4 ms·

How is borrowing then selling 140% of the available shares legal? How is that not market manipulation? This is the market at work. This was taken too far and t

How is borrowing then selling 140% of the available shares legal? How is that not market manipulation? This is the market at work. This was taken too far and the market has a method for correcting this behavior and we're seeing it now. The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding. We NEED financial reform but we need to look at what allowed this situation in the first place, not ways to silence what are effectively the whistle blowers.

bko 6y ago
> How is borrowing then selling 140% of the available shares legal? How is that not market manipulation? Why wouldn't someone be allowed to lend out a security they own to someone else? If not allowed, why wouldn't I be allowed to make an agreement where I pay you the difference between a future stock price and some fixed value? > The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding. The backroom deal will be a phone call to the CEO of reddit, discord, disqus and similar and tell them to cut it out. Simple as that. No coordinating mechanism, this will die.
- nixass 6y ago
  > Why wouldn't someone be allowed to lend out a security they own to someone else? Can you explain what individual or company can own 140% of available shares?
parsimo2010 6y ago
You seem to be hinting at the idea that naked short selling should be illegal, which it has been for over a decade. So here’s a minor clarification for you: The short interest (140% or more for GME) is calculated on the public float. There is a significant chunk of GameStop shares that are not publicly accessible, but could be borrowed against (the shares do exist). If you consider the total outstanding shares of GME, then only 99% or so of the company was shorted. So it’s a crazy high amount, but there is no proof that any (actually illegal) naked short selling was occurring. So long as the people holding the non-public portion allowed their shares to be borrowed, then nothing illegal is going on. If, in the unlikely situation that EVERYONE needed to close their short positions at once, these non-public shares could actually be sold if the owner wanted to. Of course, they could dictate a really high price if the public market volume isn’t enough to close out the short positions in the standard three day period. The reason that short interest is calculated on public float is because that makes the most sense for normal situations. We just happen to have stumbled into one of those unusual situations.
- esrauch 6y ago
  Can you explain how it's possible that 99% of shares were held by owners that were willing to loan their share? Surely at least 2% of GME was owned by "regular people" whose shares just sit in their brokerage accounts?
  - dragontamer 6y ago
    Those brokerage accounts loan the shares out and collect some interest %%% while waiting. The shares don't have your name on it. It has like Robinhood's name on it, holding on behalf of the customer.
    - esrauch 6y ago
      I was completely unaware this was a thing: that means there can be a "run on the bank" if all of the customers wanted to sell on a short time period, and they don't actually have the shares to cover the sales?
- mox1 6y ago
  GME stock has been on nasdaq's "failed to deliver" list for about a month now. That means someone sold a GME share they didn't own (short) and failed to give it to the new owner within the correct timeframe (3 business days I believe.) Guess what the SEC has done about this blatant naked short selling. Nothing. So while in theory naked short selling is illegal, in reality it is tolerate and allowed.

bko 6y ago

> How is borrowing then selling 140% of the available shares legal? How is that not market manipulation? Why wouldn't someone be allowed to lend out a security they own to someone else? If not allowed, why wouldn't I be allowed to make an agreement where I pay you the difference between a future stock price and some fixed value? > The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding. The backroom deal will be a phone call to the CEO of reddit, discord, disqus and similar and tell them to cut it out. Simple as that. No coordinating mechanism, this will die.

nixass 6y ago
> Why wouldn't someone be allowed to lend out a security they own to someone else? Can you explain what individual or company can own 140% of available shares?

parsimo2010 6y ago

You seem to be hinting at the idea that naked short selling should be illegal, which it has been for over a decade. So here’s a minor clarification for you: The short interest (140% or more for GME) is calculated on the public float. There is a significant chunk of GameStop shares that are not publicly accessible, but could be borrowed against (the shares do exist). If you consider the total outstanding shares of GME, then only 99% or so of the company was shorted. So it’s a crazy high amount, but there is no proof that any (actually illegal) naked short selling was occurring. So long as the people holding the non-public portion allowed their shares to be borrowed, then nothing illegal is going on. If, in the unlikely situation that EVERYONE needed to close their short positions at once, these non-public shares could actually be sold if the owner wanted to. Of course, they could dictate a really high price if the public market volume isn’t enough to close out the short positions in the standard three day period. The reason that short interest is calculated on public float is because that makes the most sense for normal situations. We just happen to have stumbled into one of those unusual situations.

esrauch 6y ago
Can you explain how it's possible that 99% of shares were held by owners that were willing to loan their share? Surely at least 2% of GME was owned by "regular people" whose shares just sit in their brokerage accounts?
- dragontamer 6y ago
  Those brokerage accounts loan the shares out and collect some interest %%% while waiting. The shares don't have your name on it. It has like Robinhood's name on it, holding on behalf of the customer.
  - esrauch 6y ago
    I was completely unaware this was a thing: that means there can be a "run on the bank" if all of the customers wanted to sell on a short time period, and they don't actually have the shares to cover the sales?
mox1 6y ago
GME stock has been on nasdaq's "failed to deliver" list for about a month now. That means someone sold a GME share they didn't own (short) and failed to give it to the new owner within the correct timeframe (3 business days I believe.) Guess what the SEC has done about this blatant naked short selling. Nothing. So while in theory naked short selling is illegal, in reality it is tolerate and allowed.