A Blog By Oliver Bradford Are Gamers Gaming the Markets?
GAME STOP The subreddit thread, r/WallStreetBets, is rapidly gaining popularity and currently boasts nearly 8 million members. Fine, no cause for alarm there. On January 18, 2021, Joe Feldman, one of the analysts at Telsey Advisory Group, cut his rating to “underperform” which is code for “sell now.” GameStop, a brick-and-mortar gaming and entertainment retail business, had seen declining sales for years, posting losses over $600 million in 2018 and nearly $200 million in 2020.
Isn’t that illegal? The masses on the subreddit thread are arguing that the shorts placed on GameStop by hedge funds were “inflated” and “artificially large.” Posing the question more narrowly, is it illegal to bankrupt a hedge fund? No, it’s not; well, not exactly. However, what it has done is put social media into the crosshairs of regulatory agencies. More on that in a moment. Using social media or whatever e-Communications channel to broadcast your intention to buy or sell stocks is legal. By inhibiting the ability to trade certain securities, brokers may be charged with aiding manipulative or abusive market schemes. And the SEC makes it very clear that doing so is illegal.
What about collusion? That’s where things get more interesting. Social media and the rise of influencers coupled with increased accessibility have made it possible for communities to rally around a ringleader. Individuals can choose to become part of the collective or pursue investment independently once they get the “scoop” on which path the majority are inclined to take. And that’s the grey zone that has everyone talking. Can the SEC and other agencies in regtech move swiftly enough to legalize the surveillance of social media across all channels? We’ll have to watch things closely to see how this war between the “haves” and the “have nots” plays out. Read Complete Blog Here: https://www.shieldfc.com/