Absurd. You could falsify the opposing position by providing data that shows significant short interest. Of course you will have trouble with this because all of the data confirms the opposing position.
On the other hand, your position cannot be falsified because you dismiss all of the available data as manipulated without proof.
Your account is only four hours old but you have a dozen comments in this thread, all of which are desperately pleading with people that the shorts covered, there's no squeeze possible.
Market makers are allowed to be temporarily naked short because it's required for them to do the job they're supposed to do - provide liquidity. A market maker can sell short if they don't have any stock because they will almost certainly be buying it soon after. There's no evidence that any market makers are abusing this privilege with GameStop.
Yeah; it's not exactly what I'd called "unlimited shorting"; all of the pre-borrow and closeout requirements from Regulation SHO apply ... plus, as you say, the market maker exception is specifically there to stabilize markets by providing liquidity in the face of sudden rushes to buy.
I guess one man's price stabilization is another man's market manipulation.
It also needs to be mentioned that the entire business of MMs is to capture the spread by buying at the bid and selling at the offer. As such, they are passive market participants who will only transact if someone executes a marketable order against one of their resting orders. This means, they can only be as (naked) short as someone else is willing to buy from them. But they are also not interested in having directional exposure and will go to great lengths in order to balance their inventory.
The idea that MMs would somehow use their privilege to actively sell massive amounts of non-existent shares into the market in order to manipulate the price downwards is preposterous. That is literally the opposite of their business model and such activity would certainly be flagged by regulators.
Right - the entire Volcker reporting framework would instantly reveal anything of that nature.
Honestly it feels like a lot of the conspiracy theories around these meme stocks are based on reading a lot into a very narrow slice of regulatory text without any real understand of the whole.
This poster knows what they're talking about. The market making exception is there to prevent liquidity completely evaporating as it did during the flash crash. It's not there to encourage them to bend the rules -- it's to compel them to trade when it might be unprofitable.
Every trade has to be marked correctly, whether it's short with a physical locate or short on a riskless principal basis. Equity swaps trade and are marked as riskless principal trades (ie. they're fully hedged positions and the short position is the market maker's aggregate short position). That information gets aggregated at client level and reported to regulators.
After Dodd Frank equity swaps and rehypo became even more heavily restricted. Swaps go through a clearing house and rehypothication was basically dead the last time I worked in the industry (though that might have changed).
I'm 99% sure that the speculation about the "elites" and their sinister role in GME's trading activity is simply caused by booking errors and/or aggregation mistakes.
I think it's also worth pointing out that when selling short (naked or not), there's a big difference between adding liquidity and taking liquidity, and market makers are primarily (if not exclusively) in the business of adding liquidity.
If you're taking liquidity (i.e. "I want to sell right now"), you're directly applying downward price pressure to the market, by removing shares from the buy side.
If you're adding liquidity ("I'm selling, but I'm waiting for a buyer"), that's likely to have much less (if any) effect on the price.
This assumption is disproved every day by publicly available short interest data. If you operate on the assumption that all official data is false you can make all the wild claims you want, but you're not being serious and your theory is unfalsifiable.
It's entirely falsifiable in multiple ways: (1) a voluntary share recall triggered by GameStop would force an accurate share count; (2) an extraordinary action triggered by shareholders for a formal accounting; (3) a special dividend with no equivalent cash value (eg NFT); or (4) a majority of shares getting direct registered (DRS) with the company's transfer agent (ComputerShare) rather than through brokerages so that the unique market maker powers at the Depository Trust Company (DTC) cannot mask the underlying share count.
I will also say: you can read SEC sources about RegSHO limitations about how short interest can be manipulated and masked through "Failures to Deliver" (FTD). So this is not exactly an assumption, more of a preposition about magnitude.
> If you operate on the assumption that all official data is false
This is a strawman. It is possible to believe (and there is motive and opportunity in this case) that one "official" statistic is manipulated or does not show the whole picture without being a raving conspiracy theorist who trusts no official.
The SEC report confirms that shorts closed their positions and short interest dropped significantly over a year ago, and it has remained low since. You can't have a short squeeze without significant short interest.
Read Section 3.4 "Short Selling and Covering Short Positions". It describes the short covering that took place. Look at the chart of short interest on page 27. It shows the short interest dropping precipitously, meaning the majority of short positions were closed.
It is honestly baffling how many GME conspiracists are apparently illiterate and unable to understand that "X didn't have as much of an effect as Y" doesn't mean "X did not happen". Especially when it is surrounded by multiple paragraphs explicitly talking about the X that was happening.
Look at XRT short interest. There's plenty of information explaining the situation. If you look at the recent votes by the SEC. GG wanted to make better short reporting since that is a big issue. In multiple occasions hedge funds and banks mark their short position long and then get a small fine years later.
Note: I was never a member of WSB. I have researched GME years before this whole saga and hold a position in my portfolio because I saw the value in the turnaround prior to the squeeze saga. That said, as an investor the mechanics of the market need to change.
I think it comes down to priming, at least for those of average intelligence. They don't read the report start to finish with an objective mindset, they are first fed snippets here and there while being told what to read from those snippets. If they ever do decide to really read it, they are primed to take from it only what they have already been told to take from it.
I have read the report multiple times trying to make an educated investment decision. As I mention in other comments, I was following the company way before this saga. Probably for similar reasons than Burry, Ryan Cohen and DFV decided to invest on it, although I admit what caugh my attention was their dividend years ago (no longer pays a dividend). I researched a lot of companies, GME happened to ended up with this craziness all around. I think this is not going be worth millions per share like Reddit says, but it will be worth way more than it is right now. I am far from a bagholder, I've earned a nice return and based on what I have seeing, things are going to be better for the company. The short part of investment is something I had to learn more thanks to the whole saga. I am always looking for bearish thesis about my investments and why this is not going to be worth more in 5 years. Watch DFV youtube videos, he is far from a meme, his videos are very informative about why it is worth it.
That was without counting any work performed by RC and the turnaround.
From for the report:
* Figure 6 shows that the run-up in GME stock price coincided with buying by those with short positions. However, it also shows that such buying was a small fraction of overall buy volume, and that GME share prices continued to be high after the direct effects of covering short positions would have waned.
The SI was 140% of the float. Small fraction of the volume was the short (without counting short volume), you think it was enough volume for both? There's no way to know how much was that. Gabe Plotkin in his testimony even says that short have plenty of time to cover but it didn't seem that was the case. If you look at the SI chart it seems the shorts got closed right away, but the stock manage to have couple of wild runs to 300 and a few to 250. With no retail nor volume to back it up. Why is that? you don't see that with any other company. Maybe some fraud behind?I really don't know.
Anyway, I am not saying there's a 140% short position (nor crazy 1000% like reddit speculate), but the SI is not 10% nor 20%. The price action nor the options market backs those numbers, I may be wrong but I believe there's more to it. It is hard to be sure obviously, but I don't mind to have a few hundred shares and see how it unfolds, long term it is going to be worth more and I am not counting on any squeeze for that. This is not financial advice, it is just my opinion on something I ended up finding fascinating, from the investment side and the human behavior side.
It's not clear to me what you think the error is. That the majority of the price action was caused by retail and not short sellers covering their position doesn't negate the fact that shorts were forced to cover their positions and did so. The language and charts in the SEC report show as much.
In the section "Short Selling and Covering Short Positions" is a chart on page 27 that shows the short interest for GME. It shows the short interest dropping precipitously, meaning that the majority of positions were closed.
XRT has been highly shorted for well over a decade because pretty much all of the stocks in it are failing brick and mortars, including gamestop. What does that have to do with GameStop’s short position?
On the other hand, your position cannot be falsified because you dismiss all of the available data as manipulated without proof.