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As does going long. Your classic pump-and-dump scheme has led to thousands of disinformation campaigns that don't require shorting at all.
On some level shorting is worse though. A pump and dump scheme hurts investors. A shorting scheme can hurt investors and destroy the company.
I've read a couple of the lawsuits on courtlistener. From what I've read, these lawsuits are going to go absolutely nowhere. The biggest problem most of the lawsuits face is that there is a provision in the Terms of Service that basically says that Robinhood can prevent you from trading in any stock it wishes. Any complaint that amounts to "Robinhood violated its contract" is going to go down in flames as a result--i…
Someone that owned GME shares could argue that by restricting buying but not selling shares, Robinhood was acting to lower the value of this asset. They might argue that in this situation the only fair thing to do is to restrict buying and selling altogether.
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> Do you mean, this is legal for market makers? Yes, market makers are allowed to sell short without having a locate. It should be noted that the market makers will attempt to zero out their total exposure by the end of the trading session.
That should be DMM or PMM or the equivalent designation by the exchange. These are special appointments, you can't just call yourself a market maker and sell short.
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Shorting can also help investors in the market at large if it helps bring down companies that are obvious scams. Some short seller reports have pretty famously destroyed companies that were up to no good, preventing further harm to future investors and boosting confidence in the valuations of the rest of the market. If there's no money in doing all of those short seller reports, then people won't do them, and the mar…
Like what
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No brokerage is under any obligation to use their own funds as collateral in order to allow you to trade using unsettled funds or margin on highly volatile securities. A brokerage could be left holding a huge bag here if they put up their own funds to allow someone to buy GME, then the incoming unsettled funds from the customer bounce, and now the brokerage is left holding shares of GME worth $100 or whatever and the…
For margin trading, sure, but IIRC Robinhood halted all trading, even with your own money. I think it has more to do with Robinhood giving away free trading, while the trades themselves have a non-zero variable cost to Robinhood. Since their revenue comes from selling insightful user trade data, a run on GME isn't insightful and had diminishing returns (my hypothesis anyways).
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Shorting can also help investors in the market at large if it helps bring down companies that are obvious scams. Some short seller reports have pretty famously destroyed companies that were up to no good, preventing further harm to future investors and boosting confidence in the valuations of the rest of the market. If there's no money in doing all of those short seller reports, then people won't do them, and the mar…
Like what
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Hard to hear. Robinhood has normalized pay for flow, a service that is literally shaving cash off each order in exchange for “free trading”. Pff can only generate net revenue by making traders pay more per trade than actual best execution, which Robinhood is suppose to be legally required to deliver. The SEC in the 90s and 2000s thought the practice amounted to middle manning traders and should be illegal. Basically:…
When RH sells to a internalizer for payment (PFOF) it is always inside the NBBO (National Best Bid and Offer) which is always going to be a better price than what you would receive on a public exchange AND there are 0 commissions.
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Multiple brokerages shut down buying due to the collateral requirements that were raised. Robinhood seems like the fall guy here, hopefully people start asking the right questions about the collateral and the manipulation there.
other brokerages simply put up the money. this meant that while huge swaths of the retail investors in the US (and parts of Europe) were not allowed to buy GME, other retail investors had no issues. to top it off, certain brokerages only allowed sell orders. this meant a huge imbalance in the market. i really don’t get how this is legal and why heads aren’t rolling. case in point: saxo bank let me trade GME without a…
The next squeeze will put pressure on the other brokers given the movement of accounts out of Robinhood. I feel this works out in favor of Robinhood and as they don’t need to deal with gambling style traders.
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Yeah, about as "perfectly natural" as the stock market soaring while the economy is in crisis (i.e. logical, but completely perverted).
why is shorting a company perverted? I would argue it's a great asset to society. Eg. those who shorted stock because they expected covid-19 to cause a market dip, sent a giant signal to the entire world that covid was going to be a big problem.
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On some level shorting is worse though. A pump and dump scheme hurts investors. A shorting scheme can hurt investors and destroy the company.
How does shorting destroy a company destroy it?
Shorting a company itself isn't so bad. Orchestrating bad PR to boost your short option earnings is bad.