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Robinhood, Trading 212 and others go down amid AMC and GameStop stock frenzy
- ISL 6y agoSomebody, somewhere, is going to get paid a lot of money when they figure out how to stabilize this inefficiency. If there is a way to insure traditional shorts and the option-sellers against the losses they incur in this sort of situation, those actors are now going to be willing to pay at least a small amount to ensure smooth operation of the markets. The transients right now (especially their emergent origins!) are interesting in the abstract, but generally antithetical to the efficient flow of capital.
- ummonk 6y agoWell let's say a company is trading at 1 dollar per share with a billion shares outstanding. And some short-sellers are shorting it believing it is worth almost nothing. Now a bunch of traders buy up shares, sending it to $20, at which point the company dilutes by 10% by selling 100 million shares. All of a sudden the company has 2 billion in cash, and even with a complete collapse, it will still be worth more than the price at which the short-sellers shorted.
- ISL 6y agoSuch an outcome is clearly possible. It is unclear whether or not it is efficient. This situation has shorts identify a probably-failing company and set the stage for traders to (possibly) detonate a GameStop/Hertz cash-bomb. It yields a transfer of cash from "greater-fools" to a probably-failing company. As a value-investor, it seems to me that occasionally raining cash upon failing companies seems like a strategy with a below-average probability of long-term success. Extracting that cash from unsophisticated investors seems to risk moral hazard -- the school of hard knocks is expensive and bruising. Someone, somewhere, should be able to profit from blunting these explosions. Why aren't options prices increasing to make this effect unlikely? Surely there are options-traders who are incurring losses as they expand their hedges.
- ummonk 6y agoSo one could argue that short interest is actually inefficient since it soaks up capital that would have gone into equity raises by a struggling company. I.e. that in a traditional market short sellers function as a sort of reverse pump and dump, preventing an otherwise viable business from raising short term capital and forcing it into bankruptcy and shuttering. Arguably, by injecting large amounts of cash into a handful of such companies, WSBers are not only saving those companies, but helping save others by puttinf predatory shorters out of business.
- ISL 6y agoUnderstood and agreed, at least in part. In the best case, short-sellers are the jackals/vultures that cull the weak and free up capital for new ventures. To the extent that shorts engage in reverse pump-and-dump, that is likely, too, to be inefficient. It is my expectation that in the long term, both nefarious shorts and WSBers will lose to those working to create real value. It is simply unfortunate and perhaps unnecessary that the war between the chaos monkeys involves collateral damage. Such an environment adds reasons for successful companies to stay privately-traded, which is probably a net-negative for humanity.
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- vincentmarle 6y agoYes, but it's not easy: you have timing risk, litigation risk, and SEC enforcement risk.
- alephnan 6y agoIt's not inefficiency. Recklessness isn't the word, neither. It was greed and arrogance. (1) They borrowed more shares than in circulation (2) They double downed on their losing position and lost a $3 billion bailout within a day. Their bet was, really, that financial institutions can stay solvent longer than retail can be "irrational". It was a game of chicken, but The emperor has no clothes.
- paulpauper 6y agoIt is hard to fathom how much money ppl are making with options on this. I have never seen anything like this. It is like everyone is becoming multi millionaires on walsltreetbets. Like the fakebook IPO or What's App acquisition, when a bunch of people suddenly became millionaires. It is probably keep going up. This is the stuff dreams are made of, the stuff of legends. People think it cannot happen but then it does.
- xedeon 6y agoRoughly $22M https://www.reddit.com/r/wallstreetbets/comments/l5nphz/gme_yolo_update_jan_26_2021/ https://www.reddit.com/r/wallstreetbets/comments/l5nphz/gme_...
- paulpauper 6y agoThere is no rational reason to ever short this. The funds that are shorting this deserve to be liquidated for being so foolish. At best you can only double your money with thirsting , unless you keep adding to your short. Losses however are unlimited. Too many people think that they can make a fortune shorting, like in 2008. But the reason why a movie was made about those guys is because success at shorting is so rare and difficult that when someone does it successfully , it is big deal. No one makes movies about people who buy and hold stocks.
- rahimnathwani 6y agoYour argument has the same structure as "There is no rational reason to drive a car. The most I could gain would be to get where I'm going faster, but the downside is unlimited (I could die in a car crash)." Just because a bet has unlimited downside and limited upside, that doesn't mean it doesn't have positive expected value, and would not be made by rational actor.
- vorpalhex 6y agoRobinhood frequently goes down during busy trade windows. It's bad enough that I warn people against using them if they intend to do any kind of active trading.
- allie1 6y agoOn reddit /wallstreetbets people report other trading platforms down as well, not sure if true
- 52-6F-62 6y agoWealthSimple is still functioning fine here in Canada. They're probably just overloading their servers.
- rlyshw 6y agocan't even access my vanguard account. Hearing reports from friends/family across the board that they can't access their financial accounts. Fidelity, Schwab, more.
- ianhawes 6y agoI maintain accounts on Robinhood, TD, and Interactive Brokers. Typically, Robinhood is always down at market open (even on low volume days). On high volume days, IB has been down several times. However, the thinkorswim platform on TD is great and I've yet to encounter downtime.
- DenverCode 6y agoVanguard, Robinhood, Charles Schwab, and TD Ameritrade are all having outages. Regarding TD, https://twitter.com/TDAmeritrade/status/1354447688205443076 https://twitter.com/TDAmeritrade/status/1354447688205443076
- toomuchtodo 6y agoFidelity Active Trader Pro has been flaky all day, intermittently freezing when streaming data is temporarily lost.
- Fjolsvith 6y agoHedge funds loosing their shirts to nerds and soccer moms.
- asdfasgasdgasdg 6y agoPlenty of "nerds and soccer moms" are going to lose their shirts in this too. Whoever is buying this stock today is likely to have a bad time (unless they can keep the pyramid going for a little longer and hand the bag to someone else).
- germinalphrase 6y agoIt’s a fascinating little story. Cant help but think that there is someone in the industry making the real money here and all the “soccer moms and nerds” are just cover/dopes.
- geogra4 6y agoThat's my sense too. There's gotta be some big muscle behind this.
- 52-6F-62 6y agoBecause that's usually how it goes. It appears that every bit of skepticism has been thrown out the window. I think a lot of people are about to get burned who expected riches. And all because of empty promises by anonymous message board users. It's disconcerting.
- asdfasgasdgasdg 6y agoMaybe I'm just a bad person but I don't feel much for people who get scammed due to their own greed.
- 52-6F-62 6y agoI'm a little more ambivalent, myself. But I think I just don't like seeing it at all. If the entirety of the human were, functionally, a complex organism then the result of this sudden and energy-expensive outgrowth will likely be a sudden and intense immune response that will have effects beyond those directly involved.
- marzell 6y agoVanguard went down for me about 5 minutes ago. Possibly related?
- bityard 6y agoI couldn't view the story because it requires you to click-through a legal agreement in order to bring up the content.
- exabrial 6y agoCurrently queuing, but should be available in 10m or so: https://archive.is/wip/avECz https://archive.is/wip/avECz
- motohagiography 6y agoTotally random outage I'm sure. From what I am interpreting, the people who have most to lose on this are the banks and brokerages who needed to buy the GameStop stock to cover their positions after selling the options to all these retail traders. There are regulatory "circuit breaker" conditions but I wonder if this was a more informal one. The internet hive mind wasn't in their risk models and I would wonder if there was risk of this event causing a cascading blow-up effect.
- robjan 6y agoThe outages are caused by the execution brokers not being able to execute orders fast enough resulting in the order queue getting longer and longer. Also other capacity issues caused by everyone logging in simultaneously.
- motohagiography 6y agoThat surprises me, as horizontal scaling to demand is a solved problem. One provider, sure, but cascading failures through many, that's a systemic critical infrastructure vulnerability that is going to bring down the regulatory hammer.
- bpicolo 6y agoI'm under the impression that order books tend to be hard to scale horizontally, because they have tremendous atomicity requirement. Can anybody chime in whether these systems, today, tend to be on distributed infra versus e.g. mainframes or other big vertical compute pieces?
- hangonhn 6y agoI don't know the specific answer to your question but I do have a data point to add. When I was just starting out in my career in the early 2000s, I worked for a hedge fund. One curious thing I noticed is that all the traders had time stamping machines on their desks that are inspected and sealed regularly. I was told that during an outage, these timestamp machines allow trades to continue to happen because the trader can write down the order and stamp it and their counter party would presumably do the same. Later the orders can then be reconciled when things are back up and running. This leads me to think that it is at the very least possible for transactions to be recorded in a distributed manner. Example of machine: http://www.carpenterstimesystems.com/Amano-TS3000i-OATS-Time-Validation-Clock-System.html http://www.carpenterstimesystems.com/Amano-TS3000i-OATS-Time... This might all be historical now.
- cdiamand 6y agoI track /r/wallstreetbets chatter as a sideproject. https://topstonks.com/stocks/gme https://topstonks.com/stocks/gme The chatter levels are through the roof today. Even more than when the market dropped in April due to the coronavirus.
- chippy 6y agoThere are around 800,000 people reading that subreddit right now. It seems like around 60 posts being submitted every second. Could you record these figures too?
- roybattylives 6y agoThe mods have a dashboard newest link: https://wsb.gold/public/dashboard/e65fcfcb-70a4-4d86-b7fb-888057c67881 https://wsb.gold/public/dashboard/e65fcfcb-70a4-4d86-b7fb-88... old link: http://104.131.48.154:3000/public/dashboard/e65fcfcb-70a4-4d86-b7fb-888057c67881 http://104.131.48.154:3000/public/dashboard/e65fcfcb-70a4-4d... (not available right now .. no surprise)
- marzell 6y agoI had never previously considered how website performance of individual subreddits might differ. I'm not a web dev, so it's probably not like an interesting engineering matter, but it is kinda interesting to witness this first-hand as a user. At least the rest of the site seems to be working ok.
- zaroth 6y agoIt’s fun to actually delve deeper than the headlines on this one. The main driver of this trade on WSB is a user “deepfuckingvalues”. As of September 2019 they were posting GME holdings of 1,000 Jan 21 calls at $8, a position they built up since June 2019. [1] The user then posted monthly updates ever since. By May 2020 they had 2,500 call option contracts and had a net loss of $10k. By August 2020 they had lost $60k on $145k. Then it all started turning around. They were an activist investor that actively rallied the Board to do buybacks and pushed overall interest in a GME turnaround. As usual, by the time the mass media picks up on something it looks to the outside world like something that just magically happened like a rocketship taking off in just the last week. In reality this was over a year in the making by a devoted user of WSB who gained a following over many months of persistence in the face of mounting losses. It was in fact the perfect WSB story. Initially every comment is begging them to sell, and then mocking their losses, and then reveling in their pain... and still they held and posted YOLO month after month. As of their last update on the 26th their account value is $23mm. [1] - https://www.reddit.com/u/DeepFuckingValue/ https://www.reddit.com/u/DeepFuckingValue/
- conanbatt 6y agoHe might be at 50 million profit by now
- deleted 6y ago[deleted]
- nfriedly 6y agoMoney Stuff had some good coverage of the GameStop / r/wallstreetbets shenanigans over the past couple of days: Monday: https://www.bloomberg.com/news/newsletters/2021-01-25/money-stuff-the-game-never-stops https://www.bloomberg.com/news/newsletters/2021-01-25/money-... Yesterday: https://www.bloomberg.com/opinion/articles/2021-01-26/will-wallstreetbets-face-sec-scrutiny-after-gamestop-rally https://www.bloomberg.com/opinion/articles/2021-01-26/will-w... Update: here's today's issue: https://www.bloomberg.com/opinion/articles/2021-01-27/reddit-driven-surge-puts-gamestop-and-ryan-cohen-in-a-weird-spot https://www.bloomberg.com/opinion/articles/2021-01-27/reddit...
- andjd 6y agoThis seems like a classic pump-and-dump scheme to me. The twist is that instead of claiming that the target company is going to start doing way better, they're claiming that the upside comes from hedge funds over-shorting the stock. The people who are going to make a lot off this are the people who sell before the stock crashes. If those people were also suggesting others buy the stock on reddit, they may be criminally liable for securities fraud.
- deleted 6y ago[deleted]
- mckirk 6y agoThere's a critical difference though: The amount of stock sold short is externally verifiable -- and it's still more than the available stock.
- firstfewshells 6y agoWhere is this information available?
- marzell 6y agoFor NASDAQ, I think they publish the info daily on their website. But GME is NYSE, they publish semi-monthly and you can pay for it: https://www.nyse.com/market-data/reference/nyse-group-short-interest https://www.nyse.com/market-data/reference/nyse-group-short-... There may be other sources available, I didn't know this either so this is what I've found so far.
- deleted 6y ago[deleted]
- marzell 6y agoI think it's potentially more interesting than that. It's hard to get figures to back up any speculation, of course... but it seems like this is at least somewhat a short squeeze. And it's potentially not just a bunch of gambling where people are gonna lose the farm... The righteous narrative, for however much you might believe it, is that a significant portion of traders all basically agreed to each take on a small degree of risk in order to prove a point. People going big in, and not using the right instruments to ahem hedge their losses, are certainly gambling, but the proportion of these is not really clear.
- xangel 6y agoWhat about smaller brokers with less users? Robinhood is the biggest broker in the USA, Trading 212 is the biggest broker in Europe and the UK.
- qndreoi 6y agoFewer users, they are countable
- swed66 6y agoTake from the rich give to the poor.. Isnt that Robin Hood??? Lots of rich People with power in high positions are scared of being poor.