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Statement of SEC Regarding Recent Market Volatility

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Re: Statement of SEC Regarding Recent Market Volatility

#681

Post by Sohcahtoa82 »

dleslie wrote: post #336
throwaway-571 wrote: post #302

Earlier quoted context omitted.

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).…

Dogecoin is ... Just _why_? There's no limit on the number of coins. Mining is designed to be forever-easy. The coin is _designed_ for rapid deflation. Why are people treating it as anything other than the joke it was intended to be?

> There's no limit on the number of coins. Mining is designed to be forever-easy. The coin is _designed_ for rapid deflation.

Yes, but the increase in coins is constant. So as a percentage of available supply, the inflation rate approaches 0%.

Right now, there are 128,000,000,000 DOGE in circulation. The block target for Doge is 1 minute, with a reward of 10,000 DOGE, which gives a yearly minting of 5,256,000,000 doge, which gives and inflation rate of 4.11%. Next year, another 5.256T gets added, which is an inflation of 3.94%.

And of course, since it's a cryptocurrency, there are bound to be permanent losses in the supply because of people losing their wallet files. This is difficult to track because even with a public ledger, there's no way to be sure if unspent DOGE is simply not being spent, or if the private key to spend it was lost.

Re: Statement of SEC Regarding Recent Market Volatility

#682

Post by [deleted] »

dudeinjapan wrote: post #627
ditonal wrote: post #586

Earlier quoted context omitted.

If a physicists tells me something about how the solar system works, they don't have much reason to lie to me. If RobinHood tells me how clearing houses work, they have a huge reason to lie to me. Given what we say in cases like Enron, Bear Stearns, I am shocked and dismayed at the eagerness of Hacker News contributors to so readily accept whatever Robinhood tells them as 100% gospel. Where were all these experts on…

Maybe not apples-to-apples, but... I worked on Lehman's Tokyo electronic trading desk in 2008. When we went bankrupt, it wasn't our clients, or even the exchanges which stopped our trading. It was our clearing banks. Interestingly, we weren't cutoff uniformly in all markets. NY desk was trading about 75% of regular volume for 4 days into the bankruptcy before someone (SEC?) told them to knock it off. There's a lot go…

[deleted]

Re: Statement of SEC Regarding Recent Market Volatility

#683

Post by threedots »

adriancr wrote: post #616
threedots wrote: post #538

Earlier quoted context omitted.

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.

Ok, let's assume they shorted at 10$, they lost 3 Billion at 65$ (and say they closed the position) So, the stock needed to be bought back was worth 3 billion at 65$, reduce the 10$ per share it was shorted at and you get 3000M/55 = 54M shares. Total stock float of GME is ~64M, so the short % was ~80% You see how it's way off of the 14%? (and close to impossible to close out of?) If they did not get out then they wou…

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.

Re: Statement of SEC Regarding Recent Market Volatility

#684

Post by zamalek »

esoterica wrote: post #666
zamalek wrote: post #637

Earlier quoted context omitted.

Shorting more than 100% of the stock is excessive and irresponsible. That figure is not a conspiracy theory: it is public information that the SEC releases monthly. Whether hedge fund managers did make a call to their buddies is not the only thing in question here (although the SEC will surely determine the truth). Shorting a stock drives the price down and, while this is no less legal than buying a stock, the questi…

The parent commenter claimed that brokerages were colluding to drive the price of GME down to benefits the shorts. That is QAnon-level evidence-free conspiracy theorizing. The clearing houses were demanding more collateral and brokerages couldn't afford or didn't want to put it up. > whether shorting 136% of the stock counts as outright manipulation I refer you to the snarky top comment about how all the Dunning-Krug…

> So GameStop was an artificial bubble at $10 but not at $500? Really?

Did I claim that? I wouldn't touch GME with a barge pole.

Re: Statement of SEC Regarding Recent Market Volatility

#685

Post by ummonk »

"Our core market infrastructure has proven resilient under the weight of this week’s extraordinary trading volumes." - this is flat out false. The market infrastructure was supposedly unable to handle the desired buy volumes under high volatility on meme stocks, resulting in multiple retail brokerages disabling purchases of the meme stocks.

Re: Statement of SEC Regarding Recent Market Volatility

#686

Post by pas »

snarf21 wrote: post #566
sanderjd wrote: post #368

Earlier quoted context omitted.

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…

And what about all the people who watch MSNBC and CNBC and Cramer, do they need to stop pushing stops as good or bad too? They tell lots of people "who don't care about hedge funds or any of that, but just got the impression from the news that hey this stock is going way up and that must mean it is a way to make a quick buck" too. None of this could have happened if they weren't shorting GME at 143%+ of float. They w…

You're mushing together two separate issues. Shorting GME at 100+ is not in itself a problem. (There's an argument that it dilutes the stock, makes it harder for the underlying company to turn around, because market sentiment is already against them, see investment reflexivity theory, etc.)

There's a problem with bailing out big companies again and again. While not bailing out small investors (directly).

The other problem is that there's no real defense against CNBC/Twitter amplified end-user stupidity: https://www.youtube.com/watch?v=lMUtU0tOmNE

Every stock trading app/site/service requires submitting tons of "risk declaration" forms. (Sure, all of it is next next finish. It's the EULA/TOS all again, but with money.) And that's the problem.

Re: Statement of SEC Regarding Recent Market Volatility

#687

Post by dudeinjapan »

mgleason_3 wrote: post #670
dudeinjapan wrote: post #627

Earlier quoted context omitted.

Maybe not apples-to-apples, but... I worked on Lehman's Tokyo electronic trading desk in 2008. When we went bankrupt, it wasn't our clients, or even the exchanges which stopped our trading. It was our clearing banks. Interestingly, we weren't cutoff uniformly in all markets. NY desk was trading about 75% of regular volume for 4 days into the bankruptcy before someone (SEC?) told them to knock it off. There's a lot go…

“I’m as pissed as anyone that they shut off trading,” Robinhood did not halt trading or shut off trading. Robinhood prevented _buying_ Gamestop and only allowed selling. That’s entirely different. It can only do one thing - drive the price down which is market manipulation. It’s supposed to be illegal.

Playing devil's advocate, it's possible that the lawyer/clearing bank/regulator gave the instruction to cutoff all trading in the name, and cutting off only buys was the lesser of bad options. (Had they also cutoff selling, it would have been even worse!)

Reading the SEC's letter (in the OP), you can clearly see the SEC wants everyone to sell out of their position and make this whole thing go away. RH no doubt has an army of lawyers and compliance people whose entire jobs/careers is to predict what the regulator wants and proactively be their lapdog. (The regulators meanwhile are completely free to be Monday-morning quarterbacks and retroactively assess fines to anyone, despite providing no concrete guidance of what to do in an unprecedented situation like this one.)

Re: Statement of SEC Regarding Recent Market Volatility

#688

Post by ummonk »

PaulDavisThe1st wrote: post #475
sanderjd wrote: post #379

Earlier quoted context omitted.

That would be useful if they were actually sticking it to the man. But that isn't what's happening here. What's happening is a big bubble where most of these regular people are gonna lose lots of money while the hedge funds end up closing out their position for a manageable loss and come out just fine.

... not to mention the few smarter hedge funds and mutual funds that quickly jumped in an out of this and made substantial gains, leaving everyone who thinks they are "holding the line" even more "on the line".

Ehh, the short ratio is still over 100%, and I guarantee you those aren't retail investors. So plenty of institutional investments to stick it to left.

Re: Statement of SEC Regarding Recent Market Volatility

#689

Post by boring_twenties »

ants_a wrote: post #481
remolacha wrote: post #410

Earlier quoted context omitted.

Bad take. We need capital markets to effectively value and fund different business efforts (unless you want to do things Soviet-style). And no matter how much fundamental analysis you do, some things remain unknown; all finance is in some way speculative. There are rough patches, but you need to take the bad to get the good.

A serious outsider question - are shorts an essential part of capital markets? Or do they at least provide some valuable service to the markets?

Of course they are. If you believe a stock is undervalued, you buy it. If I believe the same stock is overvalued, I sell it. That's how price discovery happens. If only people who already hold the stock are allowed to sell it, then price discovery is impeded.

Re: Statement of SEC Regarding Recent Market Volatility

#690

Post by jrochkind1 »

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…

When it comes to how the authorities will act, is one of the few places that appeals to authority are absolutely reasonable.

What do the regulations and laws actually mean and how are they actually in real life enforced historically? Oh yeah appeal to authority. We're literally talking about the authorities.

Laws and regulations -- and business arrangements and customs -- aren't some kind of objective external thing to be observed scientifically from first principles. That's the whole error. Like if you can show a logical flaw you can prove they are't really so because they must be logical! They are socially constructed and the result of human action, by people with the power to do so, for particular ends. They are continually re-constructed by human action, they are constructed by the powerful.

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