I totally agree, but it's not like there's a level playing field now. If the new regs enshrine the current reality in law then maybe there'll be more hope for fundamental reform.
Basically what we probably have now is a behavior that is legal so long as no one engages in it. Losing a fake option is not losing anything.
> I don't see how this is different than what is constantly being criticized such as flash crashes, contagion and large moves based on rumors, other than the group benefiting (fiscally irresponsible internet strangers vs fiscally irresponsible professionals)
Isn't that the whole point WSB is making? This is not different and the media treating it as something crazy or new is disingenuous.
This is a sideshow. Feds or regulatory body will crack down, we'll just accept another banned community that is "a threat to our democracy" and we'll move on. I don't think what is essentially financial de-regulation is a movement that's going to pick up steam some time soon. There's vagueness in securities laws and this will continue. Meanwhile banks will periodically be sued for tens of billions that will fill the coffers of attorney generals, justice departments and various state regulators [0]
> Isn't that the whole point WSB is making?
Yes, partly. I think much of it is about having some fun and having a sense of community.
[0] https://www.wsj.com/articles/big-banks-paid-110-billionin-mo...
Then why would any company ever get sued?
It’s not your job to decide what is an efficient place for capital. The market is serving its purpose exactly right now by allowing the free trade of shares in GME. If people want to spend their money on a GME share to be a part of something, that’s their prerogative.
You know what else the market allocates capital to? Gold funds, who do nothing but sit on giant vaults of gold. It’s about the stupidest allocation of capital possible but nobody is clutching their pearls about that.
Telling people what is inappropriate to do with their money is a great way to get them to do it more. The whole reason we have a free market is because historically the big people in charge can’t allocate capital more efficiently than free-for-alls.
But how can you regulate that people get together and buy stock? They need... 1) Internet bulletin board. That's it. The barrier of entry is just so damn low, and that's in part also why this has happened. In hindsight I'm surprised it hasn't happened before but I suppose Covid-19 brought this on.
I think it would be easier to regulate something that at least takes a certain amount of investment in terms of insight or knowledge, but here you can just take any random heavily shorted company and like... get people on a popular board to buy stocks over a day.
This time, sure, it was Reddit and the subreddit may be suspended. Next time it'll be a Discord or Telegram board or something. It's just... so easy
It's not so easy. There are concentrated tech players. There's decentralized systems but they aren't there yet in terms of usability for millions of people to just log on and use seamlessly like they do w/ Reddit. It may get there eventually, but its nowhere close to being available.
And then you have different layers of protocol that are all more or less centralized. AWS, gcp, Azure isn't going to host illegal or risky content. And even if you get around that, you'll have to contend w/ the ISPs that can just block arbitrarily if they so choose.
Yes, you can get around all those, but not on the scale to make a meaningful impact and the barriers will deter all but the most fervent supporters, and they likely wouldn't have enough money or influence to cause the havoc they're causing today.
Some people trying to make a point are going to make a lot of bucks as well.
And some people trying to make a buck are going to lose a lot of money. Not everyone can get out of an inflated stock with gains, pretty much by definition. And those least likely to understand the point are also probably the ones buying into the stock late (and at an inflated price).
The mix of who makes and loses money is going to affect how society sees this. It will look somewhere between an egalitarian social movement, or a few now-wealthy loudmouths who took everyone else for a ride.
Making money in a bubble is all about timing... and it gets ethically complicated when some traders have control of the timing (in this case by declaring whether the vendetta against Melvin is over or not).
Note that I have made no ethical considerations for Melvin; they knew what game they were playing and are not victims here IMO.
For the sake of argument, one can say that actions of forums like WSB should also be regulated to protect them, just like laws for compulsory wearing of helmet (while riding two-wheelers) or putting seatbelts (while riding cars) exist, even though one would think that education and common sense would make them do this automatically out of self-preservation instincts.
But since I am not an expert in finance or stock markets, I really am not in any sound position to comment on the specifics here.
My broader general argument (not at all related to WSB or the financial industry) is just that education alone is insufficient, and regulation is often required too for maximum efficacy.
This seems too authoritarian.
On this, we agree.
Now, if you do believe it's wrong and it should be educated against, how would this work? Do you think that this is wrong beacsue people are going to lose money? Maybe then it makes some sense to give better education, but this is obviously a special moment and it's hard to educate people so that they don't engage in a social phenomenon. Not to mention, a lot of educated people may be making some pretty educated bets and winning a lot of money; other educated people may just be 'paying' money for a cause that they believe in.
How would one go about educating people? There's been a lot of ink spilled on this story and it seems to have captured the public's imagination. Not all of the reporting is accurate, but all the major media outlets get out the point that this is essentially reckless market manipulation by a group of loosely banded individuals coordinating online.
I doubt anyone participating in this will cut it out if just told to by some authoritative body.
This is the market at work. This was taken too far and the market has a method for correcting this behavior and we're seeing it now. The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding.
We NEED financial reform but we need to look at what allowed this situation in the first place, not ways to silence what are effectively the whistle blowers.
Why wouldn't someone be allowed to lend out a security they own to someone else?
If not allowed, why wouldn't I be allowed to make an agreement where I pay you the difference between a future stock price and some fixed value?
> The difference is retail is going to win AND there's no backroom deal to be made to stop the bleeding.
The backroom deal will be a phone call to the CEO of reddit, discord, disqus and similar and tell them to cut it out. Simple as that. No coordinating mechanism, this will die.
Can you explain what individual or company can own 140% of available shares?
The reason that short interest is calculated on public float is because that makes the most sense for normal situations. We just happen to have stumbled into one of those unusual situations.
Guess what the SEC has done about this blatant naked short selling. Nothing.
So while in theory naked short selling is illegal, in reality it is tolerate and allowed.
The shares don't have your name on it. It has like Robinhood's name on it, holding on behalf of the customer.
You're talking about the hedge funds, right?
I'm not saying reddit is manipulating the market either (maybe! I dunno). Just clarifying this point.
These laws will not be legal under US law, because US congress is not permitted to make a law abridging an act of speaking, or expressing an idea, or opinion.
> Finance is highly regulated and arbitrarily so.
The level of arbitrariness of legal process in legal systems of ex-UK colonies is in league of its own in the world, and USA is particularly prominent at that.
In US, financial regulations are some of the most vaguely defined of laws, in the rest of the world, they are usually are the most verbose, and formal in definition.
A law whose execution is wholly arbitrary is not a law at all, and a country allowing arbitrary interpretation of laws is lawless.
This is why what is "technically legal" is legal. What is defined in the law as legal, or not defined as illegal is what is legal. This is why no smarty pants bureaucrat should be allowed to wiggle out arbitrary powers by coming with "interpretations," "extended definitions," or "legal theories."
> If you think the lawmakers and regulators will throw their hands up and say geez, it's technically legal, carry on, you're sorely mistaken.
It can probably be written in such a way that this style of speech can be argued through the new law to fall under some of the exceptions, perhaps incitement or fraud.
They may just decide instead of policing the speech, to police the practice, and make being an investor even more arbitrarily difficult.
I can easily imagine a law getting passed that in order to invest in a brokerage account where you have autonomy over the investments requires you to be an accredited investor, and it will be worded so that it is for the benefit of the people who were taken for a ride on massive "pump-and-dump" schemes that originated on misinformation platforms and social media, regardless of whether they were truly pump-and-dump or just tom-fuckery against "big hedge".
Can you post a link to some comparison of arbitrariness of ex-UK legal systems and other systems?
Do you believe in it's right to give power to somebody, whether it will be a government, private party, or a class to rule over allocation of capital, and decide whose capital allocation is good, and whose capital allocation is bad?
There is a country that tried, they name to it was USSR.
They don't make laws for this any more, it will be stopped by some obscure regulatory agency.
This exactly what stock market speculation is about, is it?
Thing is no one is going to prosecute a randomer on the internet for throwing $5k at an option especially when there's no proof that it was done in bad faith.
To be clear, market manipulation is very vague and very broad, and from what I've read the SEC is only going after you if there was fraud or lying involved. Most of WSB's activity is not illegal market manipulation.
P.S. not legal advice
I referenced the % just as a convenient label for that group of market participants.
What is a "fair impression," it's all up to owners of the paper to decide on selling price, nobody else can.
> Not when moving the price is the goal.
Market transactions don't move the price, its people doing them do.
What does it matter what it is "ideally", if it was never that in practice? Ideally communism is a stateless moneyless classless society, let's get working on dissolving the state then?
A lot of the people involved aren't just buying and holding. They're specifically buying/selling short dated out of the money options in order to move the price. Some understand the market microstructure and the various levers they have to make the price move using what is effectively leverage.
> Seriously. It's that easy. It's not illegal.
Finance is highly regulated and arbitrarily so. If you think the lawmakers and regulators will throw their hands up and say geez, it's technically legal, carry on, you're sorely mistaken.
Ideally finance is meant to be about allocation of capital. If a market is allocating capital to a dying company just because meme, then the market isn't serving its purpose. I don't see how this is different than what is constantly being criticized such as flash crashes, contagion and large moves based on rumors, other than the group benefiting (fiscally irresponsible internet strangers vs fiscally irresponsible professionals)
I know, hedge funds bad, and they do this crap all the time. That may be true, but this isn't going to end well for the average consumer. My prediction is reddit will shutdown wsb because that's what reddit does. And there will be more laws made targeting individuals engaging in this sort of activity (basically coordinating with groups of people). This may hurt newsletters and other financial venues. The large hedge funds will be fine, we might see a few bailouts, and life will go on.