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Can anyone tell me why SEC won't just step in, suspend trading, and force some kind of resolution? Its obvious that the market has been effectively broken by th

by kart23 6y ago

Can anyone tell me why SEC won't just step in, suspend trading, and force some kind of resolution? Its obvious that the market has been effectively broken by the short sellers. It might just make the redditors more angry and likely to hit other shorted stocks, and possibly cause markets to decline, but its the best applicable solution i see. https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_tradingsuspensions https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_tr...

rjbwork 6y ago
The forced resolution will be to force the shorts to cover. Screwing people that took the other side of the trade because the short sellers screwed up doesn't really make any sense to me.
- pvarangot 6y ago
  Also the short-sellers are not being fooled into taking risks and neither are the call buyers. Everyone should know what they are doing.
- girvo 6y ago
  Though regulatory bodies “picking a winner” can happen, as unfair as it sounds. I would hope they wouldn’t in this situation though.
- kart23 6y ago
  yes, the resolution would entail that. its not about screwing people, its about fixing something thats broken. Isn't that what happened in 2008? Banks made stupid decisions, and government bailed them out for it. Obviously more complicated and probably higher stakes, but the crisis essentially boils down to that. Don't see why it can't happen here.
Miner49er 6y ago
It's not like this is the first time a short squeeze has happened. Has the SEC stepped in for other squeezes? If they were gonna step in, it should have been when naked shorting was occurring, not now.
- sjy 6y ago
  It looks like there was a listed short squeeze fund, SQZZ [1], which closed in 2018 only for lack of investors [2], so the SEC doesn't seem to have a fundamental problem with the strategy. [1] https://www.sec.gov/Archives/edgar/data/1559109/000089109215003026/e63610_485apos.htm https://www.sec.gov/Archives/edgar/data/1559109/000089109215... [2] https://www.etfstrategy.com/active-alts-closes-contrarian-short-squeeze-etf-65487/ https://www.etfstrategy.com/active-alts-closes-contrarian-sh...
rantwasp 6y ago
so heads I win, tail you lose? why would the SEC step in? I think if they step in they need to put in stronger rules from the wall street shamans not inhibit the retail traders. the stock market is not gonna get in trouble if a bunch a people are buying an overvalued stock. it is gonna get in trouble when you short 140% of the float and b*tch moan for more restrictions when you get called on it
kahrl 6y ago
Short sellers illegally borrowed more stock that actually existed. They are the criminals here. Not the people discovering this and taking the criminals for everything they have.
- xur17 6y ago
  Is it actually illegal to do this (not should it be, is it)?
  - kgwgk 6y ago
    Not at all.
    - kahrl 6y ago
      Wrong. https://en.m.wikipedia.org/wiki/Naked_short_selling https://en.m.wikipedia.org/wiki/Naked_short_selling
      - detaro 6y ago
        After someone has setup a covered short, the stock they borrowed and sold is again on the open market, is it not? And thus could be lent out by the new owner, enabling a second covered short?
      - kgwgk 6y ago
        I understood “this” to mean “borrowing [more stock that actually existed] and shorting”. As your link explains “Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing [...]”
  - kahrl 6y ago
    Yes. It’s called naked short selling. It’s been illegal since 2008. https://en.m.wikipedia.org/wiki/Naked_short_selling https://en.m.wikipedia.org/wiki/Naked_short_selling
qaq 6y ago
That is already happing people basically sorted stocks by % of shorted float and are piling on. AMC, SPCE etc
pvarangot 6y ago
They only interfere when the amount of magical floating stock that would need to materialize to fulfill all the contracts and pay back all the loans is too much to actually break down the market. That is not the case yet. As long as the only consequence of a squeeze is that people that made bets loose all their money the SEC is not going to do anything. No one is being fooled into buying something that's riskier than it looks here. Of course if GME asked to be delisted they could also help, but that also hasn't happened yet I think.
- imtringued 6y ago
  GME can make money from the short squeeze so why should it help those who short it and just accelerate its demise?

by kart23 6y ago

rjbwork 6y ago

The forced resolution will be to force the shorts to cover. Screwing people that took the other side of the trade because the short sellers screwed up doesn't really make any sense to me.

pvarangot 6y ago
Also the short-sellers are not being fooled into taking risks and neither are the call buyers. Everyone should know what they are doing.
girvo 6y ago
Though regulatory bodies “picking a winner” can happen, as unfair as it sounds. I would hope they wouldn’t in this situation though.
kart23 6y ago
yes, the resolution would entail that. its not about screwing people, its about fixing something thats broken. Isn't that what happened in 2008? Banks made stupid decisions, and government bailed them out for it. Obviously more complicated and probably higher stakes, but the crisis essentially boils down to that. Don't see why it can't happen here.

Miner49er 6y ago

It's not like this is the first time a short squeeze has happened. Has the SEC stepped in for other squeezes? If they were gonna step in, it should have been when naked shorting was occurring, not now.

sjy 6y ago
It looks like there was a listed short squeeze fund, SQZZ [1], which closed in 2018 only for lack of investors [2], so the SEC doesn't seem to have a fundamental problem with the strategy. [1] https://www.sec.gov/Archives/edgar/data/1559109/000089109215003026/e63610_485apos.htm https://www.sec.gov/Archives/edgar/data/1559109/000089109215... [2] https://www.etfstrategy.com/active-alts-closes-contrarian-short-squeeze-etf-65487/ https://www.etfstrategy.com/active-alts-closes-contrarian-sh...

rantwasp 6y ago

so heads I win, tail you lose? why would the SEC step in? I think if they step in they need to put in stronger rules from the wall street shamans not inhibit the retail traders. the stock market is not gonna get in trouble if a bunch a people are buying an overvalued stock. it is gonna get in trouble when you short 140% of the float and b*tch moan for more restrictions when you get called on it

kahrl 6y ago

Short sellers illegally borrowed more stock that actually existed. They are the criminals here. Not the people discovering this and taking the criminals for everything they have.

xur17 6y ago
Is it actually illegal to do this (not should it be, is it)?
- kgwgk 6y ago
  Not at all.
  - kahrl 6y ago
    Wrong. https://en.m.wikipedia.org/wiki/Naked_short_selling https://en.m.wikipedia.org/wiki/Naked_short_selling
    - detaro 6y ago
      After someone has setup a covered short, the stock they borrowed and sold is again on the open market, is it not? And thus could be lent out by the new owner, enabling a second covered short?
    - kgwgk 6y ago
      I understood “this” to mean “borrowing [more stock that actually existed] and shorting”. As your link explains “Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing [...]”
- kahrl 6y ago
  Yes. It’s called naked short selling. It’s been illegal since 2008. https://en.m.wikipedia.org/wiki/Naked_short_selling https://en.m.wikipedia.org/wiki/Naked_short_selling

qaq 6y ago

That is already happing people basically sorted stocks by % of shorted float and are piling on. AMC, SPCE etc

pvarangot 6y ago

They only interfere when the amount of magical floating stock that would need to materialize to fulfill all the contracts and pay back all the loans is too much to actually break down the market. That is not the case yet. As long as the only consequence of a squeeze is that people that made bets loose all their money the SEC is not going to do anything. No one is being fooled into buying something that's riskier than it looks here. Of course if GME asked to be delisted they could also help, but that also hasn't happened yet I think.

imtringued 6y ago
GME can make money from the short squeeze so why should it help those who short it and just accelerate its demise?