions even if they weren't directly impacted. In my opinion you're underestimating the mood on this, but I'd like to see some data on it.
> Again, we elected a 40+ year veteran politician. House and Senate re-election rates are still 85%+ and we're ceding ever more of our authority to the [health] experts.
I already talked about federal government above^ But I think this has actually been an incredibly interesting year in that divergence from health experts became "mainstream". Tons of people getting Covid news from people on Twitter who called out studies being used by mainstream press and national governments to justify their policy decisions. I can point out a dozen random people on twitter who I trust more than NYT or Dr. Fauci to give me relevant, contextualized analysis of different COVID-19 strategies around the world. And most importantly, there's little social risk to this. I can tell that to people and they don't think I'm a quack. Half of them do are doing the same thing. Additionally, you're seeing protests break out across the world as governments try to lock-down and re-lock-down without legitimately strong evidence to back up their proposals.
[1] Figure 2.4.1a, https://wir2018.wid.world/part-2.html#article-39
Do you have a reference for older people having more wealth? There's definitely a smaller number of people holding more wealth, but I haven't read about older people holding more wealth.
Saying that there's wealth deficit for millennials/genx because boomers have accumulated more wealth later in life is a little handy-wavy.
What did the boomer chart look like when they were 20-35? What will the genx chart look like when they're 50-70? And what will the millennial chart look like when they're 30-70?
Edit - 70+ for everyone would be good too.
That's not what the chart I linked is claiming. The Boomer line goes back to when they were 35. Not sure what the data limitations were preventing it from going back further. Meanwhile all age data is shown for Gen X.
I'm not sure what you mean about the future chart? I guess we'll have to wait and see :-)
But anyway, this chart appears to answer the question: "which generation had more relative wealth in its early 30s?"
Leaving out boomer data from ~18-35 makes me a little more suspicious of cherry picking because that data could be similar. It may also show boomers gaining even more wealth, but if it's not available we can't know.
What does that refer to?
As of now, I believe the last explicit ban on that was repealed decades ago.
When buying property, you may have agreed that you were not acquiring mineral rights, water rights, etc. and you still might have problems even in the absence of a government rule against it. I don't know how legitimate such claims are or how often they're successful, but I know someone who got legal nasty-grams from a land developer for doing it, and the property owner backed off when they saw the papers they had signed again.
Also, I don't think most of them were bans. I think they usually just limited the extent of it. Some barrels collecting from the downspouts from your roof--fine. Building a huge reservoir filled by rain--not fine.
And they haven't been all repealed. A few states still have restrictions, such as freely allowing collecting anything that falls on the roofs of your buildings as long as the building weren't specifically to collect rainwater but requiring approval for anything else.
It's a fun show regardless.
Do you know how the Arab Spring started? A municipal official bullied a street vendor who was selling produce from a cart roadside.
https://en.wikipedia.org/wiki/Arab_Spring#Events_leading_up_...
"I believe we are on the brink of a terrible civil war (as I described in The Changing World Order series), where we are at an inflection point between entering a type of hell of fighting or pulling back to work together for peace and prosperity..."
It isn't simply that people can't buy certain stocks. Its an accumulation of events that increasingly lead people to believe that the system is rigged against them. This extends back decades. You have to have been living under a rock to have missed the rising tide of populist sentiment over the last decade, as seen in the pro-Trump anti-establishment contingent on the right, and the explosion of pro-socialist sentiment on the far left.
This Gamestop business probably amounts to a large bucketful of water, but at a certain point, a single drop causes the dam to burst. Kicking the can down the road by saying "surely people won't resort to violence over this" all but ensures that eventually, people will.
Please read this whole thread (https://old.reddit.com/r/wallstreetbets/comments/l6omry/an_o...)
This isn't about buying stock any more. This has become a battleground. The people in this thread are normal people fighting back for the first time in their lives.
We are near levels of inequality that caused the French Revolution to go violent.
KYC is fine if you are a multi-millionaire. You just delegate your lawyers and army of accountants to do it. But if you are a small man/company, it's a headache that can drive you out of business.
This financial restrictions has to be stopped. Financial freedom is more important than Freedom of expression.
The fenomenon is global by the way, but it still has been dominated by classic political tags on the media, like alt-right vs commie etc. A very few polititians broke that pattern the last 5 years or so, won'tt give any names, because all that labels I mentioned,
Agree. It is not like there aren't half a dozen apps that let you trade stocks commission free on your phone. Some may require you to have $500-$1k to invest, but seriously if you don't have that you should invest in a different way then treading individual stocks.
That said, I have no idea why Robin Hood should ban the trading of GME and I wish they wouldn't.
Also this isn't people 'asserting themselves financially', this is people mug punting on a stock that wealthier and more financially savvy people who got in early are happy to unload their stock to. There will end up being people quite relieved they didn't get to execute their plan to put their life savings into peak-price Gamestop.
I wonder how big the intersection is between people saying this now and people who said that the Black Lives Matter protests were violent (when they largely weren't).
> there is the deplatforming going on, people asserted their power financially, and now getting that removed too
It's not the same people. I keep seeing efforts to compare the deplatforming of violent and radical white supremacists that were using platforms to coordinate a coup to whatever other unpopular thing is happening today. I suspect that's an attempt to cultivate a little sympathy for people who have none for others.
Yes, large investment firms appear to be circling their wagons now and making moves through media partners and others to try to stop the bleeding. That's an entertaining enough event all on its own, it doesn't need specious comparisons to other recent events.
Best part? They are not even hiding it. Everyone can see the message.
A clever way to create a situation to pass mass gun control and limit those pesky civil liberties, no?
We usually don't see distributed market manipulation like this, but I wouldn't be surprised if a shitton of people buying GameStop to squeeze a short-seller breaks securities law. Does it feel good to get one up on a hedge fund idiot that was trying to manipulate GameStop the other way? Yes - but this is, at best, financial vigilantism.
This is text-book illegal activity.
There is no logical derivation of GameStop's financial books that would warrant the kind of stock price it has.
It is very very clearly market manipulation, and these exact sorts of manipulations are commonly prosecuted.
If only value investing was legal, the stock market look and operate very differently to today.
Edited to add: ultimately the law should be there to prevent fraud, not to restrict capital ownership and financial autonomy to a handful of cronies. You know, what they call a free market.
Incidentally, if this had been a properly regulated market to begin with, the price inflation would not have been possible.
I think it's very risky for the investors but I don't know whether the SEC has stuff that would cover this.
And even if there were a law, if you somehow have your thumb on the social media hype button then how would you enforce that law? Makes me think nothing unruly is going on, just a bubble that will inevitably collapse and make Musk etc. rich once more just like during the dot com era. Some people only know how to make money through theft and I'm not surprised we've found ourselves here after the last 4 years.
If i tell you GME has a new product line that will increase their wealth 10x - that seems like manipulation. If i say to you i'm buying GME and you should too, with clear disclaimers that this isn't financial advice but rather a meme - i don't think i manipulated you.
By "normal" definition manipulation requires some about of deception/etc. I don't think "anyone" (within obvious reason) is being manipulated here. It's very clear what the community is buying into.
So i come back to what "manipulation" is defined as in the stock sense. Is it meaningfully different?
Is it? If I have the money to put a short squeeze on someone by myself, with my own money, is that illegal? Isn't that what some people do all the time with smaller numbers?
(honestly asking)
Pump and Dump schemes have been illegal forever. This is no different.
Furthermore, if you're arguing that it's illegal because it's done in group, then I don't understand what legal basis you are using for that. I also don't understand why you'd say it's "very different" from doing it on your own. I can't think of anything else off the top of my head that legal to do on your own, but illegal in group (some things are more illegal in a group, but that's not what we're talking about)
Hedge funds are so used to being the only tool on the block, they overextended, and for the first(?) time the retail side is fighting back.
The professional investing world have so many advantages over main street that it's not even funny. They've got everything from frontrunning, colocation, free money, and leverage(10x), 'unsophisticated' investors only can dream of this. And when they do go belly up, tax payers bail them out, meanwhile the bonus machine keeps churning.
But it is funny and good when main street actually catches them with their hand in the cookie jar.
How is this different from Bill Ackmans attack on Herbal life? https://www.youtube.com/watch?v=bQc6L4ieMwo
How is this different from all the FUD Tesla has gotten over the years? Which CNBC has happily broadcast for years. https://www.youtube.com/watch?v=a-YgFDAroeI
That was shorting. That is LEGAL.
> How is this different from all the FUD Tesla has gotten over the years?
Tesla was specifically investigated by the SEC when it tried to push short sellers out - and they paid an undisclosed fine for that ILLEGAL activity.
Is there a requirement for stock prices to be logical? Wouldn't that would ban all sorts of hft trades?
Why is one okay but not the other? Right because rich people with connections are the ones being burnt right now.
In other words, the capital firm that got short-squeezed by the idiots at /r/WSB were also doing something illegal. It's not the case that the short is legal but the longs aren't. Alternatively, if the argument is that /r/WSB isn't market-manipulating, they just think the stock is undervalued, then the hedge fund can use the same argument. "We think this stock is overvalued so we shorted it" is how they'll explain it to the SEC.
And that's not an invalid position: GME has been suspiciously overvalued way before any of the parties involved started holding positions. It's a retail-heavy business in pandemic season with multiple year-over-year same-store sales cuts. What that means is that, for each one of their stores, on average, they sold 30% less product in Q3 2020 than they did in Q3 2019. And even if you think, "oh, that's just the COVID economy, they'll be back"; Q3 2019 sales were already 20% down from the year before. This is a company nobody wanted to buy games from even before a novel coronavirus decided to close a good chunk of their stores.
The fun fact about that above explanation is that it provides plausible deniability for someone trying to juice the market in a particular direction. Hell, if /r/WSB hadn't caught the hedge fund with their pants down, they probably would have gotten off scot-free. However, the financial vigilantes dumping fat stacks into GME don't have the same kind of excuse - they explicitly coordinated in public fora to manipulate stock price, so it's an easy target for an SEC that really doesn't get the budget necessary to prosecute the complex kinds of financial crimes they're tasked with.
So, from a legal perspective, both parties are in the wrong. From an enforcement perspective, /r/WSB is a soft target.
On top of that, you have the beginnings of a takeover by a successful e-commerce CEO and potential for real turnaround.
That would have been enough on its own for WSB longs to jump in, but then the hedge funds shorted over 100% of the stock making it the perfect powder keg for this explosion.
What can be market manipulation is to collude with others to move a stock price not because you believe it is worth a different amount, but because you predict others will react to the movement you create. That applies to collusion involving shorts (bear raids) too. Proving the collusion and the artificial price bit is the difficult bit
Hedge funds do this to each other every day. Why is it suddenly wrong when it’s retail investors on the other side of the trade?
I truly do not understand the naïveté of arguments like these. Only the wealthy should be allowed to game the price of assets and rip each other off?
Do you have a source for this?
For eg, here’s an insane one from last fall on negative oil futures:
https://www.bloomberg.com/opinion/articles/2020-08-04/some-p...
(this is why you might want to... hedge your shorts.)
I agree it's somewhat suspicious if it happens all the time, like this has happened enough times why haven't you designed your infrastructure to handle surges more gracefully, but for the most part I think it's legit.
If we assume intentional malice every time a website goes down, that's a dangerous precedent for the tech industry.
The corporations I've worked for had nothing to do with finances but managed to have several major outages I've sat in on that have lasted as little as 2 hours and as much as 48 hours. They were pretty much always network or server related, sometimes unrelated to the business entirely (a T1 line got cut accidentally by the city in one case).
Those corporations didn't want to go down, and often lost some serious money as a result. I imagine Coinbase loses out on a good amount of money every time they go down as well.
I also expect it's at least somewhat overreported or only a partial outage as well. One person has an issue and announces it and everyone just repeats it without checking themselves. There was at least two instances when I saw people say Coinbase was down and I tried logging in myself and had no issues.
Don't compare deplatforming and this.
Deplatforming is akin to throwing a customer out of the grocery store for doing nazi salutes in the vegetable aisle.
What Robinhood is doing is akin to throwing a customer out of the grocery store because you don't agree with his choice of vegetables.
> throwing a customer out of the grocery store because you don't agree with his choice of vegetables.
There, fixed for you.
There are millions of users of this app, and it’s easy enough to verify - why the skepticism?
I have little doubt that it's happening, but the twitter link was not substantive in comparison to:
https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
Over the last 8-10 years online activism/mobs have increasingly been co-opted by those in power as a means of astroturfing. I think it is totally fair to be skeptical and ask whether that is going on here.
One thing is for sure. Even if this is organic, it won’t be next time. After seeing this why wouldn’t some hedge fund orchestrate something like this to manipulate the market?
But it would be a mistake to not think that some hedge fund manager, oligarch, etc. somewhere is paying attention and thinking about how they might be able to co-opt.
Listed companies want nothing to do with this.
Restaurants like customers, but imagine a stampede of 1000 people rushing through the doors, it's not what they want.
The populism here is getting ridiculous, I don't think most people have any understanding of what's going on.
Given that a lot of people egging the plebes absolutely 'know better' you have to wonder what their motivations are.
People have found an unpopular target (large funds, still a lot of dislike built up over the 2008 recession, current inflated housing markets in many cities) and there's a swing in popular emotion and yes, public figures have egged it on at this stage, but it's not really a protest against donald trump's deplatforming or liberal elites that some people are trying to make it out to be.
Plenty more people willing to take risks on that among the middle class when the stock market is the only way to even keep the value of their savings anyway. My savings account has an actual interest rate that was cut from 0.50% to 0.01% this year, whereas 2020 excluded, inflation has been around 1% in my country. Many of my friends in similar situations have gotten involved in stocks under a similar background and a not insignificant number of them are operating under logic like "90% in long term stocks, 10% for whatever crazy long bets" (like which airlines are going to come out of this, whatever stock reddit is pumping at the moment, bitcoin or companies like AMD a few months ago which they're like "I use this stuff and so many insitutional investors are completely clueless on the market dynamics").
So you get people with "stupid bets" funds, and an idea that gets momentum (The shorts cannot not buy, let's outwait them), and this is the result.
This is why academic fields involved with "identity politics" are in the same class as "scientists" involved in climate change denial and questionable nutrition/smoking studies. Once there were academics involved in "critic theory" which more or less used Marxist level of analysis. A thorn in the side of the establishment. A branch within this field took the language of Marxism but replaced capitalist/working class with identities(e.g white men/minority women). Ofcourse those in power have supported this branch of critic theory and have gotten to the point where they even use it as a wedge issue. At this point this is the orthodox branch of "critic theory" and it's not because of intellectual merit.
I think the biggest thing that the lay-person doesn't understand is that thinking of hedge funds (and other proprietary firms), banks, exchanges and ATS's, retail brokerages, the SEC, and lawmakers as all being either one entity or all being on the same side is just absolutely incorrect. They all need each other, but by and large they are not friends.
Some claims I've seen that are just comical to me:
"The SEC is going to step in to save hedge funds"
The relationship between regulators and proprietary firms is particularly cagey. The SEC constantly audits them and asks, in my ex-professional opinions, extremely annoying questions about even the most innocuous trading activity. (Annoying because they take so much time because frequently, not knowing what the firm is doing, they ask questions that internal tooling is just not prepared to answer, thus requiring custom development; and annoying because some of them feel like they're just the SEC trying to use their authority to conduct audits to learn more about the industry). But I digress. The SEC is absolutely not going to step in and do a prop shop a favor. Their concern is with the efficient and accurate functioning of the equities market. The fact the GME, a company with no news releases and no change in their (honestly dismal) fundamentals, has experienced such absolutely insane volatility (there are large numbers of options contracts with less volatility, for crying out loud!) is absolutely a concern for them. The fact that "what is the price of GME right now", asked to a person who looked at Apple Stocks app yesterday but not yet today, is "somewhere between 10 dollars and 1000 dollars", is absolutely a major cause for concern to them. Equity markets exist to discover pricing and transfer risk. It's hard to transfer risk if you don't have any idea of the pricing!
"retail brokerages are cancel culturing the GME rocketship!" and similar rhetoric, especially with aphorisms suggesting that the SEC or shadowy "the rich and powerful" are pressing them to do so.
I really, really doubt it. Retail brokerages toe a very fine line, because on one hand they obviously really want people to store their money with them (e.g. Schwab makes like 80% of its operating revenue from interest on uninvested cash balances) and also to use their trading services. But at the same time, they are taking as clients some of the most dangerous creatures known to man: retail investors. They're dangerous because they have so little clue what they're doing (which is like, fine, you know? this is no judgement on them) that there is a very real responsibility places on the retail brokerage to protect them from themselves. There's a reason you have to apply and be approved to trade options, and there's various levels of approval for various risk categories too. You need at least 25k in balances to be a pattern day trader. There's precedent for brokerages limiting access to some ETFs that expose equities investors to the kinds of leveraged risk that is more typical of options. Brokerages have been sued - successfully - for not doing their fiduciary duty to educate investors about risk.
I am absolutely unsurprised that retail brokerages are limiting trading of GME, AMC, etc. I can already see the lawsuits coming when this thing folds - "Why did you let me trade GME given the volatility, especially after the SEC even made a statement about it? I am a retail investor and your client, and cannot be expected to know better, and you failed in your fiduciary duty to me." This is absolutely something a retail brokerage would do to protect themselves from regulatory scrutiny.
(I had more to vent, but this post is already huge so I'll stop here. You get my gist, though.)
I didn't read any such claim in my German and Scandinavian news diet, is this a US-only thing? Here, the consensus seems to be that what happens is a somewhat well-deserved embarrassment.
I think creating and using decentralized alternatives beyond the control of the state and affiliated corporations is a much better tool for creating lasting change. Violent revolutions tend to just replace (or restyle) the ruling class without significant changes to their behavior.
They do realize that and are confident that they will win. In the end it boils down to that.
In here we have a case of the wrong people succeeding at a game that de jure is supposed to be open to everyone but de facto is only open to the right people.
This is a dangerous thing to say in 2021. Merely suggesting violence is an option or eventuality could be considered incitement and get you banned from every major internet platform.
Let's punish hedge funds - fake outrage
Stocks are climbing up - fear of missing out
Restrictions on platforms to prevent people from falling into this scam - fake outrage
Scammers' freedom of speech is in danger - fake outrage
Looks like we entered new era where fake outrage on social media (Reddit, HN and Twitter) can make scammers a lot of money.
I am surprised that HN community is falling for this scam.
Please don't post like that to HN. Instead, either post comments that are unambiguously within the site guidelines to begin with, or be careful to disambiguate your intent. Otherwise we end up in flamewar hell or something even worse than flamewar hell.
https://news.ycombinator.com/newsguidelines.html
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
(dang: Thank you for all your moderation. This is a meta-comment, not a complaint.)
On an unrelated note, start preparing yourself for a neo-feudal society now and you will still live well. You will own nothing, and you will be happy.
What would it mean to prep for this? What would a neo-feudal society actually look like?
1. stop hemmorage
2. lose their edge in market (buying order flow from RH)
3. go to court & hopefully settle for less than their AUM.
All in all, this seems like a desperate move. Every securities lawyer is celebrating right now because they have a home run case.
Either way, Citadel is screwed but the HF managers probably decided its better to call it a day at -30% than over -100%.
They are a private company and you aren't allowed to complain, something something American law.
Freetrade is the only platform that was still allowing trades. I thibk i will stick by them, despite them taking saubscribtuon payments
the narrative that the evil corporate oligarchs are ruining peoples lives is certainly rooted in truth, but it is not true enough that people need to die about it.
these people with their FREE stock trading platforms browsing reddit all day with their $500-$2000 smart phones AND computers, feel like life is unfair. they feel repressed (because there is certainly >0 repression occurring), but have no idea how deep this rabbit hole is. the single mothers with 4 kids arent on WSB. the mentally ill, the 75 year olds that lost pensions, the drug addicted, the slumlords, the victims of being poor in ghettos - none of the people with real problems are WSB players.
once people with actual problems get involved, all these kulaks are gonna realize how much they have to lose.
where have I seen this before?