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I have been seeing people on WSB claim that the stock price shown on the ticker is "manipulated by the hedgies" and asking when the real stock price is going to finally appear. This is pretty similar to Q people asking when it will be revealed that 45 is still the president. That one absolutely fits my definition of "wild conspiracy theory."

In terms of more popular accusations of wrongdoing among brokerages as they shut down the buy side, that seems plausible but hard to prove coordination unless someone recorded the conversation in a smoke filled room. If there was big money to make and a way to get away with it, I assume most corporations would engage in illegal activities.

I’m certainly not denying there’s plenty of misinformation and far fetched theories floating around. I think there’s a big middle ground between “accept every half brained idea on Reddit” and “take a 300 word corporate blog post at face value.”

It is a fact that the relevant ticker symbols were hidden in Robinhood UI during the restrictions. This could simply be because the UI always hid symbols with restrictions, but that would be a strange decision in the first place (why not just always show the tickers info?) and in context is another oddity worth looking into.

My suggested middle ground is, call for investigation. Maybe there’s no smoking gun but if, for example, it was uncovered that a huge amount of institutional short covering took place during the restrictions that would be more hints that foul play occurred and justify more investigation.

In the future, if we don’t get answers , well connected players can manipulate markets by blaming opaque clearing house requirements unless more transparency is added.

My concern is that by being too dismissive of calls for investigation, we lose the political steam to at least try and get better answers that we deserve.

> I have been seeing people on WSB claim that the stock price shown on the ticker is "manipulated by the hedgies" and asking when the real stock price is going to finally appear. This is pretty similar to Q people asking when it will be revealed that 45 is still the president.

I don't think it's fair to draw an equivalence between the two theories.

It's pretty easy for a large market participant to impact the bid/offer when there isn't much liquidity, especially if the natural buyers are restricted from trading. The price moves because of supply and demand.

The WSB perspective is perhaps a bit uninformed, but it's not particularly bizarre (unlike the QAnon garbage). They're just asking "when will the price reflect our pent-up demand rather than artificial supply?"

Unfortunately, the reality is that prices get set during these moments of absolute craziness. That's why you sometimes see hedge funds reload after hours after an earnings miss on one of their long positions. They want to absorb the supply so the stock doesn't crash lower.

Look at GME today. The price moved a couple of percent even though nobody has the slightest reason to believe that GME stock is worth this particular price. Some say it should be higher due to flows around positioning, and others say it should be lower because of fundamentals.

> there’s more than enough conflict of interest and unprecedented behavior to call for an investigation

Fair. I don't think anyone is reasonably calling for investigations to be halted. At the very least, there is public education required.

But there is a difference between saying "whoah, that's weird" and the combination of trading on it, encouraging others to trade on it, spreading one's hypothesis with zero facts and calling everyone who points out the issues with one's argument [1] a shill. There was a lot of the latter.

[1] With respect to why "fully cleared non-margin cash accounts" got restricted, it's because the bottleneck was clearing collateral. Not Robinhood's margin risk. Clearinghouses don't care about how a trade was financed. They care about the risk of (a) the broker going under and (b) the collateral being insufficient to settle the trades. When their risk limits get hit, the broker has to reduce flow and/or pony up.

I was sceptical at first too because of the fact that they only restricted buy orders, but it makes perfect sense from the perspective of a broker in this situation. Thomas Peterffy explains it pretty well in [1], basically if you have a short squeeze and the supply is limited because of people holding their shares, the stock would basically go to infinity. Those that sold call options are out of business and the brokers have to take the counterparty risk and are themselves insolvent as a result. [1] https://youtu.be/kV_P8wnY854

> if you have a short squeeze and the supply is limited because of people holding their shares, the stock would basically go to infinity.

Whoa whoa whoa. This is a slippery slope argument.

If everybody is holding their shares as in your scenario, then the only way to buy shares would be to get them from a short seller. Market-makers typically have an obligation to maintain continuous and two-sided quotations, but there are exceptions to this rule in mitigating technical or legal circumstances (solvency risk seems like it would be a valid exception).

If nobody is selling and everyone is buying, the price ought to go higher. That is what happens in unadulterated markets. But the price won't go to "infinity." Rather, it will go to the level at which long holders decide the payoff for selling is irresistible. They will begin to sell. A new price will be set.

It is true that some hedge funds (including Melvin) would potentially have been ruined if the natural buyers had been permitted to bid for the stock. However, exchanges don't halt securities just because a hedge fund is about to go under. That is a fundamentally unfair practice. Hedge funds have failed in the past, too; not every market participant is Too Big To Fail. Their PB would be left to cover the short position, and would be responsible for whatever loss remains after the hedge fund goes broke.

>Conspiracies happen so frequently on Wall St that “conspiracy theories” should be closer to a priori assumption than irrational fringe ideas.

This is not good logic. There may be a lot of dodgy stuff going on and there may even be conspiracies, but even if you accept that there is a conspiracy that doesn't make it any more likely that the conspiracies being peddled by WSB are correct.

It's like I pick a card out of a deck, I tell you my card is 7 of spades but I have a history of lying. Most likely, the card isn't the 7 of spades. But that doesn't mean it's likely that the card is the 9 of diamonds. That's what this logic is saying - that it must be the (often clearly wrong) assertion simply because the only specific alternative is from someone you don't trust.

What you described is called "ad hominem" fallacy.

It's absolutely not, I know nothing about the guy on WSB, it's not an attack against him to simply say that the average person on the internet claiming something extremely unlikely is just most likely lying.

What I was referring to is this:

"I tell you my card is 7 of spades but I have a history of lying. Most likely, the card isn't the 7 of spades. But that doesn't mean it's likely that the card is the 9 of diamonds."

I suggested that such reasoning could, in a nutshell, be summarized as "ad hominem".

Nobody is saying that we should not be investigating Citadel or Robinhood or the hedge funds. The problem is that people are treating these conspiracy theories as facts and acting on this misinformation. Many people got duped into buying GME at a heavy loss. Others are going to abandon the stock market altogether because they think it's rigged.

I hate to respond to this "rigged" word but the markets are rigged except not in the way you think. If you try to bet on value plays you will never succeed. If you bet on the stocks the hedge funds support, you will succeed. Go against them and your account will just die. Learn to see what they want and that's how you join the house. It's just hard for a regular person to understand that.

If you pick and choose where conspiracies happen based on your political slant, then you aren't thinking critically. By the same level of rationality that Robinhood took action to protect Citadel's positions, China could have released the coronavirus because it would have a greater impact on freer countries.

Conspiracies happen everywhere, all the time, but you need to avoid applying a bias because of political implications. I highly doubt there are more conspiracies happening anywhere in the private sector than in most large governments.

Thank you so much for spelling this out. I have no dog in that race, but with everything you said, and politicians from AOC to Ted Cruz calling for an investigation, calling the allegations of wrongdoing "conspiracies" is simply being in denial.

Neither AOC nor Cruz would benefit from saying there's no need for an investigation. And Elizabeth Warren, who you'd think would be most on top of this, published a list of reasonable questions and people immediately attacked her for defending the hedge funds.