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Comment by jefe_ | Hacker News Reader

I've perused WSB for a while, but watching GameStop this morning, I'm worried this recent 'short squeeze initiative' opens the door for various retail trading restrictions. Whether phase-out of commission-free trading, per-trade taxes, restrictions on options trading, tightening of pattern day trading restrictions, it seems something is coming. It's tough to envision a circumstance where retail trading is permitted to interfere with such a fundamental activity as short-selling. It's like a DDoS attack on the stock market, and I expect the defenses to be similar: additional vetting, limits, circuit breakers (which already exist but could be modified).

I really hope I'm wrong because their ability to make GameStop, Nokia, and BlackBerry trend in 2021 is genuinely hilarious.

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Short selling is not a fundamental activity. Short selling should be the thing that is illegal. None of this nonsense would exist if it weren’t for the absurd nonsense that is borrowing a stock, selling it, waiting for the price to drop, buying a stock, and giving it back. Short selling is absurd. All options trading should be banned by the SEC.

What you are suggesting is a one-sided market where prices can only go up and there is no restoring force. That's dumb.

What's worth knowing is that immoral conspiracies among short sellers are incredibly rare. I challenge you to find a documented case. By contrast, there have been many, many pump-and-dump sell-side scams, and without the short side there would be many more.

One sided? You buy, and you sell. The price goes down if there are more sellers than buyers. This is how it worked until the “professionals” invented all of this ridiculous nonsense so they could gamble on the markets.

Buy or sell. And nothing more.

In that case, you would need to get rid of derivative markets and perhaps leveraging mechanism such as margins.

I do believe banning certain instruments from the market can have a positive effect, but I'm not sure if short-sell is one of them.

Just because something has existed a certain way doesn’t mean it is the optimal way it should exist. What is the fundamental point of having a stock market?

Fulfill that purpose, and the leave the gamblers to find something else to do for a living. They add no value to the market or to society.

Short selling came in the seventeenth century with the rest of stock markets. You can’t really have a functional market without it.

Yes, you certainly can.

Your position is essentially that the price-finding function of stock markets is not necessary, in which case I wonder why we have the stock market at all.

Your position is that the price-finding function of the market is the ability to short. This isn't required in ANY other market.

If there are more buyers than sellers, the price goes up. If there are more sellers than buyers, the price goes down.

We don't need uninvested third parties literally gambling on the outcome of the above. The market will work just perfectly fine with just buying and selling.

In another kind of market I can just enter the market. If the price of chairs goes bananas because someone has decided to buy and hoard all the chairs, I can make chairs, therefore increasing supply and restoring a normal price.

In the stock market the number of shares of each issue is fixed, so that doesn't work. This is why the short side is important for price finding. They inject supply into markets even when the long side is trying to manipulate the price up.

> What you are suggesting is a one-sided market where prices can only go up and there is no restoring force.

Aren't there other ways to take a short position on a stock without actually short selling it? Like buying a put option?

That's a way to profit from the price falling but it doesn't serve the price-finding function of the market because it doesn't actually increase the supply of shares for sale.

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