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"Abusive or manipulative trading activity that is prohibited by the federal securities laws." Is that aimed at "professional hedge funds" or self-proclaimed "a

"Abusive or manipulative trading activity that is prohibited by the federal securities laws." Is that aimed at "professional hedge funds" or self-proclaimed "autists" in an internet forum?

ChrisRR 6y ago
The big traders probably have friends in high places, so I suspect they're going after WSB and not wall street who caused the issues in the first place.
- TeMPOraL 6y ago
  With the amount of media attention WSB has been gaining, this is setting itself up for "Wall Street versus The People" situation. It may be politically tough to go against the retailers now, particularly mid-pandemic and with all the other political comorbidities US is suffering from.
  - mrkramer 6y ago
    This is not about "Wall Street versus The People" or WallStreet vs Retail (small investors) it is about federal securities laws. And you know where the law is? In court. I think court needs to decide whether what is WSB doing illegal or legal.
    - mrkramer 6y ago
      I think court needs to decide whether what is WSB doing is* illegal or legal.
  - Izkata 6y ago
    It's been that for a while. Lots of people on social media have been framing it as another Occupy Wall Street, except this time they've figured out how to make the elites hurt. There's plenty of people who don't care how much they lose when it bursts, because Wall Street is set up to lose more.
  - fnimick 6y ago
    If after bubble pops it's shown that an elite group of WSB traders made huge profits while a large amount of retail traders lost their entire investment, I think there's going to be plenty of public appetite for nailing the market manipulators to the wall.
- throwaway4good 6y ago
  I know of cases from the Danish market where the financial service authorities went for people who had tried driving the price up in a pump and dump scheme for a small penny stock. Using internet forums and a couple of trading accounts. They made a few thousand dollars and got months in jail for it. The problem with wsb is that it has gotten so big and there are too many involved at this point.
  - vinceguidry 6y ago
    It's not really that the government can't go after WSB. Sure they're not going to prosecute 2 million degenerates, but it's not like they can't round up 50 of the big names to make a statement. It's that there's really no appetite in the federal government for going after retail traders. Retail trading as an industry took a very long time to build and ham-fisted enforcement could tank it harder than a few lawsuits ever could. Make no mistake, this was going to happen eventually. There's infinite ability to gather information, infinite ability to share it. Retail collusion was inevitable. The people who built the industry knew it was going to happen. They prepared for it. Everyone, including the SEC, knew it was only a matter of time before something like this happens. Denmark did that because there's much greater financial regulatory capture than there is here.
    - throwaway4good 6y ago
      Yes. This stuff (market manipulation using internet hype) is so easy to do that they need to make an example. I am very certain that most of retail traders who buy GME at 400 will end up losing money.
- mariodiana 6y ago
  There is no "probably." It is well-known that people leave their civil servant jobs at regulatory industries, after putting in their time, and bring their know-how and connections to big banks and hedge funds in return for cushy salaries.
  - nsonha 6y ago
    Worked in a broker in Australia, our head of compliance is a former ASIC (the Australian regulator) employee.
    - mariodiana 6y ago
      There is an NPR (National Public Radio) show called "This American Life" and several years back it had an episode devoted to this. They interviewed regulators. The big banks, for instance, will have an office on site for a regulator. The pull is to "go native" at some point.
SpicyLemonZest 6y ago
It’s aimed at both, presumably. It’s not like hedge funds have never gotten in trouble for abusive trading practices.
- bilbo0s 6y ago
  This. It's clear that everyone should be lawyering up depending on what positions they had when they started pumping this idea to the masses. That said, I'm a big believer in "a fool and his money". If there are hedge funds or retail investors out there who, perhaps, didn't understand all the risks of what they were doing, protecting them from their folly only causes more problems in the future. As horrible as this sounds, now is the time to let everyone fail. Hard. If we don't, no lessons will be learned.
  - stonecraftwolf 6y ago
    IANAL, but to me it seems like it would be very difficult to convict retail investors of investing in a stock they believe has value and then telling other people they invested in a stock they believe has value. Unless there are chat records of a few redditors coordinating an astroturf campaign while twirling their mustaches or whatever, I don’t see how this could be aimed at retail. Regulated entities who have access to tools or information not available to retail investors, or who applied financial pressure to manipulate access to the markets, or did not disclose conflicts of interest...that seems like a much easier case to make.
  - vorpalhex 6y ago
    It's also not as if hedge funds are employing thousands of welders or craftsmen. These are high risk financial strategies by people who qualify as professional traders - "I didn't know" isn't an excuse anymore. If they lose the game, they get to eat their losses. We will probably see a few retail traders get burned, and I suspect anyone wanting to do trading in the future is going to have to fill out more disclaimers.
    - jeffbee 6y ago
      Maybe not hedge funds but I estimate that the majority of what laypeople call "hedge funds" are not hedge funds. There are tons of firms that just run money for ordinary people. At my old firm they have shorted blackberry in thousands of individual margin accounts, and those accounts are losing money on paper and might have to realize losses in order to rebalance their risk.
marcosdumay 6y ago
> actions taken by regulated entities That's clearly not about random people commenting on an internet forum. It may still be about specific people commenting on an internet forum, but those people would know it's about them.
deleted 6y ago
[deleted]
boublepop 6y ago
It is aimed at the people who shut down buying GME, then tried to create a downward trend at unusual low volumes to try to scare the wallstreet bets crowed into abandoning their positions in GME to allow short positions to recoup their gigantic losses. It failed mind you. The shorts are still bleeding and the GME hold is continuing though just at a slightly reduced price. Retail investors who have bought GME can afford to wait out the antics of hedge funds, but those funds are on borrowed time to try to turn the loss of a century into some kind of win, or they are done for good. Ask yourself, who do you think is trailing the borders of legality? A teen who goes “hmm GME at 100$? Sure why not, I’ll take 10” or the hedgefond manager calling all his friends to stop trading because his fund is going bankrupt on a stupid bet he made that he would have gotten away with if it wasn’t for those meddling kids.
- esoterica 6y ago
  This is QAnon/Kraken/Dominion level crankery. The MAGA types are happy to believe in voter fraud conspiracy theories with no evidence because they hate the Democratic party, and here you are doing literally the exact same thing here except replacing "Deep State" with "hedgefond managers". People like you make fun of the QAnon-types but you're just as willing to indulge in deranged evidence-free conspiracy theorizing as long as it accommodates your ideological priors.
  - zamalek 6y ago
    Shorting more than 100% of the stock is excessive and irresponsible. That figure is not a conspiracy theory: it is public information that the SEC releases monthly. Whether hedge fund managers did make a call to their buddies is not the only thing in question here (although the SEC will surely determine the truth). Shorting a stock drives the price down and, while this is no less legal than buying a stock, the question is whether shorting 136% of the stock counts as outright manipulation. Reddit kids have done nothing but pop an artificial bubble, they did not participate in manipulation; as the hedge fund managers and their buddies claim. > QAnon I have yet to see the baby cookbook or other evidence of their ridiculous claims.

"Abusive or manipulative trading activity that is prohibited by the federal securities laws." Is that aimed at "professional hedge funds" or self-proclaimed "autists" in an internet forum?

ChrisRR 6y ago

The big traders probably have friends in high places, so I suspect they're going after WSB and not wall street who caused the issues in the first place.

TeMPOraL 6y ago
With the amount of media attention WSB has been gaining, this is setting itself up for "Wall Street versus The People" situation. It may be politically tough to go against the retailers now, particularly mid-pandemic and with all the other political comorbidities US is suffering from.
- mrkramer 6y ago
  This is not about "Wall Street versus The People" or WallStreet vs Retail (small investors) it is about federal securities laws. And you know where the law is? In court. I think court needs to decide whether what is WSB doing illegal or legal.
  - mrkramer 6y ago
    I think court needs to decide whether what is WSB doing is* illegal or legal.
- Izkata 6y ago
  It's been that for a while. Lots of people on social media have been framing it as another Occupy Wall Street, except this time they've figured out how to make the elites hurt. There's plenty of people who don't care how much they lose when it bursts, because Wall Street is set up to lose more.
- fnimick 6y ago
  If after bubble pops it's shown that an elite group of WSB traders made huge profits while a large amount of retail traders lost their entire investment, I think there's going to be plenty of public appetite for nailing the market manipulators to the wall.
throwaway4good 6y ago
I know of cases from the Danish market where the financial service authorities went for people who had tried driving the price up in a pump and dump scheme for a small penny stock. Using internet forums and a couple of trading accounts. They made a few thousand dollars and got months in jail for it. The problem with wsb is that it has gotten so big and there are too many involved at this point.
- vinceguidry 6y ago
  It's not really that the government can't go after WSB. Sure they're not going to prosecute 2 million degenerates, but it's not like they can't round up 50 of the big names to make a statement. It's that there's really no appetite in the federal government for going after retail traders. Retail trading as an industry took a very long time to build and ham-fisted enforcement could tank it harder than a few lawsuits ever could. Make no mistake, this was going to happen eventually. There's infinite ability to gather information, infinite ability to share it. Retail collusion was inevitable. The people who built the industry knew it was going to happen. They prepared for it. Everyone, including the SEC, knew it was only a matter of time before something like this happens. Denmark did that because there's much greater financial regulatory capture than there is here.
  - throwaway4good 6y ago
    Yes. This stuff (market manipulation using internet hype) is so easy to do that they need to make an example. I am very certain that most of retail traders who buy GME at 400 will end up losing money.
mariodiana 6y ago
There is no "probably." It is well-known that people leave their civil servant jobs at regulatory industries, after putting in their time, and bring their know-how and connections to big banks and hedge funds in return for cushy salaries.
- nsonha 6y ago
  Worked in a broker in Australia, our head of compliance is a former ASIC (the Australian regulator) employee.
  - mariodiana 6y ago
    There is an NPR (National Public Radio) show called "This American Life" and several years back it had an episode devoted to this. They interviewed regulators. The big banks, for instance, will have an office on site for a regulator. The pull is to "go native" at some point.

SpicyLemonZest 6y ago

It’s aimed at both, presumably. It’s not like hedge funds have never gotten in trouble for abusive trading practices.

bilbo0s 6y ago
This. It's clear that everyone should be lawyering up depending on what positions they had when they started pumping this idea to the masses. That said, I'm a big believer in "a fool and his money". If there are hedge funds or retail investors out there who, perhaps, didn't understand all the risks of what they were doing, protecting them from their folly only causes more problems in the future. As horrible as this sounds, now is the time to let everyone fail. Hard. If we don't, no lessons will be learned.
- stonecraftwolf 6y ago
  IANAL, but to me it seems like it would be very difficult to convict retail investors of investing in a stock they believe has value and then telling other people they invested in a stock they believe has value. Unless there are chat records of a few redditors coordinating an astroturf campaign while twirling their mustaches or whatever, I don’t see how this could be aimed at retail. Regulated entities who have access to tools or information not available to retail investors, or who applied financial pressure to manipulate access to the markets, or did not disclose conflicts of interest...that seems like a much easier case to make.
- vorpalhex 6y ago
  It's also not as if hedge funds are employing thousands of welders or craftsmen. These are high risk financial strategies by people who qualify as professional traders - "I didn't know" isn't an excuse anymore. If they lose the game, they get to eat their losses. We will probably see a few retail traders get burned, and I suspect anyone wanting to do trading in the future is going to have to fill out more disclaimers.
  - jeffbee 6y ago
    Maybe not hedge funds but I estimate that the majority of what laypeople call "hedge funds" are not hedge funds. There are tons of firms that just run money for ordinary people. At my old firm they have shorted blackberry in thousands of individual margin accounts, and those accounts are losing money on paper and might have to realize losses in order to rebalance their risk.

marcosdumay 6y ago

> actions taken by regulated entities That's clearly not about random people commenting on an internet forum. It may still be about specific people commenting on an internet forum, but those people would know it's about them.

deleted 6y ago

[deleted]

boublepop 6y ago

It is aimed at the people who shut down buying GME, then tried to create a downward trend at unusual low volumes to try to scare the wallstreet bets crowed into abandoning their positions in GME to allow short positions to recoup their gigantic losses. It failed mind you. The shorts are still bleeding and the GME hold is continuing though just at a slightly reduced price. Retail investors who have bought GME can afford to wait out the antics of hedge funds, but those funds are on borrowed time to try to turn the loss of a century into some kind of win, or they are done for good. Ask yourself, who do you think is trailing the borders of legality? A teen who goes “hmm GME at 100$? Sure why not, I’ll take 10” or the hedgefond manager calling all his friends to stop trading because his fund is going bankrupt on a stupid bet he made that he would have gotten away with if it wasn’t for those meddling kids.

esoterica 6y ago
This is QAnon/Kraken/Dominion level crankery. The MAGA types are happy to believe in voter fraud conspiracy theories with no evidence because they hate the Democratic party, and here you are doing literally the exact same thing here except replacing "Deep State" with "hedgefond managers". People like you make fun of the QAnon-types but you're just as willing to indulge in deranged evidence-free conspiracy theorizing as long as it accommodates your ideological priors.
- zamalek 6y ago
  Shorting more than 100% of the stock is excessive and irresponsible. That figure is not a conspiracy theory: it is public information that the SEC releases monthly. Whether hedge fund managers did make a call to their buddies is not the only thing in question here (although the SEC will surely determine the truth). Shorting a stock drives the price down and, while this is no less legal than buying a stock, the question is whether shorting 136% of the stock counts as outright manipulation. Reddit kids have done nothing but pop an artificial bubble, they did not participate in manipulation; as the hedge fund managers and their buddies claim. > QAnon I have yet to see the baby cookbook or other evidence of their ridiculous claims.