When the games stop...
The lessons to be learned from the recent GameStop/Reddit/Robinhood controversy are still developing. Understanding the roles played by certain individuals/firms will take years to unravel. Understanding the ethical and legal consequences of their actions will take even longer. One thing is certain. No single event since the October 1987 Stock Market Crash has shown how vulnerable financial markets can be.
Factor 1: Hubris
Fitzgerald, Maggie, 20210205, GameStop mania may not have been the retail trader rebellion it was perceived to be, data shows. CNBC.
Yi, Yun, 20210202, As GameStop plunges, Volkswagen's 2008 short squeeze gives an idea of how painful it will get. ABC News.
The U.S. Congress House Committee on Financial Services brought together key played in the GameStop controversy to testify on Thursday, February 18, 2021. A video with the full hearing as well as the written testimony by each participant can be obtained at the link below:
Factor 2: Brokers knowingly allowing traders to lose money.
Rudegeair, Peter, 20210221, Robinhood in talks to settle Finra probes in options-trading practices, outages. WSJ.
Robinhood co-CEO on users depositing stimulus checks into the app and market accessibility