"The fury of the cloth, the blood of five steps, the world is musu."
Every time I open the trading software, I can't help but think of this rather imposing idealistic declaration and the big battle that shook the intestines 9 months ago.
For many years, retail investors and Wall Street have competed on the same stage, and no one has ever thought that the two can compete fairly. Not to mention that one day, Xiao Shan could actually wear a cloak and shout "YOLO" in his mouth to pull the emperor off the horse.
During those thrilling two weeks, the leeks of the world fought against each other, which was simply a bit of a "Internacional, it will be achieved".
This fairy tale-like contemporary legend has stirred countless hearts until it is completely shattered by a document.
On October 18, the U.S. Securities and Exchange Commission released an employee report entitled "Employee Report on the Structural Conditions of the Stock and Options Markets in Early 2021", restoring the truth behind the "retail vs. bears" at the beginning of the year.
It turned out that the so-called retail revenge was just a change of tricks to be cut.
<h3>1</h3>
<h3>The people are gentry</h3>
Summing up the facts exposed in this document in one sentence, it is "we must first let the gentry pay the money and take the people to donate the money." When the gentry donated, the people followed suit." Only this time, after the money arrived, "Whether it is the money of the gentry or the money of the people, we will divide the account into three or seven." ”
How to think about this so-called "truth" is very different from the cognition in people's memory. It's been nine months since the retail war, and now the SEC is trying to overturn it with a 44-page report, how can you be convinced?
To review the ins and outs of this matter, I have to start with a tweet in January this year.
On January 22, Citron, a well-known Wall Street bearer, tweeted, "I have 5 ways to prove that GME is only worth $20." The arrogant tweet was like a fuse, quickly igniting long-standing resentment in the hearts of retail investors.
Here we have to introduce GTE, the full name of the stock gameStop, behind which is an old game retail giant in the United States. As soon as you hear it, you know that this is a sunset industry.
Nowadays, most players buy physical games online, or play digital versions, coupled with the blow of the epidemic on the offline service industry last year, GameStop's heavy asset operation is almost unsustainable, and it was once on the verge of bankruptcy under consecutive years of losses.
The fundamentals are like this, but GME's stock price has caught up after falling to $3. By January 21, it had risen to an all-time high of $45, more than those years that had made money, and that was followed by citron's tweet.
The reason why GME has nothing to do with operation is mainly due to coincidence, it has become a shining star stock in the WSB forum.
WSB's full name is WallStreetBets, meaning "Wall Street Casino", and is a branch of the Reddit website. As the name suggests, there is a group of highly gamblers gathered here, who are generally not very old, studding at every turn, and vainly trying to ascend to the sky one step at a time.
GME is popular here, in addition to the emotional factor as a childhood memory of the older generation of players. On top of that, it's the most iconic of those stocks that Wall Street has unscrupulously shorted. According to the SEC, the short selling ratio is as high as 123%. This means that GME has as many short positions as 1.2 times that of outstanding stocks.
Theoretically, the risk of shorting is not capped. Once the stock is pushed all the way by the bulls, the bears must buy back the stock at a high price and stop the bleeding out in the continuous loss, which is to force the short. When buying back the stock, it is bound to push up the stock price, and the bears trample on each other, forming the so-called short-selling.
The bears' greatest fears were thus staged in the most violent way.
On January 22, retail investors enraged by citron rushed into THEGM, buying the stock or leveraging the call option GME rose 50% that day, as high as $77. The bears have lost nearly $5 billion so far. This is just the beginning.
A big yang line, thousands of troops and horses to meet each other. In the week that followed, GME rose as high as $483, doubling its share price 10-fold in five days. Retail investors have made a soft hand in the short war, and the bears have to endure the pain of buying doubled stocks, either continue to consume, or close their positions to stop the bleeding. Or worse, blow up when there is no money available.
Although GME plummeted after peaking, its share price is still as high as $180 today. In this frenzy, some retail investors posted more than 4420% of the gains; after the bears lost more than $14 billion a day, citron announced a change of career, melvin capital and other hedge funds burst.
In this way, retail investors have really won a big victory. However, the SEC report gives a very different conclusion: although the bears have made huge losses, retail investors have only been used as pawns.
The winner behind the scenes is actually someone else.
<h3>2</h3>
<h3>Rogue Comprador</h3>
After a bloody battle, the two sides stopped fighting and found that they had actually lost both. Even if there is a winner, it is a crushing victory at best.
Keith Patrick Gill, a 34-year-old Boston financial analyst who was one of the leaders of the WSB forum, bought GME back in June 2019. By Jan. 27, $50,000 turned into $20.1 million; but other retail investors who bought that day were not so lucky, and they would witness a rush from $500 to $38 in half a month.
In the first five months of this year, Wall Street bears lost $9.25 billion on GME and AMC stocks alone; former fund manager Ryan Cohen made $2.9 billion on GME.
"The world is out of my generation, and once I enter the rivers and lakes, I am urged to do so." Whether it is eating steak and drinking red wine or eating Fries and drinking Coke, elites and retail investors have to gamble and lose in this game, which is not unfair. But the SEC wants to tell the world:
There is a force behind the scenes, and the retail investors and bears are on their way.
On October 19, SEC Chairman Gary Gensler appeared on U.S. television. Claiming that "the stocks ordered by retail investors do not actually flow to transparent exchanges, but to the 'black pool'." According to him, the original retail investors' funds walked around the "black pool market" before they became stocks on the account.
The conspiracy of retail investors to be shot at was conceived in this so-called "black pool".
Before discussing "blackpool", it is necessary to understand robinhood, the internet celebrity brokerage that has risen in North America in the past two years. Founded in 2013 by two Wall Street-born post-80s, it was touted last year in a widespread home quarantine during the pandemic.
Robinhood is a representative of the brokerage with Internet thinking, it has found its own youthful positioning, relying on zero commissions, zero thresholds and fool-like trading interfaces, which quickly swelled up when last year's large-scale release led to the peak of young retail investors entering the market around the world. In the retail war in January alone, Robinhood received 3 million downloads.
In July, Robinhood was listed on the NASDAQ.
However, although Robin Hood is a famous rogue in British legend, Robinhood also carries the banner of "retail base camp". This brokerage firm, in essence, still defends the interests of Wall Street.
For example, during the most intense period of the retail war, Robinhood suddenly announced that it would restrict trading in stocks such as GME and AMC, and no buying was allowed, only selling. "Pulling the gate and cutting off the power" cannot be described as ruthless.
Even after trading resumes, traders are only allowed to buy 1 share of GME, which is gradually increased to 4 shares, 20 shares and 100 shares. Blunt knives grind flesh, and raw life grinds this retail frenzy to vanishing.
To this end, Musk, a staunch supporter of retail investors, once questioned Robinhood founder Tenev at The Clubhouse whether he was pushed by Citadel to implement transaction restrictions, which Tenev flatly denied.
Citadel is another protagonist in the SEC report. It is the largest options market maker in the United States, having generously lent 3 billion on the eve of Melvin's blowout. But Citadel also has an identity, which is one of Robinhood's biggest revenue streams.
Gary Gensler's "blackpool" is also What Citadel did.
Citadel's CEO Griffin
"Blackpool" is an unknown alternative trading system, where market makers such as Citadel and Virtu Americas manipulate everything, inhabiting emerging Internet brokers such as Robinhood, thus bypassing SEC approval and regulation.
The trading rules of the black pool are simple, and retail investors are not executed immediately after Robinhood places an order, but flow to market makers such as Citadel in the black pool, who then centralize the orders to trade with Robinhood wholesale.
This process can be completed in a few milliseconds, but it can bring them huge benefits. In just 19 trading days in January this year, the trading volume of one stock in the black pool alone exceeded $110 billion.
<h3>3</h3>
<h3>Millisecond trillions</h3>
Regarding what a few millimeters can do, the well-known domestic private equity phantom party has a lot of say.
In January this year, the second-generation supercomputer "Firefly II" was delivered. In October last year, when introducing The Firefly One, Phantom Fang claimed that its computing power was equivalent to 40,000 personal computers. The computing power of Firefly II is 18 times that of No. 1.
The small town of Greenwich in the United States has also gathered more than 300 hedge funds, managing hundreds of billions of dollars in assets, second only to New York and London. The reason why this projectile land of only 174 square kilometers is full of friends is inseparable from those submarine cables that are a stone's throw away.
The capital of hedge funds – Greenwich
The third master's bold words of "hundreds of thousands of up and down a second" have become the dust of history. Whether it is optical cable or supercomputing, using the most cash technology to reduce latency and create trillions of profits in milliseconds is a dimensionality reduction blow to the human brain by quantitative investment with AI.
Quantitative investment in North America has been developing for decades, while domestic investment has only started in 10 years. For example, magic square, which was only established in early 2016, has a new scale of more than 60 billion yuan. In January this year, there were 59 filing products, which won the "private placement filing king" for several consecutive months.
The similarity is that quantitative trading has shown its face in different forms in china and the United States this year.
North America's epic retail vs. Wall Street didn't show its foot in quantitative trading until this week. According to the SEC, the so-called short rolling is not actually a reason for stocks such as GME to skyrocket.
Supporting the WSB concept stock is simply the high optimism of retail investors around the world.
But it's easy to see how this emotion explodes. Whether anyone has taken advantage of the long-standing contradiction between Wall Street and retail investors, and whether anyone has used the loose organizational form of the forum to secretly guide public opinion, this is very suspicious.
Don't forget how Sun Yuchen fished in muddy waters when Robinhood pulled the gate, pulled 200,000 WSB users into the group to harvest, and then shipped 7 billion TRXs in a few minutes and made tens of millions of dollars.
No matter how it is operated, the truth about the market makers and Internet brokers Yu Wengdeli is indeed exposed.
In response to this matter, Gary Gensler, who took over as chairman of the SEC in April, although a banker by birth, prefers to reduce Wall Street's outrages through iron-fisted supervision, which is somewhat similar to the china securities regulatory commission's approach.
Last month, while the record of A-shares turnover of more than one trillion yuan for 49 consecutive trading days was talked about, the rumor that the total management scale of domestic quantitative private equity funds officially exceeded 1 trillion yuan also attracted the attention of some shareholders.
Some voices believe that the so-called trillion turnover is actually the "fat" supported by the quantitative private placement of high turnover. True or false, this should be noted.
After the A-share mad bull fell sharply in 2015, regulators clearly listed quantitative investment as the cause of market volatility. Within a month, the value of the A-stock market evaporated by 30%, and after being identified as a malicious shorting by overseas hedge funds, regulators directly restricted 34 foreign accounts.
One of the most famous hedge funds is Citadel.
<h3>4</h3>
<h3>epilogue</h3>
Regarding the game between retail investors and institutions, Gary Gensler famously said:
I am not neutral on investor protection. If someone wants to speculate, that's their choice, but we, as a country, have a responsibility to protect those investors from fraud.
Facts have proved that without fundamentals, retail investors cannot compete with institutions in terms of funds, connections, tools and even laws, so it is difficult to escape the fate of being harvested.
But that doesn't mean that retail vs. Wall Street is a meaningless struggle, it at least proves how much energy can erupt from a united people, which is enough for any government to take seriously.
The responsibility of supervision is nothing more than the use of various ways to achieve the word "fairness" that investors dream of. It is the nature of capital to chase profits, at all costs.
Citadel is not crazy enough to cut China and cut the United States?