{"id":10048,"date":"2022-11-09T10:00:05","date_gmt":"2022-11-09T04:30:05","guid":{"rendered":"https:\/\/gtm360.com\/blog\/?p=10048"},"modified":"2023-03-22T21:42:35","modified_gmt":"2023-03-22T16:12:35","slug":"hair-splitting-in-finance","status":"publish","type":"post","link":"https:\/\/gtm360.com\/blog\/2022\/11\/09\/hair-splitting-in-finance\/","title":{"rendered":"Hair Splitting In Finance"},"content":{"rendered":"

Between Eight WYSINWYG Terms In Finance – Part 1<\/strong><\/a> and Eight WYSINWYG Terms In Finance – Part 2<\/strong><\/a>, we covered eight terms in finance that should not be taken literally i.e. they’re WYSINWYG (“What You See Is Not What You Get” – to be pronounced “wisinwig”). To recap, they were:<\/p>\n

    \n
  1. Nonprofit Company<\/li>\n
  2. Winner Takes All<\/li>\n
  3. Banking the Unbanked<\/li>\n
  4. Too Big To Fail<\/li>\n
  5. Market Manipulation \/ Pump and Dump<\/li>\n
  6. Insider Trading<\/li>\n
  7. Know Your Customer<\/li>\n
  8. Maximum Retail Price<\/li>\n<\/ol>\n

    You might have noticed that there’s a lot of hair splitting in finance.<\/p>\n

    Let’s take “Pump and Dump” as an example:<\/p>\n

    Pump and dump is when you purchase the stock with the sole intention of increasing its price in order to cash out of another position that yields a profit only if the stock price goes up.<\/p><\/blockquote>\n

    I really don’t know how anyone can objectively judge whether you bought the share to<\/em> pump and dump or just to sell it at a higher price. As Matt Levine says in his Bloomberg essay titled Trying to Buy Stuff You Want Is Not Manipulation<\/strong><\/a>:<\/p>\n

    <\/p>\n

    <\/p>\n

    \n
    \u201cMarket manipulation\u201d is a famously\u00a0hard-to-define term<\/a>. In casual usage, people often use it to mean doing stuff that tends to push the price of a thing up or down, but it can\u2019t really mean that: Any time you buy or sell a thing, that will affect its price, and surely not\u00a0all\u00a0<\/em>trading is manipulation.\u00a0In practice, manipulation\u00a0seems to have two elements:<\/p>\n
      \n
    1. Buying or selling a thing, or bidding or offering to buy or sell the thing, in a way that tends to push its price up or down;<\/li>\n
    2. In a way that a regulator doesn\u2019t like.<\/li>\n<\/ol>\n

      Still that is a little underdetermined. Sometimes a regulator will just be wrong!<\/p>\n<\/div>\n<\/blockquote>\n

      <\/p>\n

      Let’s see whether the regulator is right or wrong when SEC’s lawsuit against Archegos and its Founder<\/a> for market manipulation goes to trial. Spoiler Alert: It will involve a lot of hair splitting.<\/p>\n

      Hair splitting scales new heights when it involves Regulatory Gap<\/em>.<\/p>\n

      \n
      \n

      \u201cRegulatory Gap\u201d is something that lies in the twilight zone between \u201cNot Legal\u201d and \u201cNot Illegal\u201d. This is how these startups interpret these terms:<\/p>\n

        \n
      1. \u201cNot Legal\u201d means there\u2019s no law on it.<\/li>\n
      2. \u201cNot Illegal\u201d means it does not violate any existing laws.<\/li>\n
      3. \u201cNot Illegal\u201d does not mean \u201cLegal\u201d and \u201cNot Legal\u201d does not mean \u201cIllegal\u201d.<\/li>\n<\/ol>\n

        To put it colloquially, Regulatory Gap is something that\u2019s\u00a0neither permitted nor banned by law<\/strong><\/em>.<\/p>\n

        – Fintechs Need Marketers And Lobbyists \u2013 Not Lawyers<\/a><\/p>\n<\/div>\n<\/blockquote>\n

        We talked here<\/a> about a slew of new BNPL fintechs that have expanded the supply of credit in India and thereby “credited the uncredited”.<\/p>\n

        The banking regulator’s recent Reg PPI rule banned uploading of credit lines into nonbank PPI accounts. When it was announced, Reg PPI cast a shadow on the operating models of these BNPL startups. However, I predicted that they’re smart enough to figure out ways to beat this existential threat, as unicorns in ecommerce, epharmacy, rideshare, and other regulated industries have done in the past.<\/p>\n

        \n

        Online sale of medicine is apparently banned in India but that doesn't seem to have stopped a couple of Indian ePharmacy startups from becoming unicorns. #GoFigure<\/a> .https:\/\/t.co\/uRjTOOxnGd<\/a> .#RegulatoryGap<\/a> pic.twitter.com\/BxEGbC80mO<\/a><\/p>\n

        — Ketharaman Swaminathan (@s_ketharaman) July 5, 2021<\/a><\/p><\/blockquote>\n