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Roaring Kitty to testify on GameStop alongside hedge fund managers

reuters.com

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Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#91

Post by w23j »

avereveard wrote: post #41
pjc50 wrote: post #12

Earlier quoted context omitted.

The collateral requirement was imposed because of the incredibly high chance of the stock simply collapsing again. Trading halts in response to massive movements aren't unusual either.

but they blocked stock purchases alongside options, which makes no sense if the justification was collaterals for options

Stock purchases are settled after 2 days. If the buyer goes broke before that, the seller would be left holding to bag. To mitigate this risk you need to post collateral.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#92

Post by molticrystal »

sillysaurusx wrote: post #10

It's interesting watching /r/wallstreetbets oscillate between "We did nothing wrong!" to "Well okay, some people were doing some things that were wrong, but hopefully no one will notice." https://www.reddit.com/r/wallstreetbets/comments/lj8djx/day_... (I don't personally believe that anyone did anything that should be prosecuted here, but what I believe is irrelevant to courts.) There is one thing that (in my un-humb…

>Gill getting rich Did Gill sell? I thought he didn't convert his options yet and was still holding.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#93

Post by KDJohnBrown »

Ekaros wrote: post #68
KDJohnBrown wrote: post #54

Nice to know that the US legislature has deemed this a more important use of their time than the pandemic and the economy.

I would call this action to be directly related to the economy... Albeit GMC was small stock. There could be some open questions of market stability that were clearly under-covered. It is reasonable to look into this and if similar situation could lead to larger market impact.

Sure, and that’s what the SEC is for. I’ve been unemployed for a year and couldn’t care less about wall street.

Congress has exactly two issues they should be focusing on: stimulus and vaccination. This is just another piece of theatre designed to distract us from the bigger picture.

(Edit: fixed autocorrect typo)

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#94

Post by w23j »

arafsheikh wrote: post #72
5350-uiop-1130 wrote: post #38

What about Musk making tweets about bitcoin whilst his company has a large investment. Isn't that market manipulation or maybe does not apply to rogue billionaires.

As Matt Levine likes to say - everything is securities fraud. > contributing to global warming is securities fraud, and sexual harassment by executives is securities fraud, and customer data breaches are securities fraud, and mistreating killer whales is securities fraud, and whatever else you’ve got. Source: https://www.bloomberg.com/opinion/articles/2019-06-26/everyt...

Nah, every bad thing a company does is securities fraud. With regards to this, this quote is more relevant.

Maddeningly, people continue to think that it is somehow illegal insider trading? “You bought a thing without telling anyone, and then you told people that you liked the thing and it went up, that’s illegal.” I don’t even understand that intuition. No! You can trade when you know your own intentions, even when nobody else does! Also, man, it’s Bitcoin, there’s no such thing as insider trading.

https://www.bloomberg.com/opinion/articles/2021-02-08/elon-m...

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#95

Post by xorcist »

csours wrote: post #25
sillysaurusx wrote: post #10

It's interesting watching /r/wallstreetbets oscillate between "We did nothing wrong!" to "Well okay, some people were doing some things that were wrong, but hopefully no one will notice." https://www.reddit.com/r/wallstreetbets/comments/lj8djx/day_... (I don't personally believe that anyone did anything that should be prosecuted here, but what I believe is irrelevant to courts.) There is one thing that (in my un-humb…

They didn't change the rules of the game. The volatility and risk changed, thus the collateral requirements changed. Note: I am not a financial professional. I'm not sure if anyone from wsb should be prosecuted; but I will say that if another hedge fund had tried to do what wsb did, it would have been clearly and unambiguously illegal market manipulation. I do think it is quite likely there were some financial profes…

Can someone please explain the situation to someone with no competence how these markets work?

As far as I understand, no one is allowed to trade on stock exchanges directly. Everyone has to go through a broker. Orders has to be settled in 2 days. So there are counterparty risks involved in both steps here. Is this where there was a problem? But the retail trading platform takes zero financial risk as long as they don't allow their customers to trade on credit (which is an entirely different issue).

As a retail customer I am entirely confident that I own whatever stocks has been purchased, even if the trading platform used should go belly up, as long as the stock in question is traded in a public exchange, which was the case here.

So what exactly was the problem? Some posts led my to believe Robin Hood and other apps extended some credit to its users in order for customers to be able to speculate immediately with their money and not have to wait for the trade to be settled. But surely the appropriate response to that would be to halt that credit, not suspend trading?

There is also the question how it is possible to limit buys or not sells? For every sell there is also a buy. If some platforms are limited to sell orders, someone must be on the other side of that trade, and will have an advantage in the market. How is that legal?

Or did this not concern stock trading at all? Some articles mentions options trading, which is a financial instrument issued by a counter party. But those kinds of orders are stopped all the time for all sorts of reasons. That is in itself hardly newsworthy.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#96

Post by seafoam »

jimminy wrote: post #77
3001 wrote: post #71

Earlier quoted context omitted.

Charles Schwab did not implement restrictions.They had a banner until last week saying that when you log in.Stop spreading misinformation

> “The bottom line is that clients are still able to trade in GME, but we’ve put some restrictions on certain types of transactions in the interest of helping mitigate risk for our clients,” Schwab said Wednesday in a statement.[0] They very much did 3 weeks ago. Not to the same degree as the smaller brokerages, but they still put limitations on margin trading, and restrictions on options. [0] https://www.thinkadviso…

The string "put" does not occur in the article referenced.

Existing restrictions became sizable due to the market volatility. This impacted certain clients of the brokerage that had significant exposure to the names relative to their account.

Not the same thing as the brokerage implementing new restrictions.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#97

Post by xorcist »

rcxdude wrote: post #82
sillysaurusx wrote: post #50

Earlier quoted context omitted.

One level up, I think! Think of it like a pyramid: the clearinghouse sits at the top, the brokers are in the middle, and the rest of us dirty peasants sit at the bottom where we belong. The clearinghouse covers 95% of trades on Wall Street. So the clearinghouse issued a decree: "we are no longer able to support opening positions for GME, AMC, and KOSS." Since most brokers use this clearinghouse, that means almost all…

Not quite right. There's the DTC (which carries out 95% of the trades), then there's clearing houses (sometimes a seperate entity, sometimes part of the broker: the larger ones all do their own clearing. e.g. Robinhood has their own clearing house), then there's the brokers, then the traders. The DTC said 'we need 100% collateral on these trades' (probably because they viewed there being a significant risk that someo…

The Wikipedia article on DTC isn't very informative

What is the relationship between the NYSE and DTC?

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#98

Post by stereolambda »

alecco wrote: post #81
stereolambda wrote: post #66

Older RoaringKitty YT spreadsheet videos (before he became all about GME and before much of anyone watched his streams) are interesting to watch for a person casually interested in finance. They are very nerdy in discussing his approach to investing, tools etc. and don't present any clear recipes. He had/probably still has a biggish public portfolio of stocks and seemed to base it on financial analysis applying the v…

> ...applying the value investing style. I thought this style is pretty much dead, because market efficiency has increased compared to the times when Benjamin Graham analysed securities by hand I thouhgt this style is pretty much dead, because the Fed is out of control stimulating the markets. Even purchasing bonds and ETFs. As if they embraced the "stonks only go up" meme. But what about the US dollar? Hmm...

In my understanding, the fact that growth/expensive stocks rise has only an indirect influence on value/cheap stocks being worse investments. Nowadays, anyone can easily access and scan in aggregate financials and financial indicators. In the middle of the 20th century, you had to do it on paper with each stock. It was a bigger edge. So it was easier to notice something that others didn't.

Still (again, in my understanding) there's some sense in assuming that lots of cash and low debt in the company (compared to the ticker price) at least limit your downside a little, when the price is at the rock bottom. Doesn't mean there's a potential for profit, because stock prices are irrational.

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#99

Post by chrisco255 »

ivalm wrote: post #63
emteycz wrote: post #60

Earlier quoted context omitted.

There's no work to be done, the answer is no.

Can you point to a GME like price action of a non-penny stock ticker? Of course we both know the answer is no. Things shot up, things shot down, of course people who bought the hype lost money. There is nothing surprising here.

https://moxreports.com/vw-infinity-squeeze/ Volkswagen 2008

Re: Roaring Kitty to testify on GameStop alongside hedge fund managers

#100

Post by derangedHorse »

xorcist wrote: post #95
csours wrote: post #25

Earlier quoted context omitted.

They didn't change the rules of the game. The volatility and risk changed, thus the collateral requirements changed. Note: I am not a financial professional. I'm not sure if anyone from wsb should be prosecuted; but I will say that if another hedge fund had tried to do what wsb did, it would have been clearly and unambiguously illegal market manipulation. I do think it is quite likely there were some financial profes…

Can someone please explain the situation to someone with no competence how these markets work? As far as I understand, no one is allowed to trade on stock exchanges directly. Everyone has to go through a broker. Orders has to be settled in 2 days. So there are counterparty risks involved in both steps here. Is this where there was a problem? But the retail trading platform takes zero financial risk as long as they do…

I'm thinking it was a decision guided by their current application architecture. My guess is that there was no easy way to disable the purchasing of stock on credit, and preventing a stock from being bought was probably the easiest mitigation.
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