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> But the point is that NONE of this information or analysis was secret, conducted in back rooms, or even hard to find. There seems to be a massive misundersta

> But the point is that NONE of this information or analysis was secret, conducted in back rooms, or even hard to find. There seems to be a massive misunderstanding that somehow because these discussions happened publicly on reddit everything is fine and dandy. It seems people are conflating insider trading (which has nothing to do with the $GME short squeeze unless you’re wearing a tinfoil hat) and market manipulation. I would be surprised if the SEC went after redditors (this time, at least) but there is no “we did it openly and conspicuously” safe harbor or defense when it comes to charges of market manipulation or securities fraud. There’s a reason market commentary comes with a whole bunch of disclaimers in the footnotes with language like “not intended as investment advice” and “references to specific securities and issuers are not intended to be, and should not be interpreted as, recommendations to purchase or sell securities”.

maxerickson 6y ago
It's rich that coordinated behavior is manipulation but investing in a targeted managed fund isn't. Or that "I'm buying to squeeze the shorts" is manipulation and "I'm buying because the shorts are overextended" isn't.
- deleted 6y ago
  [deleted]
- nrmitchi 6y ago
  > I'm buying to squeeze the shorts You are buying in specifically to manipulate the price of availability of an asset in the market. > I'm buying because the shorts are overextended You're buying in based on some perception of the market, but not attempting your action of "buying in" to have a direct impact. Ya, they can be very similar, but as with a lot of legal aspects, intent matters (but is still hard to prove). Regarding investing in a targeted managed fund, I think it's different because the rules are sort of different. A fund has to have an exit strategy that is a net positive for the whole fund. A fund can't make a profit for half of it's investors, and a lose for the other half of it's investors, on the same position. If there is no exit strategy, the position/play/trade/whatever doesn't make sense. The current WSB exit strategy seems to be "hope to make it out before everyone else loses money".
  - innagadadavida 6y ago
    >> I'm buying to squeeze the shorts > You are buying in specifically to manipulate the price of availability of an asset in the market. Naive question: isn’t shorting market manipulation as well or only if it is coordinated among many people?
    - nrmitchi 6y ago
      There is a difference between "market manipulation" and "illegal market manipulation. Any action that can impact the price of something can be called "market manipulation". Apple releasing their quarterly earnings affects the price, but is clearly not illegal. When people short a stock, it is typically because they believe that the current price is not representative of what the business fundamentals and environment dictate it should be. Ie, they expect it to go down in the long run. While yes, the act of "shorting" can lower the price, that is not the main goal of the action, and it doesn't actually cause them an immediate profit (if they wanted to exit their position, they'd have to buy it all right back up, and the price would rebound as they do).
  - deleted 6y ago
    [deleted]
  - maxerickson 6y ago
    Yes, I likely wouldn't have constructed the compact example if I didn't understand the basics of the issue. I suppose my point is that someone with intent can use careful language to avoid creating any evidence of intent (and lawyers will cheer them on) and then someone without much in the way intent will say something sloppy that implies intent (and lawyers will punish them severely).
    - nrmitchi 6y ago
      Ya, you're not wrong. And the unwritten/unknown rules of how to do skirt around the law aren't going to be changed by this situation. We still (in my opinion, unfortunately) have a legal system that is way to heavy on "word of the law" vs "intent of the law". We saw some of this a couple weeks ago. True intent is hard to prove through words, and context is super important. For what it's worth, I seriously doubt that someone on reddit who made an market-manipulation-incriminating statement and made a couple hundred bucks will face punishment. I suspect that when all of this is looked at at the end, the "gains" will be rather bi/tri-modal. A ton of people losing money, a bunch making a little bit (relatively), and then a small handful who make absolute bank. The group on the right are the ones who will have to be careful/worried.
jrochkind1 6y ago
Is a "short squeeze" by definition market manipulation? In an illegal way? I don't think it is generally considered such? Unless it involves putting out fraudulent/false information. Porsche execs were investigated/tried in Germany for lying about their financial situation in order to trigger a short squeeze on Volkswagon (i believe none were convicted) -- the potential crime was the fraudulently misleading communications, not the short squeeze itself. Because this seems just like any other short squeeze, the difference is mainly that it was planned in public instead of secretly in private. And that makes it less likely to cross the line into some kind of illegality, not more, right? "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. It's what tons of big traders do all the time, right? It's illegal when it involves fraud, lying, secret collusion, insider trading, dereliction of fiduciary responsibility, etc. Any kind of 'short squeeze' could certainly be considered "market manipulation" in the plain English meaning of those words, but that doesn't mean it's illegal. This investopedia article [1] on 'short squeeze' says "Contrarian investors may buy stocks with heavy short interest in order to exploit the potential for a short squeeze" -- it does not suggest there is anything illegal about that. Is that not exactly what wsb did, no more no less? they collectively decided to buy shares to exploit the potential for a short squeeze. Investors do this all the time, the unusual thing here is that it was planned completely in public, and that it involved such a large number of small retail traders (in addition to a few pretty big traders... and quite likely other non-wsb-affiliated big traders we don't even know about who saw what wsb was doing and decided to go along for the ride, or who saw the short squeeze potential themselves independently). Most traders don't put their "market manipulation" in public because a) they don't think it could work if they did, and b) they know they cross grey areas of legality all the time, so don't want their business to be out in the open like that. But in this case... what law was violated? [1] https://www.investopedia.com/terms/s/shortsqueeze.asp https://www.investopedia.com/terms/s/shortsqueeze.asp
- elliekelly 6y ago
  You’re absolutely right. A short squeeze in and of itself is absolutely not market manipulation. Sometimes it just happens. But creating a short squeeze can be market manipulation. > "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. I’m not quite sure what you mean by this. Market manipulation is a concerted (and sometimes coordinated) effort to artificially influence the supply or demand of a security. Market manipulation often relies on false information but false information is not at all a required element of market manipulation. Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market. I suppose its theoretically possible for everyone in the market to coordinate against one or a few players. To my knowledge there’s never been a situation with such a large coordinated effort. That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily. I definitely think the SEC could make the case they've violated the Exchange Act and potentially the '33 Act depending on what % of $GME the group controlled.
kevin_thibedeau 6y ago
If they were an incorporated bank, made the same realization, and executed a buyout it would be perfectly legal.
caseysoftware 6y ago
Doesn't "securities fraud" require false information or at least misrepresenting information? The data cited in this (and many other posts) are often publicly verifiable but people didn't know where to look until then. It definitely looks like "market manipulation" but I think that's where the "public" aspect will play a part. The defense will make the case of "why this group of little guys and not the hedge funds" against the SEC selectively prosecuting Redditors while giving hedge funds a pass.. in 2009-2010 under Obama and again under Biden. I'll take the odds on WSB.
- caffeine 6y ago
  Market manipulation is defined as intentionally causing an artificial or misleading price in a security. This definitely qualifies, because the stated intention is to move the price of the shares, not to acquire a position for any other reasonable purpose. I work at a trading firm, if I outlined a plan to do anything like this I would (rightly) be fired instantly. If I actually did it I would go to jail. The law shouldn't be applied differently for redditors, but probably it will be.
  - mancerayder 6y ago
    What's your opinion of Ackman going on CNBC in March and announcing that the world was ending, right AFTER he set up a giant hedge to short a bunch of industries. There are articles from March 2020 you can find. Regarding last week, what about the blocking of a number of symbols from being bought (but not sold) on retail platforms while the folks on the short side could unwind their positions? These were stocks with high short interest. How did Robinhood and IB and TD get the list, from analyzing Reddit in ML?
    - JackFr 6y ago
      Anytime a money manager goes on TV they it’s pretty safe to assume they’re talking there book. Markets are the one place we’re talking can make it happen. And even though you should assume this, CNBC and Ackman perform the legal dance of warning that he may have long or short positions in any or all things discussed etc. As to Robinhood, IB and TD, the Bloomberg reporting that DTCC (clearinghouse for trades) was demanding more collateral for the high volatility names and the retail brokers were facing a heard time coming up with it is pretty compelling. Unless someone can point to something other than innuendo, I’m probably gonna believe that.
deleted 6y ago
[deleted]
mike00632 6y ago
This is the problem with popular conspiracy theories. If a lot of people believe that a shadowy group is regularly breaking the law then that emboldens them to break the law.
- orestarod 6y ago
  That law is being constantly broken is a conspiracy theory? Really now? A crime has not happened unless there is a court decision for it, else it's a conspiracy theory? You realize how weak this logic is?
  - mike00632 6y ago
    Who exactly am I conspiring with?
dasudasu 6y ago
If it's 2 million people with $250 willing to make a bet, it's manipulation, but if a rich hedge fund manager like Soros has the money upfront to do something like short the pound and induce a Black Wednesday event [1] all by himself, that's fine and not manipulation at all? Just taking this as a random example. Any fund with enough money can move a market. This is their basic modus operandi. [1]: https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday
- ViViDboarder 6y ago
  I feel like many (maybe most?) people believe that type of event should not be considered fine either. To me, none of it is fine. I hope that this event is eye opening enough that some protections are put in place that effect everyone, including hedge funds, that prevent this type of manipulation.
  - sudosysgen 6y ago
    There's no way of preventing things like this as long as capital markets exist and wealth distributions are the way they are. Its simple supply and demand.
  - feanaro 6y ago
    What do you propose should be done about it? Should we prevent markets from "a lot" (whatever that would mean) in a single time period?
  - himurajing 6y ago
    Stop letting hedge fund managers group up together and have "idea dinners" where they plan their next strategic shorts behind closed door. Oh that's right you can't stop rich people from having dinners and talking about manipulating the market. The only thing imposing restrictions and laws in a free market now is solely to fuck over the retail investors while letting the elists continue controlling the market. I'm sure it's been thought about during the 1918 crash and the 2008 crash. Everyone is making it seem like the stock markets only experienced crippling manipulation only during 2000s. The game is set in stone and any government intervention prevents it from ever being a "free market" ideologically.
JohnTHaller 6y ago
Plus, only big hedge funds and billionaires can manipulate the market without going to jail (see: 2008... or pretty much everything else), individual investors can.
zaroth 6y ago
It’s hardly the buyers’ fault that sellers shorted over 100% of the float. If it’s anyone’s fault, it’s the hedge funds who tried to hammer GME into dust.
radiator 6y ago
Then it seems that "market manipulation" is so broad a term that many activities, essential to the daily operations of hedge funds, qualify for it. This would be fine by me: to just make whole sectors of these financial markets illegal, close some large exchanges and companies, in an effort to somehow limit their parasitism on the the real economy.
tcskeptic 6y ago
You're going to have to explain to me how this post is any different from Cramer banging his buy button about a specific stock on CNBC. It can't be that the difference is that people actually did it... So what is the difference?

maxerickson 6y ago

It's rich that coordinated behavior is manipulation but investing in a targeted managed fund isn't. Or that "I'm buying to squeeze the shorts" is manipulation and "I'm buying because the shorts are overextended" isn't.

deleted 6y ago
[deleted]
nrmitchi 6y ago
> I'm buying to squeeze the shorts You are buying in specifically to manipulate the price of availability of an asset in the market. > I'm buying because the shorts are overextended You're buying in based on some perception of the market, but not attempting your action of "buying in" to have a direct impact. Ya, they can be very similar, but as with a lot of legal aspects, intent matters (but is still hard to prove). Regarding investing in a targeted managed fund, I think it's different because the rules are sort of different. A fund has to have an exit strategy that is a net positive for the whole fund. A fund can't make a profit for half of it's investors, and a lose for the other half of it's investors, on the same position. If there is no exit strategy, the position/play/trade/whatever doesn't make sense. The current WSB exit strategy seems to be "hope to make it out before everyone else loses money".
- innagadadavida 6y ago
  >> I'm buying to squeeze the shorts > You are buying in specifically to manipulate the price of availability of an asset in the market. Naive question: isn’t shorting market manipulation as well or only if it is coordinated among many people?
  - nrmitchi 6y ago
    There is a difference between "market manipulation" and "illegal market manipulation. Any action that can impact the price of something can be called "market manipulation". Apple releasing their quarterly earnings affects the price, but is clearly not illegal. When people short a stock, it is typically because they believe that the current price is not representative of what the business fundamentals and environment dictate it should be. Ie, they expect it to go down in the long run. While yes, the act of "shorting" can lower the price, that is not the main goal of the action, and it doesn't actually cause them an immediate profit (if they wanted to exit their position, they'd have to buy it all right back up, and the price would rebound as they do).
- deleted 6y ago
  [deleted]
- maxerickson 6y ago
  Yes, I likely wouldn't have constructed the compact example if I didn't understand the basics of the issue. I suppose my point is that someone with intent can use careful language to avoid creating any evidence of intent (and lawyers will cheer them on) and then someone without much in the way intent will say something sloppy that implies intent (and lawyers will punish them severely).
  - nrmitchi 6y ago
    Ya, you're not wrong. And the unwritten/unknown rules of how to do skirt around the law aren't going to be changed by this situation. We still (in my opinion, unfortunately) have a legal system that is way to heavy on "word of the law" vs "intent of the law". We saw some of this a couple weeks ago. True intent is hard to prove through words, and context is super important. For what it's worth, I seriously doubt that someone on reddit who made an market-manipulation-incriminating statement and made a couple hundred bucks will face punishment. I suspect that when all of this is looked at at the end, the "gains" will be rather bi/tri-modal. A ton of people losing money, a bunch making a little bit (relatively), and then a small handful who make absolute bank. The group on the right are the ones who will have to be careful/worried.

jrochkind1 6y ago

Is a "short squeeze" by definition market manipulation? In an illegal way? I don't think it is generally considered such? Unless it involves putting out fraudulent/false information. Porsche execs were investigated/tried in Germany for lying about their financial situation in order to trigger a short squeeze on Volkswagon (i believe none were convicted) -- the potential crime was the fraudulently misleading communications, not the short squeeze itself. Because this seems just like any other short squeeze, the difference is mainly that it was planned in public instead of secretly in private. And that makes it less likely to cross the line into some kind of illegality, not more, right? "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. It's what tons of big traders do all the time, right? It's illegal when it involves fraud, lying, secret collusion, insider trading, dereliction of fiduciary responsibility, etc. Any kind of 'short squeeze' could certainly be considered "market manipulation" in the plain English meaning of those words, but that doesn't mean it's illegal. This investopedia article [1] on 'short squeeze' says "Contrarian investors may buy stocks with heavy short interest in order to exploit the potential for a short squeeze" -- it does not suggest there is anything illegal about that. Is that not exactly what wsb did, no more no less? they collectively decided to buy shares to exploit the potential for a short squeeze. Investors do this all the time, the unusual thing here is that it was planned completely in public, and that it involved such a large number of small retail traders (in addition to a few pretty big traders... and quite likely other non-wsb-affiliated big traders we don't even know about who saw what wsb was doing and decided to go along for the ride, or who saw the short squeeze potential themselves independently). Most traders don't put their "market manipulation" in public because a) they don't think it could work if they did, and b) they know they cross grey areas of legality all the time, so don't want their business to be out in the open like that. But in this case... what law was violated? [1] https://www.investopedia.com/terms/s/shortsqueeze.asp https://www.investopedia.com/terms/s/shortsqueeze.asp

elliekelly 6y ago
You’re absolutely right. A short squeeze in and of itself is absolutely not market manipulation. Sometimes it just happens. But creating a short squeeze can be market manipulation. > "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. I’m not quite sure what you mean by this. Market manipulation is a concerted (and sometimes coordinated) effort to artificially influence the supply or demand of a security. Market manipulation often relies on false information but false information is not at all a required element of market manipulation. Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market. I suppose its theoretically possible for everyone in the market to coordinate against one or a few players. To my knowledge there’s never been a situation with such a large coordinated effort. That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily. I definitely think the SEC could make the case they've violated the Exchange Act and potentially the '33 Act depending on what % of $GME the group controlled.

kevin_thibedeau 6y ago

If they were an incorporated bank, made the same realization, and executed a buyout it would be perfectly legal.

caseysoftware 6y ago

Doesn't "securities fraud" require false information or at least misrepresenting information? The data cited in this (and many other posts) are often publicly verifiable but people didn't know where to look until then. It definitely looks like "market manipulation" but I think that's where the "public" aspect will play a part. The defense will make the case of "why this group of little guys and not the hedge funds" against the SEC selectively prosecuting Redditors while giving hedge funds a pass.. in 2009-2010 under Obama and again under Biden. I'll take the odds on WSB.

caffeine 6y ago
Market manipulation is defined as intentionally causing an artificial or misleading price in a security. This definitely qualifies, because the stated intention is to move the price of the shares, not to acquire a position for any other reasonable purpose. I work at a trading firm, if I outlined a plan to do anything like this I would (rightly) be fired instantly. If I actually did it I would go to jail. The law shouldn't be applied differently for redditors, but probably it will be.
- mancerayder 6y ago
  What's your opinion of Ackman going on CNBC in March and announcing that the world was ending, right AFTER he set up a giant hedge to short a bunch of industries. There are articles from March 2020 you can find. Regarding last week, what about the blocking of a number of symbols from being bought (but not sold) on retail platforms while the folks on the short side could unwind their positions? These were stocks with high short interest. How did Robinhood and IB and TD get the list, from analyzing Reddit in ML?
  - JackFr 6y ago
    Anytime a money manager goes on TV they it’s pretty safe to assume they’re talking there book. Markets are the one place we’re talking can make it happen. And even though you should assume this, CNBC and Ackman perform the legal dance of warning that he may have long or short positions in any or all things discussed etc. As to Robinhood, IB and TD, the Bloomberg reporting that DTCC (clearinghouse for trades) was demanding more collateral for the high volatility names and the retail brokers were facing a heard time coming up with it is pretty compelling. Unless someone can point to something other than innuendo, I’m probably gonna believe that.

deleted 6y ago

[deleted]

mike00632 6y ago

This is the problem with popular conspiracy theories. If a lot of people believe that a shadowy group is regularly breaking the law then that emboldens them to break the law.

orestarod 6y ago
That law is being constantly broken is a conspiracy theory? Really now? A crime has not happened unless there is a court decision for it, else it's a conspiracy theory? You realize how weak this logic is?
- mike00632 6y ago
  Who exactly am I conspiring with?

dasudasu 6y ago

If it's 2 million people with $250 willing to make a bet, it's manipulation, but if a rich hedge fund manager like Soros has the money upfront to do something like short the pound and induce a Black Wednesday event [1] all by himself, that's fine and not manipulation at all? Just taking this as a random example. Any fund with enough money can move a market. This is their basic modus operandi. [1]: https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday

ViViDboarder 6y ago
I feel like many (maybe most?) people believe that type of event should not be considered fine either. To me, none of it is fine. I hope that this event is eye opening enough that some protections are put in place that effect everyone, including hedge funds, that prevent this type of manipulation.
- sudosysgen 6y ago
  There's no way of preventing things like this as long as capital markets exist and wealth distributions are the way they are. Its simple supply and demand.
- feanaro 6y ago
  What do you propose should be done about it? Should we prevent markets from "a lot" (whatever that would mean) in a single time period?
- himurajing 6y ago
  Stop letting hedge fund managers group up together and have "idea dinners" where they plan their next strategic shorts behind closed door. Oh that's right you can't stop rich people from having dinners and talking about manipulating the market. The only thing imposing restrictions and laws in a free market now is solely to fuck over the retail investors while letting the elists continue controlling the market. I'm sure it's been thought about during the 1918 crash and the 2008 crash. Everyone is making it seem like the stock markets only experienced crippling manipulation only during 2000s. The game is set in stone and any government intervention prevents it from ever being a "free market" ideologically.

JohnTHaller 6y ago

Plus, only big hedge funds and billionaires can manipulate the market without going to jail (see: 2008... or pretty much everything else), individual investors can.

zaroth 6y ago

It’s hardly the buyers’ fault that sellers shorted over 100% of the float. If it’s anyone’s fault, it’s the hedge funds who tried to hammer GME into dust.

radiator 6y ago

Then it seems that "market manipulation" is so broad a term that many activities, essential to the daily operations of hedge funds, qualify for it. This would be fine by me: to just make whole sectors of these financial markets illegal, close some large exchanges and companies, in an effort to somehow limit their parasitism on the the real economy.

tcskeptic 6y ago

You're going to have to explain to me how this post is any different from Cramer banging his buy button about a specific stock on CNBC. It can't be that the difference is that people actually did it... So what is the difference?