Could be? It's an open, publicly-documented market manipulation event. How can there be any question about it? You might decide that this kind of manipulation is OK due to it's stated goals, but that doesn't make it not manipulation.
Which is one take, certainly. But the problem is once you say that this is a market manipulation event you run into other issues.
Is going on CNBC and talking about the strength of a company that you invested in market manipulation? Before this blew up you certainly had more reach.
Is posting "research" or holding a conference call and telling people a company is garbage while you have the company shorted market manipulation? What about when you short a company and sell a ton of shares to induce panic? What about algorithms that are created to trade shares to reach a certain profitable price based on internal holdings/analysis?
Here's another thing - if WallStreetBets was incorporated into a hedge fund and took a huge long position is that market manipulation? It seems to me the main difference is that they aren't behind closed doors talking privately in a legal fiction called a company that is really the problem here...
You have to define what you mean by manipulating the market and apply that equally under the eyes of the law. The fact that this was done publicly makes it all the more interesting. Had it been done behind closed doors (like so many things are on Wall Street) it would have been an open and shut case, but it wasn't.
So sure, let's say it's a market manipulation event. Ok. Can you tell me what isn't a market manipulation event?
If WSB was a hedge fund they just have to buy some of GME - not all or even too much. Other hedge funds could buy some too.
Just have a "dinner conversation" about it.
Just like you and a few hedge funds can get together and collectively short GameStop and other companies... as they are doing now.
There's no rule that I know of that says only one entity can make a specific investment.
-edit-
Don't forget that hedge funds ARE on the other side of this trade. WSB and retail do not have the ability to move this solely on their own. I wonder how long until they're on CNBC/Bloomberg "we saw a great opportunity in the market and executed our position well". If it's market manipulation - was it market manipulation to even have heard about WSB and entered the trade? WSB is a nice scapegoat for the real money that caught these hedge funds in a bad position. Didn't take long before WSB became alt-right, white supremacist, market manipulators... etc.
It isn't. Hedge fund managers have "idea dinners" with dozens of their friends all the time to discuss what plays they are thinking... they frequently also bring in guests that represent companies, or even politicians/former politicians to discuss lobbying strategies to keep this exact type of collusion and market manipulation legal for them.
But as soon as a bunch of the dreaded "retail investors" start doing it in the open, Wall Street calls on K Street to save them.
That's amazing. So they basically found a legal protocol to do things that would otherwise be illegal, and institutions like judges and the SEC just let that happen?
It could be argued that r/wallstreetbets is a public forum. Anyone can join. Think of it like a virtual conference room.
If I walk into this room and yell “Everybody buy GME to screw the hedge funds” am I engaging in market manipulation? There is no formal or informal agreement to do so if someone says “ok great idea” and go buys GME.
Besides how are they going to enforce the laws? Match IPs to ISPs and extradite all the thousands if not millions of people across the world who bough stock? If a fine is issued do they just divide it up by the number of people who commented in wallstreetbets and held stock? Or is every person fined individually?
How is this worse than the sell walls that hedge funds use to deflate a share price?
The truth of the matter is the SEC dropped the ball. They were probably too busy having a wank while on pornhub [0].
In December as soon as the share price started to rise GME was placed on the NYSE threshold securities list for large numbers of “failure to deliver”. Keep in mind it had entered this same list earlier in the year. Followers of wallstreetbets were suspicious and believed that illegal naked short selling was occurring so they informed the SEC [1].
Then a few weeks later the stock rose 10% then 50% the next day leaving the call options ITM on a Friday afternoon. What did the SEC do? They sat on their hands over the weekend instead of suspending trading of the stock and performing an investigation.
If you actually read that link that case is so extraordinarily different than the reality of what’s happening today I don’t know how you can argue this in good faith.
> I don’t know how you can argue this in good faith
I'm not an expert and am rather dumb.
What do you think the differences are?
Differences:
* One hedge fund versus a multitude of investors
* Owning all the securities vs only a portion
The similarities are:
* Intentionally buying all the stock to cause a short squeeze
* Explicitly recalling borrowed shares to cause a short squeeze
To be clear, I'm not arguing that what wallstreetbets is doing is illegal but something fairly similar is. I thought an actual example of market manipulation was relevant to the conversation.
A short squeeze in and of itself is not illegal. The squeezers were not prosecuted in 2008 when they held onto VW even though it briefly became the most valuable stock in the world. Seeing an opportunity to advantage oneself of a bad short position is just trading, nothing fancier than that.
The Falcone case is much more complicated because it was a single person buying the entirety of the market. Much weirder mechanics at play. Squeezes are always carried out through the self-interest of uncoordinated parties, be they retail investors or firms.
well, the case reached a settlement so i would not say it was litigated in the sense of establishing case law or legal precedent.
it's interesting- it reads as though harbinger bought bonds and demanded delivery. can you imagine it! asking to take possession of the thing you just bought is painted as manipulation!!!
You realise that all of this stuff has specific rules. There are specific rules about posting research, there are specific rules about media (newspapers and TV), there are specific rules about algorithms (I will answer your questions: no, no, no, no...the last question is...odd, if you know about sure-win algos then you must be very rich).
And all of this stuff has happened before, it happened in 2000, lots of people went on bulletin boards, and some ended up going to jail for market manipulation. The difference between doing it publicly and privately is huge, that is a necessary component of market manipulation (generally speaking, market manipulation isn't very effective if you don't have anyone to baghold for you).
I'm certainly no expert in the rules at play here, but I can't fathom how posting on a public forum and saying "let's all go buy $GME and screw these hedge fund guys!" would not be absolutely protected by the First Amendment. There's no fraud or anything like that, and you're not posting anything false or misleading about the company.
If a bunch of people feel like it's a good idea and want to join in, then it is what it is.
Because there is the first amendment...and there is securities fraud. You are saying: anything that anyone says at any time has no legal consequence because of the first amendment...no.
Misleading stuff is being posted on wsb. And some people are likely not being honest about what they are doing (i.e. telling people to buy when they are selling). This is how pump and dumps work. If you buy a stock worth $5 for $300...your only option is to sell to someone who knows nothing. That is what it is happening now.
The stuff about hedge funds only came later, it is funny that people are citing this now (as ever, financial markets and ex-post rationalisations...human reasoning is amazing). All this stuff about revolutions against bankers, and the wealthy, and politicans leaping onto it...lol. The funniest thing about this is that people who have the least knowledge believe they need protection the least...and when this blows up, they will still say it is rigged. Oh well. Plus ca change.
I'm more of a "spirit of the thing" than "this is what the text says" kind of guy.
I'd argue that those things aren't fundamentally different than anything going on via WSB (assuming no bot accounts saying buy buy buy or something similar).
I think the difference is that for these other items there's nobody around to measure the impact.
No. If you do any of those things wrong then you will get charged.
There aren't bot accounts. There are people telling other people to buy who are probably selling (there is a reason why DFV isn't posting anything but account updates). No conpsiracy theory around bots, the people manipulating the market are there, they are posting on a public forum. It doesn't get more cut and dry.
I just don't see a difference in manipulating the markets through official channels versus unofficial channels. If CNBC wants to have me or reddit user r/deepfuckingvalue (Keith Gill) on their platform instead of WSB sure I'll give them some stock picks too.
There's a bit of nuance. We're using the word "manipulation" to mean two different things -- one is the colloquial meaning, and yes it's very obvious that the price was manipulated in that sense. As far as the legal definition of manipulation is concerned though, we haven't necessarily met all the requirements.
Applying this logic, perhaps we can get "professional" stock ... manipulators off the TV. CNBC can go away entirely. Marketing speak would be replaced with value charts. Ban all forums that discuss specific stock values.
Then prevent people from buying stocks in groups. Mutual funds, ETFs, etc... all of these abstractions on abstractions, we can throw them away. The more abstractions we throw away, the closer we get to what all this should actually be meant to serve; people.
Absolutely. I mean, what's different now in comparison to Ackman shorting hotels then going on CNBC and saying hotels are going to burn financially? Except for the fact it's one rich guy compared to thousands (maybe millions?) of not so rich folks.
People are free to purchase stock how they want to. If those people collect together and discuss potentially profitable strategies for trading who is to stop them? Do you think its possible youve fallen ill to the rhetoric that this is bad purely because the rich people didn't get their way?
I have a general, all-purpose opposition to financial trading that’s about exploiting weird market structure tricks to screw people over rather than expressing beliefs about the value of the underlying things being traded. Institutional traders too often get away with doing that kind of thing, and I’m hardly losing sleep over the particular targets of this campaign, but we can’t let the takeaway here be “it’s fine as long as retail investors get to play too”.
The issue with that argument is that it's really not “it’s fine as long as retail investors get to play too," it's “it’s fine until retail investors get to play too”
The point is that it's not fine. The institutional investors who have historically said it was fine were wrong. If the average retail investor comes away thinking scummy tactics are cool now that you and I can use them, it'll be a disaster for the cause of real financial reform.
It's hypocritical to only now be concerned with "scummy tactics" when the little people found a way to turn them on the big money. No one seemed to really care until hedge funds started losing billions due to a situation they created.
I'm just not sure what to tell you here. I'm not gonna support unethical trading practices because other people might have hypocritical reasons to oppose them. Again, it's not just this one event; I really am worried that the SEC will be unable to implement market reforms here because Robinhood traders argue it's their turn to exploit the system.
The idea that there has to be behind the scenes coordination (i.e., non-publically available communication/information) runs pretty clearly through all of them, but IANASEC
>Could be? It's an open, publicly-documented market manipulation event.
Strange question, what's the bar for market manipulation? For example if a company took out debt to buy their own stock in order to drive up the price would that count?
So do everything up to specifically stating the effect that you want, and it’s not market manipulation? This is the “emperor’s new clothes” absurdity of this whole system.
The whole fucking market has been manipulated by various parties this year, most notably by the Federal Reserve, yet there’s only a moral panic when some firefighter from Long Island gets a little taste?
Stock buy back is perfectly fine and its authorization is usually announced in a press release. Hiding that you are taking new debt to do just about anything would be illegal.
Persuading people that they should invest in X company for Y reason is not market manipulation. People who take a short position frequently announce their short publicly, with the express aim of achieving their goals.
Matt Levine did a pretty good job explaining why it probably doesn't fit the traditional definition of market manipulation in his newsletter on Tuesday[1], see the second section titled "But is it securities fraud?"
Maybe one or two specific individuals, but you're right in general. That's the part that frightens me the most here. The tactics that are being used are equivalent to the ones used by sideshow street racers and political riots: if we get thousands of individuals to break the law at the same time and place then law enforcement will be ineffective.
It certainly _feels_ like an organized riot, but I'm not 100% sure that it is. In a riot, there are organizers and instigators, and then there is a mob who follows them. Here, I'm not really sure that the organizers exist: the closest thing I can see is the Reddit user DeepFuckingValue, and all they do is post screenshots of their position in GME without futher comment. And have been doing so for the best part of a year.
> Could be? It's an open, publicly-documented market manipulation event.
And required the coordination of a 18th century war to pull off. It's one thing if this was "led" by an individual, organization, etc. but it wasn't. It was the wisdom of the crowds who played by the very same rules that the hedge funds play.
> You might decide that this kind of manipulation is OK due to it's stated goals
Where did every stock holder publicly state their case? If Jim Cramer says "i think you should buy AAPL" and everyone does it, is that manipulation?
"Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal."
It's an open question whether this case is more of a natural occurrence or "a scheme to manipulate", given that it's all randos who found a Schelling point and are now hyping each other up. I think it's fair to say it's unprecedented.
"scheme to manipulate" is the keyword here, patting each other on the back for riding market volatility on a forum about stocks isn't neither novel nor illegal.
it would be quite different if they were to coordinate the sale moment or the sale prices; for the latter, I don't see much coordination beyond memes, for the first SEC might have a point and there's many posts walking a thin line suggesting friday will be the day.
however this is a billion dollar operation which include many players and wide interference by multiple actors ranging from unclear to blatant business relationships; I wouldn't be surprised by anonymous plants joining wsb trying to stir up a movement and coordinate sales/prices to create a solid case where there is just a feeble suspicion; and as a matter of fact there has been quite many fresh accounts (either low karma, no posts in a long time, no posts at all etc) joining in just to propose to hold until a certain price or date is reached.
Is there any actual evidence of naked short selling? The only evidence I've seen people raising is that the total value of the shorts was over 100%, but that can happen completely legitimately if the people who buy from short sellers allow the stock to be sold short a second (or third, fourth, ...) time.
I don't get why loaning out an already loaned stock is legal. Short selling should be limited to first gen loans. Otherwise it's like Beavis and Butthead in the Candy Store episode where they keep loaning the same dollar back and forth.
Interesting.. WSB was 100% orchestrating a short squeeze. They were telling anyone who would listen and in fact using it to rationalize what they were doing..
scheme (verb): make plans, especially in a devious way or with intent to do something illegal or wrong.
Discussing buying stock on a public forum is certainly not devious, and although the goal is to cause short positions to lose a bunch of money I would argue that it's neither illegal nor wrong.
You could argue that but you’d be clearly wrong on American law and jurisprudence. If the goal is to cause other market participants to lose, that it specifically against the letter of the law.
If I were the short-sellers I'd be a bit aggrieved at the SEC not going after WSB here.
People keep saying that the hedge funds 'knew what they were getting into', and are therefore fair game. But they could well have thought that they were protected by this regulation. It's unlucky for them that they got squeezed by loveable retail investors rather than another hedge fund that the SEC would have no qualms about prosecuting.
In the debate between the free market vs regulation, the worst possible outcome is to have people thinking they are protected by regulation when they in fact aren't.
The shorters should form a class action and sue wall street bets, I'm sure a 5 dollar check in 3 years and a year of free stonk advice will cover it right?
Wall street bets is not an organization, and does not really even have a defined membership, and I've never heard of a court case with a class as a defendant. But I suppose that would be a really amusing circus show. Class of shorters vs class of buyers.
This worldview seems like one of the biggest problems facing America right now.
We should strive for equal rules and justice for all, rather than first deciding how likeable or sympathetic the parties involved are and then changing the interpretation of rules to favor the group we perceive as being inherently more deserving of our favoritism.
It kinda feels like that to me. The nostalgia value of owning 1 share of GameStop is pretty important considering the joy that going to that store brought to me as a child. I can totally understand if 20 million people also want in, especially given the idea that we're fighting against a short position to cause a squeeze. It's like a dumb feel-good movie where we had a bake-sale and everyone buys a cookie for an unreasonable price to help our favorite local grocery store avoid bankruptcy by the evil liquidators who want to turn it into a Walmart.
That's the thing: there is NO QUESTION as to the motives of the r/wsb traders. They are overtly conspiring to raise the price of shares in order to force specific parties to buy it. That's manipulation!
Is it illegal to corner the market on a product because you know someone else is going to need to buy it, so you can charge them a lot because they must buy from you? It seems like what is being done is pretty much this; just for a large definition of "you".
Yes, it is broadly illegal to corner or attempt to corner any market, and the law directs the CFTC to step in and and void commodities contracts or take whatever other actions it deems appropriate when it finds that a market has been destabilized. See 7 USC 12a(9).
To raise cash? Shorting a company in terminal decline, but that will never die and will live on the pink sheets forever, is a great way to take a gain without ever having to pay the taxes.
And you just described a form of market manipulation. Except that we can't know Melvin's true motives because for some weird reason, hedge funds don't have to make their methodologies public.
So why are you getting mad that retail investors are engaging in the same practices that hedge funds can do with impunity?
