No one remembers that most short positions are actually held by retail investors. I myself regularly take short positions.
The reason trading was stopped is that if a stock price suddenly gaps then the retail investors can lose more money than they have in their accounts. Then the brokerage or their clearing firm have to take the losses. They are not willing to do so, so they stop allowing trading. The brokerages are not somehow colluding to make hedge funds money, they are just trying to make sure that they do not lose money themselves.
But trading wasn't stopped. Avenues for non-professional investors to continue buying shares were cut off. They were still allowed to sell shares as desired.
I don't really have an opinion on whether the GME thing is a pump and dump scam, or a real opportunity to enforce a classic "The market can remain irrational longer than you can remain solvent" lesson to those shorting these stocks.
But I do have a real issue with removing just the "buy" side of the equation. Price is always a function of supply and demand, and I don't understand how anyone could justify halting just buy orders. The obvious impact of artificially reduced demand is that the price will drop.
Further - if this price drop was designed to protect these firms from possible losses (and I don't really care whether that loss was by allowing unvetted shorts by investors who don't have the capital to cover, or whether it was collusion to protect other parties) then I still don't see how you can reasonably come to a conclusion that looks good for these firms here - They're manipulating stock prices to avoid losses.
Short squeezes are absolutely not illegal - They're a natural property of how the investment vehicle operates when the price of shares spikes.
The illegal part is a scheme to collude and manipulate the availability or price of the stock to intentionally cause a short squeeze. I'm not entirely sure I agree with you that posts like that are "collusion" (Cornell def here is interesting as a refresher - https://www.law.cornell.edu/wex/collusion), but I can certainly concede there's plenty of shades of gray here.
Short squeezes are illegal, and Robinhood continuing to allow blatant short squeeze activity could be construed to be aiding and abetting it, giving it huge legal liability. Hence, the shutdown of trading.
Right, OP mis-spoke about some critical, leading detail of their argument, while going on to support questionably legal action giving off a great appearance of market manipulation by large entities with great vigor.
I think this supports my point. This user is spreading misinformation and arguing against a point their past blogging and commentary would not suggest them to be an expert about nor impassioned by.
This is surely against the HN community guidelines.
"Please don't post insinuations about astroturfing, shilling, brigading, foreign agents and the like. It degrades discussion and is usually mistaken. If you're worried about abuse, email hn@ycombinator.com and we'll look at the data."
> most short positions are actually held by retail investors
That is an unsourced lie, told at a time to cause maximum confusion about what is happening in a situation where large financial entities are colluding to mitigate a situation wherein large amounts of capital are at risk.
These illogical comments are, via Occam's razor, literally most easily explained by astroturfing.
Lol look at my history and profile. I know lots of people are upset over losing money here, but that does not make me a shill or a bad person or even incorrect.
The reason trading was stopped is that if a stock price suddenly gaps then the retail investors can lose more money than they have in their accounts. Then the brokerage or their clearing firm have to take the losses. They are not willing to do so, so they stop allowing trading. The brokerages are not somehow colluding to make hedge funds money, they are just trying to make sure that they do not lose money themselves.