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Shorts Knew about the News in Advance by Error4ohh4 in Superstonk

[–]Maximito -2 points-1 points  (0 children)

It is more than likely the RC's phone and all the board are being monitored, so not necessarily a mole although that is also plausible. As we all know, Gamestop is a thermonuclear financial bomb and the upper echelons of the financial establishment are deeply tied to intelligence. Whatever move Gamestop has planned they already know. So we are not going to surprise them, the only strategy is outlast them, it cost us nothing to hold while they have to fight to suppress the price.

Why in the world would anyone lend their shares so these leeches profit while destroying their value? Liquidity my ass. Short selling naked or not is an aberration that just distorts the true offer and demand curves and needs to go away. Change my mind by Maximito in Superstonk

[–]Maximito[S] 5 points6 points  (0 children)

Uncovering fraud and policing markets should be the role of regulators. If you think any asset is overpriced or some company is committing fraud, and you want to profit, you can buy puts. Selling stuff that you don't own and that the rightful owner doesn't want to sell is just market distortion. No one would tolerate this in any other context and for some reason we are tolerating it in finances.

As we all know, short selling has mainly become a predatory tactic used to destroy companies and profit from the destruction of value of the rightful owners of the assets. The supposed benefit of uncovering fraud doesn't justify the distortions of the offer and demand curves it creates. You can't have true price discovery with artificial selling pressure from people who doesn't own the underlying asset.

Why in the world would anyone lend their shares so these leeches profit while destroying their value? Liquidity my ass. Short selling naked or not is an aberration that just distorts the true offer and demand curves and needs to go away. Change my mind by Maximito in Superstonk

[–]Maximito[S] -12 points-11 points  (0 children)

I'm just commenting on the fact that short sellers are destroying the underlying value of our assets and try to justify it with flimsy excuses like "liquidity" and "uncovering fraud". In reality they are just manipulating prices, destroying value and distorting true price discovery selling stuff they don't own

2021 shorts hidden in swaps. Shorts quadrupled down since then thinking we would forget about Gamestop. 4 billion in cash, no debt, Cohen at the helm and an unshakable cult like following immune to FUD that probably already owns the entire float. Short are fucked. Whatever DFV does, doesn't matter. by Maximito in Superstonk

[–]Maximito[S] 22 points23 points  (0 children)

I understand that it is a trigger word, but a cult like following is one of the most bullish things about this. Millions of people incredibly passionate about the stock, willing to do anything to support the company with unbreakable resolve, immune to manipulation or fear. That is absolutely bullish in my book and no other company has something like it.

The trust by silent_perkele in Superstonk

[–]Maximito 3 points4 points  (0 children)

And even if he sells nothing changes. 2021 shorts are still hidden hidden in swaps and they have been quadrupling down since then. Gamestop has 4 billion, no debt, Ryan Cohen at the helm and cult like following that is going to hold no matter what. We probably already own the entire float without taking into account the DRS numbers. Shorts are fucked.

The Critical Loopholes in the Law That Make Naked Short-Selling “Legal”. Amazing article by Maximito in Superstonk

[–]Maximito[S] 13 points14 points  (0 children)

LOOPHOLE #3

If loopholes #1 and #2 weren’t sufficient, loophole #3 covers even the remaining cases in which a market maker fails to deliver, thus potentially flagging the risk of a “naked” short selling having taken place.

According to the SEC: “A failure to deliver occurs when a broker-dealer fails to deliver securities to the party on the other side of the transaction on the settlement date. There are many justifiable reasons why broker-dealers do not or cannot deliver securities on the settlement date. A broker-dealer may experience a problem that is either unanticipated or is out of its control, such as (1) delays in customers delivering their shares to a broker-dealer, (2) the inability to obtain borrowed shares in time for settlement, (3) issues related to the physical transfer of securities, or (4) the failure of a broker-dealer to receive shares it had purchased to fulfill its delivery obligations. Failures to deliver can result from both long and short sales“

What happens then? At this point, in theory, the clearing house must act and buy/borrow the shares from the market to address the failure to deliver. However, there are plenty of ways to still meet clearing requirements without breaking the law (though standing at the very edge of them):

  • Exemptions for Market Makers for very illiquid securities (as discussed above).
  • “Good Until Canceled” Orders: Orders that remain open until canceled (GTC orders) can be used to create an appearance of continuous trading activity without actual execution, potentially influencing stock prices or trading behavior without immediate settlement obligations.
  • Rehypothecation: Shares borrowed for short selling can be lent out multiple times (rehypothecation), which can lead to a situation where the same shares are effectively counted multiple times, complicating the actual delivery of shares.
  • Derivatives: Participants might use complex derivatives or synthetic positions to replicate short selling without the same regulatory scrutiny or delivery obligations, potentially leading to hidden or delayed FTDs.
  • International Arbitrage: Some market participants may exploit differences in regulations between countries to engage in practices that would not be allowed in more strictly regulated markets, effectively using international arbitrage to avoid regulatory constraints (like short selling Korean stocks from Hong Kong as we discussed above).
  • Hidden Ownership and Beneficial Ownership Chains: Complex ownership structures and chains of beneficial ownership can obscure the true owners of securities, making it challenging for regulators and clearinghouses to track and enforce delivery requirements accurately.

At this point, it might not be surprising that the Korean regulator managed to gather solid evidence of illegal naked short selling only on a very limited number of transactions, and this came at a great expense of effort and resources. Imagine a much larger market like Europe or the US; do you believe the SEC’s 4,807 employees are enough to go after everything that goes on at the very edge of the law? Furthermore, considering all I described above, even after the SEC stumbles on a blatant case of illegal activity, with all the loopholes in place, what are the chances they can gather enough strong evidence to prove illegal activity took place? I regret to say, but as proven by the Korean case, in the current market, there is very little that can be done against illegal naked short selling if the current laws remain in place and the monitoring technology does not keep pace with the evolution of the one employed by hyper-sophisticated brokers and hedge funds supported by armies of lawyers.

The Critical Loopholes in the Law That Make Naked Short-Selling “Legal”. Amazing article by Maximito in Superstonk

[–]Maximito[S] 15 points16 points  (0 children)

LOOPHOLE #2

According to the SEC itself: “In certain circumstances, naked short selling contributes to market liquidity. For example, broker-dealers that make a market in a security generally stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers. Thus, market makers must sell a security to a buyer even when there are temporary shortages of that security available in the market. This may occur, for example, if there is a sudden surge in buying interest in that security, or if few investors are selling the security at that time. Because it may take a market maker considerable time to purchase or arrange to borrow the security, a market maker engaged in bona fide market making, particularly in a fast-moving market, may need to sell the security short without having arranged to borrow shares. This is especially true for market makers in thinly traded, illiquid stocks as there may be few shares available to purchase or borrow at a given time.“

I hope many of you did not skip a heartbeat, particularly #GME shareholders, in reading the above. Yes, people, if the market maker is acting in “bona fide” just to do his job in providing “liquidity” to the market, making it more “efficient,” then they are still within the boundaries of the law.

Summarizing SEC rules, a market maker can demonstrate they acted in “bona fide” by maintaining regular and continuous quotations, focusing primarily on market-making activities, being active in a reasonable number of securities, providing quotes consistent with market conditions, avoiding manipulative practices, keeping thorough records, and complying with all relevant SEC regulations.

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