Reddit’s army of “monkey” traders are fighting to raise awareness of dark pool abuses, believing that the 1% is manipulating the AMC stock market.
Since the start of 2021, the price of AMC has increased by 831%. Meanwhile, hedge funds have taken a $ 12 billion hit due to the stock mania meme, motivating those with apathy towards stocks to download an app and start investing. It was a story of an earlier revolution, exposing the fragility of the market when the Normans want to gamble – but now something fishy is going on.
#DarkPoolAbuse is trending on Twitter, especially in the United States. You may be curious enough to click, where you’ll find rabid tweets, clips of market tipsters and traders explaining (but not really, as they speak to their savvy viewers) about the apparent scandal gripping AMC.
Let’s break it down in the simplest possible terms. As you probably know, trading takes place on the stock exchange, whether in New York, London, or NASDAQ. People can access it through websites and trading apps, and there are smaller exchanges for Dogecoin and Ethereum. Nothing controversial to see here.
The dark pools are not open to the public. According to Investopedia, they are “private stock exchanges which are not accessible to the investing public”, and they are not visible to the public either, often criticized for their lack of transparency. A dark pool – in theory – is completely legal and (barely) regulated by the Securities Exchange Commission.
They were first created to “facilitate block transactions by institutional investors who did not wish to impact the markets with their large orders and obtain unfavorable prices for their transactions”.
Think of it this way: you are an investor with sizable pockets looking to buy 10 million shares of a company. Such a purchase on the normal stock exchange would introduce fairly instant volatility, as the price would rise significantly, in addition to the risk of the share’s value falling due to an increase in supply and exposure of their position. . The same goes for selling.
So, on a dark pool, also known as dark liquidity, they could buy the 10 million shares “over the counter” in the stock exchange order books, matching the buyers and sellers to the. going exchange price (but not necessarily the price a normal person would pay) with lower fees. The intentions of their transaction are not revealed to the open market until after they have been executed, usually with a delay so as not to “trigger an overreaction or an under-reaction in prices” – this exact length of this delay is rarely examined.
Intentions were good, but market makers began to act like hedge funds, leaving dark pools “susceptible to conflicts of interest from their owners and predatory business practices of HFT companies.” Off-market prices can be significantly disproportionate, often benefiting institutional investors over your standard Reddit traders.
“Institutional investors may be able to sell large holdings of a security in a dark pool before retail investors are aware of this activity,” Market realistic Remarks. Dark pools have grown in popularity and now represent around 40% of the global stock market.
So back to AMC. Its current price is $ 37.24, down 8.68% today. According to Market chameleon, 83.2 million shares were traded on AMC shares yesterday – that sounds like a lot, doesn’t it? Well, 71% of those trades took place through dark pools.
Why is it a problem? Well, with billions of dollars in transactions taking place in a dark pool, retail investors don’t get any smarter until it’s too late. On June 25, $ 40 billion in purchases were reportedly made on AMC stocks in dark pools, with $ 10 billion in sales.
If all of the dark pool’s transactions took place in the open market, the price would rocket into crazy numbers – and in turn, make normal people rich. But because hedge funds and other financiers seem to be channeling their sales into the open market and buying through the dark pool, this keeps the price low and prompts people to sell their positions, without any SEC oversight.
‘Listen to me. On 3/3, the volume of the dark pool was 59%. Over the past 20 days, the average has been 62%. With 73% today, one thing is perfectly clear to me: they are losing control of this situation. I’m angry, but I’m looking at it from a different perspective, ”one user wrote.
“The former Wall Street lawyer here. Do the Monkeys know that the SEC can stop or suspend Dark Pool trading at any time? The government is testing pilot programs all the time. Why not take a 30 day break ??? ‘ another wrote, echoing widespread pressure on the commission to shrink dark pools amid unprecedented volume.
“With AMC, we know they trade HUGE volumes of this stock with each other. These huge volumes would obviously affect the share price… why do you think so many AMC shares are traded through dark pools? If all AMC buy orders were executed in the open market, AMC’s stock price would be ridiculously high right now, ”wrote Redditor ArcherOk6223.
” From now on ? We can do a sweet FA. As always, all we can do is buy and hold. When they come together in their dark pools to trade, all they will see is that no one is selling and everyone wants to buy, ”they added.