Why Did Reddit Trigger a GameStop Stock Surge?

[kyphysics]

GME: $106.57 ...how low can they go?

game over?

 

[InkTide]

GME: $106.57 ...how low can they go?

game over?

Given the enormous number of new bearish positions opened in just the last few days (puts/shorts) and the staggering number of FTDs (failures to deliver - basically means the broker sold a share but couldn't find one, so they've got to either buy one or give up one they own because they still owe the buyer a share), I'd say this is looking more interesting than it has in months.

The FTD spike data is from December. FTDs aren't from the seller - they are essentially the buyer saying "I bought a share X days ago (X days being the amount of time broker is given to "find" a share after selling one), you still haven't delivered." It's roughly 8 million FTDs, as of December, in ETFs alone - for perspective, that's over 10% of the total number of shares issued by GameStop (76,351,000) ... that brokers sold without finding a share to deliver for over a month.

All these new bearish positions they've opened drive the price down - and with a volume as dried up and illiquid as GME has become since people started directly registering shares to pull them out of DTCC circulation, the negative price action is actually easier - right as they start hitting the deadline of when they need to buy the shares they failed to deliver in December. But it's ultimately only a delay - those new short positions create new potential future FTDs, and the cycle could repeat... but the cycle repeating forever is no longer an option. Retail has put friction into the stock shorting perpetual motion machine, by simply refusing to sell and taking volume away. The whole machine is relying on retail to sell, en masse, at a loss, or the ouroboros of using new shorts today to lessen the consequences of yesterday's shorts will drive them to autophagy. Retail selling at a loss is what used to happen. I don't think the past trends included the effect of retail holding shares out of spite.

IMO, less "game over," more "level 2 unlocked".

 

[russ_watters]

@InkTide, that's a long rant with some conspiracy theory/counter-culture -ish vibes that I don't agree with but don't want to get into. But a few thoughts on the specific issue of the thread:

The current underlying thesis of retail holding GME still is "all these big players didn't learn their lesson in January 2021."

If you play a soccer (football) game and instead of trying to score goals you focus on kicking your opponents in the shins, you might succeed in breaking some legs, but you won't win the game. And you might also break your foot.

And if it's wrong? Well, it'll be a fun ride to see how, far from a tragic or depressing one - most people talking about it consider their investment to be an expense unless/until GME squeezes. In other words, it costs them nothing to hold, and they won't sell unless/until a squeeze.

Expensive ride, and I'm not sure they will believe it was worth it when the ride ends.

If the price goes to pennies, they damn well might buy more.

Unless it closes and is taken off the market. Although I suppose if they can get ahold of paper shares like you seem to want, they can still keep buying and selling the paper shares of a company that no longer exists.

In perhaps the greatest irony of all of this, according to mainstream economics, even if retail's investment thesis is completely wrong, the very fact that so many believe GME is worth more than its current price means GME becomes worth more than its current price - because the alternative is a market completely divorced from the sentiment of market actors, which would itself be evidence that the market was being manipulated by insiders and retail's thesis wasn't completely wrong. The alternative appears increasingly likely to me.

All of that is backwards for this case. You said it yourself: it's the wallstreetbets crowd who is leading the manipulation right now and many/most don't really believe it's worth the price and that's not why they are playing the game. But that does make it ironic.

 

[russ_watters]

GME: $106.57 ...how low can they go?

game over?

Maybe. There's a real value reason that is likely behind the current drop: Microsoft is buying Activision and that's likely to be very bad for Gamestop:
https://finance.yahoo.com/news/micr...-really-hurt-game-stop-analyst-112343875.html

 

[InkTide]

that's a long rant with some conspiracy theory/counter-culture -ish vibes that I don't agree with

Really? Understanding what FTDs are (this is public information from the SEC by the way, has been since I believe 2004 - but even the public data needs to be viewed with the context that is not difficult to hide FTDs, and the reports to the SEC only come from within the NSCC's "Continuous Net Settlement" (CNS) system. If the NSCC decides that it doesn't want to be liable for some trade in the CNS, they can simply decide that trade is a "Special Trade". Instead of clearing it through CNS they can force the trade to clear via the Obligation Warehouse - which doesn't report FTDs to the SEC.) and what 8 million of them last month for just ETFs containing GME means is "conspiracy theory/counter-culture -ish"? If you are basing this conclusion on a better understanding of stock market structure and function I would very much appreciate an explanation of where I'm wro-...

but don't want to get into.

...oh.

If you play a soccer (football) game and instead of trying to score goals you focus on kicking your opponents in the shins, you might succeed in breaking some legs, but you won't win the game. And you might also break your foot.

A more apt analogy for this would be kicking the ball towards the goal because you think the goalie is a cardboard cutout, actually scoring (what happened in January 2021), and then not believing the other team's coach when he tells you he put a real goalie in this time.

Unless it closes and is taken off the market.

This is ultimately the goal of the short selling institutions, because it would mean they never have to cover their short positions. It is in the best interest (see: not doing this is literally an existential threat) of anyone who shorted GME to do anything and everything possible to ensure that GameStop either goes bankrupt or GME holders sell for a loss, because un-covered short positions have theoretically unlimited risk. How? It's quite simple - a short position means you borrowed someone else's share and sold it with the expectation that it will be cheaper to buy in the future. If you were right, you pocket the difference as profit. If not - you still don't own a share to give back (because you sold it, but, again, you never actually owned it), so you either give the owner you borrowed from one of your own or you have to go out and buy another at whatever price it currently is (this is "covering" the short).

That is why FTDs are so important - even if likely under-reported, it's an unavoidably public indicator of when the short sellers couldn't find shares to replace the borrowed ones, so they'll have to go out and buy more... before the end of a period roughly 35 calendar days from the FTD declaration, which for the aforementioned 8 million FTDs would start tomorrow (i.e. January 21, 2022) through I believe February 8th if they used every delay tactic possible (there are quite a few, and big market players tend to heel drag as a general rule). This creates immense buy pressure, and buy pressure on a stock that has become increasingly illiquid (i.e. current holders just aren't selling, and so many shares have been pulled out of DTCC circulation that the DTCC's usual methods of preserving liquidity are already starting to become ineffectual - fun fact, legal naked short selling by the DTCC itself is one of those liquidity preservation methods... and it would be absolutely disastrous to try it in this scenario) has enormous potential to increase the price, which is why so many additional short positions have been opened in the last few weeks (also public info) to suppress price (and that is indeed how that works - betting against a stock makes additional betting against the stock more viable, but more bets increases squeeze risk - the selling of the borrowed stock pushes the price down, even as you're betting the price will go down, but you still never actually owned the stock you sold, so you owe somebody at least one stock; the cash is used in the interim to buy other assets so you're not betting against your own positions - selling those other assets for the liquid cash to cover your short positions is why basically the entire market that wasn't GME went red in January of last year right as GME spiked) just before that buy pressure would start hitting and drive the price up.

GameStop going bankrupt any time soon - especially within the next few months - is quite simply not feasible given the company's net positive assets and minimal debts, without significantly greater losses than they are incurring (during an internal restructuring and market pivot, but that's not important to the basic math of their current solvency). The best some analysts (I think it was mainly yahoo finance) could do a few months ago was theorize a valuation for the company that was less than half of the liquid cash it had on hand at the time. In other words, the only way to make it seem like their bankruptcy was imminent was pretending every dollar held by GameStop is worth 50 cents - which, ironically, even if somehow true, would still have left GameStop net-positive in wealth terms (a.k.a. still not bankrupt).

it's the wallstreetbets crowd who is leading the manipulation right now

Well, r/wallstreetbets had essentially banned discussion of GME following a sudden and large amount of moderator turnover in late winter last year - there have been multiple exoduses (exodi?) of users to other forums/subreddits. Believe it or not r/wallstreetbets actually has a history of moderators being "bought off" by outside actors that predates the whole GME saga. R/wallstreetbets itself has not been a primary forum for discussion of GME trends and theses for months now, but it is the only forum that is regularly mentioned in the media in the context of GME. The culture of r/wallstreetbets and the forums to which GME discussion migrated are notably different.

Expensive ride, and I'm not sure they will believe it was worth it when the ride ends.

They paid an admission price. Key tense: past. It costs nothing more to ride the ride - which they have already been doing for months - just to buy more tickets. Oh, and GameStop's transfer agent, Computershare, allows you to set an investment amount in cash and they will register in your name whatever shares or portions of a share that investment amount (minus some fees) is worth when they batch purchase other aggregated share orders. What this means is that the minimum expense of having at least some "skin" in the ride/game is not actually the cost of a GME share - it's the minimum investment amount in Computershare's transfer structure with GameStop, which for a one-time investment is, IIRC, $25, or $50 if you have no account with them. The fees are taken from those amounts at purchase, not added to them - even with fees, that minimum amount is all you'd need to pay.

Given that the ticket itself is the asset (i.e. the stock), the asset holders only incur a permanent reduction to their liquid net worth (i.e. a loss of liquid funds) if they each decide to sell at a loss.

many/most don't really believe it's worth the price and that's not why they are playing the game.

Do you have the market data to back that declaration of majority motive/belief up?

Microsoft is buying Activision and that's likely to be very bad for Gamestop:

I wouldn't call "two companies you already have extensive contractual relationships with becoming one company" a "very bad" thing - it may allow Microsoft to have more leverage in individual contract negotiations... but buying Activision means they also inherit the motives to sell with GameStop that Activision had before, as well as likely directly inheriting many of Activision's existing contractual obligations. They have more to offer GameStop, but at the same time have more that they can benefit from selling through GameStop by virtue of having more to sell.

That yahoo finance piece is absolutely bizarrely reasoned - it's like saying a grocery store will be severely harmed if, where before it was buying two different kinds of bread from two sellers, those two sellers are now one company and it now buys both kinds of bread from that company. The newly merged bread company still wants to sell its bread - and it already knows, twice over, that the grocer is a reliable way to do that. This might be less important in a digital system or with nonperishable goods... unless you also sell digital bread and now know that the grocer itself is heavily investing in building new infrastructure to sell nonperishable digital bread in an emerging new kind of digital market, which allows you to outsource the new digital storefront and sale infrastructure construction/maintenance costs to an already proven reliable business partner and potentially merge your digital and physical sales into the same storefront system, all while letting your business partner handle most of the risks associated with the early stages of a new kind of market. Yes, those risks are potentially detrimental to GameStop... but they are risks that were actively being taken by GameStop already, regardless of Microsoft's acquisition of Activision.

It also evidently hasn't been enough of a "material reason" to maintain the "current drop" momentum, which thus far today as market nears close has been basically sideways overall up until basically the last minute (though to be fair, market makers and brokers historically like to do their big selling moves and therefore potential negative price manipulation right at the end of the trading day, because overnight trading is something the public generally cannot access but they can). See: https://arxiv.org/pdf/2201.00223.pdf

EDIT as of 18:00 EST (original post was at 15:37) - Yep, exactly as I suspected, the price went from ~106.00 at around 15:20 EST down to 100.00 in basically the last 30 minutes before regular trading hours ended + some after hours selling. Which means the net negative price movement was basically confined to a period of time during which no non-market makers or non-brokers would have been able to react with any buy pressure, which tracks rather directly with the central thesis of the arxiv paper I linked, alongside a pending period of significant exposure to squeeze risk through FTD covering to heavily incentivize pushing the price as low as possible - even if it increases future short exposure - today. The goal may be to try and trigger any stop losses set at the nice round number of 100.00, but only tomorrow (hence the actual decline to 100.00 being during after hours and therefore not able to trigger those stop loss sells until tomorrow in pre-market at the earliest) so the price goes down before market open tomorrow just before the usual "right as market opens" buys the big players tend to do to give them the minimum possible price just before shorts from December start needing to be closed.

Oh, and as an aside, you may want to take yahoo finance analysis with a bit of a more skeptical eye - earlier this month they reported that GME had declined sharply "because of an NFT marketplace announcement by GameStop being underwhelming," but there are two issues with this:

1. GME's price when that was published had not declined - it had been stable; the actual decline in GME's price that day didn't happen until after the article talking about the decline was published, and was largely attributable to an enormous number of new short or bearish options positions being opened - in other words, not the fundamentals of the stock, as the analysis had implied, but very poorly veiled market manipulation.
2. GameStop never actually made any such announcement. Yahoo finance was citing a mostly speculative Wall Street Journal piece that had been published the day before... and had done basically nothing to the price (see "it had been stable" from 1.).

 

[kyphysics]

Maybe. There's a real value reason that is likely behind the current drop: Microsoft is buying Activision and that's likely to be very bad for Gamestop:
https://finance.yahoo.com/news/micr...-really-hurt-game-stop-analyst-112343875.html

Yeah. Lots of factors. Plus, I think GameStop was decrepit as a business beforehand.

I hope Microsoft doesn't take down my Zoom. I don't believe they will, given Eric Yuan's well-oiled customer-centric/obsessive machine that is Bezos-like in customer obsession.

Teams sucks when I used it. I'm more worried about Google Meet, but think Zoom has a current edge.

I'd much rather own meme/pandemic stock $ZM vs. $GME.

 

[Office_Shredder]

@InkTide I just want to comment on this

Given that the ticket itself is the asset (i.e. the stock), the asset holders only incur a permanent reduction to their liquid net worth (i.e. a loss of liquid funds) if they each decide to sell at a loss.

This is terrible accounting. Liquid means easily accessible, if you choose to never sell, your loss of liquid funds is your your entire stake.

 

[kyphysics]

$92.72 $GME...

 

[InkTide]

@InkTide I just want to comment on this
This is terrible accounting. Liquid means easily accessible, if you choose to never sell, your loss of liquid funds is your your entire stake.

Ease of access ≠ actually accessing. Your definition would make liquid funds held in banks a "loss" because you "decided never to sell" by not constantly engaging in currency transfers. It would be impossible for any asset not actively being exchanged to not be recorded as a loss, in large part because you've conflated not selling now at a loss with not selling ever.

An asset doesn't lose all value or all liquidity because you happen to not be exchanging it at the moment - selling securities is very easily accessible, hence the existence of the stock market. A belief that the asset will soon vanish from exchangeable existence like a perishable good (i.e. you think it will be removed from the exchange) before you can sell for a net gain is exactly that - a belief. It is not an actual measurement of future liquidity.

Hell, in the context of inflation, the security asset is likely more liquid than your literal bank held "liquid cash".

I'm talking about liquid in the "ease of asset conversion" sense, not the sense it's often used with in accounting (even if most of the time they agree), which is more along the lines of "ease of conversion into local currency" because accounting tends to assume local currency is and will always be the most liquid possible asset to hold. Even in the accounting sense, though, you don't lock what your asset's liquidity in local currency is until the moment you attempt to exchange it for that currency - hence not selling at a loss not itself somehow being a loss of liquidity - the change in liquidity is at best undefined from simply not currently making such an attempt.

A wave function that hasn't collapsed doesn't mean the wave function doesn't exist, despite what the solipsists might tell you (if they aren't too busy thinking you don't exist either).

$92.72 $GME...

Weird how stable that price point was. Totally didn't indicate an enormous amount of <$100 buy support by jumping back to above the close yesterday ...in the middle of a market selloff.

 

[Office_Shredder]

Ease of access ≠ actually accessing. Your definition would make liquid funds held in banks a "loss" because you "decided never to sell" by not constantly engaging in currency transfers. It would be impossible for any asset not actively being exchanged to not be recorded as a loss, in large part because you've conflated not selling now at a loss with not selling ever.

You said, if the stock goes down, you haven't lost liquid assets if you don't sell it. You clearly have. If you do sell it, you get less money back than you started with. If you refuse to sell it, then it's not liquid
The money in my bank isn't considered lost liquid assets because I can withdraw it for its full value whenever I want. I don't have to wait for it to go back up.

 

[Astronuc]

Not Reddit, but related as in 'speculative investing'.

Close today: BTC-USD (Bitcoin USD) $36,490.42 $-4,400.04 -10.76%

Sometime after hours. $36,416.80

Change in value in one month ~$-12,241.80 (25.16%)

During the period 23-37 December, Bitcoin was valued over $50K, but since then has declined, especially in the last two days, after Russia apparently is thinking about banning it.

 

[InkTide]

You said, if the stock goes down, you haven't lost liquid assets if you don't sell it. You clearly have. If you do sell it, you get less money back than you started with. If you refuse to sell it, then it's not liquid

The act of selling is what tests the liquidity - you can't assume not testing liquidity means a reduction in liquidity. Liquidity is ease of exchange, which cannot be established without actually exchanging something. This is why stock is considered an asset and not a position - the position you take is holding, selling, or buying (ignoring the derivatives market where positions are sold as assets for the moment). Holding contains no exchange with which to test liquidity of the asset - selling or buying are the exchanges, and the measured liquidity is dependent on the exchange price at the time of selling or buying. In other words, you don't measure liquidity by holding - you only lose liquid assets in the case that the asset ceases to be exchangeable or you test liquidity by selling at a time where the asset you exchanged for the stock is worth more relative to the stock as an asset than it was when you bought. The delta affecting the asset's price is the aggregate of positions; the only delta for holding is the arrow of time or a breakdown of the exchange itself... which, by the way, is not unique to stocks - it's exactly what happens to currency during a bank run, because the relationship that accounting finance has with banks is simply not an accurate representation of the macroeconomic reality of what banks are and do.

The money in my bank isn't considered lost liquid assets because I can withdraw it for its full value whenever I want.

The inputting of the money into the bank is itself an exchange. If the bank decides you can't withdraw your "liquid assets" because they don't have it to give you (such as during a bank run), the fact the asset is cash does not make the liquidity you test by trying to withdraw and establish to be zero when that exchange fails suddenly positive just because it is convention to treat "liquid" as synonymous with "converted to a cash equivalent". The position you take by holding is essentially that the asset will be worth exactly what you put in when you withdraw - by your definition, you have indeed lost liquid assets by putting it into the bank, because you're assuming that not selling now (exchanging your position of cash held by a bank for the position of cash held by you in the case of a withdrawal) means not selling ever (i.e. never withdrawing).

 

[kyphysics]

Not Reddit, but related as in 'speculative investing'.

Close today: BTC-USD (Bitcoin USD) $36,490.42 $-4,400.04 -10.76%

Sometime after hours. $36,416.80

Change in value in one month ~$-12,241.80 (25.16%)

I think BTC is possibly the world's most volatile asset. I pretty much just shrug if it drops 25% in a day (or rises).

The connection to WSB meme stock trading is that a lot of the Reddit crowd probably owns a lot of BTC too...as their assets all fall, perhaps they'll have less capital to deploy going forward. Some might go broke entirely during this Fed liquidity pull and probable small tightening cycle afterwards.

I'm like many people, who believe we get a 20-30% market crash by summer or so - after which the Fed has an excuse to swoop in and cut rates + deploy QE again to save markets before the mid-term elections. An unstated rule by Fed insiders is that they try hard not to do anything crazy around election season. They want calm markets, so as to not show an appearance of favoring one party/candidate over another.

QE goes to $0 by mid-March, after which I suspect we could get rate hikes for several months that reset market multiples and bring on that Fed savior moment by late-July. That gives about three months for markets to recover into the November mid-terms.

Regardless, Q2 2022 is universally expected to be horrendous from a macroeconomic front. All the data will have impossible to surpass base effects on top of genuinely slowing economic data hitting at the same time. Bumpy ride perhaps and maybe crashing asset prices will wipe out that retail crowd at home trading in their pajamas.

 

[Office_Shredder]

The act of selling is what tests the liquidity - you can't assume not testing liquidity means a reduction in liquidity.

What are you talking about? It's a stock, the price is publicly available for anyone to look at. Unless you're trading warren buffet sizes or you're trading a super illiquid microcap stock (which gme is not) you will not get a noticeably different price than the public quote.

 

[scompi]

after Russia apparently is thinking about banning it.

Russia's central bank in particular. Of course it is proposing banning cryptocurrencies. Bitcoin, at least, is a potential threat to them. Any so-called "decentralized" currency has no use for a central bank.

I'm like many people, who believe we get a 20-30% market crash by summer or so - after which the Fed as an excuse to swoop in and cut rates + deploy QE again to save markets before the mid-term elections. An unstated rule by Fed insiders is that they try hard not to do anything crazy around election season. They want calm markets, so as to not show an appearance

Couldn't agree more. I expect the Fed will capitulate and reverse course once the markets actually tank. In that case, the next few months can be seen as a great buying opportunity.

 

[InkTide]

What are you talking about? It's a stock, the price is publicly available for anyone to look at. Unless you're trading warren buffet sizes or you're trading a super illiquid microcap stock (which gme is not) you will not get a noticeably different price than the public quote.

The price of a unit of currency is also available to look at. Price is not liquidity. The volatility of price movements is, in theory, a representation of other market actors testing the liquidity. In practice, the affects of the derivatives market and the actual representation of price change on the security's ticker (which is unchanged by exchanges with a volume under 100 total shares) mean this relationship is largely indirect.

GME is not microcap, but its volume had been steadily going down prior to January and buying has become much more difficult. A better representation of the share asset's liquidity relative to cash is the price movement of options contracts within the derivative markets, which have been extremely volatile over the last month as well as extremely expensive on the buying side. The large number of publicly reported FTDs is another indicator of severe illiquidity of attempts to exchange "liquid" cash for GME shares. When the asset fails to deliver after an exchange (what FTDs mean), the liquidity of the asset you traded (cash) for that undelivered asset (a share) has failed - in other words, if you had a FTD, you're basically being told that the market maker you bought from wasn't able to find any available shares being sold at that price during the entire ~30 day period that has to elapse before FTDs are even reported. Market makers can suppress FTD data as I described above in several ways, one of which is hiding it in something called stock ETFs (Exchange Traded Funds), which are like baskets of pre-diversified shares that have their own ticker symbol that can be traded like a single stock. The largest number of GME shares in ETFs are in the XRT ticker - that ticker had over 1 million FTDs last month reported by the SEC.

Yesterday, short interest in XRT was reported at over 715%. This means that some group in the market has open short positions on 7.15 times more XRT than there exists XRT.

 

[Office_Shredder]

Price is not liquidity.

No, but current price represents the best price you can get. If you send an order to sell a stock, it's not going to go up and give you a better price than what it's currently trading at. And if you have a regular person amount of size, it probably won't go down either. Gme traded yesterday more than 500 million dollars, if you sell 10,000 dollars (100 shares), nobody is going to notice/react in any serious way.
I don't know, if you want to continue to believe that if you bought gme for 200 dollars, that you still have 200 dollars of liquidity available, go for it. Hopefully everyone else reading this realizes that's wrong. There's obviously not much point in this back and forth.

 

[InkTide]

The connection to WSB meme stock trading is that a lot of the Reddit crowd probably owns a lot of BTC too

This is why I mentioned that the culture outside of WSB is very different, and in general very different around GME. Most GME-focused communities are highly bearish on cryptocurrencies, BTC and Eth especially - many of them have been theorizing for months that the cryptocurrencies were being buoyed by hedge funds using them as a way to store value and facilitate exchanges protected from taxation.

WSB has always loved crypto, in large part because WSB as a community loves the entertainment that volatility creates - it's antithetical to going long on any asset, even ignoring GME, because going long is boring to the "YOLO" loss/gain porn zeitgeist of WSB. WSB is simply not analogous to "retail investors long on GME", and hasn't even been host to a significant subcommunity of them since early last year (until the volatility-loving options players started looking at the volatility in GME options and started to increase their interest as of late).

No, but current price represents the best price you can get.

Price is not a universal measure of value that is location/choice of market/circumstance invariant. It is, nominally, a measure of the amount of local currency for which a given seller will exchange the asset they are selling with a given buyer.

If you send an order to sell a stock, it's not going to go up and give you a better price than what it's currently trading at.

This depends on the structure of your broker and the contractual relationship you have with them - the money you get from a sale of the asset is actually, in theory, the market price when the order is carried out, not when you placed the order (minus fees). If the share is directly registered to your name, you are the broker - if not, the broker and/or market maker is legally free to delay or expedite your order to carry out the trade if the price goes above when you ordered (giving you the price at order time and burying their own gain in the settlement period, which is two entire business days), or sell high in a dark pool (i.e. nonpublic trading) or internalize the transaction with themselves to not affect the price if they don't want to. Buying information about pending transactions (whose wait time is something market makers can control to a significant degree) is called "Payment For Order Flow", and is essentially unregulated and the method by which market makers essentially extort all direct participants in the market for profit. Banks and large market players don't mind the relatively minimal fees compared to the sizes of their usual moves, and it rarely affects them significantly to have that inherent disadvantage in the market because most of their own liquid assets spend their time floating around in the derivatives market. Basically nothing has structurally changed since 2008, with the sole exception of QE, which has created the precedent of state-backed protection from market risk for banks and market makers. This is what macroeconomics might call a "systemic moral hazard."

And if you have a regular person amount of size, it probably won't go down either.

If you have anything less than 100 in volume, it is not recorded in the ticker. If a market maker or broker wishes to split one side of transactions to influence the public representation of the price in the other direction, they can - and they can do so without buying or selling anything.

Gme traded yesterday more than 500 million dollars, if you sell 10,000 dollars (100 shares), nobody is going to notice/react in any serious way.

The reaction is irrelevant; the effect on the ticker is dependent on how your broker decides to structure your transaction (though they are limited by what other transactions of that security they are processing in a given timeframe).

if you want to continue to believe that if you bought gme for 200 dollars, that you still have 200 dollars of liquidity available

Here again you are equating cash with liquidity. This is simply not the case - just because cash is a differently backed asset doesn't mean it isn't an asset (see: the existence of currency exchanges).

It's also implying an imperative to sell at current value that simply doesn't exist unless you need to divest because for some reason you bought on margin - in which case your obligation is debt not related to the asset in question reducing your own liquid assets elsewhere.

Fun fact, banks and hedge funds buy on margin constantly. Goldman Sachs is leveraged something like 2:1.

There's obviously not much point in this back and forth.

On the contrary, I've found it quite instructive on the general beliefs from a personal accounting perspective of the public in regards to market and asset finance. Between that and the revolving door of Wall Street funds and financial regulators, and the immense short term profits of the derivatives market, they're the only feasible reasons I can surmise that this system has still persisted since 2008 with nothing more than a new name (CLOs instead of CDOs) and a literal reward (bailout) for irresponsible gambling by people whose central provided economic service is literally "take your cash and sit on it until you need to use it".

 

[Office_Shredder]

This depends on the structure of your broker and the contractual relationship you have with them - the money you get from a sale of the asset is actually, in theory, the market price when the order is carried out, not when you placed the order (minus fees)

Right, so if you want to sell it now, you get the current price.

. If the share is directly registered to your name, you are the broker - if not, the broker and/or market maker is legally free to delay or expedite your order to carry out the trade if the price goes above when you ordered

This is false. If your order is marketable they are required to execute it immediately. If it's non marketable, they are required to post it on an exchange, unless it's "block size" (feel free to disapprove of the block size rule, I'm not attached to it).

(giving you the price at order time and burying their own gain in the settlement period, which is two entire business days),

The settlement period of two days has no economic effect on the trade that you get.

or sell high in a dark pool (i.e. nonpublic trading) or internalize the transaction with themselves to not affect the price if they don't want to.

If they choose to internalize your transaction it's because they think it's a good trade, not because they want to manipulate the price.

When a market maker receives your order, if they route out to them market they are required to give the fills they get to you. So if you send an order to sell and they send a sell order to a dark pool to see if they get filled as part of handling your order, they have to give you the fill they get.

Buying information about pending transactions (whose wait time is something market makers can control to a significant degree) is called "Payment For Order Flow",

This is not true at all. All trades are required to be reported immediately upon execution, you can't wait.

Payment for order flow is where they pay to get your order so they can make money by trading against you, because on average retail traders do not make money.

and is essentially unregulated and the method by which market makers essentially extort all direct participants in the market for profit.

Market maker internalization is a competitive business. Citadel, virtu and other companies give price improvement to the orders they receive (that is, give people a better price than that market on average), and whoever gives the most price improvement gets the most flow from the retail broker.

Separately, Claiming anything in this industry is unregulated is kind of absurd, all that parties here are large finra regulated broker dealers.

If you have anything less than 100 in volume, it is not recorded in the ticker. If a market maker or broker wishes to split one side of transactions to influence the public representation of the price in the other direction, they can - and they can do so without buying or selling anything.

This isn't true, every trade of any size is reported on the tape. You're probably thinking of the fact that odd lot *quotes* are not reported to the SIP, but they still show up in the exchanges' proprietary marketdata which many professionals pay for, so a lot of people know about the quotes anyway (that said, the sec is considering making odd lot quotes show up in the SIP feed).

The reaction is irrelevant; the effect on the ticker is dependent on how your broker decides to structure your transaction (though they are limited by what other transactions of that security they are processing in a given timeframe).

I mean, in as far as if they choose to route you vs internalize, yes, the price you get and the subsequent market price will be a little different. But not like, forty dollars different in a hundred dollar stock. We're talking about like pennies different.

It's also implying an imperative to sell at current value that simply doesn't exist unless you need to divest because for some reason you bought on margin - in which case your obligation is debt not related to the asset in question reducing your own liquid assets elsewhere.

No, liquid means liquid. It means your can get the cash when you want it for whatever you want it. If you bought gme for 200, and today you want to buy a house, or you want to buy a car, or pay for your kid's college, you simply do not have the same amount of money to pay for those things. That's the definition of liquidity, and why people want liquid assets, so they can pay for things.

On the contrary, I've found it quite instructive on the general beliefs from a personal accounting perspective of the public in regards to market and asset finance

.

I'm sorry, you don't actually know very much about how the industry works.

 

[mfb]

$92.72 $GME...

$106.36, up 15% from that point.
You are so eager to update us every time it goes down, but when it goes up there is silence.

 

[kyphysics]

$106.36, up 15% from that point.
You are so eager to update us every time it goes down, but when it goes up there is silence.

I'm only interested when it goes down, though. It's more fun/exciting to report.

 

[InkTide]

This is false. If your order is marketable they are required to execute it immediately.

First off, it's not really your order that executes - it's the broker's. The broker has a fiduciary duty to make your order match theirs.

The legal penalty for not honoring that duty of immediacy is not a robust enough guarantee that it will be honored when the profit of essentially lying about it and profiting in the margin of time between when you as an investor made the order and when your personal finances reflect the order's execution is so enormous compared to the penalty.

Right, so if you want to sell it now, you get the current price.

"If" does a remarkable amount of work in this sentence.

If it's non marketable, they are required to post it on an exchange, unless it's "block size" (feel free to disapprove of the block size rule, I'm not attached to it).

The issue isn't even them shirking the requirements - the problem is actually that time exists.

You cannot have an instantaneous exchange. Physics itself prevents this. Law does not supersede physics.

Even in the best case scenario, where every rule is followed to the best of the market maker's reasonable ability there is a period of time during which the transaction is pending - economic theory, especially neoclassical, has a very difficult time handling... well, time. So difficult in fact that one of the primary criticisms of the EMH is that not only does it require universality of simultaneity, which anyone on this forum should know is untenable, but it also requires that all market actors have instantaneous and universally simultaneous access to market information.

Another big problem is the EMH is circular logic in even its weak form, and yet another is that its foundations fundamentally do not accommodate the very real nature of error propagation, but the EMH is a whole other can of worms.

The settlement period of two days has no economic effect on the trade that you get.

You're right, I should have been more clear that I meant mostly the time it will take to transact, but settlement requires that asset exchanges be fully completed by that time - even honoring that cannot in and of itself guarantee that what occurred to the assets between the order and the settlement was only the relevant exchange. The economic effects on you are minimal during the settlement period, because the abuses I'm talking about there occur on a literally minute-to-minute basis before the settlement period even starts.

If they choose to internalize your transaction it's because they think it's a good trade, not because they want to manipulate the price.

Ultimately I think the problem here is assuming that their motives are the same as those of an individual doing their personal accounting, just at a larger scale.

The problem with this assumption is the motives are not scale invariant - if you are one of these big players, the fact that you internalizing can manipulate the price means that it is a tool you would be highly motivated to use... because the money from the market itself, even if you lose out on that internalization, is absolutely miniscule compared to the money you can make on the derivatives market from the price change itself.

When it a market maker receives your order, if they route out to them market they are required to give the fills they get to you.

This process is not instantaneous - the wiggle room is miniscule but it exists, and it's the reason HFT is algorithmic and highly affected by literally the geographical proximity to the exchange for simple physics latency reasons (a factor that all by itself would destroy the EMH provided the market and the transactor are located at non-identical points in space and therefore not both in violation of the Pauli exclusion principle).

So if you send an order to sell and they send a sell order to a dark pool to see if they get filled as part of handling your order, they have to give you the fill they get.

In 2 days from the order. If this were always honored, FTDs would not exist. Curiously, they do.

This is not true at all. All trades are required to be reported immediately upon execution, you can't wait.

I'm not talking about time between execution and report, I'm talking about the time between order and execution.

Payment for order flow is where they pay to get your order so they can make money by trading against you, because on average retail traders do not make money.

You've mistaken a consequence for a cause.

Market maker internalization is a competitive business. Citadel, virtu and other companies give price improvement to the orders they receive (that is, give people a better price than that market on average), and whoever gives the most price improvement gets the most flow from the retail broker.

I'm not remotely arguing that these entities are not competing with each other.

There's a surprising amount one can accomplish collectively if the competition has certain constraints, however.

Separately, Claiming anything in this industry is unregulated is kind of absurd, all that parties here are large finra regulated broker dealers.

FINRA is a private organization, not a publicly funded agency - it has been genuinely illegal for the government to regulate the derivatives markets since 2000.

FINRA is, of course, trusted to regulate itself.

This isn't true, every trade of any size is reported on the tape. You're probably thinking of the fact that odd lot *quotes* are not reported to the SIP, but they still show up in the exchanges' proprietary marketdata which many professionals pay for, so a lot of people know about the quotes anyway (that said, the sec is considering making odd lot quotes show up in the SIP feed).

Did you miss the part where I said "public" representation? If you have to pay to access the data, it is not public.

But not like, forty dollars different in a hundred dollar stock. We're talking about like pennies different.

Uh huh. We are talking about pennies of difference - but pennies of difference across the entire publicly traded economy does not add up to pennies of difference total. This is why the motives are not scale invariant: having access to huge chunks of the market makes those pennies an enormous potential source of revenue, at the expense of anyone using a broker to invest.

No, liquid means liquid. It means your can get the cash when you want it for whatever you want it.

The logical construction of these two sentences is "Not A, because B = B implies B = C."

Even ignoring A (my statement), the issue I'm taking is with B's relationship to C not being unequivocally true. Using liquid to describe cash is not the same thing as the word "liquid" being synonymous with "cash". This is why I made the distinction earlier between the common definition of "liquid" in personal finance (i.e. accounting) being importantly different from its meaning in the context of an asset exchange.

Technically speaking, the asset itself is never liquid in the overall market sense - the exchanges of the asset are, and it can depend on which direction the exchange is relative to the asset. For instance, the obtaining of a cash asset in exchange for something else is considered far more illiquid than the obtaining of a non-cash asset (or good or service) in exchange for cash. The liquidity isn't the amount of cash exchanged, it's basically the odds of the exchange actually being completed. And yes, making those odds worse does tend to increase the required volume of cash assets, and making those odds better does tend to decrease the required volume of cash, but this is a function of the relative liquidity of cash transactions tending to exceed everything else - it is neither an intrinsic property of money nor exclusive to money.

Ironically, much like the EMH, it is entirely dependent on real market activity and thus by necessity a post-hoc measurement - it pretends time does not exist.

If you bought gme for 200, and today you want to buy a house, or you want to buy a car, or pay for your kid's college, you simply do not have the same amount of money to pay for those things.

Again, "if" does a lot of work here - at least this time it's helped out by some other hypotheticals that would be relevant to liquidity if their own "if"s were true.

Not being able to trade a stock for a car (in theory this is not preventable; barter is still both legal and common) doesn't make the stock illiquid - just because local currency is usually the most liquid asset does not mean currency is liquidity.

That's the definition of liquidity, and why people want liquid assets, so they can pay for things.

People want their assets to be movable when they move those assets - it does not mean that the definition of motion is "the thing that is easy to move most of the time".

I'm sorry, you don't actually know very much about how the industry works.

Perhaps, but I think this has more to do with how little I believe what the industry says about itself.

Ultimately, the thesis of holding GME is basically a hedge against the legitimacy of the market and financial system itself. If the short positions were closed, those holding GME are more likely to forget that they hold GME than sell for a loss. The position is, in essence, "don't sell GME for a loss regardless of how long that takes", which is why even if the short positions were closed last January, it's difficult not to see this as something of a self-fulfilling prophecy given enough time. If holders believe (rather reasonably, given their assets and nonexistent debt, IMO) that GameStop is not actually in danger of bankruptcy, and they are not in immediate need of the funds spent on the stock, they don't need to exchange anything - the longer their strategy takes, the more risky any short position - even entirely backed and legal ones - becomes.

The risk to a short position is theoretically infinite - the risk to a naked short of a company exceeding the available shares if that company does not go out of business is also theoretically infinite.

The realization of that risk must, mathematically, always be to the disadvantage of retail investors, because otherwise market makers and brokers become an existential threat to both each other and themselves. If FINRA wants a cut of the profits as a fine, they're happy to oblige - just a cost of doing business.

I'd like to remind you that XRT is basically a tradable index fund for the entertainment industry EDIT: I was wrong, it's even worse - it's broader than that. Do you really think market makers, brokers, and banks following FINRA rules as if they took precedence over the laws of physics would mean that shorting an index fund for 7.15 times the volume of the fund itself is "business as usual, everything normal, nothing to see"?

Because that was last Friday.

 

[InkTide]

I'm only interested when it goes down, though. It's more fun/exciting to report.

I always appreciate when people are honest and open about their selection biases.

Your selection of a low that lasted too small a time to even appear on most online tickers is truly a testament to your commitment to those biases.

 

[kyphysics]

psssst InkTide: Your perspectives are always interesting. But, your posts are a bit long. Any chance you can review them before posting and trim if need be?

 

[kyphysics]

Couldn't agree more. I expect the Fed will capitulate and reverse course once the markets actually tank. In that case, the next few months can be seen as a great buying opportunity.

I've got some cash stashed. I think it could definitely be a great buying opportunity.

In other news, I probably bought $ZM a tad too soon ($158). I'm willing to load up more if it drops precipitously (it's $147 now - which I'm holding off on buying more of).

On top of Fed capitulation, I wonder if the Dems can use a market/economic crash to also force Joe Manchin and his corporate-bought Dem friends (e.g., Sinema) to cave to a larger stimulus plan. They ain't budging unless there is a lot to lose.

 

[InkTide]

psssst InkTide: Your perspectives are always interesting. But, your posts are a bit long. Any chance you can review them before posting and trim if need be?

First, I appreciate that you can take a jab in good humor - second, I do get carried away a bit when it comes to living up to my username (which I use all over the place, have for years).

Truth is, there are a lot of complicated reasons I hold the positions I do, and the way I think is very "analogy heavy" and abstract. It takes a lot of words to express an explanation of what I think and why I think it - and I try to avoid completely inflexible statements.

Naturally, I still make tons of them anyway...

 

[kyphysics]

Naturally, I still make tons of them anyway...

Lest I be an absolute hypocrite, I am guilty of overly long posts myself! People have complained about my rambling and long emails at work. I had to learn that people's time is valuable in the business world and they don't put up with length like in academia.

They are different worlds. I learned the hard way. Professors LOVE long emails and talks. My business colleagues think you're annoying if you do that. Although, each profession/company has its own culture. I guess it depends. But, even then, there sometimes IS JUST an overly long response too. lol

 

[russ_watters]

First off, it's not really your order that executes - it's the broker's. The broker has a fiduciary duty to make your order match theirs.

The legal penalty for not honoring that duty of immediacy is not a robust enough guarantee that it will be honored when the profit of essentially lying about it and profiting in the margin of time between when you as an investor made the order and when your personal finances reflect the order's execution is so enormous compared to the penalty.

So, what you are alleging here is widespread fraud by brokerage firms, to profit from buying/selling a security at one price while telling the client they did so at another price? Have any evidence of this?

 

[InkTide]

So, what you are alleging here is widespread fraud by brokerage firms, to profit from buying/selling a security at one price while telling the client they did so at another price? Have any evidence of this?

Correct, I am alleging - and describing as one of the core motives behind current retail sentiment around holding GME - that securities fraud both exists at scale and investor protections against it are woefully inadequate.

That it exists is not really much of a question, it does - the question is to what extent and how good are the protections, especially in the context of a law passed 22 years ago that made it illegal to make laws about the derivatives market (the derivatives market was basically destroyed by legislation seeking to prevent a repeat of the Great Depression in 1936; in the early 1990s, this legislation was, after an enormous lobbying campaign, gutted; over the next decade, attempts to reimplement it were fought with additional lobbying and ultimately defeated in 2000 with one of the most blatant examples of regulatory capture in existence). I see very little reason to believe that the extent is not enormous and the protections are perfectly adequate, especially in the context of the structural causes of the 2008 crisis and the lack of changes to that structure (and the precedent that the big players that caused the crisis in the first place get protected from the broader consequences of their own actions, creating what I described earlier as a "systemic moral hazard.")

I am also very concerned that banks have done with CLOs exactly what they did with CDOs prior to 2008 - except CLOs are mostly corporate debt. And the CLO market is much, much larger than the CDO market ever was.

As an aside, were you aware that, out of nowhere, $1.44 QUADRILLION of cryptocurrency exchange volume happened in a single 24 hour period to create that "crypto crash" on Friday?

 

[Office_Shredder]

That it exists is not really much of a question, it does - the question is to what extent and how good are the protections, especially in the context of a law passed 22 years ago that made it illegal to make laws about the derivatives market

I think the thing you linked earlier was only about otc derivatives. The cftc literally regulates derivatives. Besides, what does any of this have to do with stock trading, which is regulated by the sec. If you want to complain that Bill Clinton caused the 2008 crash, then fine, but I have no idea what that has to do with the rest of this thread.

I see very little reason to believe that the extent is not enormous and the protections are perfectly adequate, especially in the context of the structural causes of the 2008 crisis and the lack of changes to that structure (and the precedent that the big players that caused the crisis in the first place get protected from the broader consequences of their own actions, creating what I described earlier as a "systemic moral hazard.")

Do you literally believe that banks over leveraging themselves and market makers violating clearly written laws that are enforced by a regulator who exists only to enforce these laws, are the exact same thing? Like, even if the structure that permitted to let the first thing happened still exists, what does it have to do with the second thing, besides the fact that they are both "finance".

I am also very concerned that banks have done with CLOs exactly what they did with CDOs prior to 2008 - except CLOs are mostly corporate debt. And the CLO market is much, much larger than the CDO market ever was.

Fine, but what does this have to do with market manipulation or giving retail customers bad prices.

View attachment 295904
As an aside, were you aware that, out of nowhere, $1.44 QUADRILLION of cryptocurrency exchange volume happened in a single 24 hour period to create that "crypto crash" on Friday?

I have no idea what this is supposed to imply.

 

[russ_watters]

Correct, I am alleging - and describing as one of the core motives behind current retail sentiment around holding GME - that securities fraud both exists at scale and investor protections against it are woefully inadequate.

And do you have any evidence of either of those claims? (the third is an opinion)

Do you have the market data to back that declaration of majority motive/belief up?

No. Perhaps like your first claim, motive is something you can only find by polling people. However, I wouldn't have expected this to be controversial; isn't it common knowledge that Jan 2021 happened because the reddit crowd got mad at the hedge funds and wanted to try and hurt them -- regardless of the actual value of the company Gamestop? On the other end, it would be hard to believe that people who are setting the price actually believe Gamestop is worth its current market value.

 

[InkTide]

And do you have any evidence of either of those claims? (the third is an opinion)

Yes, actually. Here's the synopsis written in one of the largest communities around this now, one that is very much not r/WallStreetBets. The polling on reddit is essentially done by the community itself, and they will quite readily tell you what their beliefs surrounding the market currently are. Naturally there's good and bad, but the general sentiment of what they're doing is... kinda obvious because it's so consistent and pervasive.

the reddit crowd got mad at the hedge funds and wanted to try and hurt them

It would be more accurate to say that a group of people suspected that some of what was theorized to be a central cause of the corporate decline after the 2008 financial crisis was naked short selling, and that GameStop's stock was being artificially kept down by securities fraud in large part by hedge funds who intended to turn it into a penny stock or drive GameStop into bankruptcy so their short positions would be protected from risk by the effect the positions had on the stock. It was widely believed that COVID was being used to reinforce that position. EDIT: A narrative around COVID being poised to bankrupt GameStop - I am by no means blaming these people for COVID, it was just a good way to "short and distort."

January was a vindication of that hypothesis, but importantly it was entirely in the context of a lack of awareness that shares in a broker are "beneficially owned". The trust in the markets and market makers is predicated on things like turning off the ability to buy a stock being illegal and thus impossible. There is no way to describe market makers actively refusing to execute only one side of an exchange as anything but a complete failure of the market to facilitate liquidity.

What's happened since is GameStop hasn't gone bankrupt, nothing about the markets has changed structurally, and far more people in general are aware that they can remove a share from DTCC circulation by directly registering it. It's mostly become a movement around distrust of the DTCC and markets in general because of what happened in January last year. It is definitely motivated by hatred of hedge funds now, but only because of what they did to protect themselves when a bet that they were naked shorting GameStop happened to pay off not in their favor.

I expect the next week to be very interesting. Friday last week certainly was.

 

[russ_watters]

Yes, actually. Here's the synopsis written in one of the largest communities around this now, one that is very much not r/WallStreetBets. The polling on reddit is essentially done by the community itself, and they will quite readily tell you what their beliefs surrounding the market currently are. Naturally there's good and bad, but the general sentiment of what they're doing is... kinda obvious because it's so consistent and pervasive.

Did you mix two responses into one there? Your link appears to be answering the wrong question. I asked for your evidence of fraud in the market by the brokerage firms, not by the reddit crowd. In either case, you've been verbose to this point, but can't say more than a few words of substantiation for what appears to be your major theses? Please try again.

It would be more accurate to say that a group of people suspected that some of what was theorized to be a central cause of the corporate decline after the 2008 financial crisis was naked short selling, and that GameStop's stock was being artificially kept down by securities fraud...

Again: is there any evidence of that? Not the part about guessing what redditors believe/are motivated by, but the part about securities fraud leading to artificial suppression of GME.

Note, the SEC says there was no naked shorting:
https://investorplace.com/2021/10/s...-to-know-about-the-landmark-gme-stock-report/

Maybe I should just ask this: do you think the company Gamestop is worth $20 a share? $100 a share? Do you think it will even exist in 5 years?

January was a vindication of that hypothesis...

How so?

I'll repeat: this all sounds very hand-wavey/conspiracy-theoryish.

 

[InkTide]

I think the thing you linked earlier was only about otc derivatives.

A big part of it was essentially redefining terms to sidestep the language regarding futures trading in the 1936 legislation.

The cftc literally regulates derivatives.

And it has been functionally toothless since the legislation that I'm talking about.

Besides, what does any of this have to do with stock trading, which is regulated by the sec.

Do... do you know what the derivatives market is? Stock trading is asset trading; the derivatives markets are exchanges of contracts to engage in certain asset trades within asset trading markets. This is why they are called derivatives - they are derivative of the asset markets.

If you want to complain that Bill Clinton caused the 2008 crash

The 2008 crash was essentially caused by banks assuming that charging someone a million dollars means you will eventually receive a million dollars, and then bundling a bunch of those assumptions into CDOs with the further assumption that putting an enormous amount of those assumptions together means it is impossible for nearly all of them to be wrong.

A lot of them were wrong.

I have no idea what that has to do with the rest of this thread.

CDOs are a derivative of mortgage backed securities. They were a substantial component of the derivatives market that collapsed in 2007/8.

Do you literally believe that banks over leveraging themselves and market makers violating clearly written laws that are enforced by a regulator who exists only to enforce these laws, are the exact same thing?

It's not that they're the same thing - it's that what the banks are over leveraged into is this poorly regulated derivatives market.

Like, even if the structure that permitted to let the first thing happened still exists, what does it have to do with the second thing, besides the fact that they are both "finance".

That structure does still exist. It is quite literally the reason for bank runs being such a systemic risk. And because that overleverage is largely in the derivatives market... well, if the derivatives market is broken, so is the entire financial industry.

Oops.

Fine, but what does this have to do with market manipulation or giving retail customers bad prices.

This is where the derivatives market and HFT makes its money - trading on the motion of an asset exchange creates an entire new dimension of incentives to manipulate the price. And those are incentives in the market that banks are overleveraged into because it's the market that the entire financial industry has overleveraged into.

I have no idea what this is supposed to imply.

That is a logarithmic scale.

In the span of one of those bars - roughly 20 minutes - there was such a massive spike in volume in the market that the 24h volume would have exceeded the entire theorized value of the world's derivatives markets by nearly $450,000,000,000,000. The huge volume spike was followed almost immediately by a precipitous decline in market cap, meaning the volume was mostly selling off.

Remember when I said one of the hypotheses floating around was that cryptocurrencies were being inflated by the financial industry using them as a less regulated and more difficult to tax way to keep liquid assets? I don't know exactly what it would look like if, say, I were a hedge fund and I was using cryptocurrencies to store value and suddenly needed to load up on cash because an enormous number of FTDs around GME start to hit their deadlines for settlement next week (because they do, even according to public information)... but a huge and sudden selloff of a bunch of cryptocurrency assets late on the Friday before might look strikingly similar.

There's also a... rather large number of year-long puts for something like $0.50 a share from last January currently expiring in the GME options chain.

 

[InkTide]

Did you mix two responses into one there?

Believe it or not, yes, that paragraph answers more than one of your statements, I am trying to be less verbose.

I asked for your evidence of fraud in the market by the brokerage firms

I linked you to a community maintained resource that itself links to a great deal of

not by the reddit crowd

Are you alleging widespread securities fraud by the reddit crowd? The reddit crowd is not a market maker or broker. Their forums of discussion are entirely public and not subject to anything that could be considered a directing leadership. It's just a bunch of people who agree about something.

Or is your implication that I should implicitly and exclusively trust what the actual brokerage firms say publicly about themselves in an industry with an entire sub-industry dedicated to profiting off of selling proprietary information in a market largely 'regulated' by SROs (Self Regulatory Organizations) with minimal external oversight that has been effectively lobbied out of relevance to the discussion?

but can't say more than a few words of substantiation for what appears to be your major theses?

I gave you a link to resources. I am trying to be a bit less verbose.

If you would like for me to reproduce the entire pages of text, links, and data across the last year of posts in that community that composes the extent of what I linked to you, I'm afraid I'll have to decline and suggest you follow the context of what I linked to whatever extend leaves you satisfied it is either reasonable or not.

Again: is there any evidence of that?

See above.

Not the part about guessing what redditors believe

I'm not guessing, their posts rather explicitly lay those beliefs out if you actually read them.

but the part about securities fraud leading to artificial suppression of GME.

Basically, the theory was that GME was nakedly shorted and being hit by a COVID-reinforced "short-and-distort" campaign, as well as internal manipulation by board members within GameStop that had publicly prominent ties to the theorized entities shorting the stock (more a corporate fraud thing than securities fraud, but super difficult to prove and helps the whole thing along immensely). According to that theory, the price of the stock was far below market value, but more importantly the obligations of a short position meant naked shorting created the potential for a short squeeze.

Then the short squeeze started to happen, and it was bigger than anyone expected - and market makers/brokers started to take the very clearly illegal step of shutting off one direction of the exchange.

Maybe I should just ask this: do you think the company Gamestop is worth $20 a share? $100 a share?

It's basically unknown at this point - because the buy buttons were shut off, and because such a large short position is hypothesized to exist, GameStop stock price has become less a function of the value of the company and more a function of whatever the derivatives market is doing with it.

That has always been the risk that derivatives markets pose - a complete divorce of stock price from the fundamentals of its asset value.

Do you think it will even exist in 5 years?

Yes. They have no outstanding debts, a huge amount of assets, and a decent cash flow. They are mostly finished internally restructuring, and building infrastructure to enter into an emerging digital market as well as in general becoming more of a tech company. I find it very unlikely that they are in danger of bankruptcy within the next decade.

How so?

The rate of the squeeze and absolute horror of Wall Street establishment that it had happened caught even the bullish WSB members by surprise - the fact the squeeze happened meant that they were absolutely correct in their theory that a squeeze could happen (because that was the extent of their thesis at the time).

The hatred for hedge funds, brokers, and market makers alike arose from the fact that the stock was blatantly manipulated to stop the squeeze from happening (the fact multiple brokers made trading GME one-way, sale only, is not an indicator of a healthy market) and regulators did basically nothing.

I'll repeat: this all sounds very hand-wavey/conspiracy-theoryish.

I've provided plenty of text for you to cherry pick through, surely you can do better than that.

Besides, if it is "hand-wavey/conspiracy-theoryish", the evidence should simply make that evident by demonstrating that the market is functioning and its facilitators and regulators have created a system without flaws of note.

There is nothing accomplished by weasel-wording an accusation that the act of noting potential problems is a conspiracy theory. It's entirely possible my belief is wrong - but finding that out is science. Calling it hand-wavey is not.