As r/WallStreetBets sent the GameStop stock value up over 1700% in a month or so, the market went into an absolute frenzy leading to a glut of questions and debates (wait for the movie, rights already sold). Putting aside who really got richer — retail investors or market makers and who’re the bad guys — Robinhood, Citadel, Melvin. It’s been fascinating to learn the dynamics — gamma squeeze, short interest, momentum trading, “synthetic longs” in float calculation (naked shorting sprucely?). The 140% SI Float we heard was actually 57% (analytics firm S3 Partners specified it’s the highest SI% Float seen with SI over $100M). Stating simply, SI % Float summation is faulty that doesn’t count in synthetic longs formed by short selling, adding excess liquidity to the market.
Did retail investors manipulate the market? Manipulative traders implicate deception: concerning a company’s performance, or sincere opinion about a company, or the true owner of a share. While this instance was based on identifying a loophole and exploiting it — is it market manipulation? Not entirely. Nevertheless, it clearly brings to light what needs fixing. To note, they were not acting on some vile plan but one based on sharp observation (honing in on a stock that was more than 100% shorted) and sheer enthusiasm, which became viral gaining the momentum.
This should be about fixing the pre-set conditions and mechanics of how things function; it shouldn’t be about gating the retail (free market?). Not to forget, these online communities are highly developed/knowledgeable and are much smarter/more focussed on deep analysis than “smart money”.
For starters, let’s get institutional capital to be fully transparent. To create a level playing field that minimises volatility. The question here is to change — not to save the investors from harm but to reform the way the market works. For the very purpose of improving capital allocation in the economy.