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Statement of SEC Regarding Recent Market Volatility

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Re: Statement of SEC Regarding Recent Market Volatility

#381

Post by FabHK »

kgwgk wrote: post #360
FabHK wrote: post #345

Earlier quoted context omitted.

You could stipulate, though, that the outstanding short position mustn't exceed the net position, or equivalently that the total long positions can't exceed twice the net position. Why not? (This would require new regulation, but not be impossible, I think.) If the total long or short positions exceed the underlying economics by a lot, you create all sort of weird incentives for manipulation, as can be seen in the CD…

You could stipulate whatever you wanted, but there is nothing special about that threshold in particular. I fully agree that derivatives can create all sort of problems in many cases, including when the nominal amount of the positions is much higher than the actual amount of the underlying.

Agreed fully. The 2x long, -1 short limit is just a neat, natural limit that one could discuss, and might be easier to enforce than other (similarly arbitrary) limits.

Re: Statement of SEC Regarding Recent Market Volatility

#382

Post by lukeramsden »

FartyMcFarter wrote: post #136
ericmay wrote: post #101

Earlier quoted context omitted.

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 f…

> Just have a "dinner conversation" about it. This would be illegal I think.

This is well known the be common practice and very much not punished.

Re: Statement of SEC Regarding Recent Market Volatility

#383

Post by hogFeast »

ericmay wrote: post #200
hogFeast wrote: post #158

Earlier quoted context omitted.

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…

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.

Re: Statement of SEC Regarding Recent Market Volatility

#384

Post by throwawaylolx »

xster wrote: post #237
tompccs wrote: post #212

Earlier quoted context omitted.

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…

This seems like a strawman. The OP isn't arguing against outsider/non-expert discussion. He's just satirizing HN's specific tendencies to spin off of a headline/article first glance into a let-me-teach-you-something fan fiction vs fan fiction argument.

> The OP isn't arguing against outsider/non-expert discussion.

Yeah, he's just strawmanning and shaming a hypothetical group for the applauses of a circlejerk.

Re: Statement of SEC Regarding Recent Market Volatility

#385

Post by phkahler »

dmurray wrote: post #254
kodah wrote: post #185

Earlier quoted context omitted.

Personally, I think smart people just do this. When I got sick with COVID I cannot begin to describe the number of people who became doctors during this unprecedented time , only to send me outdated comments, articles, and speculation. All of these people thought they were smarter than the instruction I received from a real doctor, nurse practitioner, and the CDC. These were smart people, though, and mostly (but not…

To be fair, professional medical advice was especially low-quality in the early days of the pandemic. What was important was public health messaging, picking some lowest-common-denominator messages and having everyone repeat them. It wasn't hard to be better informed than that.

>> To be fair, professional medical advice was especially low-quality in the early days of the pandemic.

They primarily suffer from dogma IMHO. For example, now they know people with breathing difficulty should be kept in prone position. I dont know if that applies outside of Covid19, but I thought it was really interesting to see them learn it. Like "oh, what we'd normally do is bad but this variation is good".

Medicine also suffers from a fear (justified) of litigation. If they dont follow accepted practices they may get sued if someone dies. The funny thing with Covid was watching that fear when there was no accepted treatment. Seeing them say "The FDA hasn't approved that for covid" when they hadn't approved anything at all yet.

Re: Statement of SEC Regarding Recent Market Volatility

#386

Post by seabird »

andylei wrote: post #301
seabird wrote: post #276

Earlier quoted context omitted.

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…

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.

Re: Statement of SEC Regarding Recent Market Volatility

#387

Post by kgwgk »

electrondood wrote: post #280
richardwhiuk wrote: post #203

Earlier quoted context omitted.

It's quite difficult to stop without blocking all shorts.

Why? My broker doesn't let me trade unsettled funds, even though I've made a sale and they're "in my account." How hard would it be to create a restriction that says you're not allowed to double-loan the obligation to return a share borrowed in a short sale?

Because when you buy a share on the market there is no notion of it being "a true share that someone sold to you" or "a borrowed share that someone sold to you". The only way to prevent double-lending is to prevent all lending.

Re: Statement of SEC Regarding Recent Market Volatility

#388

Post by NoOneNew »

sanderjd wrote: post #368
NoOneNew wrote: post #300

Earlier quoted context omitted.

Everything on WSB states this is a bad investment plan and is more to bankrupt Melvin because they tried to bankrupt Gamestop. Short sellers have been using the down turned economy to collapse struggling companies that hire everyday people. What's funny is how the HN community tries to defend the firms they've whined about for years. Is what's going on irrational? Yup. But it pulls back the curtain of what the financ…

Here's what oh-so-many people are missing: the gigantic volume in these stocks is no longer coming from the WSB YOLO bros who know they'll lose money but think that's worth it to stick it to hedge funds. That may well be who was getting into the stock on Monday and Tuesday. But now it is people who saw the story on Good Morning America, having never previously heard of WSB or Robinhood, who don't care about hedge fun…

So it's WSB fault that the news outlets spun the narrative to confuse people?

Sorry, but hasn't the news spinning and generally misconstruing news stories to the benefit of their advertisers and financiers agendas been the issue the past few years?

Re: Statement of SEC Regarding Recent Market Volatility

#389

Post by realmod »

adriancr wrote: post #341
andylei wrote: post #301

Earlier quoted context omitted.

> 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…

> you are obligated to "find" shares to borrow Unless you know... you just dont. Or you are big enough to have an exception. Whats the punishment?, how will they find you? (you dont need to disclose shorts)

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.

Re: Statement of SEC Regarding Recent Market Volatility

#390

Post by cambalache »

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"…

> Too busy to use the very internet which some of them probably helped build

I didnt know Vincent Cerf, Tim Berners-Lee et al were HN users.

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