US Proposes New Rules to Curb 'Meme Stock' Rallies (yahoo.com) 53
America's Securities and Exchange Commission "is considering broad changes to curb the frenetic trading of stocks based on social media activity," reports Reuters:
The proposed overhaul would be the biggest change to Wall Street's rules since 2005 and would affect nearly every corner of the market, from commission-free brokerages to market makers and exchanges. The U.S. House Committee on Financial Services on Friday called for the SEC, along with other regulators, to do more to protect the markets from similar events....
The U.S. House Financial Services Committee on Friday urged Congress to adopt legislation mandating the SEC study how its rules need to change to address new technological developments, such as digital engagement practices and social media-driven market activity.
The U.S. House Financial Services Committee on Friday urged Congress to adopt legislation mandating the SEC study how its rules need to change to address new technological developments, such as digital engagement practices and social media-driven market activity.
In other words.. (Score:1)
1st Amendment issues (Score:5, Funny)
They will have to work out a bunch of 1st amendment issues with that.
And anyway, pump & dump has been a staple of wall street since forever. The difference now is that rich people (ie: the hedge funds and shorts) are on the dump side.
Re:1st Amendment issues (Score:4, Informative)
Exactly. The Meme stock phenomenon caused rich people to lose money. Result: it should be illegal.
The stock market is rigged. Look at how many trades were reversed when Knight Capital made a mistake. No small trader gets trades reversed if they make a mistake.
Unfortunately, there is no alternative.
Re: 1st Amendment issues (Score:2)
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>> there is no alternative.
Really ?
The free hand of the market is not an alternative ?
Color me skeptic.
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I wasn't clear. I meant that, for a small investor, there isn't really anywhere else to put your money, with comparable returns. Hence, the small investor has no real alternative but to invest using stock markets.
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Not true.
There are many alternatives.
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please list
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Would be nice if this attempt at a law just made pump & dump better punishable/preventable/illegal.
But those are probably pipe dreams, considering most senators get rich exactly because of these kind of things.
It's only very recently that they got somewhat (but not really) serious about insider trading.
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It's only very recently that they got somewhat (but not really) serious about insider trading.
Except for congress, of course. Or anyone who cuts 'em off a piece.
Re: 1st Amendment issues (Score:1)
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Like the hedge funds that gave a couple million dollars in "speaking fees" to the Secretary of the Treasury... and then got caught red handed when people bought so much GME they empirically proved that the hedge funds had to be short-selling huge amounts of counterfeit stocks because there weren't enough shares in existence for both to happen at the same time.
I think the "unrealised gains" tax was probably the single most blatant fuck you I've ever seen. About the only way to get more obvious would've been
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That's what I said :D And until... 6 years? ago, insider trading wasn't even illegal in any way when you were a senator.
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That's what I said :D And until... 6 years? ago, insider trading wasn't even illegal in any way when you were a senator.
Yeah, but it effectively still isn't since they're "all" (essentially) doing it, and none of them wants to kill the goose. The small handful of honest people in congress are overwhelmed.
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pump and dump is already illegal, the problem with what they are trying to address here is while it is easy to prosecute a few inidividuals for doing it, it is nearly impossible to prosecute 10's of thousands of individuals banding together to do it.
But they weren't pumping and dumping, they were pumping and holding, making it impossible for the short brokers to buy their way out of their short position.
On a different note, if they don't also restrict HFT, then they should just burn the whole thing down.
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On a different note, if they don't also restrict HFT, then they should just burn the whole thing down.
That sentence is too long - every word prior to the second comma is redundant.
Re: 1st Amendment issues (Score:1)
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Just another friendly reminder (Score:5, Insightful)
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They lost (Score:5, Insightful)
They got beaten at their own game, now they want to change the rules.
Re: They lost (Score:2)
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To be fair, changing the rules is part of their game.
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Most of these meme stock momo traders lose money.
Perhaps. But they are losing their own money. So why does the government need to get involved?
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive." -- C.S. Lewis
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They made the rules in the first place (Score:2)
Misleading title (Score:5, Informative)
From the article:
>Nearly all retail trades are executed away from exchanges.
>That is partly due to rules that allow market makers to offer fractional sub-penny price improvement on bids and offers, whereas exchanges have to quote in pennies.
>Gensler has said that has created an uneven playing field in the competition for retail orders.
>Gensler has asked SEC staff to recommend potential changes to harmonize the ability to display sub-penny quotes on and off exchange.
So basically they are fiddling with some rules on the back-end so that the markets are more closely aligned with the "market-makers" and the connection between the two can't get badly out of synch.
This feels like a pretty reasonable technical fix to me.
Give me transparency. (Score:5, Interesting)
Otherwise if you are going to screw over the free trades for the retail 'investor' in the name of protecting corporations and hedge funds, then also disallow high frequency trading and require everyone to hold a stock for 1 business day before selling it (or for short situations buying it back). Otherwise this looks like the Casinos just kicking out card counters, and I have been told that the stock market is not a Casino but a legitimate investing tool.
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As a retail brokerage user all I would like to see is transparency. Tell me the price that effects me AND tell me the price that the brokerage and wholesaler made the trade at.
Good solution.
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They should have disallowed high-frequency trading years ago.
Re: Give me transparency. (Score:2)
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The faster turnaround on market-making trades means lower risks, narrower spreads, and lower fees for retail customers.
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They should have disallowed high-frequency trading years ago.
What problem do you think a ban will solve?
How would you enforce it?
What do you intend to replace it with?
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At least as far as your first question goes,
https://www.businessinsider.co... [businessinsider.com]
Provides one compelling answer. Also:
https://www.reddit.com/r/algot... [reddit.com]
See reply by gmion23, plus others.
As to your other questions, I'll not answer those just now and instead leave that to others, beyond observing that HFT as we know it did not always exist and therefore may not need replacing.
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>> What do you intend to replace it with?
Fixed time synchronous trading, on a slow 10 minutes cycle.
Why should a company change value every millisecond ?
Monopoly on price manipulation (Score:4, Insightful)
considering broad changes to curb the frenetic trading of stocks based on social media activity,"
Then what about frenetic trading of stocks based on articles put out by "stock analysts"?
Is the problem really about people trading based on what they hear? Or is the problem really about the power to manipulate stock price this way is no longer restricted to the few "analysts" working for major financial institutions, hence the wrong people are reaping the profits now?
Re: Monopoly on price manipulation (Score:2)
Newbies attracted to price momentum, price curbs.. (Score:3)
.. to protect newbie speculators more than anybody else. If you traded a meme stock, you may think you were the good guys but what happened is a lot of newbies got left holding the bag just as they did with cryptos. But most speculators know that cryptos are unregulated by the SEC but since meme stocks are regulated, there is something they can do.
Price curbs have been in the markets across the world for ages, even the US equity indices have price curbs, only now the price curbs need to be fine tuned to meme stocks when they are being pumped. Once speculators know that there are price curbs targeting meme stocks, they will just flock to the next stock, penny stocks, commodities or cryptos where they stand little chance of success.
And yet (Score:4, Informative)
And yet, not a peep on the situation that triggered the whole Game Stop circus in the first place: a few big players shorted more shares of Game Stop than actually existed (a short squeeze). That observation is what inspired the Redditors to buy heavily. At least the first wave of that was well justified financially for anyone who could afford to do it. They had good logical reason to believe those shares would become hot commodities as short sellers attempted to exit their position.
Huh? (Score:1)
Translation (Score:2)
Rich kids don't like the plebes to touch their toys.
Just curious (Score:3, Interesting)
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Wall Street got caught with their pants down and we can't be having that again. Retail traders are only supposed to be there to get rinsed, not do the rinsing! Stocks are only supposed to pump when we pay for media coverage and analyst coverage, that ain't right I tell ya! SEC, help us!
Re: Just curious (Score:3)
Baloney. (Score:1)
"Oh no! The wrong people are manipulating the stock market" - Brandy Jensen on Twitter, 26 Jan.21 -- They just want to destroy the side markets they don't/can't/won't control because "money" and the flows of money that they can't control scare them. How about they take a look at things like high-speed trading that suck value out of the markets regardless of whether they're headed up or down and actually punish the huge companies and their minions that do wrong? I prefer the young, nimble, sometimes-scam
Eat their shorts. (Score:2)
Oh noes, Bitcoin stock will be worthless now (Score:2)
And any company doing something with blockchains will also be not able to create a hype around their products solving web3 issues and bringing world peace.