6 ms·

What SEC rule is WSB violating? I've seen no evidence yet that there is any sort of pump and dump collusion, the speculative bubble / stick-it-to-the-market-man

What SEC rule is WSB violating? I've seen no evidence yet that there is any sort of pump and dump collusion, the speculative bubble / stick-it-to-the-market-manipulators deal on WallStreetBets seems to be fairly organically driven as many memes are. There's no rules that I can think of against "tulip mania" type speculative bubbles. If there were, a huge amount of people would have been in serious trouble for the 2008 real estate bubble / crash. To be honest, I think the recent restrictions on trading specific stocks (on Robinhood etc.) is absolutely dumb. Apparently, the sort of crappy market manipulation that led to the 2008 Volkswagen "short squeeze" or the 2010 "flash crash" is absolutely fine because it was driven by traders. But an amateur mob performing the short squeeze must be stopped at all cost? What bullshit. Either the "casino" should be open to all, or rules that apply to the "amateur mob" should apply to the HFT and derivatives market as well.

BitwiseFool 6y ago
None, but Reddit doesn't need a valid reason to ban a subreddit. Where there's a will, there's a way.
tylerhou 6y ago
> What SEC rule is WSB violating? Market manipulation. Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Buying stock with the intention of causing a short squeeze can be interpreted to fit that definition. I believe that WSB is creating artificial demand to try to "screw over" certain institutional investors. I am not a lawyer; this is not a legal interpretation. > Apparently, the sort of crappy market manipulation that led to the 2008 Volkswagen "short squeeze" or the 2010 "flash crash" is absolutely fine because it was driven by traders. How were they "absolutely fine?" You do know that regulators attempted to prosecute the traders/executives responsible for the 2008 VW short squeeze [1], and successfully prosecuted a trader for the 2010 flash crash [2]? For the VW short squeeze, regulators were not able to find evidence that the traders involved intended to cause a short squeeze or engaged in any artificial demand; they actually demanded the stock because they sought to take over VW. This is also evidenced by the fact the Porsche sold stock on the open market once they released that a squeeze was happening [3]. [1] https://www.ft.com/content/ad782326-ed02-11e5-888e-2eadd5fbc4a4 https://www.ft.com/content/ad782326-ed02-11e5-888e-2eadd5fbc... [2] https://en.wikipedia.org/wiki/2010_flash_crash https://en.wikipedia.org/wiki/2010_flash_crash [3] https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39a26 https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39...
- baybal2 6y ago
  > Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Every purchase influences the market, and results in gain, otherwise people would not be buying, and selling things. Every purchase, is a market manipulation by the definition.
  - tylerhou 6y ago
    > Every purchase, is a market manipulation by the definition. Well, I don't think this would hold up in court. Both the SEC and courts have made a distinction in the past between "real demand" (i.e. demand motivated because you think the stock is undervalued) and "artificial demand" (i.e. demand that is not based on any underlying analysis, but instead motivated because you intend to trigger other market mechanisms, including coverings of short positions). Like most legal definitions, the actual definition is hazy, and courts may have established legal tests. Read Matt Levine for a nuanced analysis [1]. Again, not a lawyer, this isn't legal advice. [1] 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...
    - baybal2 6y ago
      And every time, an effort to judge whose demand is more real that other ends up with absurd, scandalous legal rulings. They should not be. These guys have full understanding how laughable it the attempt to judge somebody by pretending the judge/bureaucrat can peer into somebody's mind, and yet they do it.
      - tylerhou 6y ago
        > pretending the judge/bureaucrat can peer into somebody's mind But historical cases don't peer into people's minds. They look at evidence, such as texts in chat rooms that show clear intent to manipulate. See the Libor scandal chats [1], where one trader wrote "its just amazing how libor fixing can make you that much money" and "its a cartel now in london." I think it's unlikely that the SEC will be able to successfully prosecute WSB traders, though, due to lack of evidence. It's also probably not even worth their time. [1] https://www.buzzfeednews.com/article/matthewzeitlin/why-banks-want-to-get-their-traders-out-of-chatrooms https://www.buzzfeednews.com/article/matthewzeitlin/why-bank...
luxuryballs 6y ago
Facts won’t matter, they can ban just out of lawyer fear that they are at risk if they don’t ban.
- Simulacra 6y ago
  IMO the same is true with mask mandates. Businesses probably fear lawsuits from employees and customers who might get sick, and blame them for not doing enough. Sometimes a business does something that it claims is in the public interest but in reality is to protect them; i.e. Green Washing. https://en.wikipedia.org/wiki/Greenwashing https://en.wikipedia.org/wiki/Greenwashing
  - luxuryballs 6y ago
    Yep. In Virginia a church sued and forced the mandate to put the misdemeanor on the individual rather than the church. I wish they would do this for businesses as well.
WorldMaker 6y ago
Wall Street asked for exactly these sorts of deregulations. It's absolutely hypocritical for them to ask for exceptions to be made now and those half-assed versions of older regulations brought back but for only some traders.
zappo2938 6y ago
The hedge funds went to CNBC and told them they settled their short positions at $90. This news rippled through the entire trading community, exactly the same as WSB information ripples through the entire trading community. There is zero difference. Most likely this will be like accessibility to poker online and in casinos which don't profit off the game directly interestingly in the 2000s. A lot of people got involved. A few made a lot of money and the rest went to do other things after a while.

BitwiseFool 6y ago

None, but Reddit doesn't need a valid reason to ban a subreddit. Where there's a will, there's a way.

tylerhou 6y ago

> What SEC rule is WSB violating? Market manipulation. Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Buying stock with the intention of causing a short squeeze can be interpreted to fit that definition. I believe that WSB is creating artificial demand to try to "screw over" certain institutional investors. I am not a lawyer; this is not a legal interpretation. > Apparently, the sort of crappy market manipulation that led to the 2008 Volkswagen "short squeeze" or the 2010 "flash crash" is absolutely fine because it was driven by traders. How were they "absolutely fine?" You do know that regulators attempted to prosecute the traders/executives responsible for the 2008 VW short squeeze [1], and successfully prosecuted a trader for the 2010 flash crash [2]? For the VW short squeeze, regulators were not able to find evidence that the traders involved intended to cause a short squeeze or engaged in any artificial demand; they actually demanded the stock because they sought to take over VW. This is also evidenced by the fact the Porsche sold stock on the open market once they released that a squeeze was happening [3]. [1] https://www.ft.com/content/ad782326-ed02-11e5-888e-2eadd5fbc4a4 https://www.ft.com/content/ad782326-ed02-11e5-888e-2eadd5fbc... [2] https://en.wikipedia.org/wiki/2010_flash_crash https://en.wikipedia.org/wiki/2010_flash_crash [3] https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39a26 https://www.ft.com/content/0a58b63a-4294-3e07-8390-c3aabef39...

baybal2 6y ago
> Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Every purchase influences the market, and results in gain, otherwise people would not be buying, and selling things. Every purchase, is a market manipulation by the definition.
- tylerhou 6y ago
  > Every purchase, is a market manipulation by the definition. Well, I don't think this would hold up in court. Both the SEC and courts have made a distinction in the past between "real demand" (i.e. demand motivated because you think the stock is undervalued) and "artificial demand" (i.e. demand that is not based on any underlying analysis, but instead motivated because you intend to trigger other market mechanisms, including coverings of short positions). Like most legal definitions, the actual definition is hazy, and courts may have established legal tests. Read Matt Levine for a nuanced analysis [1]. Again, not a lawyer, this isn't legal advice. [1] 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...
  - baybal2 6y ago
    And every time, an effort to judge whose demand is more real that other ends up with absurd, scandalous legal rulings. They should not be. These guys have full understanding how laughable it the attempt to judge somebody by pretending the judge/bureaucrat can peer into somebody's mind, and yet they do it.
    - tylerhou 6y ago
      > pretending the judge/bureaucrat can peer into somebody's mind But historical cases don't peer into people's minds. They look at evidence, such as texts in chat rooms that show clear intent to manipulate. See the Libor scandal chats [1], where one trader wrote "its just amazing how libor fixing can make you that much money" and "its a cartel now in london." I think it's unlikely that the SEC will be able to successfully prosecute WSB traders, though, due to lack of evidence. It's also probably not even worth their time. [1] https://www.buzzfeednews.com/article/matthewzeitlin/why-banks-want-to-get-their-traders-out-of-chatrooms https://www.buzzfeednews.com/article/matthewzeitlin/why-bank...

luxuryballs 6y ago

Facts won’t matter, they can ban just out of lawyer fear that they are at risk if they don’t ban.

Simulacra 6y ago
IMO the same is true with mask mandates. Businesses probably fear lawsuits from employees and customers who might get sick, and blame them for not doing enough. Sometimes a business does something that it claims is in the public interest but in reality is to protect them; i.e. Green Washing. https://en.wikipedia.org/wiki/Greenwashing https://en.wikipedia.org/wiki/Greenwashing
- luxuryballs 6y ago
  Yep. In Virginia a church sued and forced the mandate to put the misdemeanor on the individual rather than the church. I wish they would do this for businesses as well.

WorldMaker 6y ago

Wall Street asked for exactly these sorts of deregulations. It's absolutely hypocritical for them to ask for exceptions to be made now and those half-assed versions of older regulations brought back but for only some traders.

zappo2938 6y ago

The hedge funds went to CNBC and told them they settled their short positions at $90. This news rippled through the entire trading community, exactly the same as WSB information ripples through the entire trading community. There is zero difference. Most likely this will be like accessibility to poker online and in casinos which don't profit off the game directly interestingly in the 2000s. A lot of people got involved. A few made a lot of money and the rest went to do other things after a while.