What The SEC Got Wrong In Its Meme Stock Report

October 19, 2021   |  
What The SEC Got Wrong In Its Meme Stock Report

Late on Monday, the SEC released a watered down report suggesting popularized retail brokers lured investors to increase their trading via mechanisms like payment for order flow and gamified user interfaces.

The report comes after speculative commentaries on online social media fueled a price rise in shares of highly-shorted meme stocks, before the risk management of clearing agencies resulted in brokers imposing synthetic supply imbalances.

Moreover, the report found that the “act of rebellion,” on the part of retail market participants, did not result in markedly high amounts of short-covering by institutions.

Additionally, the report found that the price rise was “not consistent with a gamma squeeze.”

Well, in keeping with the SEC's abysmal track record of publishing catastrophically wrong post hoc "analysis" - like finding that the entire May 2010 Flash Crash the work of one solitary basement-dwelling spoos trader, Nav Sarao - the agency best known for Sucking Elon's C**k has just unleashed another steaming pile of horseshit, and our friends at SpotGamma have fundamentally disagree with the report's conclusion that options were not a major catalyst to the aforementioned price rise.

The report concludes with the staff identifying areas of market structure and our regulatory framework for potential study and additional consideration.

These include:

  • Forces that may cause a brokerage to restrict trading;
  • Digital engagement practices and payment for order flow;
  • Trading in dark pools and wholesalers; and
  • The market dynamics of short selling.

Tune in for full analysis from SpotGamma on the role that the options market played and the mechanics behind a gamma squeeze that made GameStop (GME) the poster child for the meme stock mania in early 2021.

The SpotGamma team will be going live today at 10:30 AM ET to unpack what the SEC got WRONG in its 45-page meme stock analysis (or use this link).

Tyler Durden Tue, 10/19/2021 - 10:10