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The fact they rolled back hours of trades is astounding to me. I'm surprised it would be legal, to be honest.

labster 5y ago
Why? Everyone agrees it was a short squeeze that led to predatory pricing. It’s a much bigger social good to reverse transactions than to bring charges against all the sellers for price gouging.
- jdhn 5y ago
  I'm tired of people supporting bailouts under the guise of "social good".
  - HWR_14 5y ago
    I'm fine with supporting bailouts for the social good. I just think that the shareholders of the bailed out companies and executives should personally lose assets. Not necessarily sufficiently to pay for the bailout but to act as a real discouragement.
    - labster 5y ago
      They did and will lose money on their bets, just not ridiculous amounts that don’t reflect the real market price. Also the bailouts we’re talking about here are loans to nickel miners to cover margin calls, not free money. They will make money selling nickel at a higher price.
      - Lionga 5y ago
        And you are the chosen one to decide which prices are real and which are not "real"?
        labster 5y ago
        Yes, that’s me. First time anyone has recognized me. One of my rules is that prices that have increased by 3 times in a few hours with no real change in demand and most suppliers still producing, then it’s not a real price.
        mynameishere 5y ago
        Anytime someone places a short position they are creating demand in the future from themselves. They know this.
        HWR_14 5y ago
        The problem was the callable short. They had nickel coming in N months. They could fulfill it then. They just couldn't take a short position that would be fulfilled then - instead it had to be fulfilled randomly before then.
    - chii 5y ago
      > the shareholders of the bailed out companies ... should personally lose assets if shareholders lose assets, then it's not a bailout. If they get bailed out, then they aren't losing assets. You're talking about the same coin, viewed from different angles. What you wish to accomplish - the shareholders taking a haircut, but for third-parties such as customers or general public to not take one, is impossible.
  - athrowaway3z 5y ago
    You're type of reply is common with people who assume the free market is real and that the rules prohibit interference. Neither has ever been true. Its just a theoretical ideal some people in government argue in favor off. Food subsidies are bailouts under the guise of "social good", in some places they prevent people from starving.
    - jdhn 5y ago
      Your type of reply is common with people who want to avoid the very real question of why the rules are bent when trades go wrong for certain people. Please tell me why you think somebody who shorted nickel so heavily to the point that they almost went broke deserves a bailout.
- joebob42 5y ago
  Is price gouging in this context illegal (genuine question, I know very little in this area, but I would not have thought so). It seems to me like they are effectively just selling at the price the market will bear, which is artificially inflated at present.
- OrangeMonkey 5y ago
  In what way can one force someone to sell at a price you want them to. Is it price gouging if I refuse to sell to you a commodity that you really want if I think I can get more out of it? Is there such a thing as price gouging for metals and is that illegal?
  - throwaway6532 5y ago
    The short sellers got margin called, so they are forced to buy Nickel to cover their short positions.
    - mrleinad 5y ago
      Well, it's part of the game, isn't it? Or if I buy and expect it to go higher, they'll rollback and reimburse me if it falls?
      - lbarrow 5y ago
        The exchange being able to roll back trades in extraordinary circumstances is also part of the game. The exchange obviously has a strong incentive not to abuse this power or the traders will find another exchange.
        djbebs 5y ago
        It really isn't, and the fact that this is the first time it has happened shows that its not.
    - daniel-cussen 5y ago
      If your team loses the basketball game, the rest of your high school hates you. If you lose your job, you lose your health insurance. If you bet on the wrong part of the roulette wheel, you lose your chips. If you miss your rent, you get evicted. In all these endeavors, if you screw up you suck up the consequences, end of story. I feel literally no pity for traders who got margin called, they're forced to buy nickel to cover their short positions but they're just not worthy victims, they're debtors. And these are expensive people, these traders took out those loans to buy proof of their superiority, like cars, houses, jewelry for wives and affairs, investment-type goods like watches...maybe one of them was smart enough to buy Magic cards, but if they get short-squeezed, I doubt it. To my knowledge these traders are consenting adults, 18 and up surely, they gambled and won and took their money, this time they gambled and lost. They have to pay, with nothing but silence from them.
- renw0rp 5y ago
  So why do we even allow entities which are not interested in actually delivering/receiving physical goods to trade futures? Genuine question
  - robbiep 5y ago
    Market makers have an important function in providing liquidity even in the absence of underlying asset. However this can create unusual and aberrant situations that certainly warrant raising these sort of questions in order to determine appropriate regulations and rules
    - krageon 5y ago
      This is an expensive way to say "they give you money maybe, even for nothing". That last part is the problem - if that is their core role, they should not exist. Even if they make some folks a lot (more) money.
      - erincandescent 5y ago
        Market Makers are basically the financial system's buffers: they exist to make sure that you can always buy or sell a given security/commodity. They are the people who make buying or selling something _immediately_ possible, rather than having to wait for someone who needs what you're selling (or is selling what you're buying) to come along. This makes trades move quickly, which speeds up price discovery. This is good for market health. Market makers make their money on the difference between the buy-sell spread. Of course, this is a bet: if the market moves against them, they can lose money on this. Often a market has one or more officially designated market makers who are paid to _always_ have a certain number of both buy and sell offers on the market to ensure that there is always liquidity. The payments help cover their risk (These payments are often also materialized in the form of a "takers fee", i.e. a surcharge you pay whenever you place an order into the market which can be immediately filled) TL;DR: They're a warehouse which will always buy and sell some product, except when talking futures we're talking wagons full of nickel 1 month from now and so the warehouse doesn't physically exist
- rollypoll 5y ago
  I dont think you understand how markets or exchanges work
lbarrow 5y ago
I think it's basically just replacing having a circuit-breaker -- if they had a circuit breaker like a lot of other exchanges, the crazy price jump never would have gotten going.
- Ekaros 5y ago
  I don't think circuit breakers should exist. And markets should operate 24/7. There is absolutely no good reason why they wouldn't in digital age. Players should not make bets where they can lose too much money.
  - kasey_junk 5y ago
    Any short position can lose infinite money, so this argument is equivalent to saying short positions should not exist. Saying short positions should not exist is equivalent to saying commodities producers should not be able to hedge production risk. That has wild implications for commodity prices and availability around the world. If that’s your position you should probably state it more directly.
    - jamesrom 5y ago
      You can hedge short positions. Ekaros is saying that traders shouldn't rely on things like circuit breakers or rollbacks to save them when they make a bet with too much on the line.
      - kasey_junk 5y ago
        In this case the hedge was going the other way. They hedged their real long position with short futures. The market broke and they were in a position where they were losing money as the price of their real asset was sky rocketing. This is because of the natural limits of hedging short positions. Circuit breakers aren’t designed to protect traders from betting too much, they are designed to prevent the market itself from breaking in unforeseen ways.
    - Ekaros 5y ago

Why? Everyone agrees it was a short squeeze that led to predatory pricing. It’s a much bigger social good to reverse transactions than to bring charges against all the sellers for price gouging.

jdhn 5y ago
I'm tired of people supporting bailouts under the guise of "social good".
- HWR_14 5y ago
  I'm fine with supporting bailouts for the social good. I just think that the shareholders of the bailed out companies and executives should personally lose assets. Not necessarily sufficiently to pay for the bailout but to act as a real discouragement.
  - labster 5y ago
    They did and will lose money on their bets, just not ridiculous amounts that don’t reflect the real market price. Also the bailouts we’re talking about here are loans to nickel miners to cover margin calls, not free money. They will make money selling nickel at a higher price.
    - Lionga 5y ago
      And you are the chosen one to decide which prices are real and which are not "real"?
      - labster 5y ago
        Yes, that’s me. First time anyone has recognized me. One of my rules is that prices that have increased by 3 times in a few hours with no real change in demand and most suppliers still producing, then it’s not a real price.
        mynameishere 5y ago
        Anytime someone places a short position they are creating demand in the future from themselves. They know this.
        HWR_14 5y ago
        The problem was the callable short. They had nickel coming in N months. They could fulfill it then. They just couldn't take a short position that would be fulfilled then - instead it had to be fulfilled randomly before then.
  - chii 5y ago
    > the shareholders of the bailed out companies ... should personally lose assets if shareholders lose assets, then it's not a bailout. If they get bailed out, then they aren't losing assets. You're talking about the same coin, viewed from different angles. What you wish to accomplish - the shareholders taking a haircut, but for third-parties such as customers or general public to not take one, is impossible.
- athrowaway3z 5y ago
  You're type of reply is common with people who assume the free market is real and that the rules prohibit interference. Neither has ever been true. Its just a theoretical ideal some people in government argue in favor off. Food subsidies are bailouts under the guise of "social good", in some places they prevent people from starving.
  - jdhn 5y ago
    Your type of reply is common with people who want to avoid the very real question of why the rules are bent when trades go wrong for certain people. Please tell me why you think somebody who shorted nickel so heavily to the point that they almost went broke deserves a bailout.
joebob42 5y ago
Is price gouging in this context illegal (genuine question, I know very little in this area, but I would not have thought so). It seems to me like they are effectively just selling at the price the market will bear, which is artificially inflated at present.
OrangeMonkey 5y ago
In what way can one force someone to sell at a price you want them to. Is it price gouging if I refuse to sell to you a commodity that you really want if I think I can get more out of it? Is there such a thing as price gouging for metals and is that illegal?
- throwaway6532 5y ago
  The short sellers got margin called, so they are forced to buy Nickel to cover their short positions.
  - mrleinad 5y ago
    Well, it's part of the game, isn't it? Or if I buy and expect it to go higher, they'll rollback and reimburse me if it falls?
    - lbarrow 5y ago
      The exchange being able to roll back trades in extraordinary circumstances is also part of the game. The exchange obviously has a strong incentive not to abuse this power or the traders will find another exchange.
      - djbebs 5y ago
        It really isn't, and the fact that this is the first time it has happened shows that its not.
  - daniel-cussen 5y ago
    If your team loses the basketball game, the rest of your high school hates you. If you lose your job, you lose your health insurance. If you bet on the wrong part of the roulette wheel, you lose your chips. If you miss your rent, you get evicted. In all these endeavors, if you screw up you suck up the consequences, end of story. I feel literally no pity for traders who got margin called, they're forced to buy nickel to cover their short positions but they're just not worthy victims, they're debtors. And these are expensive people, these traders took out those loans to buy proof of their superiority, like cars, houses, jewelry for wives and affairs, investment-type goods like watches...maybe one of them was smart enough to buy Magic cards, but if they get short-squeezed, I doubt it. To my knowledge these traders are consenting adults, 18 and up surely, they gambled and won and took their money, this time they gambled and lost. They have to pay, with nothing but silence from them.
renw0rp 5y ago
So why do we even allow entities which are not interested in actually delivering/receiving physical goods to trade futures? Genuine question
- robbiep 5y ago
  Market makers have an important function in providing liquidity even in the absence of underlying asset. However this can create unusual and aberrant situations that certainly warrant raising these sort of questions in order to determine appropriate regulations and rules
  - krageon 5y ago
    This is an expensive way to say "they give you money maybe, even for nothing". That last part is the problem - if that is their core role, they should not exist. Even if they make some folks a lot (more) money.
    - erincandescent 5y ago
      Market Makers are basically the financial system's buffers: they exist to make sure that you can always buy or sell a given security/commodity. They are the people who make buying or selling something _immediately_ possible, rather than having to wait for someone who needs what you're selling (or is selling what you're buying) to come along. This makes trades move quickly, which speeds up price discovery. This is good for market health. Market makers make their money on the difference between the buy-sell spread. Of course, this is a bet: if the market moves against them, they can lose money on this. Often a market has one or more officially designated market makers who are paid to _always_ have a certain number of both buy and sell offers on the market to ensure that there is always liquidity. The payments help cover their risk (These payments are often also materialized in the form of a "takers fee", i.e. a surcharge you pay whenever you place an order into the market which can be immediately filled) TL;DR: They're a warehouse which will always buy and sell some product, except when talking futures we're talking wagons full of nickel 1 month from now and so the warehouse doesn't physically exist
rollypoll 5y ago
I dont think you understand how markets or exchanges work

lbarrow 5y ago

I think it's basically just replacing having a circuit-breaker -- if they had a circuit breaker like a lot of other exchanges, the crazy price jump never would have gotten going.

Ekaros 5y ago
I don't think circuit breakers should exist. And markets should operate 24/7. There is absolutely no good reason why they wouldn't in digital age. Players should not make bets where they can lose too much money.
- kasey_junk 5y ago
  Any short position can lose infinite money, so this argument is equivalent to saying short positions should not exist. Saying short positions should not exist is equivalent to saying commodities producers should not be able to hedge production risk. That has wild implications for commodity prices and availability around the world. If that’s your position you should probably state it more directly.
  - jamesrom 5y ago
    You can hedge short positions. Ekaros is saying that traders shouldn't rely on things like circuit breakers or rollbacks to save them when they make a bet with too much on the line.
    - kasey_junk 5y ago
      In this case the hedge was going the other way. They hedged their real long position with short futures. The market broke and they were in a position where they were losing money as the price of their real asset was sky rocketing. This is because of the natural limits of hedging short positions. Circuit breakers aren’t designed to protect traders from betting too much, they are designed to prevent the market itself from breaking in unforeseen ways.
  - Ekaros 5y ago