WEBVTT - 'Stupid Prices' 0:00:03.880 --> 0:00:07.320 Strap on your parachute. It's time for What Goes Up 0:00:07.560 --> 0:00:15.000 with Sarah Ponzick and Mike Regan. Hello and welcome to 0:00:15.080 --> 0:00:18.880 What goes Up, a Bloomberg Weekly Markets podcast. I'm Sarah Pons, 0:00:19.120 --> 0:00:21.200 a reporter on the cross as That Team, and I'm 0:00:21.239 --> 0:00:24.200 Mike Reagan, a senior editor at Bloomberg. Again. You can 0:00:24.200 --> 0:00:28.520 think of me as the Yahoo chat room to Sarah's 0:00:28.560 --> 0:00:31.800 Wall Street bets. I get to be a Wall Street bet. 0:00:32.520 --> 0:00:34.680 I've got the power here. Joke might take a little 0:00:34.680 --> 0:00:36.560 bit of thinking, but it's a good one, I promise. 0:00:36.640 --> 0:00:39.720 I promised listeners. If you needed to get to explain, 0:00:39.800 --> 0:00:43.120 give me a call and he'll give you his personal 0:00:43.159 --> 0:00:45.960 number alongside the podcast hotline at the end of the show. 0:00:46.000 --> 0:00:50.519 Just wait for it. But this week was really a 0:00:50.560 --> 0:00:54.360 week like no other. A short squeeze for the record books, 0:00:54.520 --> 0:00:59.240 shares of game Stop AMC costs, Bill the Bear and 0:00:59.400 --> 0:01:02.440 others going to the moon to use the term and 0:01:02.520 --> 0:01:05.559 now infamous sub credit that might just referenced called Wall 0:01:05.600 --> 0:01:07.440 Street bets. I'm sure you've heard of it. By now 0:01:07.560 --> 0:01:11.200 going private then making the foreum public once again, brokerage 0:01:11.240 --> 0:01:15.920 is restricted trading and representative AOC and Senator Ted Cruz 0:01:16.000 --> 0:01:18.160 actually agreed on something that had to do with the 0:01:18.160 --> 0:01:20.600 stock market, and the list just goes on. Mike right, Sarah, 0:01:20.680 --> 0:01:23.319 And you know, I think some of our listeners might 0:01:23.400 --> 0:01:26.560 have game stop fatigue and Wall Street Bets fatigue. I've 0:01:26.560 --> 0:01:29.959 gotten a few tweets saying, please, please do not make 0:01:30.000 --> 0:01:33.480 any of the crazy things about game stopper Wall Street Bets. 0:01:33.600 --> 0:01:35.919 I've got good news and bad news for those people. 0:01:36.400 --> 0:01:39.360 My crazy thing will not be about Wall Street Bets, 0:01:39.400 --> 0:01:42.960 but the whole podcast will be so so so good 0:01:42.959 --> 0:01:45.639 news and bad news. But luckily for us, we've got 0:01:45.680 --> 0:01:49.040 a really great guest to give us some insight on 0:01:49.160 --> 0:01:52.640 all of this craziness. He's really one of the world's 0:01:52.680 --> 0:01:57.200 leading experts on the complicated structure of the stock market, 0:01:57.760 --> 0:02:01.840 where trades are getting executed dark pools and exchanges and 0:02:01.920 --> 0:02:05.760 wholesalers like Citadel. He's the founder of the research firm, 0:02:05.840 --> 0:02:07.720 the Tab Group, and for the last couple of years 0:02:07.720 --> 0:02:10.600 we've been lucky enough to call him our colleague here 0:02:10.720 --> 0:02:15.280 at Bloomberg. He is our head of market structure research 0:02:15.400 --> 0:02:18.560 at Bloomberg Intelligence, and his name is Larry Tab. Larry, 0:02:18.560 --> 0:02:21.359 Welcome to the show. Oh great to be here, Mike 0:02:21.400 --> 0:02:25.960 and Sarah. Great so Larry. I let's obviously dig into 0:02:26.040 --> 0:02:28.680 this whole game stop and Robin Hood and Wall Street 0:02:28.680 --> 0:02:32.440 bet scenario. The question I keep getting, and I keep 0:02:32.440 --> 0:02:35.679 asking people like yourself over and over again, is, um, 0:02:36.480 --> 0:02:39.840 it's obviously been so wild these moves in these stocks, 0:02:39.840 --> 0:02:44.280 hedge funds getting burned left and right, stocks up thousands 0:02:44.320 --> 0:02:47.760 of percent in a month. It seems like on first 0:02:47.760 --> 0:02:51.000 blush that there's something illegal going on here. But you know, 0:02:51.080 --> 0:02:54.079 the more I look at it on these forums, it's 0:02:54.080 --> 0:02:57.680 hard for me to really pinpoint anything illegal. I feel 0:02:57.680 --> 0:03:01.200 like the regulators have have their work cut out for them. Um. 0:03:01.240 --> 0:03:04.480 I mean imagine, if they dig far enough, maybe they'll find, 0:03:04.760 --> 0:03:07.600 you know, something here or there. Um. But when you 0:03:07.639 --> 0:03:09.720 have a brokerage like Robin Hood, who all of a 0:03:09.800 --> 0:03:14.360 sudden starts restricting trading of some of these stocks and 0:03:14.680 --> 0:03:19.320 interactive brokerage, um, you know, heightening their margin requirements both 0:03:19.360 --> 0:03:21.320 on the on the short and the long end. I 0:03:21.320 --> 0:03:23.160 feel like, all of a sudden, it's it's forcing the 0:03:23.240 --> 0:03:26.520 issue to some degree with regulators that they have to 0:03:26.800 --> 0:03:30.040 sort of get on the school board here somehow about 0:03:30.080 --> 0:03:32.320 this issue. How do you sort of look at it 0:03:32.360 --> 0:03:35.920 from the regulators standpoint, Um, is there anything they can do? 0:03:36.000 --> 0:03:40.400 Is there anything they should do? Um? Yeah, the halting 0:03:40.400 --> 0:03:46.839 of these stocks is not particularly nefarious. The issue has 0:03:46.880 --> 0:03:50.800 to do a clearing and how the clearing mechanisms work. Basically, 0:03:50.920 --> 0:03:53.680 stocks settled in a two day period and and in 0:03:53.720 --> 0:03:58.360 those two days, the brokerages are responsible for ensuring that 0:03:58.440 --> 0:04:04.440 those stocks set and so the question that becomes is, um, 0:04:04.600 --> 0:04:08.840 they can't pledge their customers cash or securities to ensure 0:04:08.920 --> 0:04:10.880 that they settle, so that they have to come up 0:04:10.880 --> 0:04:14.600 with a basically a margin, you know, their margin, just 0:04:14.760 --> 0:04:17.840 like you know, just like you know an individual investor's 0:04:17.880 --> 0:04:20.360 margins if if they're doing margin loans or at they're 0:04:20.360 --> 0:04:22.560 short or whatever. So they have to come up with 0:04:22.600 --> 0:04:25.520 a bunch of capital to basically, you know, put aside 0:04:25.520 --> 0:04:27.960 over at dt c C. And what dt c C 0:04:28.120 --> 0:04:30.640 basically said is is that these stocks have become so 0:04:30.800 --> 0:04:34.680 risky that you know, if you're buying Game Stop at 0:04:34.680 --> 0:04:37.920 three sixty uh and tomorrow it's a one d are 0:04:37.960 --> 0:04:40.320 you really going to pay three sixty for this um 0:04:40.360 --> 0:04:42.120 if it goes down the one hundred. So they put 0:04:42.200 --> 0:04:45.760 up the margin on a lot of these these uh 0:04:46.120 --> 0:04:49.800 um you know, high flyers or whatever, uh so high 0:04:49.880 --> 0:04:53.040 that they that the brokerages can't afford really the margin 0:04:53.160 --> 0:04:55.960 to to set aside so their clients can actually even 0:04:55.960 --> 0:05:00.640 buy this stuff. So it's not really caba all, it's 0:05:00.680 --> 0:05:04.400 not really Robin Hood dwin fairious stuff. It's the DTC 0:05:04.600 --> 0:05:07.760 s C saying this stuff is just too risky. We 0:05:07.800 --> 0:05:09.880 don't trust that these guys have the cash to be 0:05:09.880 --> 0:05:12.520 able to withstand settling these things two days from now, 0:05:12.560 --> 0:05:14.839 because in two days, who knows what the price could 0:05:14.839 --> 0:05:18.840 be could be zero, right, I mean, just and I'm 0:05:18.839 --> 0:05:20.360 just gonna throw it out there because things are moving 0:05:20.400 --> 0:05:23.680 so quickly these days. We record on Thursday. So in 0:05:23.720 --> 0:05:26.360 the morning on Thursday, for example, game Stop shares are 0:05:26.360 --> 0:05:28.800 trading above five hundred dollars a share, and then all 0:05:28.839 --> 0:05:31.640 of a sudden we're back down towards one hundred dollars 0:05:31.640 --> 0:05:34.720 a share. So so it's just things are moving at 0:05:34.760 --> 0:05:37.120 such a quick pace. So I want to double down 0:05:37.120 --> 0:05:39.599 on something you just said. There's obviously a lot of 0:05:39.720 --> 0:05:44.200 rumors swirling around that maybe the hedge funds got together, 0:05:44.440 --> 0:05:47.360 or Citadel or the market makers got together and are 0:05:47.400 --> 0:05:50.520 are telling Robin Hood and the other brokers that they 0:05:50.520 --> 0:05:53.479 have to halt trading on these sites. And you've also 0:05:53.520 --> 0:05:56.760 seen the likes of AOC and Ted cruz Uh and 0:05:56.880 --> 0:05:59.960 Dave Portnoy of Barstool Sports come out and kind of 0:06:00.040 --> 0:06:02.120 shooes you this and say this is an issue. We 0:06:02.120 --> 0:06:04.240 need to look into this. It shouldn't be allowed. So 0:06:04.279 --> 0:06:07.360 what you're saying is there's a structure issue behind the scenes, 0:06:07.760 --> 0:06:10.560 and it's not up to the brokers. So no, it 0:06:10.600 --> 0:06:13.440 has to do with how how securities are cleared and 0:06:13.520 --> 0:06:18.080 so UM basically I buy something today, it settles in 0:06:18.160 --> 0:06:21.839 two days. Basically there's an IOU out there for two 0:06:21.920 --> 0:06:25.839 days that somebody has to basically put cash behind UM. 0:06:25.960 --> 0:06:28.920 And it can't be UM me the individual investor that 0:06:29.000 --> 0:06:31.920 my broker can't take my cash to pledge against their 0:06:32.040 --> 0:06:35.440 overall health or their overall margin account. It's got to 0:06:35.440 --> 0:06:38.239 be capital, you know that the that that the broker 0:06:38.279 --> 0:06:42.960 puts up. And given the increase in capital and the 0:06:43.000 --> 0:06:46.440 increase in risk in clearing these items, they up the 0:06:46.480 --> 0:06:50.839 capital ratio for these tremendously and and none of the 0:06:50.880 --> 0:06:54.720 brokers can afford the risk in case the price of 0:06:54.800 --> 0:06:57.200 this goes down and basically wipes out all their clients, 0:06:57.200 --> 0:06:59.440 and they don't have any cash to basically settle the trades, 0:07:00.160 --> 0:07:04.080 you know, Larry, Unfortunately, uh, we live in the golden 0:07:04.120 --> 0:07:06.800 age of the conspiracy theory as as I'm sure you 0:07:06.920 --> 0:07:13.200 know in politics as well as markets, and obviously people 0:07:13.280 --> 0:07:19.000 looking very heavily now at the role of a wholesaler 0:07:19.080 --> 0:07:24.000 like Citadel Um. Citadel obviously being an unusual situation in that, 0:07:24.200 --> 0:07:25.920 you know, half the firms a hedge fund, half the 0:07:25.960 --> 0:07:30.640 firms a market maker wholesaler um. So walk us through 0:07:30.720 --> 0:07:34.720 how their market making sideworks. I mean, my understanding is 0:07:34.760 --> 0:07:39.320 basically Robin hood sends all their orders to Citadel, who 0:07:39.360 --> 0:07:43.760 pays them a fee, not all of them, but a percentage, uh, 0:07:43.800 --> 0:07:47.400 to Citadel and firms like that who who these orders 0:07:47.440 --> 0:07:49.800 never actually make it to a stock exchange. They're matched 0:07:50.120 --> 0:07:54.760 by these internalizers, as they're called. My impression is, you know, 0:07:54.960 --> 0:07:57.280 maybe they're making I don't know what half a cent 0:07:57.720 --> 0:08:02.400 a share something like that in this way less so, 0:08:04.200 --> 0:08:06.600 you know, and they the reason it's lucrative to them though, 0:08:06.600 --> 0:08:08.600 is they're just getting so much fune. I mean, they're 0:08:08.640 --> 0:08:12.080 they're getting however, many millions or even a billion shares 0:08:12.120 --> 0:08:15.200 a day. I guess to to some of these, Um, 0:08:15.240 --> 0:08:17.720 but I don't wonder. You know, it's got to be 0:08:17.720 --> 0:08:19.960 a tough time to be Ken Griffin with all this 0:08:20.280 --> 0:08:23.120 uh scrutiny. You know of a business that, okay, on 0:08:23.280 --> 0:08:26.560 one side of the businesses is bailing out a hedge 0:08:26.600 --> 0:08:29.480 fund that got run over by these day traders. The 0:08:29.480 --> 0:08:32.000 other side of the business is making a lot of 0:08:32.000 --> 0:08:35.559 money by matching the orders. Um. I mean, is there 0:08:35.559 --> 0:08:37.839 a case to be made for for separating the hedge 0:08:37.840 --> 0:08:40.000 fund from the market making business? Do you think that 0:08:40.160 --> 0:08:41.679 is kind of where this is going that there might 0:08:41.679 --> 0:08:44.559 be certain calls for that. I think that's Ken Griffin's view. 0:08:44.679 --> 0:08:47.280 There's been rumors for years that they're trying to take 0:08:47.320 --> 0:08:51.240 the market maker the security side of the business public. 0:08:51.760 --> 0:08:55.760 So uh, currently the security side of the business is 0:08:55.800 --> 0:08:58.360 mostly in New York or moving down to Florida. The 0:08:58.400 --> 0:09:03.800 hedge funds still in Chicago and elsewhere. They run pretty separately. Um. 0:09:04.000 --> 0:09:07.280 You know, Uh, Joe McCain runs the equities business over 0:09:07.320 --> 0:09:09.800 at the security side. Yeah, he's in Chicago every once 0:09:09.800 --> 0:09:12.960 in a while, but it's a pretty separate business. Now. Yeah, 0:09:13.400 --> 0:09:15.199 people are saying Oh yeah, you know we're going to 0:09:15.280 --> 0:09:18.480 get you know, Citadel, because you know we're gonna do 0:09:18.520 --> 0:09:22.760 all this game stop trading and it's gonna run over Citadel. UM. 0:09:22.800 --> 0:09:25.240 It's you know, it could hurt the hedge fund side 0:09:25.280 --> 0:09:28.600 if they're short. But UM market makers don't lose money 0:09:28.640 --> 0:09:31.520 on their trading. What they're doing is they're selling liquidity 0:09:31.640 --> 0:09:36.319 UM and and when UM spreads widen and the and 0:09:36.440 --> 0:09:40.760 the valuable liquidity becomes more precious, they actually make money. 0:09:40.840 --> 0:09:45.079 So UM the security side of the business of Citadel 0:09:45.160 --> 0:09:48.920 or Virtu or two Sigma or uh Susquehanna g One 0:09:49.160 --> 0:09:52.760 g One Execution, which is the other major market maker, 0:09:53.559 --> 0:09:55.440 I'm saying they have. They had a pretty good week. 0:09:55.600 --> 0:09:59.280 They've had a pretty good year. Uh. The in fact, 0:10:00.120 --> 0:10:03.120 the financials for Citadel securities were leaked for last year 0:10:03.160 --> 0:10:06.000 and I think they made six point seven billion last year, 0:10:06.440 --> 0:10:09.160 which is up from I think like a billion or 0:10:09.200 --> 0:10:13.360 two maybe a year or two ago. So UM, I'm 0:10:13.360 --> 0:10:18.480 not sure they're harden Ken Griffin too much more fuel 0:10:18.559 --> 0:10:21.880 for the redditors. So I was I was hoping, Larry, 0:10:21.920 --> 0:10:24.880 because you've done so much work on on price improvement 0:10:24.920 --> 0:10:27.520 and payment for order flow. If you could kind of 0:10:27.559 --> 0:10:31.520 break down for us at our listeners how this actually 0:10:31.960 --> 0:10:35.000 works here, because I know there's there's Before any of 0:10:35.000 --> 0:10:37.360 this happened, there's been a lot of back and forth 0:10:37.880 --> 0:10:42.199 about how, yes, Robin Hood's all about democratizing investing, then 0:10:42.200 --> 0:10:45.000 they're going ahead and selling all their customers orders and 0:10:45.080 --> 0:10:49.560 Citadel's profiting anybody any anytime anybody says anything about democratizing 0:10:49.559 --> 0:10:51.600 Wall Street, you would need to run the other direction. 0:10:51.679 --> 0:10:57.880 That's okay, But I'll talk about payment for water flow 0:10:57.880 --> 0:11:00.520 and how those mechanics were and how this stuff and 0:11:00.559 --> 0:11:03.559 why this stuff is not you know that nefarious. It's 0:11:03.600 --> 0:11:07.800 not perfect, but it's not in the fairest um the 0:11:08.200 --> 0:11:11.720 market UM the market has become. The market now is 0:11:11.720 --> 0:11:14.640 not NASDAC in New York, with NASDACK stocks trading in 0:11:14.720 --> 0:11:17.240 NASDAC and New York stocks trading in New York. There 0:11:17.240 --> 0:11:21.400 are sixteen different exchanges. Those exchanges are mostly located in 0:11:21.480 --> 0:11:25.480 three different areas in northern New Jersey. UM and there's 0:11:25.480 --> 0:11:27.960 a lot of back and forth and trading between all 0:11:28.000 --> 0:11:31.480 these exchanges. There are thirty two dark pools UM and 0:11:31.679 --> 0:11:36.480 and there's a whole fragment, fragmented world. The way that 0:11:37.320 --> 0:11:40.280 the way the SEC regulates exchanges is generally there's a 0:11:40.320 --> 0:11:43.480 minimum a minimum tick size of a penny. For a 0:11:43.480 --> 0:11:46.280 lot of the stocks trading at a penny, that spread 0:11:46.360 --> 0:11:49.880 is too wide, UM that that they'd actually traded less 0:11:49.880 --> 0:11:54.719 than a penny if if UM, if they were allowed UM. 0:11:54.800 --> 0:11:58.600 And so what happens is market makers can can actually 0:11:58.840 --> 0:12:01.640 improve the price of these things. Now getting back to 0:12:01.679 --> 0:12:05.280 the market overall um because of all this electronics and 0:12:05.320 --> 0:12:11.280 complexity um uh. The market, the lit markets are really 0:12:11.320 --> 0:12:15.480 geared for institutions. And so if you're posting a price 0:12:15.800 --> 0:12:18.559 on Nastack or New York or CEBO or any one 0:12:18.559 --> 0:12:21.000 of the sixteen exchanges, you have to be ready that 0:12:21.040 --> 0:12:24.720 it's going to get executed by you know, Stevie Cohen 0:12:24.880 --> 0:12:29.559 or some very sophisticated, very smart guy UM or some 0:12:29.760 --> 0:12:31.680 very large guy like Fidelity is going to come in 0:12:31.720 --> 0:12:34.240 and buy a million shares. So so you have to 0:12:34.240 --> 0:12:38.400 be prepared when you're when your quotes are accessible to everybody, 0:12:38.440 --> 0:12:42.280 that you're going to get hit by the most sophisticated 0:12:42.280 --> 0:12:44.760 guy in the world. And so your quote better be 0:12:45.040 --> 0:12:47.440 your quote better be good, and it better be ready 0:12:48.000 --> 0:12:51.400 for for the market to move forward. That said, when 0:12:51.400 --> 0:12:53.920 you or I or Mike or Sarah or whoever come 0:12:53.960 --> 0:12:57.040 in and buy their hundred shares of game stopper. You know, 0:12:57.320 --> 0:13:01.640 let's say Apple, Um, you know you're hunter chairs of 0:13:01.679 --> 0:13:03.679 Apple or your five shares of Apple are not going 0:13:03.720 --> 0:13:07.400 to influence the price of Apple. So in effect, the 0:13:07.440 --> 0:13:10.320 price that's being displayed on Apple is actually too wide 0:13:11.080 --> 0:13:15.439 because it's geared for the institutions. Because of this, um, 0:13:15.880 --> 0:13:18.839 market makers who know that that waterflow is coming from 0:13:18.960 --> 0:13:21.760 Robin Hood, or it's coming from e Trade or coming 0:13:21.800 --> 0:13:25.040 from Schwab, they know that it's not a million shares 0:13:25.120 --> 0:13:28.880 behind it. It's not Stevie Cohen hitting the enter button. Um. 0:13:28.960 --> 0:13:31.240 You know, they might not know it's Sarah or Larry 0:13:31.280 --> 0:13:34.480 or Mike, but they know it's a retail guy. And 0:13:34.480 --> 0:13:36.520 and because of that, they can actually give you a 0:13:36.600 --> 0:13:41.000 better price than they can give Stevie comb Um. And 0:13:41.120 --> 0:13:45.880 so they can price it better and so um, the 0:13:46.320 --> 0:13:49.319 pot of money that they make on your apple trade 0:13:49.360 --> 0:13:53.960 gets split basically three ways. One a portion goes to them. 0:13:54.040 --> 0:13:57.760 They keep it for making you know, for servicing your waterflow. 0:13:59.040 --> 0:14:04.359 The the other balance is broken out into price improvement. 0:14:05.280 --> 0:14:08.199 When you get your your your share price back from 0:14:08.200 --> 0:14:10.880 your execution. A lot of times you'll see fractions to 0:14:10.960 --> 0:14:14.920 the right of pennies. Um, that means that your price 0:14:15.000 --> 0:14:17.439 got improved. That means you've got a better price than 0:14:17.640 --> 0:14:21.960 then was displayed in the marketplace. Um, that price improvement 0:14:22.000 --> 0:14:24.200 goes to you. And then a little bit of that 0:14:24.600 --> 0:14:27.720 what's left over from from from that profit the market 0:14:27.760 --> 0:14:30.040 maker makes, goes back to the broker to pay for 0:14:30.080 --> 0:14:33.040 that order and that's that's payment for water flow. Now, 0:14:33.120 --> 0:14:35.720 payment for order flow tends to be about a quarter 0:14:36.320 --> 0:14:39.120 of what's not kept by the wholesaler. So you've got 0:14:39.120 --> 0:14:42.200 the whole salar portion, and then you've got the price 0:14:42.240 --> 0:14:46.920 improvement and the payment for waterflow of that bucket. The 0:14:47.000 --> 0:14:50.080 broker usually gets a quarter of that, and two thirds 0:14:50.080 --> 0:14:52.320 of that or three quarters of that goes to the client. 0:14:52.360 --> 0:14:55.160 In terms of those little pennies or subpennies that go 0:14:55.240 --> 0:14:59.120 to the people say oh that's demnimous. It's not necessarily dementimous. 0:14:59.200 --> 0:15:01.680 It's adds up to you know, billions dollars a year. 0:15:03.440 --> 0:15:05.800 It's just you know, shows up in your accounts for 0:15:05.840 --> 0:15:17.120 actions of assent. Yeah, Larry, I wanted to get back 0:15:17.120 --> 0:15:20.320 to that you mentioned the dt c C, the Depository 0:15:20.400 --> 0:15:24.000 Trust and Clearing corp UM, and it sounds like, um, 0:15:24.040 --> 0:15:26.560 you're thinking that robin Hood probably got a call from them, 0:15:26.600 --> 0:15:30.680 and that is sort of what motivated Uh. Chances are 0:15:31.360 --> 0:15:33.960 m robin Hood got a call from their clearing firm, 0:15:34.080 --> 0:15:37.600 who got a call from DCCC. Right, So, I mean 0:15:37.840 --> 0:15:42.840 would that lead you to expect more discount brokerages to 0:15:42.840 --> 0:15:45.200 to follow suit and restrict these talks? I mean, does 0:15:45.240 --> 0:15:48.200 it depend how well capitalized you are as as a brokerage. 0:15:48.240 --> 0:15:50.440 I guess it depends on how well capitalized you are. 0:15:50.480 --> 0:15:53.440 It also it depends on what your your percentage of 0:15:53.520 --> 0:15:56.840 volume of If you know, if you're only doing shares 0:15:56.880 --> 0:15:58.680 of one of these names, it's not a big deal. 0:15:58.760 --> 0:16:02.080 But if you're doing a billion shares, then you're probably 0:16:02.240 --> 0:16:06.240 need to pony up some more margin. So it really 0:16:06.280 --> 0:16:09.400 depends on your mix a client basis. So I kind 0:16:09.400 --> 0:16:11.880 of you know, if you think about it, you know, 0:16:12.080 --> 0:16:15.200 is Bank of America, Merrill Lynch or their clients you know, 0:16:15.400 --> 0:16:18.480 you know being funneled into the game stop Probably not 0:16:19.240 --> 0:16:23.000 um so if you know, but if you're in the 0:16:23.120 --> 0:16:27.000 Merry Trade or robin Hood or whatever, you know or 0:16:27.040 --> 0:16:30.120 it could very well be. And those are the brokerages 0:16:30.160 --> 0:16:32.920 that at this point have placed the restrictions. It seems 0:16:32.920 --> 0:16:34.960 so it's the customer base that would be trading these 0:16:34.960 --> 0:16:38.520 types of shares, which makes sense. I also just wanted 0:16:38.560 --> 0:16:40.080 to get your take clear. I mean, there's been a 0:16:40.160 --> 0:16:42.320 lot of talk this year or not this year, this 0:16:42.400 --> 0:16:46.560 week about the stock market feeling like it's broken, that 0:16:46.680 --> 0:16:51.360 we shouldn't be seeing shares of costs or game stop 0:16:51.520 --> 0:16:55.800 or a MC we shouldn't be able to see markets 0:16:55.880 --> 0:16:58.520 move like this, And there's been a lot of comparisons 0:16:58.560 --> 0:17:00.800 made to the late nineties and the dot com bubble, 0:17:01.200 --> 0:17:05.560 But have you ever seen anything like this? And is 0:17:05.600 --> 0:17:10.520 the market equipped to kind of go forwards? If if 0:17:10.560 --> 0:17:12.680 this is going to continue? And let me put in, Sara, 0:17:12.800 --> 0:17:14.920 this this week actually lasted a full year, so you're 0:17:14.960 --> 0:17:16.960 right on your right on both terms. That thank you, 0:17:17.040 --> 0:17:23.640 It's that is true. I think five I think every 0:17:23.800 --> 0:17:26.439 every week, you know, in the last year and a 0:17:26.440 --> 0:17:31.800 half has felt like a whole year. So I'm I'm 0:17:31.840 --> 0:17:35.520 tempted to say though that with everyone weighing in this week, 0:17:35.560 --> 0:17:38.159 I mean, jaw Rule was even coming out the rapper 0:17:38.320 --> 0:17:41.119 talking about this, I mean already feels weirder to me. 0:17:43.240 --> 0:17:46.959 St started to stopping your question there, Sarah, I've forgotten 0:17:47.000 --> 0:17:51.360 what it is. I've ruined the whole thing here and shortly, 0:17:52.080 --> 0:17:56.480 have you ever seen this before? I have not seen 0:17:56.520 --> 0:17:59.439 this before. Um. You know, you've got to kind of 0:17:59.440 --> 0:18:02.240 harken back to the Pets that got pets dot com 0:18:02.359 --> 0:18:09.040 days of the of the thousand's, but it wasn't like this, um. 0:18:09.119 --> 0:18:11.119 And is the market broken? No, the market is not 0:18:11.240 --> 0:18:13.560 really broken. This is what markets do. When there's a 0:18:13.560 --> 0:18:15.879 lot of buying demand, the price goes up, and when 0:18:15.880 --> 0:18:17.960 there's a lot of selling demand, the price goes down. 0:18:18.560 --> 0:18:21.560 Are there issues with short selling rules and riggings show 0:18:21.720 --> 0:18:24.159 and some of the infrastructure the price should be looked at? 0:18:24.200 --> 0:18:28.119 Should should affirm or should a company be a hundred 0:18:28.200 --> 0:18:33.240 and forty or of its float be short? You got 0:18:33.280 --> 0:18:35.679 us think that there's some problem with rig show and 0:18:35.720 --> 0:18:38.199 borrows and locates and things like that, which is basically 0:18:38.280 --> 0:18:42.960 the mechanism you need to actually go short. Um. Uh, 0:18:43.000 --> 0:18:45.600 you know that. You know, it seems like that would 0:18:45.640 --> 0:18:49.199 be a good place to look first off, But the market, 0:18:49.240 --> 0:18:51.760 that's what the market does. The market responds to buying 0:18:51.800 --> 0:18:55.240 and selling pressure. And and people are saying, oh, get 0:18:55.320 --> 0:18:58.600 rid of those electronic market makers, blah blah blah, we 0:18:58.640 --> 0:19:00.600 should go back to the days when stch lists were 0:19:00.600 --> 0:19:02.920 on the floor. Well, those guys got arrested and taken 0:19:02.960 --> 0:19:06.600 away for handcuffs, you know. And um, you know, and 0:19:06.600 --> 0:19:09.080 and put it this way, nobody no market makers in 0:19:09.119 --> 0:19:12.119 the business to provide liquidity at a loss. They're not 0:19:12.280 --> 0:19:16.919 there to basically let you profit and pillage their balance sheet. Um, 0:19:16.960 --> 0:19:19.359 They're going to react as quickly as they can to 0:19:19.920 --> 0:19:22.280 the buying and selling pressure to find what the new 0:19:22.320 --> 0:19:26.560 price should be. That's what markets do. And and you know, 0:19:27.119 --> 0:19:29.720 back in the the fractional trading days, those guys were 0:19:29.760 --> 0:19:32.960 making a killing on every trade get relatively, you know, 0:19:33.000 --> 0:19:35.520 if you compare it to the spreads now. But you know, 0:19:35.840 --> 0:19:37.880 you you mentioned the pets dot com And I made 0:19:37.880 --> 0:19:42.200 the joke about the Yahoo chatboards at the beginning. I mean, 0:19:42.240 --> 0:19:44.800 it's it's similar in a way. You know. I remember 0:19:44.880 --> 0:19:48.159 lurking in those chat rooms twenty years ago when I 0:19:48.160 --> 0:19:50.240 worked at a different news service and didn't have access 0:19:50.280 --> 0:19:52.240 to a Bloomberg, just trying to figure out what's moving 0:19:52.240 --> 0:19:55.800 each individual stock. I mean, I guess it's it's sort 0:19:55.840 --> 0:20:00.080 of just the natural evolution of the hive mind, the 0:20:00.080 --> 0:20:03.200 the hive trader mind to some degree. Well that that's 0:20:03.240 --> 0:20:05.800 actually a really interesting question because if if you would 0:20:05.800 --> 0:20:08.160 have done this ten years ago, it would have been 0:20:08.200 --> 0:20:10.480 a Long Island boiler room shop and it would have 0:20:10.480 --> 0:20:13.760 been done. It would have been done, you know, by 0:20:13.800 --> 0:20:17.640 talking up ant ant selma, you know, go buy some 0:20:17.800 --> 0:20:21.600 stock that doesn't really exist, or you know, now now 0:20:21.640 --> 0:20:24.239 you got basically the same thing going on, you know, 0:20:24.760 --> 0:20:28.280 you know, short squeeze on game stop by all three, um. 0:20:28.320 --> 0:20:32.119 You know, is you know, you know, what's the difference 0:20:32.119 --> 0:20:34.720 between that and being done and being done in a 0:20:34.960 --> 0:20:38.320 you know, Long Island boiler room. I don't know. I 0:20:38.320 --> 0:20:41.359 think SEC's I think that's a you know, that's an 0:20:41.400 --> 0:20:43.840 interesting thing for the SEC to look at. Is this 0:20:43.880 --> 0:20:46.840 market manipulation. I remember in the early days of cell 0:20:46.880 --> 0:20:49.320 phones you used to get random text pump and dump 0:20:49.359 --> 0:20:52.560 text messages saying, you know, by by this this and 0:20:52.600 --> 0:21:10.840 that stock, let's just pretend play play make believe for 0:21:10.880 --> 0:21:13.280 a minute here, and we'll pretend I'm Joe Biden and 0:21:13.320 --> 0:21:15.080 I just called you up and I said, Larry, what 0:21:15.119 --> 0:21:17.840 the heck do I do about this? I don't understand it. 0:21:17.880 --> 0:21:20.520 I know something's wrong. Can I fix this? Do I 0:21:20.560 --> 0:21:22.640 need to fix this? You know what? What's what's your 0:21:22.640 --> 0:21:26.600 response to Joe? What's my response to Joe? I think 0:21:26.680 --> 0:21:30.680 as adviser of the president promoted Larry, it's long overdo 0:21:31.800 --> 0:21:35.199 Overdo I have enough pressure being from under now? You know? 0:21:35.240 --> 0:21:39.320 Now I got to Biden. Um, you know, I think 0:21:39.359 --> 0:21:41.880 this is what I would be looking at his rig show. 0:21:42.080 --> 0:21:44.560 You know, let's you know, let's start off with, you know, 0:21:44.920 --> 0:21:47.520 is the short side of this business operating properly and 0:21:47.800 --> 0:21:51.040 where they you know, because that's kind of what started it. 0:21:51.200 --> 0:21:53.960 It was like, oh there, you know this company, this 0:21:54.119 --> 0:21:58.199 float is a short or short let's go charge it. 0:21:58.800 --> 0:22:01.480 The second thing may actually be, you know what, you know, 0:22:01.520 --> 0:22:04.520 what happened you know on Thursday, is maybe we can 0:22:04.560 --> 0:22:07.280 speed up the settlement process. Because if you can speed 0:22:07.359 --> 0:22:09.720 up the settlement process, then the marchin we don't have 0:22:09.760 --> 0:22:12.600 these issues with you know, basically you know, stopping out 0:22:12.680 --> 0:22:15.679 the brokers from letting you trade these names. But in 0:22:15.760 --> 0:22:19.919 terms of the market structure, you know, it's hard to 0:22:20.760 --> 0:22:22.879 it's hard to say that there are things wrong with 0:22:22.960 --> 0:22:25.400 it and that you know, when a lot of people 0:22:25.440 --> 0:22:27.320 come and buying, the price goes up, When a lot 0:22:27.320 --> 0:22:29.679 of people sell, the price goes down. You know, you 0:22:29.720 --> 0:22:32.359 have callers on these from the exchanges to stop them. 0:22:32.400 --> 0:22:35.000 If they're volatile, you might want to tighten some of 0:22:35.000 --> 0:22:38.000 them so that there are more stops. So, but I 0:22:38.000 --> 0:22:41.600 don't think that's the problem. These aren't These aren't air pockets, 0:22:41.640 --> 0:22:44.679 these aren't order book abnormalities. That's making this. This is 0:22:44.920 --> 0:22:48.800 clearly buying and selling demand. You know. The other issue 0:22:48.880 --> 0:22:51.560 is the linkage is possibly between the options and the 0:22:51.600 --> 0:22:56.680 equities market, but I'm not that seems what happens there 0:22:56.800 --> 0:22:58.600