Hedge fund manipulation, not error, was behind market plunge
- Thread starter dtrader98
- Start date
Come to think of it, that wasn't the most reputable article, just thought there were a few interesting conjectures.
That being said, though, I'd be happy to read a post of the actual events that did cause the debacle. So if you are somehow more informed than the rest of us, please do post a link. As far as I'm concerned, 99% of the explanations to date are no more valid than the article linked. And I for one, don't believe removing 80A and uptick rule had zero impact on market vol.
*sigh*
I'll say it again....
for the past two years the SEC has been restricting who can trade what and when. It's also been taking away market maker exemptions so that market makers can't provide liquidity without taking on massive amounts of risk.
To top it off, the SEC has been raising fees on broker dealers (market makers are all broker dealers). Your friendly too big to fail banksters have successfully gotten some of the exchanges to raise fees. Since MM's run on very very slim margins, this was not good.
All of this has driven a lot - and I mean TENS OF THOUSANDS - of market makers out of business.
No market makers, no liquidity.
All you had was a few HFT black boxes - which now provide 50-70% of daily liquidity. If you turn off a couple of boxes because the activities of the day go out of their known modeled parameters, then all the bids disappear.
I mean, STUB QUOTES were hit out - $0.01 bids! That's how little liquidity there is out there.
Hedge funds can't drive the market down like that. Not a liquid market, anyway. We don't have a liquid market anymore as compared to the one we had in the past. That's the SEC hard at work for you retail guys.
It'll be less liquid now that more than a few MM's blew up trying to provide liquidity in last week's shit storm.
So, if you want more shit storms like last week, by all means insist that the SEC restrict shorting more and take away more exemptions from market makers.
The only reason we even need MM's is because the dumbass trading rules suck all the liquidity out of the market. So, in exchange for submitting to regulation (which, BTW, doesn't actually protect anyone from anything except SEC employees from unemployment), MM's are given certain exemptions to inject liquidity back into the market. If we didn't have all these stupid trading restrictions imposed under the false assumption that we need to prevent Joe Retail Guy from hurting himself in the market, we wouldn't need MM's and there would be plenty of liquidity.
If you think this is the last shit storm you see, you're mistaken.
I don't. And for the most part, pretty good response. However, using a little bit of your common sense, do you really believe removing 80A and uptick were a good thing for markets? By your argument, that should have freed up MMs to provide more liquidity for a functional market. There are mounds of evidence proving you wrong there, (if your wondering how, just look at the immediate post market behavior).
Oh, and btw....your stupid uptick rule only ever inconvenienced you retail traders.
Study after study showed that the only thing the uptick rule ever did was suck liquidity out of medium to low liquidity stocks.
You know what that means? Of course not. I'll tell you - that means that you retail guys were subject to giant spreads. You paid through the nose to transact in those stocks. It also meant that those stocks were more volatile. So it didn't dampen "vol". It exacerbated it. You can believe whatever the hell you want - fairies, the magic of restricting shorting, uptick rules. The reality is that it's all bullshit.
As for the liquid stocks - no effect on them what so ever, but the uptick rule costs a lot of money to enforce. Which they never did, but the infrastructure had to be there.
But keep asking for it and creating scapegoats out of hedge funds. You retail guys just can't stop finding ways to screw yourself, can you?
Study after study showed that the only thing the uptick rule ever did was suck liquidity out of medium to low liquidity stocks.
You know what that means? Of course not. I'll tell you - that means that you retail guys were subject to giant spreads. You paid through the nose to transact in those stocks. It also meant that those stocks were more volatile. So it didn't dampen "vol". It exacerbated it. You can believe whatever the hell you want - fairies, the magic of restricting shorting, uptick rules. The reality is that it's all bullshit.
As for the liquid stocks - no effect on them what so ever, but the uptick rule costs a lot of money to enforce. Which they never did, but the infrastructure had to be there.
But keep asking for it and creating scapegoats out of hedge funds. You retail guys just can't stop finding ways to screw yourself, can you?
Uh....if you think that market makers weren't either exempt from the uptick rule or had 6001 ways to get around it, you are living in la la land. Institutions who were not market makers and not exempt has 6000 ways to get around it. It never bothered anyone but you retail guys.
You don't have mounds of evidence and the anecdotal evidence you profer is retarded. Markets act on new information.
The markets are volatile now because the fiat currency system has been run into the ground by your friendly politicians. Socialism is coming home to roost. It didn't work in the Soviet Union and it ain't working anywhere else either.
May I remind you that the '87 crash happened in the presence of the the uptick rule.
You're obviously a retail guy, so let me inform you that the risk profile of shorting is very bad indeed. When you're long you risk only the difference between where you bought and zero. A short position's risk is infinite because there is not limit on how high the stock can go. So, people don't tend to short willy nilly (well, retail maybe, but not anybody who actually knows what they're doing).
So, trying manipulate markets by shorting is akin to picking up pennies in front of a charging locomotive. Shorts are ALWAYS an extreme minority in any stock - even a "heavily shorted" stock. What drives the stock down is longs running for their lives and dumping as much as they can.
In fact, stocks with short interest do better on the way down because shorts provide the bids for you longs to hit because they take advantage of the stock's decline to get out of their shorts. Not to mention, most shorting is done to hedge long positions, not as a naked bet on the stock.
It would be wise for you to learn more than a little bit about capital markets, economics and finance before you go making ridiculous declarations. But, you probably won't and you'll keep shooting yourself in the foot.