American Consequences - March 2021


WallStreetBets member Keith Gill were ready and eager to testify. Among the sentiments bandied about by various committee members and panel experts, they heard concerns akin to what an EU market regulator brought forth in a market analysis... “Discussing the opportunity to buy or sell shares of an issuer does not constitute market abuse,” the EU’s top market regulator said in a statement. “However, organizing or executing coordinated strategies to trade or place orders at certain conditions and times to move a share’s price could constitute market manipulation.” How is what "the Street" does and promotes any different than what occurred with what the Reddit crowd did in GME and AMC? That was leveled at the Reddit community for its bulletin board obedience to ply into certain depressed stocks. But it sure seems like it should apply to professional market- making groups of the world. And at the retail level (you, me, and others that do not understand or care to understand some of the complexities of financial products), don’t we get pumped with newsletters and broker dealer house research reports that offer buy and sell signals? Knowing that the average hedge fund is not long (see: short sellers) and that it runs a multiple of strategies within a given asset

class, I would posit that hedge funds and market makers have more muscle than the “you only live once” (YOLO) crowd. A key differentiator would be what Citadel, Wolverine, Virtu – the professional market makers and proprietary trading groups – are doing is viewed as risk-mitigating investing or trading and liquidity provision, whereas the YOLOs are gambling. And we should give credence to that. Again, day trading differs radically from investing in that it’s based on very brief movements in the price of stocks. For these very reasons, day trading is more akin to gambling than investing. But wait, aren’t these market- making groups also day trading? Yes, they are... But one needs to consider the day trades as part of a bigger strategy or portfolio picture playing out at the market making or hedge fund. So, if these market-making groups are in the business of printing money – and if they can do it, oftentimes in concert, with other market-making shops to beat down an already depressed company – how is that any different than an online community of upstarts throwing their own caution to the wind (not hedge-fund investors’ dough) and trying to benefit from a contrary position? How is what “the Street” does and promotes any different than what occurred with what the Reddit crowd did in GME and AMC? It’s not, in my opinion. And while many market professionals may not equate it with price transparency and liquidity discovery, what takes place across Redditt and Robinhood is fairly transparent. And then on January 28, Robinhood


March 2021

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