4 ms·

>How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. Because the stock you buy may not have been actually

by rapsey 5y ago

>How is it a scam? You buy stock. You own a share in a company, or in a company that owns more companies. Because the stock you buy may not have been actually bought by your broker. Which is the entire point of the GME saga which you completely misunderstand. A stock has no business being shorted over 100% in a market that is not a scam. Major firms can get away with crimes like naked shorting and no one can do anything about it except the regulators and they turn a blind eye or impose hilariously low fines.

ericmay 5y ago
It's more complicated than that. The GameStop saga notably didn't occur with other brokers, such as Vanguard, where shares were "in-stock" if you'll pardon the pun and available for purchase or sale. The volatility of $GME caused issues with the settlement system. That doesn't make "the stock market" a scam. > A stock has no business being shorted over 100% in a market that is not a scam. I'm not sure this is a strong argument for a scam, but is a strong intuitive argument for correcting a problem with how the stock market functions.
fennecfoxen 5y ago
Meh. GME didn't stop trading because some fund had shorted the shares. They stopped trading because people couldn't be sure firms like Robin Hood would be good for the money. No one was prepared to go to bat and procure millions of dollars in meme-stocks for them, then be on the hook when those millions in dollars didn't show up. And everyone whined and whined and whined about "different rules for hedge funds!!!" Of course the big players pay the big fees to put their millions of dollars on the exchange directly, and have to do many things to limit the exchange's risk, like comply with rules and get audited and post collateral — oh, hey, that's what Robinhood didn't have enough of to execute your trade; maybe we're playing by the same rules after all...
- rapsey 5y ago
  > Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have suppose to have been owning being nothing but an IOU
  - UncleMeat 5y ago
    > The entire issue is a fund was allowed to short shares they did not have. Has this ever been demonstrated?
    - rapsey 5y ago
      The float was shorted 120%. This is not disputed.
      - gruez 5y ago
        and that's not evidence of naked shorting, because of synthetic longs. see: footnote 3 of this article https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
      - jandrewrogers 5y ago
        Shorting 120% of float does not imply naked shorting. It means some shares were re-loaned. You are only looking at the debtor side of the ledger and ignoring the creditor side. If I lend $1 to friend A, and friend A lends that same $1 to friend B, then the total debt obligation is $2 (A & B both owe $1 to someone else) i.e. 200% of the original dollar. In the case of person A, that both owes $1 and is owed $1, which effectively cancels out, no new dollar was created and they become a middleman in the chain of debt obligations. The primary implication of shorting >100% of float is the settlement time and capital required to close out that chain of loans and return the share to the original lender.
  - fennecfoxen 5y ago
    Okay, since you're so hung up on this shorting as a reason to call the market a "scam". I hear some hedge funds owed stock, and held "synthetic" stock, in the form of options, but did not hold the stock itself. Maybe some funds didn't even hold those! Let's assume all of this is truer than true and put it beyond dispute. It sounds a little dodgy, possibly a violation of contracts, possibly illegal. It also sounds like they lost a fair amount of money acquiring stock to cover their obligations, and it sounds like some retail investors were able to make money from the processes related to their need for this stock. So let's put this in perspective. If all of this is such a scam, tell me: who are the victims of this "scam?" Who precisely thought they owned stock, and found out that they did not in fact own stock, and lost some or all of their money? Does this person or legal entity actually exist? Where can we read a story of their woes as their stock evaporated? And if this is such a scam, how common is all this? We are discussing a very broad claim: "The stock market is a scam.... Don't fall for it." What saliency does the Gamestop story have to this claim? Tell me, sir: if I am an average investor, and I am investing $10,000 in the market, in the statistically average way that people invest, how many of these dollars will I expect to lose to a scam such as this one? On average? I hold that the answer is probably somewhere between $0.00 and $0.00. Oh, there are some very real scams and fraud out there on the market, but they tend to be more like Enron, or some firm like Theranos (except public) — not "failure to deliver shares" risk. And they're still a tiny risk to any index fund owner.
Aunche 5y ago
>Because the stock you buy may not have been actually bought by your broker The stock did get bought by your broker. That's why gme's stock skyrocketed and brokers didn't want to trade it. A short interest over 100% doesn't imply naked shorting. If you're borrowing a stock, you can lend it out to someone else. It's like a sublease. There are two leases for a single apartment.
- tartoran 5y ago
  And lots of naked shorts, inexistent shares sold by private market makers such as Citadel were deployed to suppress the price. Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. Perhaps cryptos have become so successful over time because this type of manipulation is harder to pull off but that doesn’t make cryptos safer either. If it wasn’t for the high inflation rate I would not touch the market even with a 10 foot pole.
  - gruez 5y ago
    >Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. can you elaborate on this? What tactics were used, and how did they "suppress the price action"? Moreover, how do they compare with "let's screw over hedge funds by driving up the price of a stock!"? AFAIK buying up stocks in a shorted company isn't illegal, but intentionally doing so to cause a short squeeze is, eg. >In 2012, the U.S. Securities and Exchange Commission charged Philip Falcone with market manipulation in relation to a short squeeze on a series of high-yield bonds issued by MAAX Holdings. After hearing that a firm was shorting the bonds, Falcone purchased the entire issue of bonds. He also lent the bonds to the short-sellers, and then bought them back when the traders sold them. As a result, his total exposure exceeded the entire issue of the MAAX bonds. Falcone then stopped lending the bonds, so that short-sellers could not liquidate their positions anymore. The price of the bonds rose dramatically.[16][17] The short-sellers could only liquidate their positions by contacting Falcone directly.[17]
chollida1 5y ago
> A stock has no business being shorted over 100% in a market that is not a scam. This also implies that those pesky, cheating buyer were long over 200% of hte stock. A stock has no business being bought over 200% in a market that is not a scam. Why is no one looking at that pesky wall street bets crowd for market manipulation:)

by rapsey 5y ago

ericmay 5y ago

It's more complicated than that. The GameStop saga notably didn't occur with other brokers, such as Vanguard, where shares were "in-stock" if you'll pardon the pun and available for purchase or sale. The volatility of $GME caused issues with the settlement system. That doesn't make "the stock market" a scam. > A stock has no business being shorted over 100% in a market that is not a scam. I'm not sure this is a strong argument for a scam, but is a strong intuitive argument for correcting a problem with how the stock market functions.

fennecfoxen 5y ago

Meh. GME didn't stop trading because some fund had shorted the shares. They stopped trading because people couldn't be sure firms like Robin Hood would be good for the money. No one was prepared to go to bat and procure millions of dollars in meme-stocks for them, then be on the hook when those millions in dollars didn't show up. And everyone whined and whined and whined about "different rules for hedge funds!!!" Of course the big players pay the big fees to put their millions of dollars on the exchange directly, and have to do many things to limit the exchange's risk, like comply with rules and get audited and post collateral — oh, hey, that's what Robinhood didn't have enough of to execute your trade; maybe we're playing by the same rules after all...

rapsey 5y ago
> Meh. GME didn't stop trading because some fund had shorted the shares The entire issue is a fund was allowed to short shares they did not have. An illegal act unless you are powerful enough. That is the origin and cause of the entire story. No one disagrees that Robin Hood is garbage. But them being that is not the main issue at all. RH having collateral is something entirely different from the shares you have suppose to have been owning being nothing but an IOU
- UncleMeat 5y ago
  > The entire issue is a fund was allowed to short shares they did not have. Has this ever been demonstrated?
  - rapsey 5y ago
    The float was shorted 120%. This is not disputed.
    - gruez 5y ago
      and that's not evidence of naked shorting, because of synthetic longs. see: footnote 3 of this article https://www.bloomberg.com/opinion/articles/2021-01-25/the-game-never-stops#footnote-3 https://www.bloomberg.com/opinion/articles/2021-01-25/the-ga...
    - jandrewrogers 5y ago
      Shorting 120% of float does not imply naked shorting. It means some shares were re-loaned. You are only looking at the debtor side of the ledger and ignoring the creditor side. If I lend $1 to friend A, and friend A lends that same $1 to friend B, then the total debt obligation is $2 (A & B both owe $1 to someone else) i.e. 200% of the original dollar. In the case of person A, that both owes $1 and is owed $1, which effectively cancels out, no new dollar was created and they become a middleman in the chain of debt obligations. The primary implication of shorting >100% of float is the settlement time and capital required to close out that chain of loans and return the share to the original lender.
- fennecfoxen 5y ago
  Okay, since you're so hung up on this shorting as a reason to call the market a "scam". I hear some hedge funds owed stock, and held "synthetic" stock, in the form of options, but did not hold the stock itself. Maybe some funds didn't even hold those! Let's assume all of this is truer than true and put it beyond dispute. It sounds a little dodgy, possibly a violation of contracts, possibly illegal. It also sounds like they lost a fair amount of money acquiring stock to cover their obligations, and it sounds like some retail investors were able to make money from the processes related to their need for this stock. So let's put this in perspective. If all of this is such a scam, tell me: who are the victims of this "scam?" Who precisely thought they owned stock, and found out that they did not in fact own stock, and lost some or all of their money? Does this person or legal entity actually exist? Where can we read a story of their woes as their stock evaporated? And if this is such a scam, how common is all this? We are discussing a very broad claim: "The stock market is a scam.... Don't fall for it." What saliency does the Gamestop story have to this claim? Tell me, sir: if I am an average investor, and I am investing $10,000 in the market, in the statistically average way that people invest, how many of these dollars will I expect to lose to a scam such as this one? On average? I hold that the answer is probably somewhere between $0.00 and $0.00. Oh, there are some very real scams and fraud out there on the market, but they tend to be more like Enron, or some firm like Theranos (except public) — not "failure to deliver shares" risk. And they're still a tiny risk to any index fund owner.

Aunche 5y ago

>Because the stock you buy may not have been actually bought by your broker The stock did get bought by your broker. That's why gme's stock skyrocketed and brokers didn't want to trade it. A short interest over 100% doesn't imply naked shorting. If you're borrowing a stock, you can lend it out to someone else. It's like a sublease. There are two leases for a single apartment.

tartoran 5y ago
And lots of naked shorts, inexistent shares sold by private market makers such as Citadel were deployed to suppress the price. Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. Perhaps cryptos have become so successful over time because this type of manipulation is harder to pull off but that doesn’t make cryptos safer either. If it wasn’t for the high inflation rate I would not touch the market even with a 10 foot pole.
- gruez 5y ago
  >Also don’t forget about dark pools and other tricks done to suppress the price action that are done shamelessly behind the scenes. can you elaborate on this? What tactics were used, and how did they "suppress the price action"? Moreover, how do they compare with "let's screw over hedge funds by driving up the price of a stock!"? AFAIK buying up stocks in a shorted company isn't illegal, but intentionally doing so to cause a short squeeze is, eg. >In 2012, the U.S. Securities and Exchange Commission charged Philip Falcone with market manipulation in relation to a short squeeze on a series of high-yield bonds issued by MAAX Holdings. After hearing that a firm was shorting the bonds, Falcone purchased the entire issue of bonds. He also lent the bonds to the short-sellers, and then bought them back when the traders sold them. As a result, his total exposure exceeded the entire issue of the MAAX bonds. Falcone then stopped lending the bonds, so that short-sellers could not liquidate their positions anymore. The price of the bonds rose dramatically.[16][17] The short-sellers could only liquidate their positions by contacting Falcone directly.[17]

chollida1 5y ago

> A stock has no business being shorted over 100% in a market that is not a scam. This also implies that those pesky, cheating buyer were long over 200% of hte stock. A stock has no business being bought over 200% in a market that is not a scam. Why is no one looking at that pesky wall street bets crowd for market manipulation:)