I'm certainly no libertarian, but I fail to see why any regulation is necessary here.
If you're a sophisticated institution and you decide to be short on a position where the aggregate short interest is 100%+ of the float, then you're the proverbial pig that deserves to be slaughtered. It's the classic greed described by Buffett: Risking what you have and need in a vain effort to gain what you don't have and don't need.
Short squeezes have been happening for decades. What's different now is that it's retail orchestrating the short squeeze and thus the "wrong kind" of person is making money from the trade. The calls for regulation are being driven by envy, pure and simple.
+1
It's not just short-squeezes though, right? I mean that exacerbated this, but short squeeze lifted the shares from $140 to $300. It was redditors and Gamma that lifted it from $4 to $140. The idea that a board of 2+ million members can be mobilized/weaponized to lever the F up and distort the trading of ANY asset/market IS problematic - for businesses, for pensions, for markets in general.
What if Pepsi makes a political donation reddit decides it doesn't like and they short its shares into oblivion taking down pensioners assets with it? Is that ok?
What if these guys get into FX futures/future options and all simultaneously enter longs into the EUR/USD pairing and blow the EUR USD pair to 3-4 USD temporarily? You don't think that could be problematic for businesses all over the world?
What if they decide that they all think the Fed is exploding the dollar and decide to drive oil into the stratosphere by all loading into the front-month contract (the exact opposite of negative prices in April)?
These things matter. Yes - those are all bigger markets. But it's a growing community now (1+ million recent member adds). More on the way. And HFT/trend follower/momo strategies that will ride their coattails. This is a HUGE pile of liquidity that can really slosh anywhere it wants that that is NOT healthy.
I wonder how you propose to regulate this.
Forget concerted shorting.
How do you propose to regulate people going long because they read something somewhere?
Are you proposing to ban social networks?
Are you proposing to ban/moderate posts about stocks? Based on what metrics?
If Jim Cramer or Chamath or Elon posts to use Signal and people buy unrelated stock to stratosphere how are you going to regulate that?
Ban every post that mentions a stock that reaches more than 1M people? How?
Just FYI, there is no cartel or monopoly here. There is no agreement that WSB bros will actually buy anything. There is no central authority that makes people buy GME. There is no single person who "did it". And even if there was - as is the case with Chamath or Elon - what exactly is their crime in saying "buy GME"?
You might be able to persuade regulators to ban options (not a big loss IMO), although I'm sure there's gonna be yuge pushback on this. Or maybe change some rules to make gamma squeeze unlikely. But I don't see how you expect to prevent millions of people from deciding that they want to buy some crappy stonk at the same time.
@Sanjeev: if this crosses no-politics line, please delete and let me know.
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