Gaming GameStop: Faculty Experts Weigh in on Reddit and Meme Trading

“When hedge funds are going to lose from a trading suspension, they don’t face any lockup like this, any suspension, any halt at the retail level. But when retail investors find themselves locked in, they find themselves unable to exit the trade.” Read more.

“These retail investors feeling paranoid about the elites, and that institutions are not looking out for their best interests is rooted in experience. It’s a justified paranoia based on what’s happened historically.” Read more.

“We’re living in a world where a post on a platform like Reddit combined with sophisticated trading machinations can lead to consequences that would have been unfathomable just a few years ago. . . . This is just the latest iteration of what has really been a decade of taking advantage of investors—sophisticated algos, Wall Street professionals, hedge funds that are masters at this, taking advantage of retail investors.” Watch the segment.

“The Securities and Exchange Commission has no policy rulemaking on social media and trading. The SEC should have data scientists sitting with every enforcement lawyer to very quickly in real time identify actors who may be doing shady things, and immediately intervene to stop bubbles like this from happening.” Read more.

“The concern is that we are seeing a repeat of 2008. We are seeing the repeat of Wall Street looking out for itself. It’s doing so by applying different rules to retail investors that cut them off from the opportunities that professional traders have.” Watch the video.

“At the end of the day, markets do what markets do: People will buy, people will sell. But that doesn’t mean there won’t be victims, people who were injured and misled. . . . Someone can go on a forum and say they’re buying a stock when they’re really looking to sell. There’s a form of deception there. The pronounced problem is anonymity. . . . It could be an engineered pump and dump.” Read more.

“We have to remember they’ve just been sued. It’s a big lawsuit by their customers who were trying to buy stock and were unable to. Probably one of the reasons why [the statement] is so confusing and kind of unclear is they’re deliberately leaving it ambiguous so they can then argue in their lawsuit without having boxed themselves into a particular story in the blog post.” Read more.

“[The SEC’s statement] isn’t saying anything in particular. I think it says we’re not asleep at the wheel. We’re not going to tell you what we’re doing, but we want you to know we’re watching.”

“There’s nothing harder to prove than manipulation. You’ve got to sort the needle out of the haystack.” Read more.

“This is completely an unprecedented phenomenon. This is kind of the proletariat of American investors rising up in a revolt to overwhelm the aristocrats—the hedge funds—that were trying to dominate the price and short it.” Watch the video.

“I expect that [Securities and Exchange Commission candidate for chairman Gary] Gensler will stick to the usual role of sounding like a stern parent and will not seek special rules to chill the market.” Read more.

“It’s one thing to try to regulate the professionals, but this is a problem of regulating investors themselves. We have a new generation of investor, the small retail investor. They used to be the proletariat of the investment world. They’ve sort of revolted and marched on the aristocrats and seized the Bastille.” Read more.

"If you are telling people to buy a company in bad faith, that is manipulation. But these people are true believers; there is nothing illegal about making wildly optimistic statements.” Read more.

“There is no theory of liability under the federal securities laws that is harder to prove than manipulation. You are looking for the evil needle in the huge haystack of uninformed, deluded fools. As for ‘squeezing the shorts’ (which is also manipulative), that too is possible, but it is easier to make money by just riding the roller coaster up and seeking to sell at the top.” Read more.