Re: <nettime> HODL: the other insurrection

[Felix Stalder <felix@openflows.com>]

On 28.01.21 20:46, carlo von lynX wrote:
> The average member of the population is enraged.
> About this or that, there are plenty of reasons to
> be. But by becoming object of manipulation, this
> person has done the worst it could possibly do to
> better its situation.

It's getting very hard to say who is manipulating whom. In a way, it's a
feeding frenzy on the the billions of at least one very large hedge
fund. The question is who is getting how much of that and how. As we are
living increasingly in an oligarchy (nowhere more so than on Wall
Street), it's generally safe to assume that, on some level, such events
are fights among oligarchs .

A very good look at the institutional side of this

https://marketsweekly.ghost.io/what-happened-with-gamestop

And the short version of the argument is: "It's not David vs Goliath.
It's Goliath vs. Goliath, with David as a fig leaf."

It's worth reading the entire thing, lots of details on the criminal
record of many of the main firms, the effect of Trump admin's
deregulation and what is called the "K-shaped Revovery."

Anway, Cory Doctorow has summarized and put into some context this
argument here:


https://threadreaderapp.com/thread/1354848494192738304.html

<...>

Recall that all of this is only possible because Robinhood lets average
joes buy and sell stocks for free. How can Robinhood give away a service
that costs it money and still stay in business? (Hint: They're not
making it up in volume).

The answer is: surveillance. Robinhood partners with institutional
investors and lets them spy on what the average joes are buying and
selling. Sometimes, this is just "market intelligence" ("Hey, people
like fidget spinners") but the main event is front-running.

If you're paying Robinhood to tell you what assets its customers are
about to buy, you can go out and buy them up first and sell them for a
profit to Robinhood's customers.

Or you can buy some of that asset up because you know its price will go
up once Robinhood's customers orders are filled.

Or both.

Citadel Securities is Robinhood's main institutional investor partner.
Founded by billionaire Ken Griffin, they combine tech (high-frequency
trading), an "asset manager" (they spend other peoples' money) and a
"market maker" (they sell things like options).

Citadel gets to see all those r/wallstreetbets buy orders before they're
filled. They can fill some of those orders, making a profit. They can
buy some of the same stock for themselves, making a profit. They can
sell options, making a profit.

A little bit of this profit comes at the expense of average joes: if
there wasn't a front-runner marking up the stocks they buy, the average
joes would pay a little less. But the average joes are still profiting
from the destruction of the shorts.

Citadel is merely taxing their winnings. The real losers here, though
are Citadel's competitors, funds like Melvin Capital, who were seriously
short on Gamestop and went bust thanks to all of this. Guess who bought
Melvin at fire-sale prices? That's right, Citadel.


So the third story goes like this: there are a lot of average joes.
They're numerous, pissed and smart. They move a lot of money against
shorts and make it go farther thanks to the force-multiplier effect of
options.

THEN all this activity is multiplied again by Citadel, a fund that is no
better (and no worse) than Melvin or the other targets of the average
joes' wrath. Citadel's bots are triggered by the average joes' activity,
which turns kilotons of damage into gigatons.

It's not clear whether the average joes know they're triggering
Citadel's bots, or whether this is just Citadel's bet on frontrunning
average joes paying off for Citadel. It's possible Citadel is the joes'
patsy, and the joes are ALSO Citadel's patsies.


<...>




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