Robbing the Poor To Help the Rich
When U.S. broker-dealer Robinhood launched its app in 2015, it appeared to be like its namesake, Robin Hood, the legendary outlaw of British folklore who robbed the rich to help the poor.
“Everyone should be able to participate in the stock market. It shouldn’t matter if you have a hundred dollars or a hundred thousand dollars,” Robinhood tweeted and promptly amassed a large number of users with its promise that it would let “everyone trade for free.”
Sadly but perhaps not unexpectedly, that promise was broken in January when it sided with the rich and tried to prevent the longoppressed and smoldering public from trying to turn the tables.
The new Occupy Wall Street protest movement was started by a band of real Robin Hoods, amateur traders who came together on social discussion website Reddit. They had noticed that hedge funds and other big established investors were shorting the stocks of ailing video game retailer GameStop. Shorting stocks means an investor borrows shares from a broker, sells the shares, then waits for the price to go down. When the price dips, they buy the shares back cheaper and return them to the broker, pocketing the difference.
Nearly 6 million amateurs on Reddit’s community board WallStreetBets (WSB) then started playing the game themselves. Their mass buying began to drive up the price of GameStop and other struggling targets like cinema chain AMC, making the established investors and brokers bleed. At one point of time Robinhood, once the advocate of free trade, announced a freeze on the sale of GameStop stock and other stocks trending on WSB, which has subsequently triggered dozens of lawsuits against it and a call for investigation by some lawmakers.
Robinhood was not the only one to try to stop the man on the street from getting the better of established investors and big capital. In keeping with the trend of tech companies like Facebook and Twitter backing politicians but coming down on the average Joe, Discord, an instant messaging platform, banned WSB for four days. However, the undeterred WSB revolutionaries promptly jumped onto new online platforms in their pursuit of teaching the establishment a lesson.
The world has been watching the upheavals. According to
Zhao Xijun, Deputy Director of Finance and Securities Institute at Renmin University of China, the incident shows that the U.S. financial market is far from being as mature as the outside world believes.
“The traditional trading system in the United States is evolving more in the direction of favoring capital, forming a trading system arrangement that serves big capital, which is very unfavorable for retail investors or small and medium-sized investors,” Zhao said. “But the Internet technology has created loopholes in the existing arrangements, enabling small players to challenge large institutional investors.”
The Robinhood incident snowballed beyond an investment game, it stimulated people’s emotions against the “big guys” that dominate the market unfairly. Ironically, it is the same big guys who make the rules; but when small players use the same rules to make a profit, they try to change the rules.
This is how Shen Yi, Director of the Center for BRICS Studies at Shanghaibased Fudan University, sees it. As he said in a video, “What we saw this time was the American elite trying to act against the rules of the game they themselves had established when their own interests were compromised.”
Shen also pointed out that on the Chinese social media people are saying that this incident has punctured the myth that the rules and mechanisms of the American market economy are neutral and apply fairly to all.