Comment by r00tanon | Hacker News Reader

Comment by r00tanon | Hacker News Reader

There is a regulatory framework, enforced by the SEC, that prevents firms from collaborating on trades in attempts to manipulate stock prices.

When an army of retail investors openly collaborate on messaging platforms to manipulate a stock's price, essentially a crowd-sourced "pump and dump," it falls under SEC enforcement. A retail investor can still be prosecuted for violating SEC regulations, such as using insider information, when trading.

This is yet another example of unintended consequences with regards to social media and its power to concentrate misinformation and incite mob behavior. I'm sure the vast majority of the people on Robinhood trading up Gamestop (GME) have no idea of the potential legal harm they may be exposed to, not to mention financial harm, even though the T&C's they signed on opening their accounts (especially margin accounts) almost certainly spelled out those risks.

Robinhood business model is the canary in the coal mine.

It's interesting because none of what you say is true. Hedge funds definitely collude and not behind closed doors, but also out in the open. Hedge funds announce their picks and go from hedge fund to hedge fund explaining the decisions they made and why they made the stock pick they did. Thousands of analysts in the stock market influence the stock price based on what they see as future investments to be made and are very vocal about it. Wall street bets is no different, reddit just seems to have beat them at their own game.

Read this. https://www.investor.gov/introduction-investing/investing-ba...

If you happen to work in the industry, you've probably had to certify compliance with SEC regulations to stay employed.

How are users on wsb openly discussing GME any different than huge banks with analysts saying “we rate GME as a strong buy”? Also, look at some of these hedge funds and their leverage—-a $3B fund with 10x leverage is going to be able to “manipulate” a stock price with big orders in almost any way they choose, and they do it in secret!

Now I don’t personally think GME is worth $300/share, but the people buying it think they will be able to sell it for more, and that is their right. They aren’t being “tricked” with deliberate misinformation, there are indeed a lot of shorts still out there that will eventually need to cover.

The combination of unique trading features offered as part of Robinhood's business model combined with the social media and relatively inexperienced investors acting in concert is prone to unintended consequences for both the business as well as the investor. That was my main point. Here's a more comprehensive article on the subject. https://www.cnbc.com/2021/01/28/gamestop-now-called-a-pump-a....

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