You're not meant to coordinate your trades with other entities. That alone is manipulation I believe.
You're meant to buy(sell) because you like the idea of (not) owning something. That means you don't want to move the price. If you move the price you can't buy more at the same great price later. Wanting to move the price is sort of the smoking gun of manipulation.
Being able to change the price in the short term means the price is "wrong". A wrong price cheats all sorts of market participants even ones who don't trade.
Securities fraud is defined as any action that "induces investors to make purchase or sale decisions on the basis of false information"[0]. A false price is a great false piece of info to manufacture.
I'm watching with interest for when WSB attracts the interest of the regulators. Being retail means they're generally ignored, until they're not.
>Wanting to move the price is sort of the smoking gun of manipulation.
That's the definition of shorting 100% of the float.
Borrow the stock of every active trader. Sell all stocks. Now the market looks like everyone, literally every single trader, is selling the stock and it is true because all of the actively traded stock was in possession of wallstreet who did indeed sell the stock.
People who are long in the stocks now get scared and sell their shares. That's how this strategy is making money for wallstreet. However, wallstreet kept shorting and shorting. From $24 per share to well below $3 and they never stopped shorting. They never closed their shorts even though going from $3 to 0 is only an extra $3 in profit but it massively increases exposure to a short squeeze and thus the potential for losses. They could have bought some options to cover their shorts and lock in profits at $6 and still have the upside of the stock going down to $0. They did neither.
It doesn't matter who buys GME. Anyone can buy the stock and go long and cause a short squeeze. Anyone. I think it is sad that I have to remind you that a short squeeze is not market manipulation. There is nothing to regulate except the short sellers and that is exactly why they try to find a scapegoat like WSB. When you fucked up and are about to get investigated just stirr up the media and control the narrative.
The difference is they expressly coordinated (a no-no) to change the price (a no-no).
There is nothing wrong with saying "X is a good stock, buy it". Saying "I don't really know about stock X, but if we work together to drive prices up we can make money when we dump the stock" is all sorts of illegal.
Don't get me wrong. I am not saying a case will definitely be made. Maybe it will be judged not worth the effort or politically unpalatable (going after the little guys). Maybe they had much less impact than they\we think and there was actually some other entity behind it.
But if there is a case to be made, those are the key elements:
* They conspired together
* Their aim was to manipulate the market (move the stock price).
But there's a problem for me -- how do you prove that this particular comment has validity? It's Reddit -- you can shitpost whenever you want. Trolls run rampant. It'd be easy for WSB mods to simply state that all those comments/examples that the SEC is presenting are just trolls and has nothing to do with WSB. A Reddit forum is far too loose to be accused of any coordination.
Has the SEC ever considered the market value of a stock false information in this way before?
Edit: and as to your first point, it has always been legal to say, hey, I am buying this stock, I like it, I recommend you buy it too. That alone is definitely not manipulation.
The reported actions of WSB is basically the second half of this with the twist that they think they can use large short positions as leverage to push prices up more.
It's actually a very common, old form of fraud. The question is whether regulators care to enforce the rules. It's what Leonardo Decaprio is guilty of in Wolf of Wallstreet.
That's not what WSB is doing. The traders charged by the SEC were acting in coordinattion to drive stock prices up and down with manufactured orders.
On the other hand, WSB is just a bunch of different people and a lot of them have bought GME because they thought would go up.
By your logic, anytime a stock goes up, how's it not just manipulation? It's typically caused by a bunch of people buying it cause they hope it will continue to go up. This is all that's happened at WSB.
That said, manipulating the price up because you think someone is manipulating it down, is still manipulating it. I'm not saying they're "the bad guy", but they're breaking the law and not actually helping anything imho.
I think I've been converted to the idea that it isn't manipulation, because you can't prove that the inflated price is the wrong price and thus artificial.
If the price goes way up, they can sell stock at that price and keep the business running.
GME being a worthless company right now is not an objective fact about the world, but a contingent one, significantly dependent on their access to capital to get through covid and restructure.
P.S. Matt Levine's column today gave a "traditional four part test" for manipulation:
(1) That the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices.
No individual on WSB can possibly be doing all four things, can they? Unless there is some private conspiracy among a small number of people.
I can understand your feeling on this, and I am only speaking from my opinion. I am certainly not an expert or in possession of special facts.
May I ask: Why would there need be an individual behind the attempt? If it takes (say) 1mUSD to manipulate a market, then the market is being manipulated whether 1 person does that in one $1m trade or 1000 people do it in 1000 trades each of $1 right?
The second possibility adds complexity admittedly. I'd have to show they were conspiring to do it, not just all randomly making the same trade on the same day.
But at least some WSB members have explicitly admitted that so...
There are a lot of reasons the SEC (and others) might not act on this. And there are a lot of "fuzzy edges" (eg how influential were they in the price move vs someone else trading at the same time?). But the case I'd make is pretty much that: Members of WSB conspired together to complete your 4 items, no different to a safe-cracker and a get away driver working together to commit a crime they couldn't have managed solo.
Of course, I'm a bit of a Crime and Justice nut, so maybe it's best I don't get to interpret these things in real life :)
I put what I thought was the most important point at the beginning of my previous comment.
"Legitimate" and "artificial" seem like undefined words. If one person or a few people puts a value on something that nobody else does, then you can call it artificial. But if millions of people are buying and selling at various prices, how can you prove any of them are "artificial"? To some extent, I think it's simply about numbers. One person who thinks different is crazy. Millions are a political party or religion or something.
They could go after Elon Musk (again), since he gave WSB a shout-out after hours and it jumped like 50%.
I think that's always the issue with any market manipulation case: how do you know it was manipulated.
To be honest, I have no idea.
There may be a hard mathematical test I'm unaware of. Or it might just come down to convincing the jury. In this case, I'd say that the statements on WSB and the fact the price rose 2 (3?) figures with no change in the underlying company is a pretty strong indication. But it's not a slam dunk, "anything over x% is manipulation" rule AFAIK.
Still, plenty of others are convicted of it, so either juries can be convinced or there is a mathematical rule I'm missing.
That's true, but finra will have a record of who sent the orders, so the SEC etc can trawl through the data and see.
I actually think WSB likely didn't do it completely alone. Plenty of hedge funds watch WSB. RobinHood sells the data too so I'd be surprised if it was a solo effort.
You're meant to buy(sell) because you like the idea of (not) owning something. That means you don't want to move the price. If you move the price you can't buy more at the same great price later. Wanting to move the price is sort of the smoking gun of manipulation.
Being able to change the price in the short term means the price is "wrong". A wrong price cheats all sorts of market participants even ones who don't trade.
Securities fraud is defined as any action that "induces investors to make purchase or sale decisions on the basis of false information"[0]. A false price is a great false piece of info to manufacture.
I'm watching with interest for when WSB attracts the interest of the regulators. Being retail means they're generally ignored, until they're not.
[0]: https://en.wikipedia.org/wiki/Securities_fraud