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I am loving every minute of this. The "professionals" gamble on the market all the time, front run, high frequency trade, and relentless tactics to get rich at

by cwhiz 6y ago

I am loving every minute of this. The "professionals" gamble on the market all the time, front run, high frequency trade, and relentless tactics to get rich at the expense of the "retail" investors. Now they are upset that apps like Robinhood has provided unprecedented access to the markets. Their exclusive access to insane gambling nonsense is being torn down in real time. If Wall St can gamble and cause a global financial crisis, I see no reason why "retail" traders can't fuck around on Robinhood and cause some meme stocks to explode. I think what is really going on here is that the "professionals" are bothered that the "idiots on WSB" are making a mockery of the market. Make no mistake, the market is already a mockery, what's happening now is that the public is finding out.

this_user 6y ago
> I see no reason why "retail" traders can't fuck around on Robinhood and cause some meme stocks to explode. It's called 15USC78i "Manipulation of security prices" [1]. It is unlawful to transact just for the purpose of forcing others to transact. Going through a fund's 13F filings, and deliberately driving up the prices of put options they sold should fall squarely into that area. And there are more than enough posts on reddit of people stating that this is exactly what they are doing. At the scale this is happening now, there is no doubt that there are going to be legal repercussions. [1] https://www.law.cornell.edu/uscode/text/15/78i https://www.law.cornell.edu/uscode/text/15/78i
- nceqs3 6y ago
  Steve Cohen and Gabe Plotkin both traded on inside information at SAC (Gabe was cc'ed on several of the communications). Why are they not in jail? Ohhhh because the justice system only impacts the 99%.
  - this_user 6y ago
    That's some nice whataboutism, but that doesn't mean this isn't exactly the kind of market manipulation for which the Securities Act of 1933 was written.
- mdoms 6y ago
  There's a pretty simple defense here. "I saw the posts on reddit and wanted to get in on the upward swing". Efficient markets at work. Unless you can tie real identities to the reddit posts there's not much to be done.
  - jeffreyrogers 6y ago
    I don't think what they're doing violates the law[0], but they could easily subpoena Reddit and find out who the users are if they wanted to. [0]: too complicated to get into here, but basically my interpretation of the law is that you need to be making trades that you intend to cancel or revert immediately in order for it to apply to you, and what these traders are doing is instead speculating on the price going up and hoping to cause the shorts to liquidate their positions, thus further driving the price up. Not spoofing to create fake demand.
    - jimbob45 6y ago
      How would Reddit know who those people are? Protonmail + VPN would hide their identities as far as Reddit is concerned, right?
      - jeffreyrogers 6y ago
        In theory. I'm not sure if Protonmail or the VPN provider would respond to a subpoena, but I wouldn't rule it out. But realistically most of these people are using their home IP address and their gmail account.
        jimbob45 6y ago
        There are VPNs not bound by US law and the same with email providers (if your email address with Reddit is even legitimate to begin with).
        jeffreyrogers 6y ago
        Yes, but it can't be more than a few percent of people who go through the effort to set that up right? I know it's not hard to do (I've done it), but I think most people on reddit are using either their personal email or a throwaway gmail account they use from their home IP.
- boringg 6y ago
  I think that only works on co-ordinated activity. Everyone on their is so small and not working in co-ordinated way. There is considerable discussion in the thread about the legality of it. Also - what do you think short sellers like Citron do all the time. Put out fake reports about companies to make money off their short positions. The sentiment on the trade is eff those short sellers and their sketchy tactics.
  - this_user 6y ago
    > I think that only works on co-ordinated activity. Everyone on their is so small and not working in co-ordinated way. There is considerable discussion in the thread about the legality of it. There are entire threads and Discord channels dedicated to coordinating this. It will be extremely difficult to convince a court that there is no coordination or market manipulation, especially when there are people who are spelling that fact out. And reddit have all of their IP addresses. > Also - what do you think short sellers like Citron do all the time. Put out fake reports about companies to make money off their short positions. If you can prove that those allegations are indeed fake, then they can be held liable for that. But Citron's influence stems from the fact that they have published a large number of reports that were indeed correct, e.g. Valiant. > The sentiment on the trade is eff those short sellers and their sketchy tactics. What sketchy tactics? Expressing their view that a company like Gamestop is not worth very much on account of their outdated business model that relies on physical retail in a sector that has been going fully digital for the last 15 years?
    - boringg 6y ago
      In Citron's case they cast super sketchy dispersions about companies and hope that they influence investors who don't understand how the companies operate. It's right at the line and the cost of proving them wrong is not worth the effort... plus the SEC has bigger fish to fry when they have a mandate to enforce.
  - cellar_door 6y ago
    The mod team is coordinating
- cwhiz 6y ago
  There are some base requirements for market manipulation that are not met here. Namely, lying. You're allowed to tell your "friends" they should buy a stock.
  - Enginerrrd 6y ago
    A lot of people have had the hammer brought down on them for pump and dumps performed by only making true statements.
- itronitron 6y ago
  No one is forcing the short sellers to buy GME, they did that all by themselves.
Thaxll 6y ago
I coudn't agree more! It's really fun to watch from an external perspective.
psim1 6y ago
This kind of market folly also has an effect on long-term investments, e.g. retirement funds. What is there to love? I hate that unshowered basement-dwellers are coordinating to screw around with the market and potentially my retirement money. Get an honest job, guys.
- jaywalk 6y ago
  As if the guys at hedge funds shorting stocks to drive companies out of business have more "honest" jobs.
  - boringg 6y ago
    Seriously those guys claim they are holding companies accountable and the market efficient. They are just sleazy stock traders. Grinds my gears people try and defend them through efficient capital markets when you see the garbage reports they put out there to manipulate the market for their positions.
    - QuesnayJr 6y ago
      Is the market more efficient now that the price for GameStop went up a factor of 10 over 5 days?
- jameslars 6y ago
  I have an honest job AND a position on GME. Thanks for your concern though.
  - cvhashim 6y ago
    Get a load of this guy with an honest job. I’m riding my GME shares to the moon :P
- jeffreyrogers 6y ago
  It shouldn't unless those funds are invested in hedge funds (some are, but usually only a few percent of their total assets). Day-to-day volatility shouldn't affect them that much.
dheera 6y ago
I'm also really loving that there are a whole bunch of Redditors donating part of their gains to charity, something that those hedge funds would never do. In my eyes those hedge funds never did anything good for humanity, and I too am loving every minute of this and how some of the big money is being siphoned into the hands of people that actually need it more.
52-6F-62 6y ago
> Make no mistake, the market is already a mockery, what's happening now is that the public is finding out. Pretty sure that was about a century ago and resulted in the Great Depression. I don't think the solution to the crock that has been going on is to "do it back". Setting one or two hedge funds back a year or so, or even to close completely, isn't going to do anything resembling justice. It starts to look more and more like just more pigs rolling around in the mud together, if you ask me (saying nothing of the collateral damage along the way).
- sleepybrett 6y ago
  > Pretty sure that was about a century ago and resulted in the Great Depression. A fine sight better than 1789
xorx 6y ago
Yes, but retail is going to get destroyed in the end. The power elite always get what they want. Right now there appear to be curbs on GME and AMC buy orders for TD Ameritrade and Schwab customers. If you have to pull strings with your drinking buddy from Dartmouth to blow up a bunch of propertyless zoomers in order to prevent a margin call on the account you've leveraged to buy your house in the Hamptons, then that's what you're going to do.
- koheripbal 6y ago
  Very likely is that the SEC is making phone calls to the big trading firms. Firms don't restrict transactions like this much voluntarily. They are going to call the Reddit CEO and have wsb shut down under the threat of SEC enforcement actions. Looks like the wsb discord is down.
  - jimbob45 6y ago
    Same stuff goes down on 4chan and several other sites. Not to mention the fact that the SEC has neglected to investigate insider trading for years now. IMHO why the fuck is shorting legal to begin with. Short insurance should be mandatory for short trading.
    - koheripbal 6y ago
      > the fact that the SEC has neglected to investigate insider trading for years now. Obviously false: https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affiliate=secsearch&dc=654&query=insider+trading&commit=Search https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affilia... > 4chan and several other sites... Scale dictates enforcement priorities, obviously. Like a lot of people, they don't deal with issues until they are large and impact the market. They are ABSOLUTELY going to intervene here. First with some immediate action, and later they'll craft a new rule to guide social media on stock advice being not allowed on their platforms (IMO). > why the f** is shorting legal Short selling rewards investors who believe that certain stocks are overvalued or that the company is covering up fraud. They helped bring Lehman Brothers down, as well as Enron, Wirecard, etc... In those instances, the shorts were instrumental in reverting stocks down to correct (sometimes zero) prices. Without them, bubbles would rise higher and poop much bigger. That sort of volatility destroys liquidity and confidence in the market. > Short insurance should be mandatory for short trading. There are naked short limits already, but yeah, this issue with GameStop should have those rules re-evaluated, because they obviously didn't work in this case.
koheripbal 6y ago
Front Running is illegal, and companies get busted and fined for doing that. High Frequency trading is actually GOOD for retail investors because it reduces spreads and increases liquidity.
- FriendlyNormie 6y ago
  Found the Jew.
- cbozeman 6y ago
  No it isn't. You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. A "law" that allows you a merely pay a fine isn't a law, its a revenue-generating procedure. Murder is illegal. You can't pay $500,000 to the authorities and then go on about your business. For a law to have any weight, you have to be inconvenienced regardless of your financial status.
  - koheripbal 6y ago
    > You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. This is not a logical sentence. They are obviously getting fined because it's illegal. The traders involved are also terminated, fyi. All banks are required to submit automated reports on Front Running detection algorithms daily to the regulators. Every trade is evaluated by the compliance systems. If you think the fines are not big enough or that the algorithms are missing things, then make that more logical argument. Stay away from hyperbole because it discredits you.
    - _jal 6y ago
      > If you think the fines are not big enough With crimes like these, it is nearly definitional. It is trivial to put a price on the value of an action like this; if the fine for the action is less than it grosses, it is just a tax.
      - 6y ago
Blackstone4 6y ago
I believe you are far off the mark here. Retail investors are well within their rights to drive up a stock to what could be above fair market value....some may well lose money in doing so. The whole narrative around retail vs. hedge funds/wall street is naive to say the least...people in financial services are worried that retail investors may lose a lot of money here which may dent confidence in the market. The irony here is that you believe the market is a mockery which most of the time it isnt but at times it can be irrational. This is clearly one of those times....as an investment professional.....I look at this and see the irrationality of the price which is not underpinned by cash flow or a fair valuation close to the price...which is called fundamental investing and not trading like what is happening here.
- fairity 6y ago
  Agree 100%. I think the smartest bet here is buying put options that expire far out. Currently, the price of the $320 GME PUT expiring in Jan 2022 is $240. That's free money...
  - beervirus 6y ago
    So you're paying $24,000 to bet that the stock will fall below a breakeven price of $80. Even if we assume that that's likely to happen, your maximum upside (i.e. if the stock goes to zero) is only $8,000. It is not a trade I would make.
  - chrchang523 6y ago
    I've been keeping an eye on the far-out-dated put options, and I haven't seen anything that's more compelling than simply leaving money parked in an index fund. The expectation that GME will drop back down to Earth over that timeframe remains priced in. The main takeaway from this incident is that margin-call-constrained short selling is even more dangerous than previously understood.
    - fairity 6y ago
      >The expectation that GME will drop back down to Earth over that timeframe remains priced in. Yea, it does seem largely priced in, but perhaps not completely. If share price is $60 in 1 year, the ROI on that contract would be 9% -- so slightly better than what you'd reasonably expect an index fund to return. A $60 share price is higher than GME's all-time high prior this fiasco.
drzoltar 6y ago
I’m worried what will happen down the road. Robinhood is likely getting super valuable data on this. Combine that with correlating post activity on Reddit and you have a recipe for obliterating the arbitrage of retail investors. These hedge funds will also buy the data that Robinhood freely sells [1]. Sure, squeezes like this will still happen every so often, but on average the hedge funds will win more in the long run. So, I think Robinhood needs to get some competitors, who charge $1-2 per month, while enforcing data privacy. This all feels like a classic Black Swan at work, and I guess the main question is if you believe that the long term expected return justifies such risky short sells. [1]: https://www.jacobinmag.com/2021/01/trading-app-robinhood-investors-scams-sec https://www.jacobinmag.com/2021/01/trading-app-robinhood-inv...
- dheera 6y ago
  Really the only thing the hedge funds could do to "win more" in the long run is to stop shorting stocks en masse. The more they short sell, the more this can be pulled off again and again. Which is good IMO, I'd be happy in a market where short selling and negativity in general just isn't a thing. If you aren't optimistic about a company just stay out.
  - amalter 6y ago
    Hard no! I want scams and shady schemes uncovered. What a disappointment that Herbalife wasn't brought down by the shorts. I'm struggling to even understand what a market with "no negativity" means. We want to evaluate firms with a critical eye. If they are mis-valued, that serves no one.
    - cwhiz 6y ago
      >I'm struggling to even understand what a market with "no negativity" means. Just imagine basically... every single other market. The price of goods at Walmart is not based on your bet on supply and demand. If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. If a business wants to raise money by issuing new shares, supply and demand will dictate the price. The market doesn't need uninvested third parties sitting outside the ring gambling on the supply and demand outcome in order to set a price.
deleted 6y ago
[deleted]
esoterica 6y ago
> Now they are upset that apps like Robinhood has provided unprecedented access to the markets. Their exclusive access to insane gambling nonsense is being torn down in real time. This is such hilariously clueless nonsense, the fact that it's expressed with such smug confidence and upvoted to the top of the thread is really emblematic of HN's complete ignorance of any topic outside of programming. When retail volume goes up there a plenty of "professionals" (brokerages, market makers) that make a killing off executing the retail flow. I assure you the industry is loving the fact that everyone and their cat is FOMOing into trying to day-trade on Robinhood. If you really want to stick it to Wall Street put all your money into a low-fee index fund.
- raesene9 6y ago
  Whilst most of Wall street may like this, I'd guess there's at least some parts (the hedge funds with large short positions in GME) who aren't having a good time today.
- briandarvell 6y ago
  Could you elaborate a bit more on why low-fee index funds are sticking it to Wall Street?
  - esoterica 6y ago
    If you’re not actively trading they’re not making any money off you.
- cwhiz 6y ago
  Yeah that’s why the SEC, White House, MSM, Discord, and multiple brokerage firms all acted in an obviously concerted effort yesterday. It’s because of their sincere concern for retail, obviously.
  - esoterica 6y ago
    You forgot to mention Jeffrey Epstein, Bill Gates, George Soros, the pope, and the lizard people. But seriously, what did the White House and SEC do?
avereveard 6y ago
> the "professionals" are bothered that the "idiots on WSB" are making a mockery of the market I think it's deeper. if they get forced by a margin call to purchase stock people that shorted without a lend will quickly come under scrutiny from sec, which will be quite interested to know which broker(s) allowed to reach this ridiculous float volume without securing the shares they're not just covering their losses, whose whom will remain with uncovered short can get fines and or jail time.
hoka-one-one 6y ago
Have you completely discounted that this thing was calculated? Plenty of professionals probably foresaw the squeeze.
- chromaton 6y ago
  The WSB thing could just be cover for them. There were more shares shorted than were outstanding, so it's a great opportunity for a trader/raider with a pile of cash.
partiallypro 6y ago
This might have started on social media, but make no mistake that the professionals are the ones that piled on to take advantage of the situation.
- briankelly 6y ago
  Burry (fund manager who Bale played in the Big Short) is the one who put this trade on most people's radar months ago.
balls187 6y ago
Yes, but some of them also manage funds that are people from Mainstreet's retirements. So while, yeah fun to stick it to the wealthy elite, I feel the law of unintended consequences is going to rear it's head much like crash of the housing market in 2007.
smabie 6y ago
No one is front running orders on a large scale. This does not happen.

by cwhiz 6y ago

this_user 6y ago

> I see no reason why "retail" traders can't fuck around on Robinhood and cause some meme stocks to explode. It's called 15USC78i "Manipulation of security prices" [1]. It is unlawful to transact just for the purpose of forcing others to transact. Going through a fund's 13F filings, and deliberately driving up the prices of put options they sold should fall squarely into that area. And there are more than enough posts on reddit of people stating that this is exactly what they are doing. At the scale this is happening now, there is no doubt that there are going to be legal repercussions. [1] https://www.law.cornell.edu/uscode/text/15/78i https://www.law.cornell.edu/uscode/text/15/78i

nceqs3 6y ago
Steve Cohen and Gabe Plotkin both traded on inside information at SAC (Gabe was cc'ed on several of the communications). Why are they not in jail? Ohhhh because the justice system only impacts the 99%.
- this_user 6y ago
  That's some nice whataboutism, but that doesn't mean this isn't exactly the kind of market manipulation for which the Securities Act of 1933 was written.
mdoms 6y ago
There's a pretty simple defense here. "I saw the posts on reddit and wanted to get in on the upward swing". Efficient markets at work. Unless you can tie real identities to the reddit posts there's not much to be done.
- jeffreyrogers 6y ago
  I don't think what they're doing violates the law[0], but they could easily subpoena Reddit and find out who the users are if they wanted to. [0]: too complicated to get into here, but basically my interpretation of the law is that you need to be making trades that you intend to cancel or revert immediately in order for it to apply to you, and what these traders are doing is instead speculating on the price going up and hoping to cause the shorts to liquidate their positions, thus further driving the price up. Not spoofing to create fake demand.
  - jimbob45 6y ago
    How would Reddit know who those people are? Protonmail + VPN would hide their identities as far as Reddit is concerned, right?
    - jeffreyrogers 6y ago
      In theory. I'm not sure if Protonmail or the VPN provider would respond to a subpoena, but I wouldn't rule it out. But realistically most of these people are using their home IP address and their gmail account.
      - jimbob45 6y ago
        There are VPNs not bound by US law and the same with email providers (if your email address with Reddit is even legitimate to begin with).
        jeffreyrogers 6y ago
        Yes, but it can't be more than a few percent of people who go through the effort to set that up right? I know it's not hard to do (I've done it), but I think most people on reddit are using either their personal email or a throwaway gmail account they use from their home IP.
boringg 6y ago
I think that only works on co-ordinated activity. Everyone on their is so small and not working in co-ordinated way. There is considerable discussion in the thread about the legality of it. Also - what do you think short sellers like Citron do all the time. Put out fake reports about companies to make money off their short positions. The sentiment on the trade is eff those short sellers and their sketchy tactics.
- this_user 6y ago
  > I think that only works on co-ordinated activity. Everyone on their is so small and not working in co-ordinated way. There is considerable discussion in the thread about the legality of it. There are entire threads and Discord channels dedicated to coordinating this. It will be extremely difficult to convince a court that there is no coordination or market manipulation, especially when there are people who are spelling that fact out. And reddit have all of their IP addresses. > Also - what do you think short sellers like Citron do all the time. Put out fake reports about companies to make money off their short positions. If you can prove that those allegations are indeed fake, then they can be held liable for that. But Citron's influence stems from the fact that they have published a large number of reports that were indeed correct, e.g. Valiant. > The sentiment on the trade is eff those short sellers and their sketchy tactics. What sketchy tactics? Expressing their view that a company like Gamestop is not worth very much on account of their outdated business model that relies on physical retail in a sector that has been going fully digital for the last 15 years?
  - boringg 6y ago
    In Citron's case they cast super sketchy dispersions about companies and hope that they influence investors who don't understand how the companies operate. It's right at the line and the cost of proving them wrong is not worth the effort... plus the SEC has bigger fish to fry when they have a mandate to enforce.
- cellar_door 6y ago
  The mod team is coordinating
cwhiz 6y ago
There are some base requirements for market manipulation that are not met here. Namely, lying. You're allowed to tell your "friends" they should buy a stock.
- Enginerrrd 6y ago
  A lot of people have had the hammer brought down on them for pump and dumps performed by only making true statements.
itronitron 6y ago
No one is forcing the short sellers to buy GME, they did that all by themselves.

Thaxll 6y ago

I coudn't agree more! It's really fun to watch from an external perspective.

psim1 6y ago

This kind of market folly also has an effect on long-term investments, e.g. retirement funds. What is there to love? I hate that unshowered basement-dwellers are coordinating to screw around with the market and potentially my retirement money. Get an honest job, guys.

jaywalk 6y ago
As if the guys at hedge funds shorting stocks to drive companies out of business have more "honest" jobs.
- boringg 6y ago
  Seriously those guys claim they are holding companies accountable and the market efficient. They are just sleazy stock traders. Grinds my gears people try and defend them through efficient capital markets when you see the garbage reports they put out there to manipulate the market for their positions.
  - QuesnayJr 6y ago
    Is the market more efficient now that the price for GameStop went up a factor of 10 over 5 days?
jameslars 6y ago
I have an honest job AND a position on GME. Thanks for your concern though.
- cvhashim 6y ago
  Get a load of this guy with an honest job. I’m riding my GME shares to the moon :P
jeffreyrogers 6y ago
It shouldn't unless those funds are invested in hedge funds (some are, but usually only a few percent of their total assets). Day-to-day volatility shouldn't affect them that much.

dheera 6y ago

I'm also really loving that there are a whole bunch of Redditors donating part of their gains to charity, something that those hedge funds would never do. In my eyes those hedge funds never did anything good for humanity, and I too am loving every minute of this and how some of the big money is being siphoned into the hands of people that actually need it more.

52-6F-62 6y ago

> Make no mistake, the market is already a mockery, what's happening now is that the public is finding out. Pretty sure that was about a century ago and resulted in the Great Depression. I don't think the solution to the crock that has been going on is to "do it back". Setting one or two hedge funds back a year or so, or even to close completely, isn't going to do anything resembling justice. It starts to look more and more like just more pigs rolling around in the mud together, if you ask me (saying nothing of the collateral damage along the way).

sleepybrett 6y ago
> Pretty sure that was about a century ago and resulted in the Great Depression. A fine sight better than 1789

xorx 6y ago

Yes, but retail is going to get destroyed in the end. The power elite always get what they want. Right now there appear to be curbs on GME and AMC buy orders for TD Ameritrade and Schwab customers. If you have to pull strings with your drinking buddy from Dartmouth to blow up a bunch of propertyless zoomers in order to prevent a margin call on the account you've leveraged to buy your house in the Hamptons, then that's what you're going to do.

koheripbal 6y ago
Very likely is that the SEC is making phone calls to the big trading firms. Firms don't restrict transactions like this much voluntarily. They are going to call the Reddit CEO and have wsb shut down under the threat of SEC enforcement actions. Looks like the wsb discord is down.
- jimbob45 6y ago
  Same stuff goes down on 4chan and several other sites. Not to mention the fact that the SEC has neglected to investigate insider trading for years now. IMHO why the fuck is shorting legal to begin with. Short insurance should be mandatory for short trading.
  - koheripbal 6y ago
    > the fact that the SEC has neglected to investigate insider trading for years now. Obviously false: https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affiliate=secsearch&dc=654&query=insider+trading&commit=Search https://secsearch.sec.gov/search/docs?utf8=%E2%9C%93&affilia... > 4chan and several other sites... Scale dictates enforcement priorities, obviously. Like a lot of people, they don't deal with issues until they are large and impact the market. They are ABSOLUTELY going to intervene here. First with some immediate action, and later they'll craft a new rule to guide social media on stock advice being not allowed on their platforms (IMO). > why the f** is shorting legal Short selling rewards investors who believe that certain stocks are overvalued or that the company is covering up fraud. They helped bring Lehman Brothers down, as well as Enron, Wirecard, etc... In those instances, the shorts were instrumental in reverting stocks down to correct (sometimes zero) prices. Without them, bubbles would rise higher and poop much bigger. That sort of volatility destroys liquidity and confidence in the market. > Short insurance should be mandatory for short trading. There are naked short limits already, but yeah, this issue with GameStop should have those rules re-evaluated, because they obviously didn't work in this case.

koheripbal 6y ago

Front Running is illegal, and companies get busted and fined for doing that. High Frequency trading is actually GOOD for retail investors because it reduces spreads and increases liquidity.

FriendlyNormie 6y ago
Found the Jew.
cbozeman 6y ago
No it isn't. You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. A "law" that allows you a merely pay a fine isn't a law, its a revenue-generating procedure. Murder is illegal. You can't pay $500,000 to the authorities and then go on about your business. For a law to have any weight, you have to be inconvenienced regardless of your financial status.
- koheripbal 6y ago
  > You know why front running isn't illegal? Because it keeps happening and companies keep getting fined for it. This is not a logical sentence. They are obviously getting fined because it's illegal. The traders involved are also terminated, fyi. All banks are required to submit automated reports on Front Running detection algorithms daily to the regulators. Every trade is evaluated by the compliance systems. If you think the fines are not big enough or that the algorithms are missing things, then make that more logical argument. Stay away from hyperbole because it discredits you.
  - _jal 6y ago
    > If you think the fines are not big enough With crimes like these, it is nearly definitional. It is trivial to put a price on the value of an action like this; if the fine for the action is less than it grosses, it is just a tax.
    - 6y ago

Blackstone4 6y ago

I believe you are far off the mark here. Retail investors are well within their rights to drive up a stock to what could be above fair market value....some may well lose money in doing so. The whole narrative around retail vs. hedge funds/wall street is naive to say the least...people in financial services are worried that retail investors may lose a lot of money here which may dent confidence in the market. The irony here is that you believe the market is a mockery which most of the time it isnt but at times it can be irrational. This is clearly one of those times....as an investment professional.....I look at this and see the irrationality of the price which is not underpinned by cash flow or a fair valuation close to the price...which is called fundamental investing and not trading like what is happening here.

fairity 6y ago
Agree 100%. I think the smartest bet here is buying put options that expire far out. Currently, the price of the $320 GME PUT expiring in Jan 2022 is $240. That's free money...
- beervirus 6y ago
  So you're paying $24,000 to bet that the stock will fall below a breakeven price of $80. Even if we assume that that's likely to happen, your maximum upside (i.e. if the stock goes to zero) is only $8,000. It is not a trade I would make.
- chrchang523 6y ago
  I've been keeping an eye on the far-out-dated put options, and I haven't seen anything that's more compelling than simply leaving money parked in an index fund. The expectation that GME will drop back down to Earth over that timeframe remains priced in. The main takeaway from this incident is that margin-call-constrained short selling is even more dangerous than previously understood.
  - fairity 6y ago
    >The expectation that GME will drop back down to Earth over that timeframe remains priced in. Yea, it does seem largely priced in, but perhaps not completely. If share price is $60 in 1 year, the ROI on that contract would be 9% -- so slightly better than what you'd reasonably expect an index fund to return. A $60 share price is higher than GME's all-time high prior this fiasco.

drzoltar 6y ago

I’m worried what will happen down the road. Robinhood is likely getting super valuable data on this. Combine that with correlating post activity on Reddit and you have a recipe for obliterating the arbitrage of retail investors. These hedge funds will also buy the data that Robinhood freely sells [1]. Sure, squeezes like this will still happen every so often, but on average the hedge funds will win more in the long run. So, I think Robinhood needs to get some competitors, who charge $1-2 per month, while enforcing data privacy. This all feels like a classic Black Swan at work, and I guess the main question is if you believe that the long term expected return justifies such risky short sells. [1]: https://www.jacobinmag.com/2021/01/trading-app-robinhood-investors-scams-sec https://www.jacobinmag.com/2021/01/trading-app-robinhood-inv...

dheera 6y ago
Really the only thing the hedge funds could do to "win more" in the long run is to stop shorting stocks en masse. The more they short sell, the more this can be pulled off again and again. Which is good IMO, I'd be happy in a market where short selling and negativity in general just isn't a thing. If you aren't optimistic about a company just stay out.
- amalter 6y ago
  Hard no! I want scams and shady schemes uncovered. What a disappointment that Herbalife wasn't brought down by the shorts. I'm struggling to even understand what a market with "no negativity" means. We want to evaluate firms with a critical eye. If they are mis-valued, that serves no one.
  - cwhiz 6y ago
    >I'm struggling to even understand what a market with "no negativity" means. Just imagine basically... every single other market. The price of goods at Walmart is not based on your bet on supply and demand. If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down. If a business wants to raise money by issuing new shares, supply and demand will dictate the price. The market doesn't need uninvested third parties sitting outside the ring gambling on the supply and demand outcome in order to set a price.

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esoterica 6y ago

> Now they are upset that apps like Robinhood has provided unprecedented access to the markets. Their exclusive access to insane gambling nonsense is being torn down in real time. This is such hilariously clueless nonsense, the fact that it's expressed with such smug confidence and upvoted to the top of the thread is really emblematic of HN's complete ignorance of any topic outside of programming. When retail volume goes up there a plenty of "professionals" (brokerages, market makers) that make a killing off executing the retail flow. I assure you the industry is loving the fact that everyone and their cat is FOMOing into trying to day-trade on Robinhood. If you really want to stick it to Wall Street put all your money into a low-fee index fund.

raesene9 6y ago
Whilst most of Wall street may like this, I'd guess there's at least some parts (the hedge funds with large short positions in GME) who aren't having a good time today.
briandarvell 6y ago
Could you elaborate a bit more on why low-fee index funds are sticking it to Wall Street?
- esoterica 6y ago
  If you’re not actively trading they’re not making any money off you.
cwhiz 6y ago
Yeah that’s why the SEC, White House, MSM, Discord, and multiple brokerage firms all acted in an obviously concerted effort yesterday. It’s because of their sincere concern for retail, obviously.
- esoterica 6y ago
  You forgot to mention Jeffrey Epstein, Bill Gates, George Soros, the pope, and the lizard people. But seriously, what did the White House and SEC do?

avereveard 6y ago

> the "professionals" are bothered that the "idiots on WSB" are making a mockery of the market I think it's deeper. if they get forced by a margin call to purchase stock people that shorted without a lend will quickly come under scrutiny from sec, which will be quite interested to know which broker(s) allowed to reach this ridiculous float volume without securing the shares they're not just covering their losses, whose whom will remain with uncovered short can get fines and or jail time.

hoka-one-one 6y ago

Have you completely discounted that this thing was calculated? Plenty of professionals probably foresaw the squeeze.

chromaton 6y ago
The WSB thing could just be cover for them. There were more shares shorted than were outstanding, so it's a great opportunity for a trader/raider with a pile of cash.

partiallypro 6y ago

This might have started on social media, but make no mistake that the professionals are the ones that piled on to take advantage of the situation.

briankelly 6y ago
Burry (fund manager who Bale played in the Big Short) is the one who put this trade on most people's radar months ago.

balls187 6y ago

Yes, but some of them also manage funds that are people from Mainstreet's retirements. So while, yeah fun to stick it to the wealthy elite, I feel the law of unintended consequences is going to rear it's head much like crash of the housing market in 2007.

smabie 6y ago

No one is front running orders on a large scale. This does not happen.