Robinhood and Pump and dump

csgohan4

https://www.bbc.co.uk/news/business-56116545

I am curious, how can you stop the masses investing in stock to drive up the price? Wall street and hedge funds do it all the time. IPO's, SPACS is quite rampant with it, ergo pump and dump.

If brokers tells us what to invest and not to, that would set a dangerous precedent in itself would it not? If I wanted to dump 30k into NIO, why should a platform stop me? A rubbish stock to some maybe a good one to others. 

MaxiRobriguez

csgohan4 said:

https://www.bbc.co.uk/news/business-56116545

I am curious, how can you stop the masses investing in stock to drive up the price? Wall street and hedge funds do it all the time. IPO's, SPACS is quite rampant with it, ergo pump and dump.

If brokers tells us what to invest and not to, that would set a dangerous precedent in itself would it not? If I wanted to dump 30k into NIO, why should a platform stop me? A rubbish stock to some maybe a good one to others. 

Tighter regulation of online "tips", a lag time between account opening and being able to buy first purchase. There's options at both ends, it just depends on the will of those making the laws.

Hindsight will show that thousands of inexperienced retail investors lost money on GameStop and many hedge funds added short positions at the height of the pump n dump. It's not always about protecting Wall Street.

csgohan4

MaxiRobriguez said:

csgohan4 said:

https://www.bbc.co.uk/news/business-56116545

I am curious, how can you stop the masses investing in stock to drive up the price? Wall street and hedge funds do it all the time. IPO's, SPACS is quite rampant with it, ergo pump and dump.

If brokers tells us what to invest and not to, that would set a dangerous precedent in itself would it not? If I wanted to dump 30k into NIO, why should a platform stop me? A rubbish stock to some maybe a good one to others. 

Tighter regulation of online "tips", a lag time between account opening and being able to buy first purchase. There's options at both ends, it just depends on the will of those making the laws.

Hindsight will show that thousands of inexperienced retail investors lost money on GameStop and many hedge funds added short positions at the height of the pump n dump. It's not always about protecting Wall Street.

You can't stifle Freedom of speech, who's to say one person is more right than others? Some people give tips to short their own position, others do so to short the competition. How do you regulate people's opinions?

YellowStarling

Whilst the end result is a broker or platform effectively restricting behaviour, I understand that it's the clearinghouse regulations and processes that support these brokers and platforms which do not appear suitably flexible enough to absorb sudden and abnormally large changes in demand for trades.
https://blog.robinhood.com/news/2021/1/29/what-happened-this-week
The above article may be useful but my summarised take on it is that the 2 day window of the clearinghouse processes can effectively leave brokers and platforms exposed from a cashflow perspective as and when there is a surge in trading for one reason or another.  In this time and age of ever-improving access to information and communication/social campaigning, this might need to be adapted to mitigate the needs for these types of temporary restrictions.

6022tivo

I find it all quite fascinating. 
I'm part of a discord group now, they have a stock identified and we will get to know at 15:30 today. 
Quite dangerous, but if I quickly get in on it and not be greedy (Won't be holding as they say) and sell a few hours later am I doing anything wrong? 

Malthusian

csgohan4 said:

You can't stifle Freedom of speech, who's to say one person is more right than others? Some people give tips to short their own position, others do so to short the competition. How do you regulate people's opinions?

Free speech is stifled all the time. It's illegal to shout "Fire!" in a crowded theatre, illegal to call someone the N word, and illegal to try to pump shares without disclosing to investors that you bought them before you pumped them.

If you actually want to know how this kind of opinion is regulated you could Google "securities fraud".

If I wanted to dump 30k into NIO, why should a platform stop me?

Robinhood didn't want to stop investors, they ran out of capacity. And nobody was stopped from buying Gamestop as a result, all they had to do was use a different broker. But people trying to join get rich quick schemes aren't rational, and the prospect of having to pay a modest fee to join the get rich quick scheme sent the bros into apoplexy because they thought it was part of the same conspiracy that was stopping them getting rich.

"The masses" don't invest in pump an dump schemes; thousands of bros on Reddit constitute a lot of people but they're not "the masses".

MaxiRobriguez

csgohan4 said:

MaxiRobriguez said:

csgohan4 said:

https://www.bbc.co.uk/news/business-56116545

I am curious, how can you stop the masses investing in stock to drive up the price? Wall street and hedge funds do it all the time. IPO's, SPACS is quite rampant with it, ergo pump and dump.

If brokers tells us what to invest and not to, that would set a dangerous precedent in itself would it not? If I wanted to dump 30k into NIO, why should a platform stop me? A rubbish stock to some maybe a good one to others. 

Tighter regulation of online "tips", a lag time between account opening and being able to buy first purchase. There's options at both ends, it just depends on the will of those making the laws.

Hindsight will show that thousands of inexperienced retail investors lost money on GameStop and many hedge funds added short positions at the height of the pump n dump. It's not always about protecting Wall Street.

You can't stifle Freedom of speech, who's to say one person is more right than others? Some people give tips to short their own position, others do so to short the competition. How do you regulate people's opinions?

It's not about stifling or regulating their opinions, but the language and the recipients. 

There's a world of difference between saying:
"Stock A has a P/E ratio of A, gross margin of B, free cash flow of C, assets worth D, a debt liability only E which we believe makes it a worthy investment from a value perspective" - to your clients, who can then determine whether they agree with that approach to keep the investment with that fund.

And
"Stock A is shorted loads and can be a 4 bagger i'm telling you this stock it's going to the moon. YOLO" - to millions of impressionable youtubers/redditors, who have zero experience in investing.

eskbanker

Malthusian said:
It's illegal to shout "Fire!" in a crowded theatre

It's illegal to be in a crowded theatre....

MaxiRobriguez

6022tivo said:

I find it all quite fascinating. 
I'm part of a discord group now, they have a stock identified and we will get to know at 15:30 today. 
Quite dangerous, but if I quickly get in on it and not be greedy (Won't be holding as they say) and sell a few hours later am I doing anything wrong? 

Legally? No, you're fine.

But you are the target. You will be given this tip at 15:30 after whoever is giving you the tip has taken up a position. They will dump their stock on you at 15:30 and you'll overpay for it because you'll be competing with other targets at the same time. You may be able to sell it on for profit but who knows?

Mickey666

Malthusian said:
Free speech is stifled all the time. It's illegal to shout "Fire!" in a crowded theatre, illegal to call someone the N word, 

. . . and yet the 'N word' can be heard all the time in films and rap music.  It's use seems to be accepted within certain ethnic groups but not within others.  

Malthusian

Mickey666 said:

Malthusian said:
Free speech is stifled all the time. It's illegal to shout "Fire!" in a crowded theatre, illegal to call someone the N word, 

. . . and yet the 'N word' can be heard all the time in films and rap music.  It's use seems to be accepted within certain ethnic groups but not within others.  

Using the N word in a song != calling someone the N word. Racist abuse is unacceptable and making rap music acceptable for good reasons. Sorry if my analogy triggered angst about how unbearably difficult it is to be a white man.