The GME short squeeze was very interesting for me as a newbie trader because it had unexpected effects despite not holding that position:
- some platforms forbid their user to buy some stocks or drastically limited the amount
- eToro experienced a strange "bug" where GME and possibly other stocks had their Stop Loss set to an amount very close to the stock value, thus triggering the Stop Loss way sooner than expected (some compensation was provided for those traders)
- some other stocks temporarily plummeted because the hedge funds had to sell big time to cover the losses incurred by the squeeze
I saw that many posted blamed the big shorting as immoral and creating a lot of problems in the market. I tried to find out more and reached this short article which explains why shorting is legal. If I understood correctly, shortly put: it used to be more regulated, now it does not seem to be that regulated and it is not clear what type of regulation would be effective.
From my rather obtuse perspective as a newbie long-term investor (I invest in something hoping to raise if it does the both me and the company win. Shorting seems like wining out of others' misery), I do not understand why shorting is not more regulated. What is exactly lost if it becomes more regulated? I see quite a lot of downsides of it being used (or abused).