There's been some speculation that what WSB are doing could be market manipulation or otherwise illegal. The fact that this statement only mention retail investors in the context of protecting them makes me suspect that the SEC's not going for it.
It is possible for one group of retail (lets say the original WSBs crowd) to take illegal action that harms other retail investors.
Taking action to protect the mass of retail does not mean that all of retail is immediately in the clear.
> In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity.
"Market participants" here is referring to retail traders. Don't make the mistake of thinking that just because you're the little guy, you're exempt from the law. It's like how the capitol rioters were sure they were on the side of America but the FBI (and half of America) sees things very differently.
A lot of government regulation is about protecting the little guy from other slightly more unscrupulous little guys. "The public" is not a monolithic entity - folks can and do screw each other over even when purporting to be part of the same mass movement.
Is going on CNBC and talking about the strength of a company that you invested in market manipulation? Before this blew up you certainly had more reach.
Is posting "research" or holding a conference call and telling people a company is garbage while you have the company shorted market manipulation? What about when you short a company and sell a ton of shares to induce panic? What about algorithms that are created to trade shares to reach a certain profitable price based on internal holdings/analysis?
Here's another thing - if WallStreetBets was incorporated into a hedge fund and took a huge long position is that market manipulation? It seems to me the main difference is that they aren't behind closed doors talking privately in a legal fiction called a company that is really the problem here...
You have to define what you mean by manipulating the market and apply that equally under the eyes of the law. The fact that this was done publicly makes it all the more interesting. Had it been done behind closed doors (like so many things are on Wall Street) it would have been an open and shut case, but it wasn't.
So sure, let's say it's a market manipulation event. Ok. Can you tell me what isn't a market manipulation event?
[0] - https://www.sec.gov/news/press-release/2013-159
Edit: litigated to settled
Just have a "dinner conversation" about it.
Just like you and a few hedge funds can get together and collectively short GameStop and other companies... as they are doing now.
There's no rule that I know of that says only one entity can make a specific investment.
-edit-
Don't forget that hedge funds ARE on the other side of this trade. WSB and retail do not have the ability to move this solely on their own. I wonder how long until they're on CNBC/Bloomberg "we saw a great opportunity in the market and executed our position well". If it's market manipulation - was it market manipulation to even have heard about WSB and entered the trade? WSB is a nice scapegoat for the real money that caught these hedge funds in a bad position. Didn't take long before WSB became alt-right, white supremacist, market manipulators... etc.
This would be illegal I think.
But as soon as a bunch of the dreaded "retail investors" start doing it in the open, Wall Street calls on K Street to save them.
If I walk into this room and yell “Everybody buy GME to screw the hedge funds” am I engaging in market manipulation? There is no formal or informal agreement to do so if someone says “ok great idea” and go buys GME.
Besides how are they going to enforce the laws? Match IPs to ISPs and extradite all the thousands if not millions of people across the world who bough stock? If a fine is issued do they just divide it up by the number of people who commented in wallstreetbets and held stock? Or is every person fined individually?
How is this worse than the sell walls that hedge funds use to deflate a share price?
The truth of the matter is the SEC dropped the ball. They were probably too busy having a wank while on pornhub [0].
In December as soon as the share price started to rise GME was placed on the NYSE threshold securities list for large numbers of “failure to deliver”. Keep in mind it had entered this same list earlier in the year. Followers of wallstreetbets were suspicious and believed that illegal naked short selling was occurring so they informed the SEC [1].
Then a few weeks later the stock rose 10% then 50% the next day leaving the call options ITM on a Friday afternoon. What did the SEC do? They sat on their hands over the weekend instead of suspending trading of the stock and performing an investigation.
[0] https://abcnews.go.com/amp/GMA/sec-pornography-employees-spe... [1] https://www.reddit.com/r/wallstreetbets/comments/kr98ym/gme_...
I'm not an expert and am rather dumb.
What do you think the differences are?
Differences:
* One hedge fund versus a multitude of investors
* Owning all the securities vs only a portion
The similarities are:
* Intentionally buying all the stock to cause a short squeeze
* Explicitly recalling borrowed shares to cause a short squeeze
To be clear, I'm not arguing that what wallstreetbets is doing is illegal but something fairly similar is. I thought an actual example of market manipulation was relevant to the conversation.
The Falcone case is much more complicated because it was a single person buying the entirety of the market. Much weirder mechanics at play. Squeezes are always carried out through the self-interest of uncoordinated parties, be they retail investors or firms.
> if WallStreetBets was incorporated into a hedge fund and took a huge long position is that market manipulation?
So your main point of contention with me for bringing up unrelated information was already brought up.
it's interesting- it reads as though harbinger bought bonds and demanded delivery. can you imagine it! asking to take possession of the thing you just bought is painted as manipulation!!!
And all of this stuff has happened before, it happened in 2000, lots of people went on bulletin boards, and some ended up going to jail for market manipulation. The difference between doing it publicly and privately is huge, that is a necessary component of market manipulation (generally speaking, market manipulation isn't very effective if you don't have anyone to baghold for you).
If a bunch of people feel like it's a good idea and want to join in, then it is what it is.
Misleading stuff is being posted on wsb. And some people are likely not being honest about what they are doing (i.e. telling people to buy when they are selling). This is how pump and dumps work. If you buy a stock worth $5 for $300...your only option is to sell to someone who knows nothing. That is what it is happening now.
The stuff about hedge funds only came later, it is funny that people are citing this now (as ever, financial markets and ex-post rationalisations...human reasoning is amazing). All this stuff about revolutions against bankers, and the wealthy, and politicans leaping onto it...lol. The funniest thing about this is that people who have the least knowledge believe they need protection the least...and when this blows up, they will still say it is rigged. Oh well. Plus ca change.
I'd argue that those things aren't fundamentally different than anything going on via WSB (assuming no bot accounts saying buy buy buy or something similar).
I think the difference is that for these other items there's nobody around to measure the impact.
There aren't bot accounts. There are people telling other people to buy who are probably selling (there is a reason why DFV isn't posting anything but account updates). No conpsiracy theory around bots, the people manipulating the market are there, they are posting on a public forum. It doesn't get more cut and dry.
Then prevent people from buying stocks in groups. Mutual funds, ETFs, etc... all of these abstractions on abstractions, we can throw them away. The more abstractions we throw away, the closer we get to what all this should actually be meant to serve; people.
https://www.sec.gov/files/Market%20Manipulations%20and%20Cas...
The idea that there has to be behind the scenes coordination (i.e., non-publically available communication/information) runs pretty clearly through all of them, but IANASEC
Strange question, what's the bar for market manipulation? For example if a company took out debt to buy their own stock in order to drive up the price would that count?
The whole fucking market has been manipulated by various parties this year, most notably by the Federal Reserve, yet there’s only a moral panic when some firefighter from Long Island gets a little taste?
[1]https://www.bloomberg.com/opinion/articles/2021-01-26/will-w...
The mob seems to have largely formed itself.
And required the coordination of a 18th century war to pull off. It's one thing if this was "led" by an individual, organization, etc. but it wasn't. It was the wisdom of the crowds who played by the very same rules that the hedge funds play.
> You might decide that this kind of manipulation is OK due to it's stated goals
Where did every stock holder publicly state their case? If Jim Cramer says "i think you should buy AAPL" and everyone does it, is that manipulation?
> How can there be any question about it?
Easy. If it were illegal, who would prosecute?
I understand that if someone publicly give you a financial strategy that is sound and it is not based on a ponzi then it is a recommendation.
"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."
From https://www.sec.gov/investor/pubs/regsho.htm.
It's an open question whether this case is more of a natural occurrence or "a scheme to manipulate", given that it's all randos who found a Schelling point and are now hyping each other up. I think it's fair to say it's unprecedented.
it would be quite different if they were to coordinate the sale moment or the sale prices; for the latter, I don't see much coordination beyond memes, for the first SEC might have a point and there's many posts walking a thin line suggesting friday will be the day.
however this is a billion dollar operation which include many players and wide interference by multiple actors ranging from unclear to blatant business relationships; I wouldn't be surprised by anonymous plants joining wsb trying to stir up a movement and coordinate sales/prices to create a solid case where there is just a feeble suspicion; and as a matter of fact there has been quite many fresh accounts (either low karma, no posts in a long time, no posts at all etc) joining in just to propose to hold until a certain price or date is reached.
Discussing buying stock on a public forum is certainly not devious, and although the goal is to cause short positions to lose a bunch of money I would argue that it's neither illegal nor wrong.
People keep saying that the hedge funds 'knew what they were getting into', and are therefore fair game. But they could well have thought that they were protected by this regulation. It's unlucky for them that they got squeezed by loveable retail investors rather than another hedge fund that the SEC would have no qualms about prosecuting.
In the debate between the free market vs regulation, the worst possible outcome is to have people thinking they are protected by regulation when they in fact aren't.
Potentially tanking your firm on a gamble seems reckless and totally ignores the fundamentals of trading.
We should strive for equal rules and justice for all, rather than first deciding how likeable or sympathetic the parties involved are and then changing the interpretation of rules to favor the group we perceive as being inherently more deserving of our favoritism.
Remember, it's perfectly legal for a hedge fund to open a short position, and then release a big expose of the company that tanks its stock price.
For a prominent recent example: https://hindenburgresearch.com/nikola/
I think they forced themselves to buy it by taking the short position they did.
Tell me: what do you think Melvin's intentions were for shorting a dying company's stock for several billion?
So why are you getting mad that retail investors are engaging in the same practices that hedge funds can do with impunity?
On the other hand, in these discussions I have seen a bunch of assertions that what the shorting hedge funds or HFTs are doing is "market manipulation" - now that is an attempt to redefine market manipulation to something entirely different than what it is/was.
Just add gig work to anything and rules no longer apply.