12 ms·

could you elaborate on legality of this?

by aerioux 11y ago

droopybuns 11y ago
This is basically what happens with company 401ks. It is totally legal, although op claims about getting out "quietly" are kind of absurd. The sell orders are available for everyone to see (and bid on).
- patio11 11y ago
  This is basically what happens with company 401ks. In the reality most of us inhabit, a 401k is a type of company-sponsored retirement account. The accounts are allowed to invest in a variety of securities, most commonly in one of a limited selection of mutual funds. There is no circumstance under which 401k contributions materially move the market. If I sound mildly put out in this comment, it is because HN comments about the stock market often make very confident claims which bear only the most tenuous connection to reality. It's as if someone on a Wall Street message board had asked "Why is Chrome faster than Internet Explorer?" and received the answer "Because it is written in Unicode." And outside the scope of this particular comment, often times responses like "Chrome is not, in fact, written in Unicode. Unicode is an imprecise name for part of a family of methods of encoding text in various human languages, not a programming language. A substantial part of Chrome, including most of the rendering engine, UI layer, and network stack is written in C++; Chrome also makes heavy use of other languages internally. Returning to the question of why Chrome is fast: this is less about language choice and more because substantial effort has been taken to ensure that Chrome is fast. 'Fast' is a complicated topic in browsers. In terms of user-visible performance, one thing which makes browsers seem fast is the Javascript runtime. Chrome uses V-8, a run-time built specifically for Chrome at the cost of hundreds of millions of dollars, which is optimized for speed." are met with "Sure that's what you would say IF YOU WERE A GOOGLE SHILL."
  - FeepingCreature 11y ago
    Also, Chrome is about three times slower than Firefox in asm.js performance. /missing-the-point
  - droopybuns 11y ago
    I guess I could have explained that better. What I was trying to express is that money managers who are working with very large sums of money have difficulty getting out of very large positions. Some companies have 401ks plans that are working with very large sums of money. This problem doesn't apply to all 401ks. This wasn't the best example. Um... not sure what to do with your comments on the shill ecosystem.
    - harryh 11y ago
      What is a circumstance in which the assets under management for a company 401k would need to get out of a very large position?
      - droopybuns 11y ago
        The fund manager decides to invest elsewhere? Here is Fidelity's Contrafund summary: https://fundresearch.fidelity.com/mutual-funds/composition/316071109 https://fundresearch.fidelity.com/mutual-funds/composition/3... FACEBOOK INC A BERKSHIRE HATHAWAY INC CL A WELLS FARGO & CO ALPHABET INC CL A APPLE INC AMAZON.COM INC ALPHABET INC CL C VISA INC CL A STARBUCKS CORP NIKE INC CL B % of Total Portfolio 31.30% I guess a worst case scenario is one of the core assets went out of business. The asset portfolio doesn't stay static- if you look at the site above, it says that these are the assets as of a specific date.
- Mikeb85 11y ago
  You buy one big block, say 50% of daily volume. Then you move the shares around, in the next few sessions sell smaller blocks through multiple brokers. The key is to buy enough volume to move the price, not so much to make exiting the position difficult. I don't do things like this, but I did see it on lower-liquidity exchanges all the time, and used to trade in small caps where a $10K bid could move the price ~5%... And if I was motivated to sell, the best bet was to break it up into smaller pieces, and sell over the course of a session or two. If daily volume is 50K, and I want to sell 20K, I can't put it all up at once. Also, on a typical exchange like the NYSE, HKex, Euronext Paris, etc..., the volume is so large you generally don't even bother to look at who's buying or selling. On smaller exchanges you're constantly glued to the screen, looking at the sellers, trying to guess what they're up to. I imagine company 401ks are managed by in a fairly conservative way. Big positions in fundamentally solid large caps, holding for a long time, selling only when you need to cash out or the price moves beyond a certain range. Traders basically manage their trades in the exact opposite fashion - short, extremely speculative trades, no regard for fundamentals, on smaller exchanges you mess with people's emotions, etc...
noja 11y ago
hedge funds
Mikeb85 11y ago
There's nothing wrong with it, as long as you're influencing prices only with your own funds, not conspiring with others or trading on information which you're not supposed to trade on. On smaller exchanges with less liquidity you see it all the time. If average trading volume is 20k shares, buy 50k and you will move the price. Then sell in small blocks, maybe through multiple brokers...
lmm 11y ago
IANAL: Buying something you think is cheap is legal, even if you know your buying it will push the price up as a side effect (any big order will move the price, if you want to buy or sell a lot it's basically impossible to do that without affecting the price). Selling it afterwards because you think the price has gone up to more than the asset is worth is legal. What's not legal is deliberately manipulating the price, and it can be hard to tell the difference from the outside. Some traders' moral instinct is that if you're taking on the risk (i.e. if you're putting your orders out there for a while where you're going to trade if anyone wants to) then it must be legitimate, which has a certain intuitive appeal but is not the current law.

could you elaborate on legality of this?

by aerioux 11y ago

could you elaborate on legality of this?

This is basically what happens with company 401ks. It is totally legal, although op claims about getting out "quietly" are kind of absurd. The sell orders are available for everyone to see (and bid on).

patio11 11y ago
This is basically what happens with company 401ks. In the reality most of us inhabit, a 401k is a type of company-sponsored retirement account. The accounts are allowed to invest in a variety of securities, most commonly in one of a limited selection of mutual funds. There is no circumstance under which 401k contributions materially move the market. If I sound mildly put out in this comment, it is because HN comments about the stock market often make very confident claims which bear only the most tenuous connection to reality. It's as if someone on a Wall Street message board had asked "Why is Chrome faster than Internet Explorer?" and received the answer "Because it is written in Unicode." And outside the scope of this particular comment, often times responses like "Chrome is not, in fact, written in Unicode. Unicode is an imprecise name for part of a family of methods of encoding text in various human languages, not a programming language. A substantial part of Chrome, including most of the rendering engine, UI layer, and network stack is written in C++; Chrome also makes heavy use of other languages internally. Returning to the question of why Chrome is fast: this is less about language choice and more because substantial effort has been taken to ensure that Chrome is fast. 'Fast' is a complicated topic in browsers. In terms of user-visible performance, one thing which makes browsers seem fast is the Javascript runtime. Chrome uses V-8, a run-time built specifically for Chrome at the cost of hundreds of millions of dollars, which is optimized for speed." are met with "Sure that's what you would say IF YOU WERE A GOOGLE SHILL."
- FeepingCreature 11y ago
  Also, Chrome is about three times slower than Firefox in asm.js performance. /missing-the-point
- droopybuns 11y ago
  I guess I could have explained that better. What I was trying to express is that money managers who are working with very large sums of money have difficulty getting out of very large positions. Some companies have 401ks plans that are working with very large sums of money. This problem doesn't apply to all 401ks. This wasn't the best example. Um... not sure what to do with your comments on the shill ecosystem.
  - harryh 11y ago
    What is a circumstance in which the assets under management for a company 401k would need to get out of a very large position?
    - droopybuns 11y ago
      The fund manager decides to invest elsewhere? Here is Fidelity's Contrafund summary: https://fundresearch.fidelity.com/mutual-funds/composition/316071109 https://fundresearch.fidelity.com/mutual-funds/composition/3... FACEBOOK INC A BERKSHIRE HATHAWAY INC CL A WELLS FARGO & CO ALPHABET INC CL A APPLE INC AMAZON.COM INC ALPHABET INC CL C VISA INC CL A STARBUCKS CORP NIKE INC CL B % of Total Portfolio 31.30% I guess a worst case scenario is one of the core assets went out of business. The asset portfolio doesn't stay static- if you look at the site above, it says that these are the assets as of a specific date.
Mikeb85 11y ago
You buy one big block, say 50% of daily volume. Then you move the shares around, in the next few sessions sell smaller blocks through multiple brokers. The key is to buy enough volume to move the price, not so much to make exiting the position difficult. I don't do things like this, but I did see it on lower-liquidity exchanges all the time, and used to trade in small caps where a $10K bid could move the price ~5%... And if I was motivated to sell, the best bet was to break it up into smaller pieces, and sell over the course of a session or two. If daily volume is 50K, and I want to sell 20K, I can't put it all up at once. Also, on a typical exchange like the NYSE, HKex, Euronext Paris, etc..., the volume is so large you generally don't even bother to look at who's buying or selling. On smaller exchanges you're constantly glued to the screen, looking at the sellers, trying to guess what they're up to. I imagine company 401ks are managed by in a fairly conservative way. Big positions in fundamentally solid large caps, holding for a long time, selling only when you need to cash out or the price moves beyond a certain range. Traders basically manage their trades in the exact opposite fashion - short, extremely speculative trades, no regard for fundamentals, on smaller exchanges you mess with people's emotions, etc...

noja 11y ago

hedge funds

Mikeb85 11y ago

There's nothing wrong with it, as long as you're influencing prices only with your own funds, not conspiring with others or trading on information which you're not supposed to trade on. On smaller exchanges with less liquidity you see it all the time. If average trading volume is 20k shares, buy 50k and you will move the price. Then sell in small blocks, maybe through multiple brokers...

lmm 11y ago

IANAL: Buying something you think is cheap is legal, even if you know your buying it will push the price up as a side effect (any big order will move the price, if you want to buy or sell a lot it's basically impossible to do that without affecting the price). Selling it afterwards because you think the price has gone up to more than the asset is worth is legal. What's not legal is deliberately manipulating the price, and it can be hard to tell the difference from the outside. Some traders' moral instinct is that if you're taking on the risk (i.e. if you're putting your orders out there for a while where you're going to trade if anyone wants to) then it must be legitimate, which has a certain intuitive appeal but is not the current law.