House Hearing On GameStop Fiasco Will Focus On “Short Selling And Stock Manipulation”

House Hearing On GameStop Fiasco Will Focus On “Short Selling And Stock Manipulation”

In order to affect change, one has to understand the problem before them. It is by those standards we can confidently say we are near-certain that this week’s upcoming congressional hearings on the GameStop fiasco will be both a useless circus and a intellectual farce.

But just in case we had any doubt left, the nationally televised exercise in Congressional incompetence when it comes to all things capital markets is now said to be focusing on “short selling and stock manipulation”.

In addition to short selling and stock manipulation, Bloomberg reported Tuesday that the hearing would also focus on “consumer protection, short squeezes, and the roles of ‘gamification’ of trading and social media” – which should be a hoot, considering precisely nobody in congress comprehends equity valuations, how capital markets work, what a short squeeze is – or really anything other than how to trade on inside government information

The topics were reportedly sent out Monday in a “memo sent to members of the House Financial Services Committee by Democratic staff.” The memo says that the GameStop chaos “raises questions regarding whether legislators and regulators should take a closer look at existing rules governing short sales and related disclosures, as well as the conflicts between the practice of payment for order flow and firms’ best execution obligations.”

Lest we forget, it was short sellers who were the target in the GameStop run up, not the parties who may have conspired to manipulate the price of the security artificially by buying it all at once. Though we can’t say we are surprised that Congress already appears to be off-base, before the hearing has even started.

The memo also says: “It also raises important questions about the efficacy of anti-market manipulation laws and whether technology and social media have outpaced regulation in a manner that leaves investors and the markets exposed to unnecessary risks.”

Short seller Jim Chanos weighed in earlier today with his response to Vlad Tenev, who is reportedly hiding out in a hotel and has been getting on our nerves, as we noted over the weekend

Other traders were…well, less than optimistic about the hearing’s ability to affect change. 

We think one trader has the right idea of how to watch the hearing:

Other traders showed their unending confidence in Maxine Waters’ ability to comprehend the situation.

And of course, the main focus of this hearing shouldn’t be “evil short sellers”, but rather Citadel’s cozy and relatively unknown relationship with Robinhood and why Robinhood, who positions itself as an app for the little guy while funneling orders to Citadel in exchange for cash, didn’t have the liquidity to perform its basic functions when market participants all threw their hat in the same ring.

You can read our entire explanation of just how cozy Robinhood and Citadel are – and, more importantly, how they make their money, here

As for our thoughts on the hearing? We think the Chez Quis Maitre D’ said it best.

Tyler Durden
Tue, 02/16/2021 – 19:30

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