Hedge funds have been manipulating the stock market for decades.
But it wasn’t until now that a community has risen to raise awareness of market injustices.
The shorting of both AMC and GameStop stock have uncovered a number of nefarious strategies used against retail investors.
What is the SEC doing to regulate these financial entities?
We’re here to find out.
Welcome to Franknez.com – The blog that fights for retail investors. Today we’re discussing how hedge funds manipulate the stock market and what the SEC is doing about it.
Let’s get started!
Overleveraging Borrowed Shares
Hedge funds have an incredible supply of short shares available to borrow.
This advantage has allowed them to manipulate a stock’s share price by initiating short-ladder attacks.
While supply and demand are pushing a stock’s price up, hedge funds short the stock using an insane amount of leverage.
This predatorial strategy has yet to be announced as illegal nor has it been addressed by the SEC.
Off Exchange Trading
Hedge funds and market makers are getting away with being able to trade and swap stock in foreign exchanges where the stock’s price isn’t required to be disclosed.
They’re taking retail orders and, in a way, manipulating the circulating supply by not reporting accurate transactions.
We’ve seen this happen with Barclays.
Reports by Finra have been made public detailing multiple fines on Barclays for inaccurate books and records.
Barclays is one of Citadel’s clearing houses.
Off exchange trading where transactions aren’t displayed on the list market such as the NYSE is a massive problem the SEC is still trying to figure out.
Though the SEC is trying to implement the D-Limit order that will allow stocks to trade under IEX, they’re having trouble from hedge funds and market makers.
Citadel has sued the SEC on this matter, we have yet to receive a public update on the case.
Related: 95% of Retail Orders Don’t Go Through the Lit Exchange
AMC and GameStop have had an incredible amount of FTDs, or failure-to-delivers.
These are orders that have not been executed in options, and are usually a result of a ‘short party’ not owning or not having all of the underlying asset.
This has led retail investors to the educated assessment that synthetic shares are floating in the market; shares known as naked shares used to short a stock.
According to Investopedia, “Despite being made illegal after the 2008–09 financial crisis, naked shorting continues to happen because of loopholes in rules and discrepancies between paper and electronic trading systems.”
Naked shorting has gone mainstream with CNBC’s Melissa Lee and Fox Business’s Charles Payne bringing light to this predatorial practice in the market.
Retail investors must use their voice to address these issues to the SEC.
Related: GTII Pursues Legal Action Against Naked Shorts
The Use of Mainstream Media Outlets
According to The Fool, you should invest in this or that “instead”.
We’ve seen the headlines countless times.
The Motley Fool is a source that provides its subscribers with hand-picked stocks with potential gains.
With tremendous respect, stick to what you do.
The integrity of this company is to help investors pick winning stocks, not to divert them from a stock due to its potential upside that can cause hedge fund partners to lose billions of dollars.
And that’s exactly what happened.
No matter how many times mainstream media outlets tried to divert retail investors from buying AMC stock, it cost hedge funds a lot of money all year.
And at the same time, a lot of retail investors have a lot of unrealized gains.
This ladies and gentlemen is how the media has tried to manipulate the performance of a stock.
This influence can sway a new retail investor from adding to the surging volume of shares being purchased in the market.
To the new retail investor – make your financial decisions based on your own due diligence.
Not on what media sources get paid to write about.
Yahoo Finance & InvestorPlace
Platforms such as Yahoo Finance & InvestorPlace have also had their fair share of negative headlines to try and divert the public from skyrocketing AMC to the moon.
With InvestorPlace even throwing a jab at GME investors saying, “If You’ve Made Money On GameStop, You’re Not An Investing Genius”.
Perhaps not, but I’m pretty certain these investors are wealthier than the person who came up with that punchline.
These media sources have been discouraging new retail investors from investing in AMC since the beginning of the year although the stock is up year-to-date!
Manipulation In the Stock Market
I’m sure you’ve all heard of the Robinhood scandal.
This is another form of manipulation in the stock market caused by the halt of buying power.
Robinhood prevented its users from buying stocks such as AMC and GME (GameStop) during GME’s bull run.
Although restrictions aren’t as tight anymore, we’re beginning to see trusted and beloved companies get exposed as hedge funds worst nightmares become a reality.
Today we’re seeing more people learn about how the stock market moves.
If more of the public is to understand how hedge funds pose a risk to our economy and businesses, we must expose these financial institutions for who they really are.
Read: Why new retail investors investing in AMC should avoid Robinhood
A House of Cards, r/superstonks (Reddit Post)
A Redditor just posted an insane amount of DD on Reddit.
This long form post discusses the transition from paper filled orders in the stock market to the use of computers going tracing back to the mid 80s.
The post reveals the beginning of issuing naked shares.
We’re also learning that a lot of transaction are being held by the actual institutions that are shorting these stocks.
Robinhood routes more than half of it’s customers to Citadel.
This information has now been disclosed via the Washington Post.
You can read the full Reddit post here.
Trey’s Trades does a quick breakdown on this DD as well.
The video is embedded for your viewing pleasure.
It costs retail investors nothing to hold, but it costs shorts and hedge funds money every day.
It’s only a matter of time before a squeeze occurs, no matter how manipulated the stock market gets.
Related: Citadel loses billions: Hedge funds are getting dragged down
Franknez.com fights The Fool, Yahoo Finance, and InvestorPlace
Franknez.com is fighting for the community against malpractice from all news media shunning AMC, GameStop, and other retail favorites.
This platform will serve as a positive media outlet for the community and only spread factual documentation, and news related cited-sources.
I will not encourage retail investors to take a position in any stock.
However, I will outline the facts and evidence to help you make your own personal financial decision.
How can retail investors bring awareness to the community?
Retail investors can expose false information on social media to shine light on manipulation tactics driven by hedge fund partners.
Sharing factual and positive articles relating to the performance or analytics of a particular stock is another way the investing community can stay united.
Franknez.com is a platform for the community.
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