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>Everyone assuming a conspiracy theory needs to read this. I'm not sure of your point here. Anyone that assumed there's a conspiracy theory is pretty much righ

by ac2u 6y ago

>Everyone assuming a conspiracy theory needs to read this. I'm not sure of your point here. Anyone that assumed there's a conspiracy theory is pretty much right. Now, if you mean the 'Brokerage X is in cahoots with this particular hedge fund theory', then yes, it's fair to argue that's debunked. But the overall conspiracy theory of "there are forces conspiring against the natural supply/demand market forces", well, they've pretty much all had the nerve to come out in the open and admit it. It's not the stockholders fault that all these clearing intermediaries use shitty fragile risk models that haven't accounted for rare events and instead of facing the music they've artificially turned the marketplace for these stocks into sell-only in order to stop a further price rise and exposing themselves further. To be clear, the rest of your comment seems that we're in agreement, expect that I would go further to call a spade a spade, it's absolutely a conspiracy.

deleted 6y ago
[deleted]
pja 6y ago
It's not the stockholders fault that all these clearing intermediaries use shitty fragile risk models that haven't accounted for rare events and instead of facing the music they've artificially turned the marketplace for these stocks into sell-only in order to stop a further price rise and exposing themselves further. The availability of liquidity in the market at any price & at any time is an illusion. It’s an illusion that holds most of the time, but nevertheless it isn’t real. When the market is under stress, the illusion falters & the plumbing starts poking through the gaps. If you want to be able to buy and sell shares with very fast confirmation at the prices quoted in the market then you need intermediaries who can extend the credit that enables that transaction to happen. When the market is under stress, that credit becomes more expensive & liquidity falls away. This isn’t a conspiracy or the result of collusion, it’s a consequence of the structure of the market.
deleted 6y ago
[deleted]
andylei 6y ago
> it's absolutely a conspiracy I think a "conspiracy" requires some sort of actual coordination. A bunch of actors doing the same thing for the same underlying reason isn't a conspiracy. Lots of people going to sleep when it gets dark isn't a conspiracy.
PragmaticPulp 6y ago
Who, specifically, do you claim is conspiring? And to what end? These collateral requirements were implemented to reduce systemic risk of the system failing under extreme volatility. It was designed to prevent collapse, requiring government bailouts. It wasn’t designed to break a consumer-facing investment app that didn’t even exist yet.
- ac2u 6y ago
  >Who, specifically, do you claim is conspiring? And to what end? I'm happy to retract the conspiracy definition on the basis that there isn't explicit coordination. If you'll allow me to move the goalposts a bit I'll settle on the fact that my frustration is in the excuse-making that these actions are just regular checks and balances, instead of being the nefarious acts they are, unfair interference in the markets to the detriment of retail investors. When you have heads of brokerages coming on talk shows (my memory of who isn't great) recently claiming that they'll open things up "when things settle down", and actually claiming "this is a $17 stock" (nothing wrong with the opinion, it's just unfair for a marketplace to be wielding their influence like that), we're living in bizarro world when the media isn't calling them out on it. Then you have the CEO of nasdaq saying they'll consider halting trading if they can match social media chatter to movements (as if it's possible to prove causation anyway) so that large institutions get time to adjust?? When does the retail investor with their pension on the line ever get time to adjust? >extreme volatility. It might be extreme but it's not unpredictable. The helpless "how could we have seen this coming?" from institutions rings hollower each time throughout the decades that it's used. The answer here is to stop the interventionalism that tries to hide natural volatility. Do you think social media is causing volatility and leaving pump and dump bagholders? Fine, let it happen on the small scale more frequently and sooner or later people will learn through frequent exposure that you can lose your shirt. However, if you constantly intervene? You're hiding the volatility until a large event is allowed to hide in plain sight and deliver a liquidity crisis for many.
  - tedunangst 6y ago
    All the people angry about this were delighted when Dodd-Frank passed promising to reduce volatility risk.
jcranmer 6y ago
> It's not the stockholders fault that all these clearing intermediaries use shitty fragile risk models that haven't accounted for rare events Those risk models were added into the system by law because the prior risk models said that there was no way anything could go wrong so that when things did go wrong during a "rare event," the entire financial system seized up practically overnight. This time, the only people who are complaining are the people who think they're driving the people shorting Gamestop out of business, while the rest of the financial system and the greater economy looks on in merry amusement.
- ummonk 6y ago
  They did not follow the risk models required by law. They went beyond that and jacked up the collateral requirements on meme stocks to 100%.
  - jcranmer 6y ago
    My understanding is that the components on the model that caused the collateral requirements to jump are actually enacted by regulation.
    - ummonk 6y ago
      No, the point is that while the model would have caused the collateral requirements to jump, that's not all the DTCC did - they enacted a 100% collateral requirement on specific stocks, which is not something the models required.
      - selectodude 6y ago
        How do you know? Do you write the risk models? There aren't many stocks that swing from +100% to -3% in a day.
scatters 6y ago
> they've artificially turned the marketplace for these stocks into sell-only in order to stop a further price rise What's your basis for attributing this intent to the discount brokers? It may have that effect, but as explained in the article it's fully accounted for by their need to conserve capital.
- ac2u 6y ago
  I didn't. I said it was the clearing infrastructure. (Although it all flows down to the brokers as a consequence).
tarsinge 6y ago
And also: it happened at nearly at the same time, in the middle of the week were volume was getting lower to the days before. The price crashed just after, and the next day we have news that a lot a short positions were closed[0]. [0] https://twitter.com/ihors3/status/1355234358194556928?s=21 https://twitter.com/ihors3/status/1355234358194556928?s=21

by ac2u 6y ago

deleted 6y ago

[deleted]

pja 6y ago

It's not the stockholders fault that all these clearing intermediaries use shitty fragile risk models that haven't accounted for rare events and instead of facing the music they've artificially turned the marketplace for these stocks into sell-only in order to stop a further price rise and exposing themselves further. The availability of liquidity in the market at any price & at any time is an illusion. It’s an illusion that holds most of the time, but nevertheless it isn’t real. When the market is under stress, the illusion falters & the plumbing starts poking through the gaps. If you want to be able to buy and sell shares with very fast confirmation at the prices quoted in the market then you need intermediaries who can extend the credit that enables that transaction to happen. When the market is under stress, that credit becomes more expensive & liquidity falls away. This isn’t a conspiracy or the result of collusion, it’s a consequence of the structure of the market.

deleted 6y ago

[deleted]

andylei 6y ago

> it's absolutely a conspiracy I think a "conspiracy" requires some sort of actual coordination. A bunch of actors doing the same thing for the same underlying reason isn't a conspiracy. Lots of people going to sleep when it gets dark isn't a conspiracy.

PragmaticPulp 6y ago

Who, specifically, do you claim is conspiring? And to what end? These collateral requirements were implemented to reduce systemic risk of the system failing under extreme volatility. It was designed to prevent collapse, requiring government bailouts. It wasn’t designed to break a consumer-facing investment app that didn’t even exist yet.

ac2u 6y ago
>Who, specifically, do you claim is conspiring? And to what end? I'm happy to retract the conspiracy definition on the basis that there isn't explicit coordination. If you'll allow me to move the goalposts a bit I'll settle on the fact that my frustration is in the excuse-making that these actions are just regular checks and balances, instead of being the nefarious acts they are, unfair interference in the markets to the detriment of retail investors. When you have heads of brokerages coming on talk shows (my memory of who isn't great) recently claiming that they'll open things up "when things settle down", and actually claiming "this is a $17 stock" (nothing wrong with the opinion, it's just unfair for a marketplace to be wielding their influence like that), we're living in bizarro world when the media isn't calling them out on it. Then you have the CEO of nasdaq saying they'll consider halting trading if they can match social media chatter to movements (as if it's possible to prove causation anyway) so that large institutions get time to adjust?? When does the retail investor with their pension on the line ever get time to adjust? >extreme volatility. It might be extreme but it's not unpredictable. The helpless "how could we have seen this coming?" from institutions rings hollower each time throughout the decades that it's used. The answer here is to stop the interventionalism that tries to hide natural volatility. Do you think social media is causing volatility and leaving pump and dump bagholders? Fine, let it happen on the small scale more frequently and sooner or later people will learn through frequent exposure that you can lose your shirt. However, if you constantly intervene? You're hiding the volatility until a large event is allowed to hide in plain sight and deliver a liquidity crisis for many.
- tedunangst 6y ago
  All the people angry about this were delighted when Dodd-Frank passed promising to reduce volatility risk.

jcranmer 6y ago

> It's not the stockholders fault that all these clearing intermediaries use shitty fragile risk models that haven't accounted for rare events Those risk models were added into the system by law because the prior risk models said that there was no way anything could go wrong so that when things did go wrong during a "rare event," the entire financial system seized up practically overnight. This time, the only people who are complaining are the people who think they're driving the people shorting Gamestop out of business, while the rest of the financial system and the greater economy looks on in merry amusement.

ummonk 6y ago
They did not follow the risk models required by law. They went beyond that and jacked up the collateral requirements on meme stocks to 100%.
- jcranmer 6y ago
  My understanding is that the components on the model that caused the collateral requirements to jump are actually enacted by regulation.
  - ummonk 6y ago
    No, the point is that while the model would have caused the collateral requirements to jump, that's not all the DTCC did - they enacted a 100% collateral requirement on specific stocks, which is not something the models required.
    - selectodude 6y ago
      How do you know? Do you write the risk models? There aren't many stocks that swing from +100% to -3% in a day.

scatters 6y ago

> they've artificially turned the marketplace for these stocks into sell-only in order to stop a further price rise What's your basis for attributing this intent to the discount brokers? It may have that effect, but as explained in the article it's fully accounted for by their need to conserve capital.

ac2u 6y ago
I didn't. I said it was the clearing infrastructure. (Although it all flows down to the brokers as a consequence).

tarsinge 6y ago

And also: it happened at nearly at the same time, in the middle of the week were volume was getting lower to the days before. The price crashed just after, and the next day we have news that a lot a short positions were closed[0]. [0] https://twitter.com/ihors3/status/1355234358194556928?s=21 https://twitter.com/ihors3/status/1355234358194556928?s=21