The GameStop phenomenon

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Paul Waine
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Re: The GameStop phenomenon

Post by Paul Waine » Mon Feb 01, 2021 6:03 pm

This guy provides a credible explanation of why Robinhood had to put a halt on the reddit guys adding to their positions.

Professor Craig Pirrong - professor of finance, University of Houston - has blogged as the "Streetwise Professor" for a number of years.

GameStop-ped Up Robinhood’s Plumbing
29 January 2021

https://streetwiseprofessor.com/

The vertigo inducing story of GameStop ramped it up to 11 yesterday, with a furore over Robinhood’s restriction of trading in GME to liquidation only, and the news that it had sold out of its customers’ positions without the customers’ permission. These actions are widely perceived as an anti-populist capitulation to Big Finance.

Well, they are in a way–but NOT the way that is being widely portrayed. What is going on is an illustration of the old adage that clearing and settlement in securities markets (like the derivatives markets) is like the plumbing–you take it for granted until the toilet backs up.

You can piece together that Robinhood was dealing with a plumbing problem from a couple of stories. Most notably, it drew down on credit lines and tapped some of its big executing firms (e.g., Citadel) for cash. Why would it need cash? Because it needs to post margin to the Depositary Trust Clearing Corporation (DTCC) on its open positions. Other firms are in similar situations, and directly or indirectly GME positions give rise to margin obligations to the DTCC.

The rise in price alone increased margin requirements because given volatility, the higher the price of a stock, the larger the dollar amount of potential loss (e.g., the VaR) that can occur prior to settlement. This alone jacks up margins. Moreover, the increase in GME volatility, and various adders to margin requirements–most notably for gap risk and portfolio concentration–ramp up margins even more. So the action in GME has led to a big increase in margin requirements, and a commensurate need for cash. Robinhood, as the primary venue for GME buyers, had/has a particularly severe position concentration/gap problem. Hence Robinhood’s scramble for liquidity.

Given these circumstances, liquidity was obviously a constraint for Robinhood. Given this constraint, it could not handle additional positions, especially in GME or other names that create particularly acute margin/liquidity demands. It was already hitting a hard constraint. The only practical way that Robinhood (and perhaps other retail brokers, like TDAmeritrade) could respond in the short run was trading for liquidation only, i.e., allow customers to sell their existing GME positions, and not add to them.

By the way, trading for liquidation is a tool in the emergency action toolbook that futures exchanges have used from time-to-time to deal with similar situation.

To extend the plumbing analogy, Robinhood couldn’t add any new houses to its development because the sewer system couldn’t handle the load.

I remember some guy saying that clearing turns credit risk into liquidity risk. (Who was that guy? Pretty observant!) For that’s exactly what we are seeing here. In times of market dislocation in particular, clearing, which is intended to mitigate credit risk, creates big increases in demand for liquidity. Those increases can cause numerous knock on effects, including dislocations in markets totally unrelated to the original source of the dislocation, and financial distress at intermediaries. We are seeing both today.

It is particularly rich to see the outrage at Robinhood and other intermediaries expressed today by those who were ardent advocates of clearing as the key to restoring and preserving financial stability in the aftermath of the Financial Crisis. Er, I hate to say I told you so, but I told you so. It’s baked into the way clearing works, and in particular the way that clearing works in stressed market conditions. It doesn’t eliminate those stresses, but transfers them elsewhere in the financial system. Surprise!

The sick irony is that clearing was advocated as a means to tame big financial institutions, the banks in particular, and reduce the risks that they can impose on the financial system. So yes, in a very real sense in the GME drama we are seeing the system operate to protect Big Finance–but it’s doing so in exactly the way many of those screaming loudest today demanded 10 years ago. Exactly.

Another illustration of one of my adages to live by: be very careful what you ask for.

Margins are almost certainly behind Robinhood’s liquidating some customer accounts. If those accounts become undermargined, Robinhood (and indeed any broker) has the right to liquidate positions. It’s not even in the fine print. It’s on the website:

If you get a margin call, you need to bring your portfolio value (minus any cryptocurrency positions) back up to your minimum margin maintenance requirement, or you risk Robinhood having to liquidate your position(s) to bring your portfolio value (minus any cryptocurrency positions) back above your margin maintenance requirement.

Another Upside Down World aspect of the outrage we are seeing is the stirring defenses of speculation (some kinds of speculation by some people, anyways) by those in politics and on opinion pages who usually decry speculation as a great evil. Those who once bewailed bubbles now cheer for them. It’s also interesting to see the demonization of short sellers–whom those with average memories will remember were lionized (e.g., “The Big Short”) for blowing the whistle on the housing boom and the bank-created and -marketed derivative products that it spawned.

There are a lot of economic issues to sort through in the midst of the GME frenzy. There will be in the aftermath. Unfortunately, and perhaps not surprisingly given the times, virtually everything in the debate has been framed in political terms. Politics is all about distributive effects–helping my friends and hurting my enemies. It’s hard, but as an economist I try to focus on the efficiency effects first, and lay out the distributive consequences of various actions that improve efficiency.

What are the costs and benefits of short selling? Should the legal and regulatory system take a totally hands off approach even when prices are manifestly distorted? What are the costs and benefits of various responses to such manifest price distortions? What are the potential unintended consequences of various policy responses (clearing being a great example)? These are hard questions to answer, and answering them is even harder in the midst of a white-hot us vs. them political debate. And I can say with metaphysical certainty that 99 percent of the opinions I have seen expressed about these issues in recent days are steeped in ignorance and fueled by emotion.

There are definitely major problems–efficiency problems–with Big Finance and the regulation thereof. Ironically, many of these efficiency problems are the result of previous attempts to “solve” perceived problems. But that does not imply that every action taken to epater les banquiers (or frapper les financiers) will result in efficiency gains, or even benefit those (often with justification) aggrieved at the bankers. I thus fear that the policy response to GameStop will make things worse, not better.

It’s not as if this is new territory. I am reminded of 19th century farmers’ discontent with banks, railroads, and futures trading. There was a lot of merit in some of these criticisms, but all too often the proposed policies were directed at chimerical wrongs, and missed altogether the real problems. The post-1929 Crash/Great Depression regulatory surge was similarly flawed.

And alas, I think that we are doomed to repeat this learning the wrong lessons in the aftermath of GameStop and the attendant plumbing problems. Virtually everything I see in the public debate today reinforces that conviction.

Paul Waine
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Re: The GameStop phenomenon

Post by Paul Waine » Mon Feb 01, 2021 6:07 pm

A couple of Times reports, this is the first.

Block on Gamestop trades was a ‘bad outcome’, admits Robinhood boss Vlad Tenev

Callum Jones - Monday February 01 2021, 5.00pm, The Times

An investment app at the centre of the online trading frenzy has insisted it was not forced to introduce restrictions on stocks including Gamestop.

Robinhood, the American platform of choice for the army of amateur traders seeking to take on Wall Street, defended its decision to curb users’ ability to pile in further to the video games retailer and other heavily shorted companies last week.

Its chief executive was questioned on Monday by Elon Musk, the Tesla boss revered by many young retail investors, who demanded in an impromptu interview that he “spill the beans”.

Vlad Tenev, co-founder of Robinhood, acknowledged the initial ban on buying a dozen stocks including Gamestop amounted to a “bad outcome” for its users, but said that claims it had buckled under pressure from hedge funds to impose restrictions on retail investors were “just false”.

Musk appeared to stoke the recent market volatility, encouraging his disciples by tweeting “Gamestonk!!” alongside a link to the Wallstreetbets forum on Reddit where investors have mobilised in recent weeks.

As the billionaire concluded a lengthy discussion on Clubhouse, the audio-based social network, in the early hours of this morning, he asked whether those tuned in wanted to hear from “Vlad the stock impaler”.

The hosts duly unmuted Tenev, 33, who described receiving an unusually large deposit request of $3 billion from Robinhood’s clearing agency before the American stock market opened for trading on Thursday.

Such brokerages are required to hold deposit accounts with clearing houses, due to a delay between when users invest in stocks and when their money is exchanged for securities.

The same day Robinhood sparked anger among the day traders who had flocked to its platform by preventing them from buying more shares in companies they had spent days targeting, such as Gamestop, the phone maker Nokia and AMC Entertainment, the cinema operator behind Odeon.

Musk, 49, asked Tenev whether he sold his users “down the river” or had “no choice” but to enforce the bans. “If you had no choice, that’s understandable,” he declared, “but then we got to find out why you have no choice.”

While Tenev suggested Musk was drifting towards conspiracy theory, he also agreed that a greater level of transparency was required in how institutions calculated deposit requirements.

Robinhood, which raised over $1 billion from existing investors in an emergency funding round on Thursday, is a California-based financial technology start-up which does not charge commission. It makes money instead by selling customer orders to high-frequency market makers, charging for margin loans and investing unused money in customers accounts.

While several hundred thousand people signed up ahead of a planned British launch last year, the company shelved its planned arrival indefinitely to focus on its American operation.

Its executives have scrambled in recent days to respond to an onslaught of criticism from their users over the restrictions. Gamestop, AMC, Nokia and Blackberry are among the eight stocks where users’ buying options remained limited on Monday.

Paul Waine
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Re: The GameStop phenomenon

Post by Paul Waine » Mon Feb 01, 2021 6:11 pm

Wallstreetbets traders are simply part of a far more dangerous trend

Patrick Hosking, Financial Editor - Monday February 01 2021, 5.00pm, The Times

In the long run the share market is a weighing machine, but in the short run it is a voting machine. The economist Benjamin Graham’s observation has never seemed more apt when examining the Wallstreetbets phenomenon. The sheer volume of buying and selling orders is determining prices, whether of silver or Gamestop shares or bitcoin. Who cares for now about weighing up the fundamentals?

This is a gigantic momentum play. Traders are succumbing to the Greater Fool delusion — that there will always be someone to whom one can offload one’s position. “As long as the music is playing, you’ve got to get up and dance,” said Chuck Prince, former Citigroup boss, about continuing to place bets on subprime loans to the bitter end in 2008.

A not dissimilar philosophy is pervasive in the Wallstreetbets chatroom. Every day that brings more trading profits — on paper at least — strengthens the conviction of many of the 7.8 million self-styled “degenerates” on the site that they do indeed have a golden touch. Momentum works . . . right up to the point when it doesn’t.

To portray this phenomenon as ordinary Joes and Josephines sticking it to Wall Street is a ludicrous over-simplification. A couple of hedge funds have been carried out whimpering, yes, but the great majority of the wholesale finance industry — both on Wall Street and in the City of London — is loving this. Nothing boosts bonuses quite like high volumes, rising customer numbers and intense volatility.

Meanwhile, the anonymity of the Reddit site and impossibility of verifying anything posted on it makes it pretty much the perfect medium for manipulating and/or being manipulated. The meme-creating users shouting about “f***ing the suits” and democratising finance could just as easily be desk heads at Goldman Sachs and JP Morgan as novices from the boondocks, for all we know.

The absence of reliable information is weird for an industry built on dispassionate data. Elon Musk, the patron saint of the movement, is allowed to tweet “GameStonk!” or “#Bitcoin” to his 44.7 million followers, both of which turned out to be market-moving utterances in the past few days, but he doesn’t have to disclose what his own personal position, if any, is in these assets.

We are, with the Gamestop phenomenon, witnessing a bubble. It is down to the potent effects of both technology and lockdown. Fast, cheap and reliable technology is behind not only the creation of accessible and low-cost trading sites like Robinhood, but also the online chatrooms like Wallstreetbets, which stoke the hysteria. Orchestrating thousands of people to instantaneously place the same trade, and so execute an impeccable short squeeze, for example, suddenly becomes feasible.

Lockdown too has surely played a large part in intensifying the phenomenon. It has created the boredom on which short-term trading thrives. It also means so many people are working from home, unsupervised. With no danger of the boss creeping up from behind unexpectedly, trading from home becomes much simpler. One wonders how many City and Wall Street workers, who are normally severely restricted from personal investing, are doing their own trading, knowing that they won’t be detected.

But it would be silly not to recognise that this is a smallish bubble on top of a much bigger bubble in financial markets more generally. How much of the extreme leverage in the out-of-the-money call options bought by the Reddit army and tolerated by the clearing houses that process their trades is made possible because interest rates are zero and liquidity plentiful?

How much of the retail trader optimism has been generated by a Wall Street that manages to smash records in the middle of a plague that has shut down large chunks of the underlying economy? The corollary of real interest rates being sent to zero is that asset values can surge to infinity — in theory anyway.

We are now witnessing “perhaps the biggest disconnect in history between financial markets and the real economy”, according to Mohamed El-Erian, the economist and former head of the bond investing colossus Pimco, in a recent talk to the Centre for the Study of Financial Innovation.

The world’s central banks have not only cut official rates to zero, they have also resorted to unprecedented levels of money printing and bond buying. Quantitative easing by the US Federal Reserve, European Central Bank, Bank of Japan and Bank of England has totalled $4.8 trillion over the past year. That is equivalent to 5 per cent of global GDP.

The International Monetary Fund, meanwhile, estimates that governments have in addition put in place fiscal support measures equivalent to 12 per cent of GDP. (They include those $600 stimulus cheques being sent to households across America and in some cases recycled into Robinhood accounts.)

According to El-Erian, this is a bubble, but a “rational bubble”, because of the way central banks have conditioned the markets always to expect more ample and predictable infusions of liquidity. The share and bond markets have become like a spoiled child, always given more sweets in the face of any setback, says El-Erian.

Should we really be surprised that youngsters on Wallstreetbets see their position-taking as rational one-way bets when the sweetshop-owning grown-ups push out more candy in response to every wobble?

Central banks remain terrified that any serious market reversal could feed through into the real economy, knocking consumer and business confidence at just the wrong moment. But at some point the bigger risk becomes allowing this bubble — as well as the bubble on the bubble — to inflate any further.

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Re: The GameStop phenomenon

Post by Spiral » Mon Feb 01, 2021 7:07 pm

They just like the stock.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Mon Feb 01, 2021 7:15 pm

Several very good articles there. Thank you for sharing.

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Re: The GameStop phenomenon

Post by Spiral » Mon Feb 01, 2021 7:49 pm

State of play:

Silver opened at $27.75, dipped, currently sat at $26.90. No short squeeze. It was all bull$hit. Reddit weren't having it. They ignored silver, because they realised it was a scam designed to move them on from GME.

GME opened at $316.56, it's been swinging up and down more than my imaginary girlfriend's moods. Currently at $246.82 (though that'll change by the time I've finished typing this sentence). But people are looking at the trade volume estimates, and they've noticed hardly any trades happening compared to other popular stocks, and especially for one as volatile as GME. So what's up? Why's the price down? It isn't because everyone is running away from GME, because the volumes are too low for that to be happening. It's because the hedge funds (you'd have to imagine Citadel and Melvin, those with skin in the game and who need the price to drop to recoup their losses) are just constantly trading very small numbers of stocks back and forth between themselves to dip the price. Screenshots posted online show that some of the bids are in fractions of cents (like $280.99857 as a hypothetical example, which humans don't do), which points towards it being algorithm-driven high frequency trades between hedge funds, bidding gradually lower and lower back and forth in an attempt to trick the pricing algorithms into thinking there's a firesale, thus attempting to drop the price and incite a panic among real people, the retail traders (reddit), to get them to sell, but like with the silver scam, reddit isn't having it. For the most part they aren't selling, or at least not on a scale sufficient to cause the bubble to burst. In fact, some have swooped in to buy cheaper after the dip in price.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Mon Feb 01, 2021 9:56 pm

Spiral wrote:
Mon Feb 01, 2021 7:49 pm
State of play:

Silver opened at $27.75, dipped, currently sat at $26.90. No short squeeze. It was all bull$hit. Reddit weren't having it. They ignored silver, because they realised it was a scam designed to move them on from GME.

GME opened at $316.56, it's been swinging up and down more than my imaginary girlfriend's moods. Currently at $246.82 (though that'll change by the time I've finished typing this sentence). But people are looking at the trade volume estimates, and they've noticed hardly any trades happening compared to other popular stocks, and especially for one as volatile as GME. So what's up? Why's the price down? It isn't because everyone is running away from GME, because the volumes are too low for that to be happening. It's because the hedge funds (you'd have to imagine Citadel and Melvin, those with skin in the game and who need the price to drop to recoup their losses) are just constantly trading very small numbers of stocks back and forth between themselves to dip the price. Screenshots posted online show that some of the bids are in fractions of cents (like $280.99857 as a hypothetical example, which humans don't do), which points towards it being algorithm-driven high frequency trades between hedge funds, bidding gradually lower and lower back and forth in an attempt to trick the pricing algorithms into thinking there's a firesale, thus attempting to drop the price and incite a panic among real people, the retail traders (reddit), to get them to sell, but like with the silver scam, reddit isn't having it. For the most part they aren't selling, or at least not on a scale sufficient to cause the bubble to burst. In fact, some have swooped in to buy cheaper after the dip in price.
I think it’s very interesting watching from the sidelines, even the media was saying they were buying Silver. The expert on Bloomberg questioned it as a good idea. Because it was not them.

Not sure they will tricked so easily.

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Re: The GameStop phenomenon

Post by willsclarets » Tue Feb 02, 2021 12:52 am

Spiral wrote:
Mon Feb 01, 2021 7:49 pm
State of play:

Silver opened at $27.75, dipped, currently sat at $26.90. No short squeeze. It was all bull$hit. Reddit weren't having it. They ignored silver, because they realised it was a scam designed to move them on from GME.

GME opened at $316.56, it's been swinging up and down more than my imaginary girlfriend's moods. Currently at $246.82 (though that'll change by the time I've finished typing this sentence). But people are looking at the trade volume estimates, and they've noticed hardly any trades happening compared to other popular stocks, and especially for one as volatile as GME. So what's up? Why's the price down? It isn't because everyone is running away from GME, because the volumes are too low for that to be happening. It's because the hedge funds (you'd have to imagine Citadel and Melvin, those with skin in the game and who need the price to drop to recoup their losses) are just constantly trading very small numbers of stocks back and forth between themselves to dip the price. Screenshots posted online show that some of the bids are in fractions of cents (like $280.99857 as a hypothetical example, which humans don't do), which points towards it being algorithm-driven high frequency trades between hedge funds, bidding gradually lower and lower back and forth in an attempt to trick the pricing algorithms into thinking there's a firesale, thus attempting to drop the price and incite a panic among real people, the retail traders (reddit), to get them to sell, but like with the silver scam, reddit isn't having it. For the most part they aren't selling, or at least not on a scale sufficient to cause the bubble to burst. In fact, some have swooped in to buy cheaper after the dip in price.
This is pure speculation. A low volume pull back could easily down to those with long positions taking weaker profits. Just because everyone on a reddit thread is saying "not selling till we hit 10,000", that has no bearing on what the population are doing. I'm not saying your version of events can't be true, I wouldn't put anything past them. But you can't know if people are selling off just because they say they aren't.

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Re: The GameStop phenomenon

Post by RVclaret » Tue Feb 02, 2021 4:04 am

GME now trading at 180 after hours. A lot of people are going to lose a lot of money on this. This will lead to lead to further regulation to protect the 'little guy' in the US. Which will then lead to the markets being even harder to access for the 'little guy' (e.g. minimum account sizes, evidence of experience in the industry/knowledge). ASIC are already doing that here in Australia from March by reducing leverage on derivative products.

Just because guys behind usernames on Reddit/WSB are saying to HOLD and MOON it doesn't mean they haven't already sold or wanting to sell.

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Re: The GameStop phenomenon

Post by Spiral » Tue Feb 02, 2021 2:56 pm

RVclaret wrote:
Tue Feb 02, 2021 4:04 am
GME now trading at 180 after hours. A lot of people are going to lose a lot of money on this. This will lead to lead to further regulation to protect the 'little guy' in the US. Which will then lead to the markets being even harder to access for the 'little guy' (e.g. minimum account sizes, evidence of experience in the industry/knowledge). ASIC are already doing that here in Australia from March by reducing leverage on derivative products.

Just because guys behind usernames on Reddit/WSB are saying to HOLD and MOON it doesn't mean they haven't already sold or wanting to sell.
The real profit is the friends you make along the way.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Tue Feb 02, 2021 6:41 pm

RVclaret wrote:
Tue Feb 02, 2021 4:04 am
GME now trading at 180 after hours. A lot of people are going to lose a lot of money on this. This will lead to lead to further regulation to protect the 'little guy' in the US. Which will then lead to the markets being even harder to access for the 'little guy' (e.g. minimum account sizes, evidence of experience in the industry/knowledge). ASIC are already doing that here in Australia from March by reducing leverage on derivative products.

Just because guys behind usernames on Reddit/WSB are saying to HOLD and MOON it doesn't mean they haven't already sold or wanting to sell.
I think the main guys know what they are doing.
GameStop was shorted by 140% of the total shares, those people have got out of the short position and it’s down to 38% shorted.

The Reddit guys didn’t buy the Silver bluff.

Bloomberg saying they found the new target that’s heavily shorted but I missed it’s name.

I think they already made their point to be fair.

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Re: The GameStop phenomenon

Post by Spiral » Tue Feb 02, 2021 7:34 pm

If, for the sake of argument, we take it as read that a significant number of folks who jumped on the bandwagon through all the hype have sold in the last two days (which might or might not be the case, but it's possible), but also that there's a substantial core of WSB investors who are holding (which volume suggests could be the case, but I'm not asserting that), then it means the real hiccup to the collectivised investment strategy was Robinhood's blocking of buys of GME last Thursday and later setting buy limits (for no other reason that they didn't have the capital to cover the kind of volume they were dealing with last week), meaning the tactic WSB expected to deploy in response to the somewhat predicable short ladder attack (predictable to someone who knows what they're talking about, not predictable to me!) — to buy the dip — was hamstrung by their broker stopping them from doing just that. And indeed, if I'm not mistaken, WSB were buying the dip during other short ladders all last week up until Robinhood's halt meant they no longer could.

If your strategy on a long position involves buying at low price 'X' but the thing stopping you from buying when it drops to 'X' is not a loss of confidence in the stock, but rather that you simply don't have access to the buy market, then it's a technical road block; it doesn't necessarily mean the stock is plummeting in response to investor sentiment, but rather, demand isn't being realised because the broker isn't doing its job properly. Right about now people should (or otherwise would) be scooping up GME at its dip price because the hedge funds will at some point need to cover their shorts and WSB will be one of the biggest seller in town, putting WSB in a good position, but they literally can't do that just now because their broker (or brokers) are preventing them. Apparently lots of people have been switching to other bigger brokers, but it apparently takes just under a week to shift your money over to a new broker. It's possible that when WSB users are finally set up with their new brokers they will buy the dip, pushing back on the short ladder the hedge funds have been deploying (low volume back-and-forth bidding between themselves to drop the price in order to incite a panic), and if WBS holds what they have and buys the dip (as per what many of them believe to be logical), the price will rise again. This could all be nonsense, of course, but it'll be interesting to see what happens late this week and into next week when WSB can access the buy markets again, assuming of course that what lots of people are posting about moving to new brokers is real.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Tue Feb 02, 2021 9:57 pm

Spiral wrote:
Tue Feb 02, 2021 7:34 pm
If, for the sake of argument, we take it as read that a significant number of folks who jumped on the bandwagon through all the hype have sold in the last two days (which might or might not be the case, but it's possible), but also that there's a substantial core of WSB investors who are holding (which volume suggests could be the case, but I'm not asserting that), then it means the real hiccup to the collectivised investment strategy was Robinhood's blocking of buys of GME last Thursday and later setting buy limits (for no other reason that they didn't have the capital to cover the kind of volume they were dealing with last week), meaning the tactic WSB expected to deploy in response to the somewhat predicable short ladder attack (predictable to someone who knows what they're talking about, not predictable to me!) — to buy the dip — was hamstrung by their broker stopping them from doing just that. And indeed, if I'm not mistaken, WSB were buying the dip during other short ladders all last week up until Robinhood's halt meant they no longer could.

If your strategy on a long position involves buying at low price 'X' but the thing stopping you from buying when it drops to 'X' is not a loss of confidence in the stock, but rather that you simply don't have access to the buy market, then it's a technical road block; it doesn't necessarily mean the stock is plummeting in response to investor sentiment, but rather, demand isn't being realised because the broker isn't doing its job properly. Right about now people should (or otherwise would) be scooping up GME at its dip price because the hedge funds will at some point need to cover their shorts and WSB will be one of the biggest seller in town, putting WSB in a good position, but they literally can't do that just now because their broker (or brokers) are preventing them. Apparently lots of people have been switching to other bigger brokers, but it apparently takes just under a week to shift your money over to a new broker. It's possible that when WSB users are finally set up with their new brokers they will buy the dip, pushing back on the short ladder the hedge funds have been deploying (low volume back-and-forth bidding between themselves to drop the price in order to incite a panic), and if WBS holds what they have and buys the dip (as per what many of them believe to be logical), the price will rise again. This could all be nonsense, of course, but it'll be interesting to see what happens late this week and into next week when WSB can access the buy markets again, assuming of course that what lots of people are posting about moving to new brokers is real.
As I mentioned, it appears the main players have got out of their short positions.

When the Reddit guys attacked GameStop it was 140% shorted, it’s now only 38%.

They didn’t fall for the silver scam.

Bloomberg suggested they moved to a new company which was heavily shorted. I didn’t catch the name.

What you have said above is very true. They have been using a commission free platform but they ran out of their credit facility. Bigger investment houses will not have similar issues, but they are likely to restrict trades if they have too.

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Re: The GameStop phenomenon

Post by scouseclaret » Thu Feb 18, 2021 3:48 pm

For all those vigilantes who were "socking it to the Man", here's a fund manager (Bill Gross) who made $10m out of was must've been the most obvious short in the history of markets (even though he admits to getting his timing wrong)...

CS: Can we talk about GameStop? Can we talk about what you witnessed there? One of the notes that Seth [Lublove, Bill Gross’s communications adviser] sent me it seemed to be that you were not surprised by the way it gone on. You said that you would support the good guys on this occasion but you’re also quite critical of Elon Musk and other people who, perhaps, should have known better or more sophisticated investors, if I’ve interpreted that right?

BG: Well to be fair, all of our opinions are based upon what we read and hear, whether social media or in the New York Times or whatever. Before I made my comments on the social aspect I I read that and it seemed logical and still seems logical that you know, Reddit and Robinhood and this joint movement it’s different than what we had.

I’m not so sure that that all these young people, or older people if they’re in there too, are really doing it the sock it to the hedge funds. You know, that’s what you see on the trails - sock it to the man. When you really get down to it, somebody’s doing it to make money and it’s not the same as storming the capital but I think there is an aspect to and I think that there has been a change because the ability of social media to condense and to egg on their fellow investors at least for a few days as we saw with GameStop.

But I do think their strategy, if indeed it was their strategy to attack and squeeze shorts, certainly GameStop was a good one. I was in the thrall of the week I guess it brought back you know, all of the things that sort of forgotten.

The fact that when you short something you actually got to deliver something and most people think it’s like going to a bookie and making a bet but you got to find those shares. I called my broker and you know, checked on what the interest rate is on the borrowing the shares and it was 5, 10, 15, 25, 30 and they could only promise 1000 shares.

I simply got a sense that you know, the Robinhood traders and Reddit had picked on the right stock despite the fact that the company was... well we’ve got three GameStop stores up here in Palm Springs and I you know, I have a sense fundamentally that you know, it’s a it’s a dying business. They picked on the right thing if they wanted to pick on something and before that tell you the truth I you know, I am well aware of the Spacs, but I wasn’t aware of Reddit and this potential movement.

Anyway I can tell you what my experience was and so I can I’m a bond guy and my glass is typically half empty when it comes to investing. I’m in a position to be conservative as opposed to being oppressive at 76 years old. I saw the headlines here and I saw the situation but I was really not expecting a stock to go from 10, 20, 30, 40 100, 200, 300 and 400 within the space of a few days. So, to be fair, I was using options and I joined that crowd to some extent.

I hold mostly shares but my little Bloomberg here is a pretty good advantage in terms of optionality and volatility and historical touches, numbers or even tracking the current volatility of GameStop at any particular moment. So I knew I had an advantage over Reddit and the boys. But I, you know, I got into early. I got short too early.

I got short around 150 or 100. Yeah, and some decent size, I guess, you know, it wasn’t one of the biggies in the hedge fund, but I was losing millions of dollars and that’s not a good feeling when you go to bed. Matter of fact, you wake up three or four times in the middle of night, and you check out GameStop on the black market.

I always remember to afraid phrase by Bernard Baruch back in the late 20s. He was a famous US investor. He supposedly shorted before the crash. But in one of his books, he always said sell to your sleeping point. I was going: “Well, I’m certainly not at the sleeping point.” I’m getting up. So I said, I suppose he was right, maybe I should get out.

And I go: “No, this stocks really worth five bucks”. What I thought, and when I think the Robinhood and Reddit people don’t understand is that is this social media is hard to not only coordinate but to move together. It’s not like the storming the Capitol for a few hours, where everybody got into a frenzy, and everybody did the same thing.

The social media, they can text each other and say stick with it and don’t sell and so on, so on, so on. But, you know, human nature is that somebody is going to cheat. Somebody is going to get out. I suppose some people did, so good for them. So I said: “No, I’m not regulated here, like, some of the hedge funds and brokers aren’t calling me for margin, and so on, and so on, and so on”.

So, you know, at 400 I think said: “Hell no”. So I doubled up to catch up, which was a really ballsy move, I found over the years, I’m just like everybody else, I get afraid at the wrong time when I get bullish at the peak times, I’m just a person with the same emotions, but I you know...

I made a lot of money. Maybe, maybe 10 [million dollars]. But I was down 10, and maybe down 15. But it was a nice intellectual, non-emotional moment for me in which I correctly analysed the social aspects and the fact that people would turn on the group itself, before others thought they were going to sell and the volatility being so high priced at, so it was really hard to win.

(From Citywire)

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Re: The GameStop phenomenon

Post by Lowbankclaret » Thu Feb 18, 2021 7:32 pm

Watching the committee question all the participants in America.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Thu Feb 18, 2021 10:44 pm

Well that’s 6 hours of my life I will not get back.

My main takes from it, Robinhood ran out of credit due to the two days from a trade being executed and being completed.

They stopped people being allowed to buy and allowed people to sell, which did mean they needed to raise less credit. So they kicked the very little people they claim to be the champion of.

Market makers make a lot of lot of money doing illegal stuff in the two day trading window, they make billions and get fined a couple of million hence it just carries on.

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Re: The GameStop phenomenon

Post by scouseclaret » Thu Feb 18, 2021 10:52 pm

Whatever the rights and wrongs of what went on in the market, the basic truth is that a failing company is still a failing company, and sooner or later the stock price was always going back to $20 - probably much lower.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Thu Feb 18, 2021 11:03 pm

Robinhood, CEO, said if instant trades were brought in, they would not have had to stop trading and the other platforms as well. Market makers not happy!
There are significant computing issues to going to instant trading.

All in all it’s all still stacked to the. Money men.

Albe it one hedge fund lost millions.

That CEO did say that no hedge fund would ever short that large amount again.

The fact the GameStop was shorted by 140% was kinda glossed over as blind shorting is illegal, so the total short position was against the law.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Thu Feb 18, 2021 11:09 pm

scouseclaret wrote:
Thu Feb 18, 2021 10:52 pm
Whatever the rights and wrongs of what went on in the market, the basic truth is that a failing company is still a failing company, and sooner or later the stock price was always going back to $20 - probably much lower.
That kind of becomes irrelevant under current market rules.

And that’s the point big money funds have been exploiting for years, this time they got double sixed.

Do you understand how shorting works??
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Re: The GameStop phenomenon

Post by Lowbankclaret » Thu Feb 18, 2021 11:37 pm

scouseclaret wrote:
Thu Feb 18, 2021 10:52 pm
Whatever the rights and wrongs of what went on in the market, the basic truth is that a failing company is still a failing company, and sooner or later the stock price was always going back to $20 - probably much lower.
Disclaimer, never done shorting so no expert, but the basics.

You agree to borrow shares at a price, normally from a pension fund etc and pay them a fee for borrowing them.

After a fixed term you buy them back and give them back, if you bought them lower you pocket the profit without ever owning the shares. If they go up you buy them at a higher price taking a loss and paying the fee.

So here’s the rub, GameStop were $5 dollar shares. Shorted by 140%. So the potential gains were small, but losses were very large if shares went north.

The Reddit guys bought shares using real money to push up the share price, the short sellers are then in a poker game of chicken. As short sellers bought shares to close out the position to give shares back that pushed up the share price. As they had shorted 140% there were not enough shares to buy so it went very very high.

That’s a market trading problem of short selling more shares than are available to buy. Plus it’s illegal, but the money men don’t care as they millions from it.

Once a group of people can identify a share that’s heavily shorted, as long as they can raise its price to start to flush out shorters, it will go exponentially, as gamestop did.

The Reddit guys exploited a tactic the money men have done for years to make money from the poor people who companies were having an issue.

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Re: The GameStop phenomenon

Post by scouseclaret » Fri Feb 19, 2021 12:16 am

Lowbankclaret wrote:
Thu Feb 18, 2021 11:09 pm
That kind of becomes irrelevant under current market rules.

And that’s the point big money funds have been exploiting for years, this time they got double sixed.

Do you understand how shorting works??
Of course I know how shorting works. The point I’m making is that while it may have caused one set of hedgies to lose millions, it simply opened the door to another lot to enrich themselves at the expense of the poor saps who were late to the party. In effect, all the exercise did was to create a massive, short-lived, Ponzi.
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Re: The GameStop phenomenon

Post by Lowbankclaret » Fri Feb 19, 2021 12:23 am

scouseclaret wrote:
Fri Feb 19, 2021 12:16 am
Of course I know how shorting works. The point I’m making is that while it may have caused one set of hedgies to lose millions, it simply opened the door to another lot to enrich themselves at the expense of the poor saps who were late to the party. In effect, all the exercise did was to create a passive, short-lived, Ponzi.
Ok, so it was a short squeeze done by private investors for the first time ever.

The money people don’t like it.

I agree some private investors got burnt, one lad committed suicide.

But the institutions have destroyed hundreds lives for years by shorting.

The very act of Gamestock has brought some balance to the markets, but perhaps you don’t see that.

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Re: The GameStop phenomenon

Post by scouseclaret » Fri Feb 19, 2021 12:44 am

No I don’t, because that is the very opposite of the truth. It brought massive imbalance to the market by ramping up the share price of a failing company which was totally irrational and could never be sustained.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Fri Feb 19, 2021 12:59 am

scouseclaret wrote:
Fri Feb 19, 2021 12:44 am
No I don’t, because that is the very opposite of the truth. It brought massive imbalance to the market by ramping up the share price of a failing company which was totally irrational and could never be sustained.
Not sure you watched the Committee but the a Reddit guy argued that Gamestops move into download of games could give it a massive upside. I will use my ex company Rolls Royce. Based on its financials it’s worth 40p at best. But it’s near £1 because people believe it will go higher when the flying increases. So that’s the deal, short it if you think it going down. Buy if you think it’s going up.

Personally I think it’s going bust. Like I said I do shorts, but buying RR now is like backing a donkey in the 3:30 at York races.

So I don’t agree with your point, shares are based on an opinion now not on fundamentals. The old rules do not count anymore

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Re: The GameStop phenomenon

Post by Burnley Ace » Fri Feb 19, 2021 9:18 am

Lowbankclaret wrote:
Fri Feb 19, 2021 12:23 am
Ok, so it was a short squeeze done by private investors for the first time ever.

The money people don’t like it.

I agree some private investors got burnt, one lad committed suicide.

But the institutions have destroyed hundreds lives for years by shorting.

The very act of Gamestock has brought some balance to the markets, but perhaps you don’t see that.
The money people loved it!! One or two got burnt but hundreds made millions. Do you not think they were shorting as well? Except they weren’t waiting to “go to the moon” they were in and out making a fortune on the back of inexperienced Reddit readers.

What balance has this bought to the market? Do you think the original group that started this on Reddit were just doing it to “stick it to the man” or have they made millions? Best of all the Gov will increase their tax revenue as short term CHT in America is really high!

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Re: The GameStop phenomenon

Post by Paul Waine » Fri Feb 19, 2021 9:54 am

Lowbankclaret wrote:
Thu Feb 18, 2021 11:37 pm
Disclaimer, never done shorting so no expert, but the basics.

You agree to borrow shares at a price, normally from a pension fund etc and pay them a fee for borrowing them.

After a fixed term you buy them back and give them back, if you bought them lower you pocket the profit without ever owning the shares. If they go up you buy them at a higher price taking a loss and paying the fee.

So here’s the rub, GameStop were $5 dollar shares. Shorted by 140%. So the potential gains were small, but losses were very large if shares went north.

The Reddit guys bought shares using real money to push up the share price, the short sellers are then in a poker game of chicken. As short sellers bought shares to close out the position to give shares back that pushed up the share price. As they had shorted 140% there were not enough shares to buy so it went very very high.

That’s a market trading problem of short selling more shares than are available to buy. Plus it’s illegal, but the money men don’t care as they millions from it.

Once a group of people can identify a share that’s heavily shorted, as long as they can raise its price to start to flush out shorters, it will go exponentially, as gamestop did.

The Reddit guys exploited a tactic the money men have done for years to make money from the poor people who companies were having an issue.
Lowbankclaret wrote:
Fri Feb 19, 2021 12:59 am

Not sure you watched the Committee but the a Reddit guy argued that Gamestops move into download of games could give it a massive upside. I will use my ex company Rolls Royce. Based on its financials it’s worth 40p at best. But it’s near £1 because people believe it will go higher when the flying increases. So that’s the deal, short it if you think it going down. Buy if you think it’s going up.

Personally I think it’s going bust. Like I said I do shorts, but buying RR now is like backing a donkey in the 3:30 at York races.

So I don’t agree with your point, shares are based on an opinion now not on fundamentals. The old rules do not count anymore
Hi Lowbank, so which is it? In your first post you write "Disclaimer, never done shorting so no expert, but the basics." In your second post you write "Like I said I do shorts." Did you mean "I never do shorts?"

Your explanation of shorts misses out the first and most important step: the sale of a security to a buyer, when you yourself do not already own the security you are selling. That's where the borrowing comes in from someone who does hold that security and is willing to lend it to someone who wants to take a short position. Of course, you sell at the prevailing market price, similarly you borrow at the prevailing market price. Technically, the "borrow" is legally the buying of the shares from the original holder with an agreement to return the same number of shares in return for paying a "borrowing fee."

I'm not sure what you mean by saying that "shares are based on an opinion now not on fundamentals." In one sense it is always "opinions" about the future that have determined share prices, and the fundamentals of CAPM have always held assumptions about the appropriate discount rate that captures the riskiness and uncertainties of future events. Do you think the Reddit guys got the valuation of GameStop right? Those that were buying at $5? $50? $100? $400?

I'm confident that the old rules continue to count, it's just that we've seen a particularly egregious demonstration that social media can be used to manipulate people to participate in a concert party. Concert parties themselves, however, aren't new and nor is market manipulation by people who have got their own wealth and own interests first and foremost in their plans.

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Re: The GameStop phenomenon

Post by RVclaret » Fri Feb 19, 2021 12:25 pm

Remember when Spiral called me a loon and ‘dunce’ for saying some of the Reditters may find themselves in a trouble for illegal pumping of GME... :)

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Re: The GameStop phenomenon

Post by Lowbankclaret » Fri Feb 19, 2021 8:07 pm

Paul Waine wrote:
Fri Feb 19, 2021 9:54 am
Hi Lowbank, so which is it? In your first post you write "Disclaimer, never done shorting so no expert, but the basics." In your second post you write "Like I said I do shorts." Did you mean "I never do shorts?"

Your explanation of shorts misses out the first and most important step: the sale of a security to a buyer, when you yourself do not already own the security you are selling. That's where the borrowing comes in from someone who does hold that security and is willing to lend it to someone who wants to take a short position. Of course, you sell at the prevailing market price, similarly you borrow at the prevailing market price. Technically, the "borrow" is legally the buying of the shares from the original holder with an agreement to return the same number of shares in return for paying a "borrowing fee."

I'm not sure what you mean by saying that "shares are based on an opinion now not on fundamentals." In one sense it is always "opinions" about the future that have determined share prices, and the fundamentals of CAPM have always held assumptions about the appropriate discount rate that captures the riskiness and uncertainties of future events. Do you think the Reddit guys got the valuation of GameStop right? Those that were buying at $5? $50? $100? $400?

Apologies, I have never done shorting and never will. Typing to fast and not checking my post before pressing send.

What I got from the committee was not much but there is a lack of control of shorting. Legally you can only short 100% of the number of shares in a company. GameStop was shorted to 140% , that was illegal. But no one controls it, people must allowing their shares to be borrowed more than once and probably multiple times. Being shorted to 140% , how do those people in a short position close out their positions. There are not enough shares available to buy for them to be able to close out the positions.

That obviously means the share price has to rise exponentially . I assume that’s why just about every platform stop people being able to buy GameStop. That protected the funds who were shorted from going bust.

One small change to the rules and significantly larger fines .

Shares can only be lent to one other person or fund. ( this might be rule but was not discussed at the hearing)
Electronic control of lending of shares and borrowing for shorting.

AnotherGamestop could not happen again. A short squeeze could but never could a share be shorted by over 100%.
I'm confident that the old rules continue to count, it's just that we've seen a particularly egregious demonstration that social media can be used to manipulate people to participate in a concert party. Concert parties themselves, however, aren't new and nor is market manipulation by people who have got their own wealth and own interests first and foremost in their plans.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Fri Feb 19, 2021 8:10 pm

RVclaret wrote:
Fri Feb 19, 2021 12:25 pm
Remember when Spiral called me a loon and ‘dunce’ for saying some of the Reditters may find themselves in a trouble for illegal pumping of GME... :)
It didn’t seem that that was a likely outcome.

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Re: The GameStop phenomenon

Post by Spiral » Fri Feb 19, 2021 8:12 pm

RVclaret wrote:
Fri Feb 19, 2021 12:25 pm
Remember when Spiral called me a loon and ‘dunce’ for saying some of the Reditters may find themselves in a trouble for illegal pumping of GME... :)
Oh no, you've got me all wrong. I didn't specify what exactly made you a dunce.

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Re: The GameStop phenomenon

Post by Spiral » Fri Feb 19, 2021 8:20 pm

By the way, let's wait to see if any indictments are actually handed down (there won't be, not to retail traders) before asserting that WSB did anything "illegal".

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Re: The GameStop phenomenon

Post by Lowbankclaret » Fri Feb 19, 2021 8:21 pm

Burnley Ace wrote:
Fri Feb 19, 2021 9:18 am
The money people loved it!! One or two got burnt but hundreds made millions. Do you not think they were shorting as well? Except they weren’t waiting to “go to the moon” they were in and out making a fortune on the back of inexperienced Reddit readers.

What balance has this bought to the market? Do you think the original group that started this on Reddit were just doing it to “stick it to the man” or have they made millions? Best of all the Gov will increase their tax revenue as short term CHT in America is really high!
I think the Reddit leader bought $50k of GameStop starting in late 2019 when the shares where at $5 each, bought in several increments. I think it was mentioned he made over $50 million dollars.

I don’t think they shorted the share and my previous post talks about the short position , which was illegal what really caused the issue. That needs to be fixed.

Not just Reddit users lost money, many people who had money invested in the hedge funds lost money as well.

The control of shorting needs to be changed as what happened was illegal but no one controls it and the funds break the rules knowing the very small fine will be magnitudes less than the profits they make.

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Re: The GameStop phenomenon

Post by Paul Waine » Fri Feb 19, 2021 11:28 pm

[quote wrote:Lowbankclaret wrote:]

Apologies, I have never done shorting and never will. Typing to fast and not checking my post before pressing send.

What I got from the committee was not much but there is a lack of control of shorting. Legally you can only short 100% of the number of shares in a company. GameStop was shorted to 140% , that was illegal. But no one controls it, people must allowing their shares to be borrowed more than once and probably multiple times. Being shorted to 140% , how do those people in a short position close out their positions. There are not enough shares available to buy for them to be able to close out the positions.

That obviously means the share price has to rise exponentially . I assume that’s why just about every platform stop people being able to buy GameStop. That protected the funds who were shorted from going bust.

One small change to the rules and significantly larger fines .

Shares can only be lent to one other person or fund. ( this might be rule but was not discussed at the hearing)
Electronic control of lending of shares and borrowing for shorting.

Another Gamestop could not happen again. A short squeeze could but never could a share be shorted by over 100%.
Hi Lowbank, Thanks for that. I thought I was guess right that you aren't experienced with shorting.

OK, you say in your post which I'm quoting here (after separating from my earlier post, which your post ended up embedded in...) that "people must allowing their shares to be borrowed more than once and probably multiple times. Being shorted to 140%...".

Let's go back again to how shorting works: the process is: (1) the sale of a security to a buyer, let's call this buyer B when you, the seller, let's call this seller S, does not already own the security S is selling. (2) To do this, S must "borrow" from someone who does hold that security and is willing to lend, let's call this lender L, it to S, so that you can take a short position. (3) But, B must have full legal title to the securities and this can only happen if S has full legal title to transfer to B. To do this, (4) S must legally buy the securities from L and this is the legal effect of the Repo/Reverse Repo Agreement. (5) The other side of the Repo/Reverse Repo Agreement is that S must sell back the equivalent shares to L - and this is where the "idea" that the securities are being "borrowed" whereas legally L has sold the securities to S.

It follows from this that L can only "lend" securities once. It is impossible for the securities to be "lent" more than once.

It also follows from this that there was nothing illegal in the short positions.

So, how do we get to 140%? Derivatives.... in addition to the "physical" transactions in securities, it is possible to trade a wide variety of derivatives, and not limited to "simple" call and put options on buying and selling the securities.

I've not seen any reports on the derivative instruments that were being used to create the 140% short position in GameStop. I imagine there will be some information in the public domain, somewhere.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Sat Feb 20, 2021 12:35 am

Paul Waine wrote:
Fri Feb 19, 2021 11:28 pm
Hi Lowbank, Thanks for that. I thought I was guess right that you aren't experienced with shorting.

OK, you say in your post which I'm quoting here (after separating from my earlier post, which your post ended up embedded in...) that "people must allowing their shares to be borrowed more than once and probably multiple times. Being shorted to 140%...".

Let's go back again to how shorting works: the process is: (1) the sale of a security to a buyer, let's call this buyer B when you, the seller, let's call this seller S, does not already own the security S is selling. (2) To do this, S must "borrow" from someone who does hold that security and is willing to lend, let's call this lender L, it to S, so that you can take a short position. (3) But, B must have full legal title to the securities and this can only happen if S has full legal title to transfer to B. To do this, (4) S must legally buy the securities from L and this is the legal effect of the Repo/Reverse Repo Agreement. (5) The other side of the Repo/Reverse Repo Agreement is that S must sell back the equivalent shares to L - and this is where the "idea" that the securities are being "borrowed" whereas legally L has sold the securities to S.

It follows from this that L can only "lend" securities once. It is impossible for the securities to be "lent" more than once.

It also follows from this that there was nothing illegal in the short positions.

So, how do we get to 140%? Derivatives.... in addition to the "physical" transactions in securities, it is possible to trade a wide variety of derivatives, and not limited to "simple" call and put options on buying and selling the securities.

I've not seen any reports on the derivative instruments that were being used to create the 140% short position in GameStop. I imagine there will be some information in the public domain, somewhere.
It was accepted by the committee that GameStop was shorted by 140%. Shorting greater than 100% is illegal, not sure why you don’t accept that when everyone in the hearing accepted it, plus made sure they provided evidence they were less than 100% shorted.
It was accepted that there is no way to control shorting amounts, the tech does not exist to control it.
It was discussed that fines were so small let’s say breaking the rules was accepted to make great profits.

The whole reason this happened was the age old short squeeze, company was over shorted, ( no **** Sherlock at 140%) they just needed enough money to move the price up. Private investors have been ignored as they didn’t have the money or the organisation to move a share.
The massive increase in private investors and the ability to talk to each other meant they could.
The money people had to shut down the markets to prevent their mates losing their companies.

The committee did ask a lot of questions why private investors were shut out of the markets. The truth is the institutions did it to save themselves as they had got themselves into a check mate position.

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Re: The GameStop phenomenon

Post by Lowbankclaret » Sat Feb 20, 2021 1:07 am

Paul,
I would just like to add. All the participants were under oath at the senate committee.
The CEO of Citadel.
The CEO of Robinhood
The CEO of Melvin funds who list millions of his investors money.
The market expert lawyer.
Plus two others.

All of them agreed and accepted its against the law to short a company over 100%.
Not one gave example how it was possible, they claimed they all had systems to prevent it from happening.

But they did say there were not robust ways to prevent it happening.

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Re: The GameStop phenomenon

Post by Spiral » Wed Mar 10, 2021 8:21 pm

GME hovering just below the price it was trading at before the buy restrictions were put in place late Jan (around the time this thread was started), but has been steadily rising over the last few days following Gamestop's announcement of its commitment to shift to e-commerce. For technical reasons that are beyond my comprehension it seems some HFs aren't so much committed to their short positions as their continued existence being entirely dependent upon it working. In spite of all this, many folks held when the price collapsed, and now a huge short squeeze could be incoming. Some folks are fantasising about 100k a share (nonsense, and systematically not possible, because a short trader would have to declare bankruptcy before paying anywhere near that price to fulfil its short positions) but those retail traders who held when it plummeted to around $40 and/or bought the dip could be about to get very rich. (And the HFs squeezing other HFs' short positions, obviously, but nobody cares about them!)

NewClaret
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Re: The GameStop phenomenon

Post by NewClaret » Wed Mar 10, 2021 9:16 pm

Spiral wrote:
Wed Mar 10, 2021 8:21 pm
GME hovering just below the price it was trading at before the buy restrictions were put in place late Jan (around the time this thread was started), but has been steadily rising over the last few days following Gamestop's announcement of its commitment to shift to e-commerce. For technical reasons that are beyond my comprehension it seems some HFs aren't so much committed to their short positions as their continued existence being entirely dependent upon it working. In spite of all this, many folks held when the price collapsed, and now a huge short squeeze could be incoming. Some folks are fantasising about 100k a share (nonsense, and systematically not possible, because a short trader would have to declare bankruptcy before paying anywhere near that price to fulfil its short positions) but those retail traders who held when it plummeted to around $40 and/or bought the dip could be about to get very rich. (And the HFs squeezing other HFs' short positions, obviously, but nobody cares about them!)
Staggering what’s happening to this stock. Very volition today after hitting ~$350, but if you bought initially and then on the pull back you’d be absolutely laughing.

Lowbankclaret
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Re: The GameStop phenomenon

Post by Lowbankclaret » Wed Mar 10, 2021 9:38 pm

Small company with relatively small volumes, massive shorting that the Reddit picked up on.

As I said early on, I would not get involved.

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