5 ms·

What a mess of a system. Getting paid for moving shares around is really one of the most useless things we have

delaaxe 6y ago
How about getting paid to do the clearing between those share movers?
incrudible 6y ago
I completely disagree. Entering short positions is an important market mechanism that allows managing risk and mitigates speculative frenzy. For this to work, there needs to be a system to borrow shares. If you think the market is volatile now, you just haven't seen it when only long positions are possible.
- cecja 6y ago
  That's the dumbest take out of all of this. Let's do risky business and secure it with shady business. Love it.
- ALittleLight 6y ago
  You could still sell covered calls and buy puts.
  - incrudible 6y ago
    That assumes somebody is selling you the put, but options pricing assumes short selling is possible. Puts would be way more expensive if short positions weren't possible.
- cwhiz 6y ago
  Yes, just like the price of goods sold at Walmart is based on third parties betting on what they think of the price. Oh, but it’s definitely necessary in the stock market. Without it, we would speculative frenzy that we definitely don’t have now. There should not be any market mechanism that financially motivates people to root against a company.
  - Majromax 6y ago
    > Yes, just like the price of goods sold at Walmart is based on third parties betting on what they think of the price. If Wal-Mart bought and sold goods via its retail counter, then it would be based on this. But it doesn't; it offers essentially final sales to the consumer. You inherently can't do that in a stock market, since stocks are capital. > There should not be any market mechanism that financially motivates people to root against a company. Why not? If I think Tesla is a good buy and you think it's a bad buy, you can borrow a share (go short) and sell it to me at the current market price. We both win; you get to place your bet and I get to purchase the stock without distorting the market as much, since I'm buying a borrowed share. But more generally, "any market mechanism" is much broader than you realize. Taking your quote seriously, you'd have to also ban options trading, since buying a put option or selling a call option are both bets against a company. But these tools are also critical for hedging, since they can be used to insure against deep losses. (Buying a call option isn't a bet against a company, but there has to be someone else selling the option who takes the other side of that bet.) "Rooting against a company" is also relative. If I think Microsoft will do better than Amazon, I can buy Microsoft shares and short Amazon to hedge my exposure to tech industry swings writ large.
    - viklove 6y ago
      > Why not? If I think Tesla is a good buy and you think it's a bad buy, you can borrow a share (go short) and sell it to me at the current market price. We both win; you get to place your bet and I get to purchase the stock without distorting the market as much, since I'm buying a borrowed share. This is a pretty naive analysis. As we saw with GME, and other stocks in the recent years, that's not at all what's happening. What's happening is that hedge funds are shorting the entire float of a company multiple times over. If you borrow a single stock and sell it to me, that's probably fine. If you borrow 50 million shares, and flood the market with them, the stock price crashes because supply vastly outstrips demand. That's what's happening right now, and the hedge funds are doing it without even borrowing the stock. They're just like "Yeah, trust us, we actually have 50 million shares over here -- oh, you're asking about our failures to deliver? Don't worry about that, we paid the $10k fine and banked a $200M profit on it!" They're literally flooding the market with shares that don't exist. How is that allowed? https://wherearetheshares.com/ https://wherearetheshares.com/

How about getting paid to do the clearing between those share movers?

I completely disagree. Entering short positions is an important market mechanism that allows managing risk and mitigates speculative frenzy. For this to work, there needs to be a system to borrow shares. If you think the market is volatile now, you just haven't seen it when only long positions are possible.

cecja 6y ago
That's the dumbest take out of all of this. Let's do risky business and secure it with shady business. Love it.
ALittleLight 6y ago
You could still sell covered calls and buy puts.
- incrudible 6y ago
  That assumes somebody is selling you the put, but options pricing assumes short selling is possible. Puts would be way more expensive if short positions weren't possible.
cwhiz 6y ago
Yes, just like the price of goods sold at Walmart is based on third parties betting on what they think of the price. Oh, but it’s definitely necessary in the stock market. Without it, we would speculative frenzy that we definitely don’t have now. There should not be any market mechanism that financially motivates people to root against a company.
- Majromax 6y ago
  > Yes, just like the price of goods sold at Walmart is based on third parties betting on what they think of the price. If Wal-Mart bought and sold goods via its retail counter, then it would be based on this. But it doesn't; it offers essentially final sales to the consumer. You inherently can't do that in a stock market, since stocks are capital. > There should not be any market mechanism that financially motivates people to root against a company. Why not? If I think Tesla is a good buy and you think it's a bad buy, you can borrow a share (go short) and sell it to me at the current market price. We both win; you get to place your bet and I get to purchase the stock without distorting the market as much, since I'm buying a borrowed share. But more generally, "any market mechanism" is much broader than you realize. Taking your quote seriously, you'd have to also ban options trading, since buying a put option or selling a call option are both bets against a company. But these tools are also critical for hedging, since they can be used to insure against deep losses. (Buying a call option isn't a bet against a company, but there has to be someone else selling the option who takes the other side of that bet.) "Rooting against a company" is also relative. If I think Microsoft will do better than Amazon, I can buy Microsoft shares and short Amazon to hedge my exposure to tech industry swings writ large.
  - viklove 6y ago
    > Why not? If I think Tesla is a good buy and you think it's a bad buy, you can borrow a share (go short) and sell it to me at the current market price. We both win; you get to place your bet and I get to purchase the stock without distorting the market as much, since I'm buying a borrowed share. This is a pretty naive analysis. As we saw with GME, and other stocks in the recent years, that's not at all what's happening. What's happening is that hedge funds are shorting the entire float of a company multiple times over. If you borrow a single stock and sell it to me, that's probably fine. If you borrow 50 million shares, and flood the market with them, the stock price crashes because supply vastly outstrips demand. That's what's happening right now, and the hedge funds are doing it without even borrowing the stock. They're just like "Yeah, trust us, we actually have 50 million shares over here -- oh, you're asking about our failures to deliver? Don't worry about that, we paid the $10k fine and banked a $200M profit on it!" They're literally flooding the market with shares that don't exist. How is that allowed? https://wherearetheshares.com/ https://wherearetheshares.com/