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As someone who is not very educated in finance, I'm curious how to interpret today's events. Is nasdaq/robinhood/everyone else transparently manipulating the ma

As someone who is not very educated in finance, I'm curious how to interpret today's events. Is nasdaq/robinhood/everyone else transparently manipulating the market on behalf of hedge funds? Or are these standard mechanisms in place for preventing the stock market from swinging wildly out of control? I don't know if it's standard to completely block trading on one or more stocks.

nabla9 6y ago
If you buy stock with the purpose of pushing the price up so that other people will buy it, that’s market manipulation. What WSB crowd is doing is market manipulation. That's illegal. WSB is doing everything openly and even celebrating it. Getting mad when openly breaking the law is not rational response. https://www.law.cornell.edu/uscode/text/15/78i https://www.law.cornell.edu/uscode/text/15/78i Brokers like Robinhood are reacting because they want too keep SEC out of their asses and prevent SEC doing something even worse to their customers. Stock Markets like nasdaq are reacting to volatility, like they usually do in abnormal situation.
- ignoramous 6y ago
  > What WSB crowd is doing is market manipulation. Shorting GME more than number stocks exist is not market manipulation? HFT isn't? Bailing out greed isn't? Why is this notion of market manipulation such a narrow one-way street?
  - tartoran 6y ago
    And they stop the manipulation by more manipulation? Why isn’t the trade blocked entirely for those stocks? Having the ability to sell seems like an inviting open door towards a specific outcome. I closed my RH account today
    - llampx 6y ago
      Exactly. Good on you. I am with Tastyworks and IB, but IB seems to be playing shenanigans with GME today as well.
    - ignoramous 6y ago
      > And they stop the manipulation by more manipulation? Moving the goal-posts here, but yes, this ought to be the catalyst to do just that. Changes to regulations may yet happen (not that I agree with it); kind of seems inevitable at this point.
  - Tenoke 6y ago
    >Shorting GME more than number stocks exist is not market manipulation? No, it's just a risky play (as long as not naked) that can blow up and that's fine. >HFT isn't? No, HFT provides a service, like it or not. You might think the service isnt worth it but it's not market manipulation. >Bailing out greed isn't? That one usually isn't (most bailouts are other private actors' loans) but yes, I guess it can be if it allows actors to make risky plays without having real risk. That said, what WSB is doing here isn't market manipulation either.
  - commandlinefan 6y ago
    > such a one way street? It's not, though - rich people get in trouble for this all the time. Bernie Madoff is going to die in prison for running a finance scam. Enough people were convicted of insider trading in the 80's that they made a movie about it - and the movie was just called "Wall Street". None of this is new.
    - andrepd 6y ago
      > It's not, though - rich people get in trouble for this all the time. This has to be a joke.
  - nabla9 6y ago
    Peasants suspected their king was getting away with raping villagers. Peasants came together and decided to show the king. They started to rape each other in the broad daylight. When the town sheriff intervened, they cried out foul, "Why is the notion of rape such a one way street?" When the dust finally settled and anuses stopped bleeding, they discovered that they were coaxed to rape each other by Kings son who disguised himself as a commoner in the village subreddit. What made it worse was that King's son was involved in raping during the rape fest but somehow avoided getting raped himself.
    - ignoramous 6y ago
      > What made it worse was that King's son was involved in raping during the rape fest but somehow avoided getting raped himself. Let's see if that's how this plays out. Also, ignoring the fact that whilst the peasants are merely slapping each other on their wrists, they're really in fact looking to take the King who doesn't jive like them, to the guillotines.
- lazide 6y ago
  Not so clear cut. If you hype stock to PROFIT from it by selling before it crashes, that is market manipulation. If you hype stock because you believe it is an amazing opportunity, and you happen to diversify before it crashes - that is talking about things in public. A bunch of people hyping each other up? Also talking in public about what they like. If that moves markets? That happens. If that opportunity is a short squeeze (which it still appears to be - newest data I can find is GME is still at 120%+ short interest), then it gets really really confusing - and I'm not sure how this is going to sort out. People going on public news networks saying they've 'got out' and other articles talking about folks no longer being short - that would be clear market manipulation if not true.
  - nabla9 6y ago
    I agree, it's not clear cut. It's unlikely that SEC goes after the WSB but they could. What happened satisfies the four part test for market manipulation. But you would have to figure out the suspects who actually match the test. Most participants are just fools.
    - lazide 6y ago
      I'm not sure it does satisfy the 4 part test, specifically in: (1) That the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices. It isn't clear that #2 is satisfied. Telling people that there is an opportunity for a short squeeze to occur is also not that different from normal technical analysis, which stock analyists do all the time. Even setting a price target is not illegal. Porsche did a short squeeze on VW and Elon is quite blatant about squeezing shorts in TSLA, and they've been fine despite profiting handsomely from it. Citron was clearly 'stating their opinion' on GME being worthless, but since they disclosed their position (short on GME), they are fine. What typically makes it illegal is lying about your own stake, or prices, or data, or plans in an attempt to influence the market. Most smart analysts don't hold positions in what they are talking about, but some do, they disclose them, and they're good. If someone makes a trade, makes it public, and tells everyone why - and they think it's a great idea - then it doesn't meet the test IMO. Additionally for #3 - no one that I am aware of is using anything but public pricing data based on free and open market trading data, so it's hard to claim artificial prices existed. If someone has been publishing fake data (so claiming no short interest exists when it does, or more exists than does), then that would certainly check the box off. So far the only claims I've seen of that happening are in public financial analysis claims, not in the WSB data. Also for #4 - It isn't clear there is any accused that checks off all 4 boxes, or a conspiracy between any individuals that could check off all 4 boxes. WSB isn't a single entity, and my guess is that none of the moderators on WSB are involved in this (if so, they are really dumb). WSB is regularly looked at for insider trading, and always comes out clean because they are a forum where people talk, they actively suppress anything that looks like a pump and dump (at least a normal one), etc. edit: add a lot of info on the 4 point test
- doytch 6y ago
  WSB is not buying the stock with the purpose of pushing the price up beyond realising that by buying and holding, it makes covering short positions more difficult to cover. It is not illegal.
- dahdum 6y ago
  That seems to be the minority view among pundits and analysts, and disregards the large amount of funds jumping into the fray to squeeze the shorts. Trading against shorts instead of fundamentals isn't market manipulation.
- nikk1 6y ago
  Sorry, but what WSB is doing is free speech. Any analyst can get on TV and announce a price target. What WSB is doing is no different. WSB is a transparent group and everything they say can be read by the public.
- volkl48 6y ago
  It's not that clear as far as I can tell (and from reading commentary from people far more knowledgeable than me). Matt Levine's column from 2 days ago, for example, goes over some of those questions to a decent degree: (possible paywall) 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...
pmart123 6y ago
A bit of both. If you are running a fund and down 50% from the events over the last few weeks, it's your fault. At the same time, stocks shouldn't be moving 100% each day.
jsjsbdkj 6y ago
WSB has basically recreated a "boiler room", which is an ages old scam where a small group of insiders would encourage people to buy stock, drive them value up, and then the insiders dump the stock. The key insight here is that for every person selling the stock and making millions, somoene has to be buying. There's a narrative about short squeezes forcing a small number of hedge funds to buy stock, but in practice many of the people buying the stock at the inflated price are retail investors hoping to get rich quick. A few retail investors will get rich quick, but that money will come from the people who join the party late and can't get out before the price drops back to earth. The trading stops and laws that exist to prevent this kind of wild volatility are basically because for 90% of people, this is not good. By the time your parents read about this in the paper and log into their TD Ameritrade accounts to "invest", they'll be in that group of people left holding the bag.
- kjakm 6y ago
  This all reminds me of the crypto ICO's a few years back. Build a tonne of hype around something, get a vast number of people who don't really know what they're doing to put in their money, and then the big investors get out, tanking the price for everyone else. In all the talk of conspiracy around this I'm surprised nobody is discussing the possibility that larger investors are likely manipulating/hyping the WSB community. The WSB community is acting untouchable but I get the feeling in the end they'll be the ones losing their money.
  - codetrotter 6y ago
    Exactly this. I went over to r/WSB earlier today to see what the fuzz was all about, and all of the posts there remind me exactly of the content that was being posted in cryptocurrency subreddits a few years ago. Posts about having bought high and intending to hold. To me when I see this I think, how many of these posts are people that are trying to hype up others to put money in, so that the people that are hyping the others can get out. And I think the answer is a lot. And the rest of them are people caught up in the hype. But the hype cannot last, it never does.
    - deleted 6y ago
EForEndeavour 6y ago
I'm also quite ignorant of investing and also contract law, but technically, Robinhood's recent disabling of buying new options or shares [1] falls under their terms of service [2]: You agree that, without notice, _Robinhood may terminate these Terms and Conditions, or suspend your access to the Service or the Content, with or without cause at any time and effective immediately._ [...] Robinhood shall not be liable to you or any third party for the termination or suspension of the Service or the Content, or any claims related to such termination or suspension. tl;dr: we can change what you can do on Robinhood at any time for any (or no) reason at all, and you can't do anything about it. [1] https://old.reddit.com/r/wallstreetbets/comments/l6w4uo/robinhood_will_not_let_new_options_or_shares_be/ https://old.reddit.com/r/wallstreetbets/comments/l6w4uo/robi... [2] https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal/Robinhood%20Terms%20and%20Conditions.pdf https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal...
- valvar 6y ago
  I am not a lawyer, but I assume that they would not get in trouble for contract breach but rather for market manipulation.
  - lazide 6y ago
    Also potentially for violating their duties as a broker. How the various duties to execute trades intersect with duties to protect their clients is going to be an interesting court case to follow. If it turns out the gamma squeeze or short squeeze works, RH clients could easily claim massive monetary losses.
fireeyed 6y ago
Don't you think the honchos at Robinhood got the call from the man last night ? Its a coordinated ban of serfs from buying up AMC GME BB. Its got too hot for them.
- kasey_junk 6y ago
  No I don’t. I think the market makers/internalizers who are normally on the other side of retail trades want no part of the irrationality around these symbols so they pulled their orders. There is no one on the other side of the book so Robinhood can’t execute. It’s standard market dynamics that anyone whose traded before understands. That a bunch of new retail traders are about to learn an expensive lesson on execution/liquidity risk is a normal cycle.
  - doytch 6y ago
    The market makers are making _bank_ right now off of the premiums. They're the last people to request a halt.
    - llampx 6y ago
      Umm, no. Every single call option in the chain is ITM. That's suicide for tomorrow, when shares must be delivered.
  - fireeyed 6y ago
    I am not a WS insider. I just checked $GME its up 6% as the serfs moved on to other trading platforms. Obviously someone is on the otherside of the trade no ?
    - kasey_junk 6y ago
      That price is based on the last trade to go through on a lit exchange independent of how big it is. I don’t have a full book feed available to see what the book looks like but on my delayed free feed the last few trades were in the 300-700 sized lots. That’s tiny especially if the internalizers have pulled out. My guess is that the book is actually showing some gigantic spread where the lowest sell price with any size is tens of dollars off the highest buy orders. But that’s speculation on my part. [edit] later: just saw a 70k lot clear at $375. Guessing that’s some stops getting hit and clearing that level. The price immediately jumped up over $410. All of this lends credence to my belief that the GME book is crazy one sided and hard to execute into.
davidw 6y ago
I would wait a few months and read the write-ups by people who have had time to ferret out the details and look at various angles. There are a lot of "hot takes" and people thinking all this fits some "narrative". But I think there is just a lot going on and I'd be cautious about assigning too much meaning to any of it without a lot more information, which we won't have right away.

nabla9 6y ago

If you buy stock with the purpose of pushing the price up so that other people will buy it, that’s market manipulation. What WSB crowd is doing is market manipulation. That's illegal. WSB is doing everything openly and even celebrating it. Getting mad when openly breaking the law is not rational response. https://www.law.cornell.edu/uscode/text/15/78i https://www.law.cornell.edu/uscode/text/15/78i Brokers like Robinhood are reacting because they want too keep SEC out of their asses and prevent SEC doing something even worse to their customers. Stock Markets like nasdaq are reacting to volatility, like they usually do in abnormal situation.

ignoramous 6y ago
> What WSB crowd is doing is market manipulation. Shorting GME more than number stocks exist is not market manipulation? HFT isn't? Bailing out greed isn't? Why is this notion of market manipulation such a narrow one-way street?
- tartoran 6y ago
  And they stop the manipulation by more manipulation? Why isn’t the trade blocked entirely for those stocks? Having the ability to sell seems like an inviting open door towards a specific outcome. I closed my RH account today
  - llampx 6y ago
    Exactly. Good on you. I am with Tastyworks and IB, but IB seems to be playing shenanigans with GME today as well.
  - ignoramous 6y ago
    > And they stop the manipulation by more manipulation? Moving the goal-posts here, but yes, this ought to be the catalyst to do just that. Changes to regulations may yet happen (not that I agree with it); kind of seems inevitable at this point.
- Tenoke 6y ago
  >Shorting GME more than number stocks exist is not market manipulation? No, it's just a risky play (as long as not naked) that can blow up and that's fine. >HFT isn't? No, HFT provides a service, like it or not. You might think the service isnt worth it but it's not market manipulation. >Bailing out greed isn't? That one usually isn't (most bailouts are other private actors' loans) but yes, I guess it can be if it allows actors to make risky plays without having real risk. That said, what WSB is doing here isn't market manipulation either.
- commandlinefan 6y ago
  > such a one way street? It's not, though - rich people get in trouble for this all the time. Bernie Madoff is going to die in prison for running a finance scam. Enough people were convicted of insider trading in the 80's that they made a movie about it - and the movie was just called "Wall Street". None of this is new.
  - andrepd 6y ago
    > It's not, though - rich people get in trouble for this all the time. This has to be a joke.
- nabla9 6y ago
  Peasants suspected their king was getting away with raping villagers. Peasants came together and decided to show the king. They started to rape each other in the broad daylight. When the town sheriff intervened, they cried out foul, "Why is the notion of rape such a one way street?" When the dust finally settled and anuses stopped bleeding, they discovered that they were coaxed to rape each other by Kings son who disguised himself as a commoner in the village subreddit. What made it worse was that King's son was involved in raping during the rape fest but somehow avoided getting raped himself.
  - ignoramous 6y ago
    > What made it worse was that King's son was involved in raping during the rape fest but somehow avoided getting raped himself. Let's see if that's how this plays out. Also, ignoring the fact that whilst the peasants are merely slapping each other on their wrists, they're really in fact looking to take the King who doesn't jive like them, to the guillotines.
lazide 6y ago
Not so clear cut. If you hype stock to PROFIT from it by selling before it crashes, that is market manipulation. If you hype stock because you believe it is an amazing opportunity, and you happen to diversify before it crashes - that is talking about things in public. A bunch of people hyping each other up? Also talking in public about what they like. If that moves markets? That happens. If that opportunity is a short squeeze (which it still appears to be - newest data I can find is GME is still at 120%+ short interest), then it gets really really confusing - and I'm not sure how this is going to sort out. People going on public news networks saying they've 'got out' and other articles talking about folks no longer being short - that would be clear market manipulation if not true.
- nabla9 6y ago
  I agree, it's not clear cut. It's unlikely that SEC goes after the WSB but they could. What happened satisfies the four part test for market manipulation. But you would have to figure out the suspects who actually match the test. Most participants are just fools.
  - lazide 6y ago
    I'm not sure it does satisfy the 4 part test, specifically in: (1) That the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices. It isn't clear that #2 is satisfied. Telling people that there is an opportunity for a short squeeze to occur is also not that different from normal technical analysis, which stock analyists do all the time. Even setting a price target is not illegal. Porsche did a short squeeze on VW and Elon is quite blatant about squeezing shorts in TSLA, and they've been fine despite profiting handsomely from it. Citron was clearly 'stating their opinion' on GME being worthless, but since they disclosed their position (short on GME), they are fine. What typically makes it illegal is lying about your own stake, or prices, or data, or plans in an attempt to influence the market. Most smart analysts don't hold positions in what they are talking about, but some do, they disclose them, and they're good. If someone makes a trade, makes it public, and tells everyone why - and they think it's a great idea - then it doesn't meet the test IMO. Additionally for #3 - no one that I am aware of is using anything but public pricing data based on free and open market trading data, so it's hard to claim artificial prices existed. If someone has been publishing fake data (so claiming no short interest exists when it does, or more exists than does), then that would certainly check the box off. So far the only claims I've seen of that happening are in public financial analysis claims, not in the WSB data. Also for #4 - It isn't clear there is any accused that checks off all 4 boxes, or a conspiracy between any individuals that could check off all 4 boxes. WSB isn't a single entity, and my guess is that none of the moderators on WSB are involved in this (if so, they are really dumb). WSB is regularly looked at for insider trading, and always comes out clean because they are a forum where people talk, they actively suppress anything that looks like a pump and dump (at least a normal one), etc. edit: add a lot of info on the 4 point test
doytch 6y ago
WSB is not buying the stock with the purpose of pushing the price up beyond realising that by buying and holding, it makes covering short positions more difficult to cover. It is not illegal.
dahdum 6y ago
That seems to be the minority view among pundits and analysts, and disregards the large amount of funds jumping into the fray to squeeze the shorts. Trading against shorts instead of fundamentals isn't market manipulation.
nikk1 6y ago
Sorry, but what WSB is doing is free speech. Any analyst can get on TV and announce a price target. What WSB is doing is no different. WSB is a transparent group and everything they say can be read by the public.
volkl48 6y ago
It's not that clear as far as I can tell (and from reading commentary from people far more knowledgeable than me). Matt Levine's column from 2 days ago, for example, goes over some of those questions to a decent degree: (possible paywall) 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...

pmart123 6y ago

A bit of both. If you are running a fund and down 50% from the events over the last few weeks, it's your fault. At the same time, stocks shouldn't be moving 100% each day.

jsjsbdkj 6y ago

WSB has basically recreated a "boiler room", which is an ages old scam where a small group of insiders would encourage people to buy stock, drive them value up, and then the insiders dump the stock. The key insight here is that for every person selling the stock and making millions, somoene has to be buying. There's a narrative about short squeezes forcing a small number of hedge funds to buy stock, but in practice many of the people buying the stock at the inflated price are retail investors hoping to get rich quick. A few retail investors will get rich quick, but that money will come from the people who join the party late and can't get out before the price drops back to earth. The trading stops and laws that exist to prevent this kind of wild volatility are basically because for 90% of people, this is not good. By the time your parents read about this in the paper and log into their TD Ameritrade accounts to "invest", they'll be in that group of people left holding the bag.

kjakm 6y ago
This all reminds me of the crypto ICO's a few years back. Build a tonne of hype around something, get a vast number of people who don't really know what they're doing to put in their money, and then the big investors get out, tanking the price for everyone else. In all the talk of conspiracy around this I'm surprised nobody is discussing the possibility that larger investors are likely manipulating/hyping the WSB community. The WSB community is acting untouchable but I get the feeling in the end they'll be the ones losing their money.
- codetrotter 6y ago
  Exactly this. I went over to r/WSB earlier today to see what the fuzz was all about, and all of the posts there remind me exactly of the content that was being posted in cryptocurrency subreddits a few years ago. Posts about having bought high and intending to hold. To me when I see this I think, how many of these posts are people that are trying to hype up others to put money in, so that the people that are hyping the others can get out. And I think the answer is a lot. And the rest of them are people caught up in the hype. But the hype cannot last, it never does.
  - deleted 6y ago

EForEndeavour 6y ago

I'm also quite ignorant of investing and also contract law, but technically, Robinhood's recent disabling of buying new options or shares [1] falls under their terms of service [2]: You agree that, without notice, _Robinhood may terminate these Terms and Conditions, or suspend your access to the Service or the Content, with or without cause at any time and effective immediately._ [...] Robinhood shall not be liable to you or any third party for the termination or suspension of the Service or the Content, or any claims related to such termination or suspension. tl;dr: we can change what you can do on Robinhood at any time for any (or no) reason at all, and you can't do anything about it. [1] https://old.reddit.com/r/wallstreetbets/comments/l6w4uo/robinhood_will_not_let_new_options_or_shares_be/ https://old.reddit.com/r/wallstreetbets/comments/l6w4uo/robi... [2] https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal/Robinhood%20Terms%20and%20Conditions.pdf https://d2ue93q3u507c2.cloudfront.net/assets/robinhood/legal...

valvar 6y ago
I am not a lawyer, but I assume that they would not get in trouble for contract breach but rather for market manipulation.
- lazide 6y ago
  Also potentially for violating their duties as a broker. How the various duties to execute trades intersect with duties to protect their clients is going to be an interesting court case to follow. If it turns out the gamma squeeze or short squeeze works, RH clients could easily claim massive monetary losses.

fireeyed 6y ago

Don't you think the honchos at Robinhood got the call from the man last night ? Its a coordinated ban of serfs from buying up AMC GME BB. Its got too hot for them.

kasey_junk 6y ago
No I don’t. I think the market makers/internalizers who are normally on the other side of retail trades want no part of the irrationality around these symbols so they pulled their orders. There is no one on the other side of the book so Robinhood can’t execute. It’s standard market dynamics that anyone whose traded before understands. That a bunch of new retail traders are about to learn an expensive lesson on execution/liquidity risk is a normal cycle.
- doytch 6y ago
  The market makers are making _bank_ right now off of the premiums. They're the last people to request a halt.
  - llampx 6y ago
    Umm, no. Every single call option in the chain is ITM. That's suicide for tomorrow, when shares must be delivered.
- fireeyed 6y ago
  I am not a WS insider. I just checked $GME its up 6% as the serfs moved on to other trading platforms. Obviously someone is on the otherside of the trade no ?
  - kasey_junk 6y ago
    That price is based on the last trade to go through on a lit exchange independent of how big it is. I don’t have a full book feed available to see what the book looks like but on my delayed free feed the last few trades were in the 300-700 sized lots. That’s tiny especially if the internalizers have pulled out. My guess is that the book is actually showing some gigantic spread where the lowest sell price with any size is tens of dollars off the highest buy orders. But that’s speculation on my part. [edit] later: just saw a 70k lot clear at $375. Guessing that’s some stops getting hit and clearing that level. The price immediately jumped up over $410. All of this lends credence to my belief that the GME book is crazy one sided and hard to execute into.

davidw 6y ago

I would wait a few months and read the write-ups by people who have had time to ferret out the details and look at various angles. There are a lot of "hot takes" and people thinking all this fits some "narrative". But I think there is just a lot going on and I'd be cautious about assigning too much meaning to any of it without a lot more information, which we won't have right away.