A few rants that i tried answering to someone before him removing post.
Free speech is allowed.
Prosecuting people for free speech is impossible.
A bunch of imbeciles posting on forums is similar to a bunch of imbeciles on CNBC arguing that price is too high.
A hedge fund with 12 billion dollars shorting 140% of a stock and then using media to drive price to 0 is illegal. Also more then idiotic since they caused the whole problem to begin with. Without their greed there would be no short squeez, gamestop would have been at 50-60 or whatever fair market value instead of suppressed 5-6 dollars a long time ago.
The only illegal thing initially was hedge funds.
They then got punished and went to do other illegal things like wash sales, stopping people from buying, collusion with supposedly neutral market makers.
Whatever happens I hope the people above go broke first, investors that got conned go after their personal belongings for breaking fiduciary and afterwards spend a long time in jail.
I also believed that most of the shorts were naked, but the director of S3partner clearly explained how this was not the case. One stock can be shorted multiple times which is what causes the SI% to be over 100%. A lends to B, B sells to C, C lends to D and so forth. Two shorters (B,D) but only 1 original stock.
And Robinhoods closure of the trade seems reasonable in retrospect as well. If the clearing house required a higher collateral to clear trades on those tickers due to their volatility and RH did not have the liquidity to provide it then blocking the purchase of those tickers seems fair.
I can't really see anything illegal about the actions of the traders or the brokerages like Robinhood and Webull.
I'm not a domain expert, but it would seem that whether or not something was sold naked is ultimately determined in the instant that you are obligated to deliver -- not doing so is a Failure to Deliver, which is when your problem actually starts.
There was no reason to not be ass-naked or close to it on the high end of GME call contract writing a few months ago. They've probably covered (at least partially) by now, but that doesn't mean it hasn't happened.
> I'm not a domain expert, but it would seem that whether or not something was sold naked is ultimately determined in the instant that you are obligated to deliver
No, this is not true. When you sell short (with some exceptions for market makers), you are obligated to "find" shares to borrow (called "locates"). Usually your broker arranges this; any shares that you borrow cannot be lent to someone else. If you do not have any borrowed shares (as recorded by the broker), that is considered a "naked short sell".
No idea why you're getting downvoted -- whether or not you're able to do it depends on if you are one of those exceptions and that is an important part I missed in my original post. I was referring to market makers, as I think it goes without saying that a retail investor or small firm will not be allowed to do something like write a naked or near-naked call, but you know what they say about assumptions.
E.g. A lends a share to B, B sells to C, C lends to D.
Now say another shorter, X, needs to cover their short and thus buys a share from C, now for this trade to settle C has to recall their share from D and then give it to X, who would then use it to cover their short. If D now fails to give back the share to C, then the trade between C-D is FTD which would then cause X trade with its borrower to be FTD since X needs C's share to settle it.
So they could have locates but still fail to settle. Though, I'm not unequivocally excluding that some naked shorts may have happened. I just find it more plausible than hedge funds and brokerages allowing huge amounts of naked shorts, which are already illegal.
You can get more the 100% without naked shorts, sure, but is that legal?, does SEC allow that?, nobody is concerned that if there is a short squeeze there is no chance in hell to close out? (like we are seeing here)
The point I tried to make was - this short was done to drive price down to zero (it can do that with that large of a position) in collusion with negative media reports from friends... That is manipulation. And they got caught with their pants down.
I'm also not convinced on no naked shorts, we'll see...
As for robinhoods closure of trade, they only disabled buy, not sale... as for reason, are you speculating? I did not see any clearing house comment. This was brought up by Cuomo as well in interview.
As for illegal on robinhoods part, we'll see, there will likely be an investigation. Especially since they are owned by the company that bailed Melvin Capital out.
> You can get more the 100% without naked shorts, sure, but is that legal?, does SEC allow that?
Yes. As someone lending out a share (for someone else to short), you can't know whether the person you bought it from had borrowed it to sell it to you.
Let's say you bought a share of stock. Can you lend it to someone for them to short sell? Of course. You own the share, regardless of how many people it passed through to get to you.
The same director noted that the SI%, according to their way of calculating*, is actually at 55% (still very high). And like the poster below stated, one cannot really know the difference between a borrowed and "ordinary" stock .
Webull came out and clearly stated that their clearinghouse had issues with putting up collateral for the tickers and thus had to shut them down [0]. And while Robinhood has not come out directly and said it was due to liquidity, one can easily gather that from the statements they put out, the new funding they needed, and lastly the fact that DTCC required higher collateral for those tickers.
* It includes all tradeable share. So in the case of the example, normal SI% states 2:1, two shorters and one original share. Their way is 2:3 which is, 2 shorters (B,D) and 3 longs (A,C,E)
Imagine an alternative universe. WSB decides that shorting some company they hate is a good idea. But wait, it has already been shorted up to 99% by hedge funds! No more shorting allowed. SEC rules.
your scenario means everyone is disallowed from shorting. Equal measure to market condition. You see it being different from disallowing just retail buying?
Oh and that already exists when there are no shares to borrow. (in theory as they can naked short)
>Prosecuting people for free speech is impossible.
Are you suggesting that pump and dumps legal because "free speech"?
>A hedge fund with 12 billion dollars shorting 140% of a stock and then using media to drive price to 0 is illegal.
What is the relevant legislation preventing someone from shorting "too much"? Furthermore, prior to this debacle I certainly haven't heard of GME in the media aside from some passing references. Therefore I'm skeptical of your narrative that the hedge funds were somehow using the media to crash GME prices.
> Are you suggesting that pump and dumps legal because "free speech"?
Where's the pump and dump?, This is a short squeeze due to Melvin Capitals 140% short and people buying due to initially Cohen joining. Same as for VW a long time ago. Now it's just because people want to buy... Hell I did so as well at recent prices as I think with a nice stock offering GME can get to a 500 fair market value easily. Que in some partnership with Tesla for 'TeslaStop' gaming while charging and they'll be good.
> What is the relevant legislation preventing someone from shorting "too much"?
Look it up under market manipulation. A oversized hedge fund overselling a stock will certainly be able to set the price where they want and then profit.
Whether this specific instance counts as a pump and dump is irrelevant. The point is that it's illegal and "free speech" isn't a valid defense. Furthermore, comments elsewhere in this thread have mentioned that intentionally causing a short squeeze is also illegal.
>Look it up under market manipulation. A oversized hedge fund overselling a stock will certainly be able to set the price where they want and then profit.
And the same isn't true of the people in WSB gobbling up GME?
Essentially none of what is written in your "rants" is factually accurate, unless by calling it out you meant to make clear that these were emotional ramblings unrelated to reality.
Neutral analysts on CNBC providing commentary is pretty different than someone with a financial stake trying to pump up a stock they own to maximize their profit.
There is no evidence that any of the major funds involved in shorting have done anything illegal.
There's nothing illegal about a wash sale, wash sales are just a minor technicality around how cost basis is calculated for tax purposes.
People figured out they could exploit a fund that was overexposed in a trade and did so. We don't need all the conspiracies and class warfare. Greedy retail traders took some money from some greedy hedge funds, that's the whole story, it doesn't need to be more than that.
This is amusing, check out interview with Chamath then everything else covered. It's even more amusing when Cramer of all people was the voice of reason.
> There is no evidence that any of the major funds involved in shorting have done anything illegal.
We will see through class action lawsuit against robinhood and SEC investigations.
> There's nothing illegal about a wash sale,
Used the wrong term, I meant the massive sell order (while people were not allowed to buy) trading halt, sell order again, trading halt, a few times to trigger stop losses then price magically goes back up where it was and the sell orders evaporated...
> it doesn't need to be more than that.
Disagree, some investigations are warranted as to how this was allowed to happen. (I'm assuming investors in hedge fund arent happy either at 3 billion loss that we know of) As well as general practices and the dirty tactics employed recently
I mean you can just do the maths, no? They probably had a few hundred million position (maybe larger) with an entry cost under <10$. There may be some puts in there too which will have been a total loss.
If they bought in at 10 and sold between 50-100 if they owned 14% of the free float they would have lost 0.5-1bn. That assumes they didn't increase exposure as the price went up and it ignores the borrow cost.
They then lost a bunch of money on options the exact amount of which we don't know. They also lost a whole bunch of money on other positions going against them which we don't know but can guess at.
To get to a 3bn loss (which btw is just a guessed number based on how much new capital they took)you probably only need to assume they are down around 10% on the rest of the short book (ex GME) which under the circumstances is entirely plausible. That assumes they run something like 200% gross exposure with an evenly balanced book with 12.5bn aum.
I'm not sure where the conspiracy is here. 3bn is a huge number to lose in a week but it looks roughly right given what happened and it's not exactly unprecedented either.
This is what I don't get, they are a hedge fund, even balanced book as you say, 200% gross exposure.
By your calculations they lost 0.5-1b from GME. That means 2b from somewhere else in the market.
Questions I'd have:
- even balanced book in my mind means they hedge risk and shouldn't lose across the board 30% in a week otherwise they are incompetent... and they seem far from that.
- with that in mind, how would they lose 2b in the rest of the market?, that means they dont hedge properly.
- As for GME, they didnt do proper risk management but that seems the only place they got blindsided. (Still surprising they had no insurance for a short squeeze...)
- Overall the stated losses were 30% of portfolio in a week... with only GME moving... you can see why I assume it was more then 14% and your logic seems flawed.
Free speech is allowed.
Prosecuting people for free speech is impossible.
A bunch of imbeciles posting on forums is similar to a bunch of imbeciles on CNBC arguing that price is too high.
A hedge fund with 12 billion dollars shorting 140% of a stock and then using media to drive price to 0 is illegal. Also more then idiotic since they caused the whole problem to begin with. Without their greed there would be no short squeez, gamestop would have been at 50-60 or whatever fair market value instead of suppressed 5-6 dollars a long time ago.
The only illegal thing initially was hedge funds.
They then got punished and went to do other illegal things like wash sales, stopping people from buying, collusion with supposedly neutral market makers.
Whatever happens I hope the people above go broke first, investors that got conned go after their personal belongings for breaking fiduciary and afterwards spend a long time in jail.