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Statement of SEC Regarding Recent Market Volatility

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Re: Statement of SEC Regarding Recent Market Volatility

#301

Post by andylei »

seabird wrote: post #276
realmod wrote: post #187

Earlier quoted context omitted.

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…

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. The SEC has 170k recorded FTDs for GME in the second half of December 2020: https://www.sec.gov/data/foiadocsfailsdatahtm GME has been on the NYSE Threshold list for months:…

> 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".

Re: Statement of SEC Regarding Recent Market Volatility

#302

Post by throwaway-571 »

sosuke wrote: post #198
dleslie wrote: post #116

Earlier quoted context omitted.

The FOMO is palpable. There's a hurried rush of small investors hoping to turn their meagre savings into a big win, backed by the anxiety that if they don't try then they'll forever regret missing their one and only chance at a comfortable life. This sort of event would be less likely if America's wealth disparity weren't so grotesquely skewed.

When hindsight points out the opportunities that you overlooked which would have giving you that comfortable life it infects all future decision making.

Is there a spoiler tag on HN ? These ones still hurt:

There is a lot of thing one could have done "for the LULz" but decided to browse HN, Imgur or Reddit instead.

- Bitcoin. I heard about it when it was still possible to mint it on CPU, but chose to run SETI@Home instead.

- Bitcoin when it was at merely $9000.

- Ethereum when it was going under $1.

- Dogecoin like anytime before yesterday (up 6x or something today).

- #GME when options where pennies on the dollar, or even the stock at $20 in early January.

- $Tesla in January, February, March of 2020 or anytime before the split.

- $Tesla instead of putting down $1000 to reserve a slot to buy a model 3 at its announcement, put it in the stock, or even better, in long dated calls.

- $Amazon or $Apple last march or anytime before that.

- $SPCE after it crashed in March (a WSB hyped stock)

Re: Statement of SEC Regarding Recent Market Volatility

#303

Post by alexpotato »

klodolph wrote: post #245
jancsika wrote: post #121

A Moment in the Life of an HN Genius: 1. Reads a technical document outside their domain. 2. Feels dumb because they don't have a grasp on any of the concepts. 3. Too busy to use the very internet which some of them probably helped build to magically render learning materials to the screen in front of them at zero marginal cost. 4. Sees the word "manipulation" 5. Substitutes the laymen's definition of "manipulation"…

> 3. Too busy to use the very internet which some of them probably helped build to magically render learning materials to the screen in front of them at zero marginal cost. I will say that I’m not too busy for this at the moment, and getting to my very basic level of understanding has required me to sort through, at the very least, a fairly decent chunk of reference material and reading interpretations and explanatio…

So maybe I can help a little with the above:

- prior the 1980s, when you bought a stock a physical stock certificate was passed back and forth between your broker and the broker selling the stock

- as you can imagine, as trading volumes increased this became unmanageable. In fact, at one point, the exchanges would close every Wednesday just to give people time to catch up on all of the exchange of certificates

- everyone, rightly, agreed that there needed to be a better way and the idea of a clearing house emerged. In this model, all of the physical certificates lived in one place. Ownership was tracked via a central "database" (originally not electronic). This made it MUCH easier to transfer ownership aka "settle". This is very similar to how gold is traded e.g. the NY Fed holds it for other countries etc

- An added benefit of a clearing house: it's easy to see how much everyone owns of everything. e.g. if one party is over leveraged or has gone extremely short, in theory, the clearing house can choose to not deal with that party or, more flexibly, request additional capital etc.

Here is also a specific example about settlement risk:

- let's say you report all of your trades to your clearing broker (think of them as a mini-clearinghouse)

- a data file gets lost or corrupted and the clearing broker says "Wait! Something is wrong! We are not letting you trade until we get this figured out!"

- EVEN IF YOU ARE CORRECT and they are wrong, you now have market risk because you may be holding a position that is losing you money. So much money in fact that it might drive you out of business.

The above is an actual answer to a settlement expert when asked "What is your nightmare scenario?". This in turn, could have ripple effects to other clearing brokers and trading firms and is generally all part of "settlement" or "clearing' risk.

Source: have worked in fintech trading for many years.

Re: Statement of SEC Regarding Recent Market Volatility

#304

Post by elliekelly »

avs733 wrote: post #12
gjsman-1000 wrote: post #3

"The Commission will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities. In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity." This shoul…

And their investors...this could (not will, could) end up being a fairly easy case for piercing Robinhood's corporate veil. Good on the SEC for stating they stand with retail investors, even if it ends up being hollow it sure is nice to hear them say it.

Absolutely not. On what theory? And on what grounds? There's no such thing as "a fairly easy case for piercing the corporate veil".

Re: Statement of SEC Regarding Recent Market Volatility

#305

Post by elefanten »

tompccs wrote: post #212
jancsika wrote: post #121

A Moment in the Life of an HN Genius: 1. Reads a technical document outside their domain. 2. Feels dumb because they don't have a grasp on any of the concepts. 3. Too busy to use the very internet which some of them probably helped build to magically render learning materials to the screen in front of them at zero marginal cost. 4. Sees the word "manipulation" 5. Substitutes the laymen's definition of "manipulation"…

I am so sick of this 'stay in your lane' attitude. Time and time again, experts have been shown to have consensus opinions which are wildly off from reality. You can almost set your watch to how often an outsider will analyse a situation from first principles and make money off the 'experts', especially in the stock market. You're welcome to your opinion but this appeal to authority is seriously wearing thin. Pretty…

That’s not at all the attitude I read in gp.

Being cognizant of our (humans’) fantastic, ego-bolstering tendencies is a good thing.

Re: Statement of SEC Regarding Recent Market Volatility

#306

Post by dcolkitt »

newsclues wrote: post #103
SpicyLemonZest wrote: post #31

Earlier quoted context omitted.

It’s aimed at both, presumably. It’s not like hedge funds have never gotten in trouble for abusive trading practices.

The problem is that when hedge funds get in trouble they do not go to jail, are not prohibited from doing business and the penalties (fines) are ineffectively weak. Given the track record of holding the powerful accountable is terrible, I don’t think this is directed at hedge funds but is a warning to the little people.

> The problem is that when hedge funds get in trouble they do not go to jail

Criminal prosecution is held to a much higher evidentiary standard than civil fines. Almost all market related crimes, including manipulation and insider trading, require mens rea. Proving state of mind beyond a shadow of a doubt is really difficult to do. Especially when the defendant is sophisticated enough to know the law and have access to high-quality legal advice.

Any US Attorney would absolutely love to have the feather in his cap of sending a billionaire hedge fund manager or investment banker to prison. Hell, the reason Rudy Giuliani is a household name is because he managed to do that. But no prosecutor is going to bring a case that he has no chance of winning.

Given that it makes much more sense to target enforcement with civil fines rather than criminal prosecution. You can tie up your resources to fight expensive, hard to prosecute criminal cases. Or you can quickly settle for reasonable fines, and cover many more cases with the same set of limited resources.

Re: Statement of SEC Regarding Recent Market Volatility

#307

Post by wavefunction »

fjabre wrote: post #275
Miner49er wrote: post #165

Earlier quoted context omitted.

> Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. The fact that buying was limited yesterday is evidence that the little guy is actually winning here. Trading was stopped to save the hedge funds, because if they go under or lose to…

This is not David vs Goliath. This is Goliath vs Goliath. A reddit mob armed with Macbook Pros and iPhone 11s does not equal 'the little guy.'

Interesting that you assign expensive Mac products to WSB members. The most that can be said is that they likely have a mobile phone of some time.

Re: Statement of SEC Regarding Recent Market Volatility

#309

Post by notahacker »

hatsunearu wrote: post #171
jancsika wrote: post #121

A Moment in the Life of an HN Genius: 1. Reads a technical document outside their domain. 2. Feels dumb because they don't have a grasp on any of the concepts. 3. Too busy to use the very internet which some of them probably helped build to magically render learning materials to the screen in front of them at zero marginal cost. 4. Sees the word "manipulation" 5. Substitutes the laymen's definition of "manipulation"…

And then there's another guy writing smug 8-point steps! Truly the pinnacle of hacker news culture.

tbh I thought I'd have to go to n-gate to get this take on recent discussions...

Re: Statement of SEC Regarding Recent Market Volatility

#310

Post by MattGaiser »

slumdev wrote: post #249
metalliqaz wrote: post #233

Earlier quoted context omitted.

> Time and time again, experts have been shown to have consensus opinions which are wildly off from reality. You can almost set your watch to how often an outsider will analyse a situation from first principles and make money off the 'experts', especially in the stock market. When? Who? Are you talking about, say, Dr. Burry and the mortgage bubble? Because he was definitely an 'expert' already.

Dr. Burry was trained as a medical doctor and started investing on the side. Definitely not one of the anointed "experts" who followed the too-common family connections, Ivy League, and i-banking VP path.

His undergrad degree was in economics from UCLA. He never practiced medicine and started his own hedge fund soon after medical school.

https://en.wikipedia.org/wiki/Michael_Burry

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