4 ms·

What exact transparency do you want?

thebean11 6y ago
There were accusations that the shorts lied about closing their positions, and that were they caught they'd only get a slap on the wrist. I'm not sure what the truth is here, but if the accusations are correct I think it's fraud level stock market manipulation.
- fractionalhare 6y ago
  Who made those accusations, and what evidence did you see? I've only seen those accusations on reddit and twitter. The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest. Short interest is an aggregate figure which doesn't track specific firms, so it can't be used to discover if an individual fund closed or opened a short position.
  - x3n0ph3n3 6y ago
    There's no actual evidence of those short positions actually being closed, other than vague language indicating that it would happen.
    - fractionalhare 6y ago
      Well there's the evidence that any firm short at $20 would have been dead if they didn't get out before $200. I'm only aware of one firm that went bankrupt, and it wasn't Melvin or another major fund. Put yourself in the firm's position and think about this from a game theoretic perspective...what is the upside in lying? The thinking is that you might convince people to lay off the voracious buying if you make it seem like the short squeeze isn't possible because you're out? That seems like a stretch and would require navigating lots of wild assumptions about why this almost unprecedented price action is happening. On the other hand, there is tons of downside. If the plan doesn't work and the price continues its meteoric rise, you're bankrupt. If you're caught lying, you're additionally hit with securities fraud. Then the veil is pierced and the partners are at risk of losing their money. On top of this if your investors are savvy they'll sue you for breaking fiduciary duty because you didn't close out a position that makes selling naked SPY calls look safe. This also puts the partners' private capital at risk. It would be cartoonishly dumb to lie about closing the position instead of actually doing it.
      - thebean11 6y ago
        What's your math on that, considering Melvin's multi billion dollar bailout?
        fractionalhare 6y ago
        Their AUM was around $13B at the beginning of the year. They were short at $20. As was reported, they lost about 53% of that, call it $6B, as GME rose from $20 to $100, which is when they said they closed out. Their AUM wouldn't be able to survive $100 - $200 given their losses going from $20 - $100.
  - thebean11 6y ago
    > Who made these accusations Random redditors, and they were quoted by CNBC and the like The post I replied to asked what people are demanding. They are demanding that institutions not lie to manipulate the market. I am not claiming this lying ever took place. > The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest. In addition to that, they claimed that volume in GME was not high enough for the shorts to be closed. I'm not familiar enough with the markets to know what I don't know here though.
    - gruez 6y ago
      >In addition to that, they claimed that volume in GME was not high enough for the shorts to be closed dark pools/OTC trades, maybe?
- Dma54rhs 6y ago
  But what is the bases for it? You're just spreading disinformation here.
ohthehugemanate 6y ago
We could start with reporting periods shorter than a month, so that naked shorting is more visible from the public data. GameStop shares stood at over 170% of float for several months, and though that's ridiculously high it's not enough information to trigger an SEC investigation.
bo1024 6y ago
I'm not the right person to ask, I'm not very finance knowledgeable. But here would be my demands, starting with most likely to possibly happen: - Total short interest in every stock updated daily, both settled and in progress. - (edit) report daily fails to deliver (not just a running total), and published at T+2 rather than every couple weeks. - For every trade, publish whether it's a short sale or sale of an owned asset. - SEC tracks each companies' daily borrows and fails to deliver, with consequences. - Every short sale must be submitted with a borrow agreement from someone who has already agreed to lend you the shares. SEC checks these are not fraudulent or frequently cancelled. - Everyone should have access to the trading data that you currently need a Bloomberg terminal for. - Every share has a serial number. Every trade must include a list of serial numbers of every share in that trade, with proof that you own or were lent those exact shares. Like I said, I"m no expert, so responses welcome.
- bo1024 6y ago
  If I could add, reddit has a ton of conspiracy theories floating around about this stuff, e.g. "shorts haven't covered because X". They're very hard to refute or even investigate as a layperson because I cannot find the data or it's not published at all. So this lack of transparency doesn't just tilt the playing field, it allows misinformation to spread more easily.
- bo1024 6y ago
  Oh, I thought of another (not exactly transparency): - If you lend out your shares, you can't "sell" them until you've recalled them and had them delivered to you. If the float is X, then there shouldn't be more than X shares available to sell at any given time. In the current system shorting increases apparent supply which devalues the stock.

There were accusations that the shorts lied about closing their positions, and that were they caught they'd only get a slap on the wrist. I'm not sure what the truth is here, but if the accusations are correct I think it's fraud level stock market manipulation.

fractionalhare 6y ago
Who made those accusations, and what evidence did you see? I've only seen those accusations on reddit and twitter. The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest. Short interest is an aggregate figure which doesn't track specific firms, so it can't be used to discover if an individual fund closed or opened a short position.
- x3n0ph3n3 6y ago
  There's no actual evidence of those short positions actually being closed, other than vague language indicating that it would happen.
  - fractionalhare 6y ago
    Well there's the evidence that any firm short at $20 would have been dead if they didn't get out before $200. I'm only aware of one firm that went bankrupt, and it wasn't Melvin or another major fund. Put yourself in the firm's position and think about this from a game theoretic perspective...what is the upside in lying? The thinking is that you might convince people to lay off the voracious buying if you make it seem like the short squeeze isn't possible because you're out? That seems like a stretch and would require navigating lots of wild assumptions about why this almost unprecedented price action is happening. On the other hand, there is tons of downside. If the plan doesn't work and the price continues its meteoric rise, you're bankrupt. If you're caught lying, you're additionally hit with securities fraud. Then the veil is pierced and the partners are at risk of losing their money. On top of this if your investors are savvy they'll sue you for breaking fiduciary duty because you didn't close out a position that makes selling naked SPY calls look safe. This also puts the partners' private capital at risk. It would be cartoonishly dumb to lie about closing the position instead of actually doing it.
    - thebean11 6y ago
      What's your math on that, considering Melvin's multi billion dollar bailout?
      - fractionalhare 6y ago
        Their AUM was around $13B at the beginning of the year. They were short at $20. As was reported, they lost about 53% of that, call it $6B, as GME rose from $20 to $100, which is when they said they closed out. Their AUM wouldn't be able to survive $100 - $200 given their losses going from $20 - $100.
- thebean11 6y ago
  > Who made these accusations Random redditors, and they were quoted by CNBC and the like The post I replied to asked what people are demanding. They are demanding that institutions not lie to manipulate the market. I am not claiming this lying ever took place. > The only "evidence" I've ever seen in support of those accusations is repeated citation of short interest. In addition to that, they claimed that volume in GME was not high enough for the shorts to be closed. I'm not familiar enough with the markets to know what I don't know here though.
  - gruez 6y ago
    >In addition to that, they claimed that volume in GME was not high enough for the shorts to be closed dark pools/OTC trades, maybe?
Dma54rhs 6y ago
But what is the bases for it? You're just spreading disinformation here.

ohthehugemanate 6y ago

We could start with reporting periods shorter than a month, so that naked shorting is more visible from the public data. GameStop shares stood at over 170% of float for several months, and though that's ridiculously high it's not enough information to trigger an SEC investigation.

bo1024 6y ago

I'm not the right person to ask, I'm not very finance knowledgeable. But here would be my demands, starting with most likely to possibly happen: - Total short interest in every stock updated daily, both settled and in progress. - (edit) report daily fails to deliver (not just a running total), and published at T+2 rather than every couple weeks. - For every trade, publish whether it's a short sale or sale of an owned asset. - SEC tracks each companies' daily borrows and fails to deliver, with consequences. - Every short sale must be submitted with a borrow agreement from someone who has already agreed to lend you the shares. SEC checks these are not fraudulent or frequently cancelled. - Everyone should have access to the trading data that you currently need a Bloomberg terminal for. - Every share has a serial number. Every trade must include a list of serial numbers of every share in that trade, with proof that you own or were lent those exact shares. Like I said, I"m no expert, so responses welcome.

bo1024 6y ago
If I could add, reddit has a ton of conspiracy theories floating around about this stuff, e.g. "shorts haven't covered because X". They're very hard to refute or even investigate as a layperson because I cannot find the data or it's not published at all. So this lack of transparency doesn't just tilt the playing field, it allows misinformation to spread more easily.
bo1024 6y ago
Oh, I thought of another (not exactly transparency): - If you lend out your shares, you can't "sell" them until you've recalled them and had them delivered to you. If the float is X, then there shouldn't be more than X shares available to sell at any given time. In the current system shorting increases apparent supply which devalues the stock.