A Report by the Ad Hoc Academic Committee on Equity and Options Market Structure Conditions in Early 2021

54 Pages Posted: 15 Feb 2022 Last revised: 3 Jul 2022

See all articles by Joshua Mitts

Joshua Mitts

Columbia Law School

Robert H. Battalio

University of Notre Dame - Department of Finance

Jonathan Brogaard

University of Utah - David Eccles School of Business

Matthew D. Cain

Berkeley Center for Law and Business

Lawrence R. Glosten

Columbia University

Brent Kochuba

SpotGamma

Date Written: July 2, 2022

Abstract

On October 18, 2021, SEC staff released a long-awaited report on equity and options trading in connection with the meteoritic rise of GameStop’s share price in January 2021. The staff report addressed several issues surrounding the GameStop episode, but one of the most widely reported was the conclusion that neither a short squeeze nor a gamma squeeze caused the increase in GameStop’s share price. Rather, staff concluded, “it was the positive sentiment, not the buying- to-cover, that sustained the weeks-long price appreciation of GameStop stock.”

In this report, we show that additional data has come to light which suggest that GameStop’s shares may have been subject to a short squeeze and gamma squeeze. First, by extending the sample and considering securities lending transactions, we find evidence suggesting that a nontrivial fraction of the trading volume in GameStop’s stock consisted of purchases by short sellers covering their positions. Second, we show that staff’s analysis of a gamma squeeze can be extended to include delta-hedging by put and call options market makers to better approximate the contribution of options positions to the increase in GameStop’s share price.

To be sure, without access to the sort of nonpublic, deanonymized data available to the Commission and its staff, we are unable to pin down the magnitude of a short squeeze or gamma squeeze in GameStop’s shares, much less identify the actors involved in or responsible for such trading. We hope that our analysis can helpfully guide the Commission and its staff in identifying additional data which might shed light on the extent to which the increase in GameStop’s share price may have been the product of a short squeeze and gamma squeeze. We are ready and willing to provide any assistance to the Commission and staff in that effort.

This draft has been revised as of July 2, 2022.

Keywords: GameStop, meme stocks, trading, short squeeze, gamma squeeze

Suggested Citation

Mitts, Joshua and Battalio, Robert H. and Brogaard, Jonathan and Cain, Matthew D. and Glosten, Lawrence R. and Kochuba, Brent, A Report by the Ad Hoc Academic Committee on Equity and Options Market Structure Conditions in Early 2021 (July 2, 2022). Available at SSRN: https://ssrn.com/abstract=4030179 or http://dx.doi.org/10.2139/ssrn.4030179

Joshua Mitts (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States

Robert H. Battalio

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States
574-631-9428 (Phone)
574-631-5255 (Fax)

Jonathan Brogaard

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Matthew D. Cain

Berkeley Center for Law and Business ( email )

215 Law Building
Berkeley, CA 94720-7200
United States

Lawrence R. Glosten

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Brent Kochuba

SpotGamma ( email )

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