6 ms·

Gamestop made me think of this. The moral of the story is that when you beat Wall Street at their own game, they will change the rules on you so they win anyway

by imgabe 6y ago

Gamestop made me think of this. The moral of the story is that when you beat Wall Street at their own game, they will change the rules on you so they win anyway. Something to be cautious about in the current situation.

gruez 6y ago
>they will change the rules on you so they win anyway Are you referring to how several popular brokerages prevented customers from opening new positions? That's due to them unable to fulfill deposit requirements on such volatile stocks, not because of some conspiracy by wall st to "change the rules on you so they win anyway". see: https://www.bloomberg.com/opinion/articles/2021-01-29/reddit-traders-on-robinhood-are-on-both-sides-of-gamestop https://www.bloomberg.com/opinion/articles/2021-01-29/reddit..., under heading "Why did Robinhood stop them?".
- deleted 6y ago
  [deleted]
- ummonk 6y ago
  I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. And the Interactive Brokers chairman is explicit about why he chose to block buys.
  - gruez 6y ago
    > I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. Is there any evidence for this, other than the general feeling of "rich people are powerful, therefore they must have been some meddling by them"? The formula for determining the deposit requirements is publicly documented: https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478, so the judgement call looks pretty straightforward to make.
    - will_pseudonym 6y ago
      And who sets the formula, who lobbies for laws to be passed to require it, who runs and owns the clearing houses? Hint: It's in the thread you linked. > RH offered to open up stock market investing more broadly. They succeeded, clearly. But the regulations didn't change - there are still pro-Wall St, pro-incumbent rules and capital requirements. It's one of the most highly regulated industries in our nation. [0] > So @aoc is right to ask how it can be that Robinhood stopped its clients from buying certain securities. And what she'll find is that the reason is that Dodd-Frank requires brokers like RH to post collateral to cover their clients' trading risk pre-settlement. [1] > And it isn't the Fed or SEC who sets the rules. It's the Wall St owned central clearing entity itself, DTCC, that makes its own rules. So when the retail masses decided to squeeze the short-sellers, in the middle of crushing them, it was govt regulations which tripped them up. [2] This last tweet in the thread was made about 13h ago, about a day after the previous last tweet in the thread. It's quite interesting, if you ask me. > Update: the plot thickens ... @The_DTCC may have exercised its right to add additional margin charges for a set of these stocks. It's a Margin Liquidity Adjustment Charge. [3] [0] https://twitter.com/KralcTrebor/status/1354952710202814470 https://twitter.com/KralcTrebor/status/1354952710202814470 [1] https://twitter.com/KralcTrebor/status/1354952711217807364 https://twitter.com/KralcTrebor/status/1354952711217807364 [2] https://twitter.com/KralcTrebor/status/1354952712400601099 https://twitter.com/KralcTrebor/status/1354952712400601099 [3] https://twitter.com/KralcTrebor/status/1355175395642003456 https://twitter.com/KralcTrebor/status/1355175395642003456
    - ummonk 6y ago
      The twitter thread you posted does have the evidence in the update https://twitter.com/KralcTrebor/status/1355172567242469377 https://twitter.com/KralcTrebor/status/1355172567242469377 And it's an open secret that Wall Street institutions colluding / bending ethics and the law is basically business as usual. (In this particular case I talked to a couple people I know who work in market makers and hedge funds and they took it as given that the requirements would have been put in place to protect short selling institutions)
    - yomly 6y ago
      I find it curious when people give these institutions the benefit of the doubt. It flies in the face of the history of the industry and also what we know about basic human nature. I've moved around these types of social circles to know that any levers that can be pulled will be pulled. We also know that for large financial institutions, breaking the law is usually just a cost of doing business. Tangential, but GS was happy to facilitate 1MDB, and HSBC empower money launderers... In any case it is speculation so my opinion carries no real weight over yours, but it does make me wonder what has coloured my world view to be so cynical/nihilistic
- throwaway2245 6y ago
  "oh, now that you're winning, there's this extra unwritten rule that I forgot to tell you about..."
  - gruez 6y ago
    >extra unwritten rule it's literally written. the average wsb user might not have known that discount brokerages were going to fail them, but it's hardly "changing the rules".
majormajor 6y ago
There's a general moral of the story here that isn't specific to Wall Street. If you think you've got a magic hack for some system, don't forget that the system might not be immutable, and that many people will consider the spirit of the rules not just the letter of them (even if this means changing the letter of them). It's fairly similar to the risk of building a business by adding one feature to someone else's platform.
- munificent 6y ago
  Yeah. It is very rare that a clever rules-lawyer-style hack of a game will let you defeat people in power because they usually have enough power to hop up a level and beat you at the meta-game and you do not. Like Solo telling Luke to let the Wookkie win.
- smnrchrds 6y ago
  This holds true, even when the system assures you that it is immutable. I recall when a hacker noticed a vulnerability in some Ethereum smart contracts and used it to "steal" ETHs, the transactions were swiftly reversed and the whole concept of "the code is the contract" was thrown out of the window in the process. https://www.wired.com/2016/06/50-million-hack-just-showed-dao-human/ https://www.wired.com/2016/06/50-million-hack-just-showed-da...
  - klipt 6y ago
    Wasn't the blockchain forked? So technically there is still a version of Ethereum out there that makes it easy for hackers to steal your stuff, but for some reason nobody wants to use that version.
    - smnrchrds 6y ago
      The bug was not in Ethereum, it was in the contracts. And before this incident, the philosophy of Ethereum was that "the code is the contract". The hacker did not breach the contract. They noticed a bug, or as one could say, a loophole, and used it to their benefit. I don't know what the mechanism of enforcement was. Whether it was a fork or something else, the net effect was that a) the history was rewritten, the contract terms changed retroactively, and the monies were returned to their source; and b) the concept of code is contract was effectively showed to be an empty gesture and the philosophy was effectively abandoned.
koolba 6y ago
> The moral of the story is that when you beat Wall Street at their own game, they will change the rules on you so they win anyway. They didn’t change the rules. The rules are clear that they’re allowed to change the rules anytime they want. That’s one of the rules.
- mattnewton 6y ago
  In this particular case I’m not sure actually; they changed contracts to allow a later date.
- emmelaich 6y ago
  https://en.wikipedia.org/wiki/Nomic https://en.wikipedia.org/wiki/Nomic
- clankyclanker 6y ago
  https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball
  - clankyclanker 6y ago
    That’s supposed to be a link to CalvinBall, but it didn’t quite work right.
- 082349872349872 6y ago
  I don't believe it's possible to come up with a fixed set of rules that protects against market manipulation in both directions: the more one attempts to manipulation-proof in one direction, the easier it gets to manipulate in the opposite.
  - gwnwest21 6y ago
    Wolfe Research firm is developing a tool that can scan large volumes of language text on subreddit forums like wallstreetbets and assess which stocks are being targeted by retail traders. The article is currently at Market Watch.
Spooky23 6y ago
Clearly the moral path is to let the market fail and implode. </s> When the market is in danger, it’s foolish not to act to stabilize it. If robinhood collapsed into receivership, the outcome would be far worse for their customers.
- ignoramous 6y ago
  > ...far worse for their customers. Doubt that, because given the overall politically charged sentiment around the squeeze, they would have declared Robinhood's demise a victory as well.
  - Spooky23 6y ago
    Idiots on Twitter would celebrate any chaos, but the customers would be waiting on SIPC for their money!
testfoobar 6y ago
One solution would be for management to raise capital by issuing boatloads of new shares. They could explicitly say the capital is to pay themselves bonuses to buy mansions and yachts.
tamaharbor 6y ago
Just like Las Vegas.
mindcrime 6y ago
The moral of the story is that when you beat Wall Street at their own game, they will change the rules on you so they win anyway https://youtu.be/MpmGXeAtWUw?t=90 https://youtu.be/MpmGXeAtWUw?t=90
coolgeek 6y ago
> when you beat Wall Street at their own game, they will change the rules on you so they win anyway It's not just Wall Street. This explains the Republican demands for even more onerous voting restrictions. Even though those same Republicans have certified - under penalty of perjury - that there was effectively no fraud in the recent elections.

by imgabe 6y ago

gruez 6y ago

>they will change the rules on you so they win anyway Are you referring to how several popular brokerages prevented customers from opening new positions? That's due to them unable to fulfill deposit requirements on such volatile stocks, not because of some conspiracy by wall st to "change the rules on you so they win anyway". see: https://www.bloomberg.com/opinion/articles/2021-01-29/reddit-traders-on-robinhood-are-on-both-sides-of-gamestop https://www.bloomberg.com/opinion/articles/2021-01-29/reddit..., under heading "Why did Robinhood stop them?".

deleted 6y ago
[deleted]
ummonk 6y ago
I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. And the Interactive Brokers chairman is explicit about why he chose to block buys.
- gruez 6y ago
  > I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. Is there any evidence for this, other than the general feeling of "rich people are powerful, therefore they must have been some meddling by them"? The formula for determining the deposit requirements is publicly documented: https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478, so the judgement call looks pretty straightforward to make.
  - will_pseudonym 6y ago
    And who sets the formula, who lobbies for laws to be passed to require it, who runs and owns the clearing houses? Hint: It's in the thread you linked. > RH offered to open up stock market investing more broadly. They succeeded, clearly. But the regulations didn't change - there are still pro-Wall St, pro-incumbent rules and capital requirements. It's one of the most highly regulated industries in our nation. [0] > So @aoc is right to ask how it can be that Robinhood stopped its clients from buying certain securities. And what she'll find is that the reason is that Dodd-Frank requires brokers like RH to post collateral to cover their clients' trading risk pre-settlement. [1] > And it isn't the Fed or SEC who sets the rules. It's the Wall St owned central clearing entity itself, DTCC, that makes its own rules. So when the retail masses decided to squeeze the short-sellers, in the middle of crushing them, it was govt regulations which tripped them up. [2] This last tweet in the thread was made about 13h ago, about a day after the previous last tweet in the thread. It's quite interesting, if you ask me. > Update: the plot thickens ... @The_DTCC may have exercised its right to add additional margin charges for a set of these stocks. It's a Margin Liquidity Adjustment Charge. [3] [0] https://twitter.com/KralcTrebor/status/1354952710202814470 https://twitter.com/KralcTrebor/status/1354952710202814470 [1] https://twitter.com/KralcTrebor/status/1354952711217807364 https://twitter.com/KralcTrebor/status/1354952711217807364 [2] https://twitter.com/KralcTrebor/status/1354952712400601099 https://twitter.com/KralcTrebor/status/1354952712400601099 [3] https://twitter.com/KralcTrebor/status/1355175395642003456 https://twitter.com/KralcTrebor/status/1355175395642003456
  - ummonk 6y ago
    The twitter thread you posted does have the evidence in the update https://twitter.com/KralcTrebor/status/1355172567242469377 https://twitter.com/KralcTrebor/status/1355172567242469377 And it's an open secret that Wall Street institutions colluding / bending ethics and the law is basically business as usual. (In this particular case I talked to a couple people I know who work in market makers and hedge funds and they took it as given that the requirements would have been put in place to protect short selling institutions)
  - yomly 6y ago
    I find it curious when people give these institutions the benefit of the doubt. It flies in the face of the history of the industry and also what we know about basic human nature. I've moved around these types of social circles to know that any levers that can be pulled will be pulled. We also know that for large financial institutions, breaking the law is usually just a cost of doing business. Tangential, but GS was happy to facilitate 1MDB, and HSBC empower money launderers... In any case it is speculation so my opinion carries no real weight over yours, but it does make me wonder what has coloured my world view to be so cynical/nihilistic
throwaway2245 6y ago
"oh, now that you're winning, there's this extra unwritten rule that I forgot to tell you about..."
- gruez 6y ago
  >extra unwritten rule it's literally written. the average wsb user might not have known that discount brokerages were going to fail them, but it's hardly "changing the rules".

majormajor 6y ago

There's a general moral of the story here that isn't specific to Wall Street. If you think you've got a magic hack for some system, don't forget that the system might not be immutable, and that many people will consider the spirit of the rules not just the letter of them (even if this means changing the letter of them). It's fairly similar to the risk of building a business by adding one feature to someone else's platform.

munificent 6y ago
Yeah. It is very rare that a clever rules-lawyer-style hack of a game will let you defeat people in power because they usually have enough power to hop up a level and beat you at the meta-game and you do not. Like Solo telling Luke to let the Wookkie win.
smnrchrds 6y ago
This holds true, even when the system assures you that it is immutable. I recall when a hacker noticed a vulnerability in some Ethereum smart contracts and used it to "steal" ETHs, the transactions were swiftly reversed and the whole concept of "the code is the contract" was thrown out of the window in the process. https://www.wired.com/2016/06/50-million-hack-just-showed-dao-human/ https://www.wired.com/2016/06/50-million-hack-just-showed-da...
- klipt 6y ago
  Wasn't the blockchain forked? So technically there is still a version of Ethereum out there that makes it easy for hackers to steal your stuff, but for some reason nobody wants to use that version.
  - smnrchrds 6y ago
    The bug was not in Ethereum, it was in the contracts. And before this incident, the philosophy of Ethereum was that "the code is the contract". The hacker did not breach the contract. They noticed a bug, or as one could say, a loophole, and used it to their benefit. I don't know what the mechanism of enforcement was. Whether it was a fork or something else, the net effect was that a) the history was rewritten, the contract terms changed retroactively, and the monies were returned to their source; and b) the concept of code is contract was effectively showed to be an empty gesture and the philosophy was effectively abandoned.

koolba 6y ago

> The moral of the story is that when you beat Wall Street at their own game, they will change the rules on you so they win anyway. They didn’t change the rules. The rules are clear that they’re allowed to change the rules anytime they want. That’s one of the rules.

mattnewton 6y ago
In this particular case I’m not sure actually; they changed contracts to allow a later date.
emmelaich 6y ago
https://en.wikipedia.org/wiki/Nomic https://en.wikipedia.org/wiki/Nomic
clankyclanker 6y ago
https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball https://en.wikipedia.org/wiki/Calvin_and_Hobbes#Calvinball
- clankyclanker 6y ago
  That’s supposed to be a link to CalvinBall, but it didn’t quite work right.
082349872349872 6y ago
I don't believe it's possible to come up with a fixed set of rules that protects against market manipulation in both directions: the more one attempts to manipulation-proof in one direction, the easier it gets to manipulate in the opposite.
- gwnwest21 6y ago
  Wolfe Research firm is developing a tool that can scan large volumes of language text on subreddit forums like wallstreetbets and assess which stocks are being targeted by retail traders. The article is currently at Market Watch.

Spooky23 6y ago

Clearly the moral path is to let the market fail and implode. </s> When the market is in danger, it’s foolish not to act to stabilize it. If robinhood collapsed into receivership, the outcome would be far worse for their customers.

ignoramous 6y ago
> ...far worse for their customers. Doubt that, because given the overall politically charged sentiment around the squeeze, they would have declared Robinhood's demise a victory as well.
- Spooky23 6y ago
  Idiots on Twitter would celebrate any chaos, but the customers would be waiting on SIPC for their money!

testfoobar 6y ago

One solution would be for management to raise capital by issuing boatloads of new shares. They could explicitly say the capital is to pay themselves bonuses to buy mansions and yachts.

tamaharbor 6y ago

Just like Las Vegas.

mindcrime 6y ago

The moral of the story is that when you beat Wall Street at their own game, they will change the rules on you so they win anyway https://youtu.be/MpmGXeAtWUw?t=90 https://youtu.be/MpmGXeAtWUw?t=90

coolgeek 6y ago

> when you beat Wall Street at their own game, they will change the rules on you so they win anyway It's not just Wall Street. This explains the Republican demands for even more onerous voting restrictions. Even though those same Republicans have certified - under penalty of perjury - that there was effectively no fraud in the recent elections.