This seems like a liveops game design problem:

This seems like a liveops game design problem:

SEC = MMO Developer & Publisher

HFs & HFTs = Gold farming sweat shops & bots

WSB = Consumer players

We have a single-world MMO where one side exploited a cheat to sell rare items on the auction house that did not exist (HF & HFT). And the other side is demanding to be paid market rate for the treasure items that do exist (Regular players).

Clearly the SEC failed to regulated naked shorts. And if we allow GME to hit $70,000k it will cause losses to reach something like 210 x $70B or $14 trillion dollars (due to the cascading obligations from what I have read).

So, while the gamer that min / maxes everything would like to hold out for the infinite $10k or $69k $GME from the short squeeze, we cannot allow a $14T bubble-pop. I mean we could, but '08 was less than $1T. So 14 is right off the table.

So the Feds will have to come in and implement some sort of fiat decision.

Seems like the easiest thing to do is to take the highest share price we have seen for GME with any real volume ~ $460 - perhaps round up to $500.

Call that GME(max).

The Feds halt all trading this weekend.

The Feds force the existing short and put holders to purchase the stocks that they borrowed for $500 each.

Keep paying off the current shareholders in tranches: everyone with 10 or fewer shares of GME is forced to sell for $500.

Keep checking the short sellers for liquidity.

When short of liquidity - go up the fiduciary stream, e.g. insurance, FINRA, etc.

Do the next tranche of say 50 or fewer shares.

When all of the short sellers and their insurance companies are BK, wipe out both their equity and debt layers for failure to perform oversight.

Then create a new entity, capitalized by the feds with phoney money. Use this new entity to pay off the remaining GME holders, until you get to some sort of FDIC-like insurance max fed payoff like $500k.

Whatever crumbs of assets remain in the short sellers and insurance companies, place in the new government owned entity.

After that the remaining GME holders simply have to hold the remaining GME shares. The shorts and their insurance companies become historical wikipedia articles.

Then the SEC actually - for reals this time, bands not just naked shorts, but limits short interest to no more than 20% of any company's float.

Also all short positions need to have more transparency and separate insurance policies.

No little retail person is blown up. All of the professional money managers on the short side - knew what they were doing by definition - and were counting on socializing the payout by us in case of a black swan.

The cost of various financial insurance products would go up, and so some forms of financial engineering would be more expensive - but that would actually help us price the risk more accurately.

Feels like a decent rules patch? How about my fellow game designers - if this was a Friday night - and you had your forums blowing up - and you had to do something - what would you do?

Originally posted on Facebook on January 29, 2021.