4 ms·

Retail investors are supposed to buy and hold all of the stocks, because they couldn't possibly be smart enough to pick the good ones. Hedge funds are supposed

Retail investors are supposed to buy and hold all of the stocks, because they couldn't possibly be smart enough to pick the good ones. Hedge funds are supposed to be allowed to naked short the stocks they don't like into oblivion, transferring wealth from retail investors to hedge funds. The hysteria and pearl clutching at this wealth transfer being reversed is hilarious.

jefftk 6y ago
> Hedge funds are supposed to be allowed to naked short the stocks they don't like into oblivion Naked shorting has been illegal for a decade: https://money.cnn.com/2008/09/17/news/companies/sec_short_selling/index.htm https://money.cnn.com/2008/09/17/news/companies/sec_short_se...
- dash2 6y ago
  Right, but it must have been happening anyway, because there’s more shorts than shares available to buy. (I think?)
  - necubi 6y ago
    Wrong, see Matt Levine's explanation of this from today: https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga... > This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
- abbbccdefd 6y ago
  SEC doesn't actually do anything. Failures to Deliver for GameStop stock has been on the securities threshold list for more than a month and off and on for the past year. I believe OverStock was on it in the past for over a year at one point and the SEC did nothing.
- josephkern 6y ago
  You are correct GME has been on the NYSE Threshold list since 09/22/2020: https://www.nyse.com/regulation/threshold-securities https://www.nyse.com/regulation/threshold-securities It's still on the list. You are only supposed to be able to hold naked shorts for "13 consecutive settlement days".

jefftk 6y ago

> Hedge funds are supposed to be allowed to naked short the stocks they don't like into oblivion Naked shorting has been illegal for a decade: https://money.cnn.com/2008/09/17/news/companies/sec_short_selling/index.htm https://money.cnn.com/2008/09/17/news/companies/sec_short_se...

dash2 6y ago
Right, but it must have been happening anyway, because there’s more shorts than shares available to buy. (I think?)
- necubi 6y ago
  Wrong, see Matt Levine's explanation of this from today: https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga... > This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine.
abbbccdefd 6y ago
SEC doesn't actually do anything. Failures to Deliver for GameStop stock has been on the securities threshold list for more than a month and off and on for the past year. I believe OverStock was on it in the past for over a year at one point and the SEC did nothing.
josephkern 6y ago
You are correct GME has been on the NYSE Threshold list since 09/22/2020: https://www.nyse.com/regulation/threshold-securities https://www.nyse.com/regulation/threshold-securities It's still on the list. You are only supposed to be able to hold naked shorts for "13 consecutive settlement days".