By contrast preventing a million people from buying a stock at a critical moment is clearly manipulation.
"Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal."
If your "short squeeze" is dependent on people buying more in order to create a short squeeze, then you are just coordinating to create a short squeeze, not dealing with a "natural occurring" one.
Obviously the blocking of buys will have an effect on the price and availability of the stock. Not that it provides any reasonable justification for RH either way.
> If your "short squeeze" is dependent on people buying more in order to create a short squeeze, then you are just coordinating to create a short squeeze, not dealing with a "natural occurring" one.
Even if you want to buy the stock because you know there is a short squeeze ongoing, that is not illegal. That is just analysing the market conditions and seeing the obvious.
I'm honestly having trouble grasping what you and others think could possibly be illegal about this. Short sellers aren't prohibited from losing money by law.
Who said that was the situation though?
The problem is that buying the stock became something that was largely barred from retail investors, while institutional investors faced no such issue. Indeed, when a stock can only be sold, that means it can only go down, so the pressure of the short squeeze was alleviated as a natural amount of selling occurred while buying was artificially deflated by multiple brokers and entities preventing retail investors from purchasing a stock that was > 100% shorted.
This was guaranteed money for these traders too, the short squeeze was already on - the shorters were on the hook for this money.
The fact that there are huge financial relationships across the chain from one of the biggest shorters of the stock all the way to Robinhood makes this the controversy it is today. The market prevented natural market mechanics dictating a short squeeze that was already on.
It's absolutely unclear if that's the case here, and in fact based on the few extreme times short selling has been illegal I'd say this definitely does not get there.
This is the first time in all this crisis that I see anybody say that short squeezes are illegal. Can you elaborate? What's illegal about them?
They have happened many times. I rememeber the VW one a while ago, and I don't rememebr anybody saying they were illegal.
Edit: Right, I saw the link now. Very interesting, thanks.
[0]: https://news.ycombinator.com/item?id=25950680 [1]: https://news.ycombinator.com/item?id=25950493
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and sticking to the rules when posting here, we'd be grateful.
Nope.
If some dude in an expensive suit gets on TV and says a stock will fall then buys a couple billion in shorts and you do the same because you like his style the two of you aren't scheming to make it happen.
Likewise, if some guy in his basement posts on an internet forum about how he's sure a stock will go up and you feel compelled to buy some too you're not scheming.
Finally, if millions of people are collectively motivated by the idea that they just really dislike hedge funds, want to make some money, and maybe want to watch the world burn, so they buy into an increasingly ridiculous idea they're _still_ not scheming because they all made the independent decision to do so after doing what amounts to each individual's 'due diligence' and are not entering or exiting the position in concert.
The risk was there when these funds shorted 140% of the stock. Retail folks noticed the potential for a naturally occurring squeeze and shared the info with world.
That is another explanation beyond the 2 day settlement window that Webull published.