In January, the market value of American video game and electronics retailer GameStop, driven by an “army” of “retail” investors, shot up from $1.4 billion to $33.7 billion. This dramatic increase in stock price caused hedge funds that were shorting GameStop to “suffer” significant losses and accuse retail investors of market manipulation. This standoff between “retail” and professional investors revealed the challenges faced by “retail” investors in equity trading: discrimination and conflicts of interest.
Once the extent of the GameStop stock surge became clear, hedge funds themselves started to buy GameStop stock in order to limit their losses, thereby redoubling the pressure on the stock (this is known as a short squeeze). Considering that the main “retail” platform on which most of the “retail” trading activity was taking place, was channeling all its retail orders to third parties, and that this platform suspended its services at the same time as the short squeeze, taking out the retail investors betting against short-sellers, it is quite ironic that those same short-sellers shouted “market manipulation”!