dspp wrote:Abuse of MM privileges by indulging in concerted naked shorting games has been going on a long time. It is regrettable that the SEC appears to be complicit in it by acting so fast to shut down anti-shorting actions by the longs who seek a short-squeeze to redress the balance. If the SEC is right to shut down the wsb-crowd on GME, then presumably the SEC would be right to shut down TLF, TMC, TMF and many other internet forums where people such as me discussed going long on TSLA and thereby cost the shorts about $50bn last year
I've seen a few of your posts on Tesla where you've meticulously laid out your fundamental-based reasoning for your position. That has zero in common with a gang of speculators whose sole intention is to manipulate price such that other participants are forced to buy. The latter is illegal per SEA. No doubt many don't realise it - including virtually everyone on WSB - but that's the case.
Furthermore, there's no "Two Wrongs Make a Right Act 2020" that permits blatant securities manipulation in the belief that some other party might themselves have done something dodgy previously. That way lies anarchy. Any illegalities should be called out.
For some strange reason, "shorting" as a subject seems to raise anger in some people and addle their minds. Shorting is a valuable market function, improving liquidity and aiding price discovery; eg. if a company issues a poor trading statement, shorts covering might be some of the first buyers to step in, enabling longs to exit their positions - you don't hear longs complaining then that they've dealt at a higher price than they would've done in the absence of such short covering demand. Participants providing valuable liquidity when no one else wishes to are rightly rewarded for that service.
Capital markets - and capitalism itself - rely on effective price discovery in order to effeciently allocate capital. If you have crappy companies with sky-high valuations, that enables them to issue shares and raise capital in order to throw at unproductive business models. The more that you misallocate capital in this manner the more that the productivity of your economy becomes impaired. When we as investors are deciding where to place our hard earned, wisely allocating capital is the key thing of value we can be rewarded for. Our capitalist systems relies upon effective allocation, so defending this is critically important.
It's not the purpose of public capital markets to act as a giant multiplayer online battle arena for coordinated gangs of speculators to fight it out attempting to force the other side to "submit". There are laws against this type of behaviour, even if the WSB crew are currently unaware of them. In addition to upending the capital allocation function of markets, this type of activity is absolutely guaranteed to deliver some dreadful to losses to some of the less informed punters drawn in. Hence rules and laws.
Another thing I find odd is the ire directed at hedgies, as if they're somehow preying on the poor. A glance at aggregate hedge fund returns over the past decade vs. stock market returns - particularly when placed in context with their fees - makes it quite clear:
hedgies take from the rich and give to themselves. And the rich, it seems, go along willingly. Some of the guff and ire I've read on WSB doesn't seem to have much basis in reality, or at least not the one I occupy anyway.
What about evil hedgies with their "naked shorts"? Long interest % = Short interest % + 100%, the "100 %" reflecting the free float. The moment that the first share in a company is lent out and sold short, long interest expressed as a % of float becomes >100%. Shock, "naked longs"! Do we see villagers waving pitchforks in response? Nope. Whenever a share is lent out and sold short it becomes "owned" by more than party, but it remains the case that Total long positions - Total shorts = Free float. A share lent out & sold short (and thus purchased) can be lent out again by the next holder, and so on, and if repeated sufficient times can lead to short interest > 100%. At that point, long interest ratio by the identity above will thus be >200%. All legit. "Nothing to see here", angry villagers.