Lessons from GameStop

Enforcing against short squeezes should be the first milestone of developing capability in dealing with market abuse

The “short squeeze” on GameStop has got everyone thinking. Short squeezes are an old problem, they hamper short selling, and constitute one element of “market abuse”. Financial markets regulation involves enforcing against short squeezes. What is new about the GameStop situation is that an amorphous mob has done the short squeeze, which challenges traditional notions of enforcement. In India, short selling through the spot market is largely infeasible, but there is now a small threat on the equity derivatives market. Enforcing against short squeezes should be the first milestone of developing capability in enforcing against market abuse.

If a speculator believes