Too Modest ?The Australian version of the now-notorious social...

Too Modest ?

The Australian version of the now-notorious social media forum at the centre of the GameStop trading frenzy is cracking down on local attempts to organise a similar “market play” and has threatened to ban rule-breakers in an effort to avoid unwanted scrutiny from the market regulator.The global financial services industry is reeling from a seemingly co-ordinated attack this week by DIY investors organising in the forum r/wallstreetbets on social media platform Reddit.

Moderators of the sub-Reddit ASX_Bets have threatened to ban rule-breakers promoting “pumping” activity.

The unexpected surge caught US short-sellers off guard, with hedge fund Melvin Capital forced to accept a $US2.75 billion ($3.6 billion) rescue package from fellow fund managers. Flushing out the fund was positioned as a deliberate goal by some vocal members of the forum.

Now, the moderators of the Australian equivalent, r/ASX_Bets, have taken a stand to prevent similar organising activity by its 33,400 members.

“As I’m sure you’re all aware, there has been some minor business going on in the big daddy sub r/wallstreetbets,” a moderator with the pseudonym Lord of Ruin wrote in the Australian forum on Thursday.

“They were clearly incensed by a hedge fund ... then it escalated. Then it escalated again. Now it’s something else entirely.

“A lot of people have decided to make posts here indicating they want to arrange a short squeeze ... any post or comment attempting to co-ordinate or organize any type of ‘market play’ via the sub will be deleted and the user subject to a three-month ban.”

Rather than a legitimate attempt to “squeeze” short-sellers and profit from the rally, some activity being suggested on the sub-reddit was more akin to “pumping”, or artificially inflating the price of the stock through false and misleading statements, the post proclaimed.

While some are looking to get in on the action and see it as an opportunity to make money, other customers are saying it is at their own peril and they will be caught with their pants down.

— Matt Leibowitz, Stake founder

The moderators said they would attempt to distinguish between satirical and serious posts, indicating that those written in jest would be more likely to pass the sub-reddit’s editorial process.

“We hope the ASIC also appreciates this differentiation given we heard they sometimes use the internet too,” the moderator continued.

The jibe is a likely reference to the Australian Securities and Investments Commission’s concerns about the effect social media influencers can have on sharemarket trading activity, first reported by The Australian Financial Review in August.

It is understood the regulator has established working groups to monitor activity on finance and investing themed groups on platforms such as Reddit, Facebook and video-sharing sensation TikTok. It is particularly worried about social media influencers providing unregulated financial advice online, for which there would be limited legal recourse for any consumer losses.

Australians also seem to have actively participated in the trading activity and discourse on the US-based forum.

“Aussie here doing my part,” posted r/wallstreetbets member u/buttmunch last weekend. “Much love from down under.” They uploaded a screenshot showing holdings of 274 BlackBerry shares valued at $3522 and 72 GameStop shares valued at $3137 at the time of posting.

Second to Tesla

Meanwhile, GameStop has been the second-most traded stock on Australian-born US share trading platform Stake in January, after perennial Millennial favourite Tesla.

Stake founder Matt Leibowitz says the cohort of users trading GameStop stock has grown fivefold in January.

About $100 million has been traded in GameStop over the past two months, with January experiencing five times the volume of December.

But Stake founder Matt Leibowitz said traders participating in the GameStop rally through its platform represented just 1.7 per cent of its 230,000-strong customer base. Eighty per cent of Stake customers are based in Australia.

While some customers were actively encouraging others to take part in Stake’s own community forums, it was a “very vocal but small minority”, he said.

“The dialogue is both positive and negative,” Mr Liebowitz told the Financial Review. “While some are looking to get in on the action and see it as an opportunity to make money, other customers are saying it is at their own peril and they will be caught with their pants down.”

He pointed out that GameStop had a buy/sell ratio of just 1.18, meaning a significant proportion of Stake customers are selling the stock, in line with the consensus view of analysts, and not just “getting blindly caught up in the hype”.

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The fintech entrepreneur, who closely followed the frenzied rally in Volkswagen shares during the global financial crisis when he worked for market maker Optiver in Chicago, said he was nervous for his customers given the current levels of volatility.

“The market always throws up freak events like we’re seeing now,” he said. “Our role is to give investors access to these opportunities ... together with the ability to dive into information they need to make informed decisions.”

Australian hedge funds were on high alert on Thursday after investment banks listed heavily shorted ASX-listed stocks such as InvoCare, Tassal Group and Inghams as potential targets for local Reddit traders.

West Australian mining company GME Resources – which shares a common ticker with the New York Stock Exchange-listed GameSpot – surged 37 per cent to $0.11 on Thursday morning, seemingly a beneficiary of misplaced demand from Australian investors. It subsequently corrected to close at $0.085.

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Aleks Vickovich is the wealth editor. He writes about financial advice, superannuation, banking and regulation, with a special interest in the next generation of investors. Connect with