Because that would be illegal market manipulation.
Any institute, including GameStop themselves, would be committing a crime if they knowingly triggered a short squeeze. The SEC rules on this is quite clear.
What's interesting to me is that the official SEC report on GameStop "squeeze" specifically called out that the rise in price WAS NOT due to short covering, but rather a large increase in retail buying and market makers balancing options. So the reported % short went from more than 100% to less than %20 with zero short covering and prices falling? Yeah, sure.
It's not illegal to push a stock up just like it's not illegal to short a stock. Certain rules apply when you become significant share holder.
Buying significant calls will move the market as the market maker buys shares the ensure they can cover. Shorting drops price because it "creates" shares. Even six figure trades can move the market,
> How and why is that illegal? I am stumped that market participants would not be allowed to correct the capital misallocations of others.
I don't think (but someone correct me as I'm no professional) the occurrence of short squeezes are illegal, unless there is a knowing collusion behind it (check previous cases from courts regarding collusion to trigger short squeezes). What is illegal is naked shorting (https://www.investopedia.com/terms/r/regsho.asp) which could be a trigger/condition to future squeezes..
Any institute, including GameStop themselves, would be committing a crime if they knowingly triggered a short squeeze. The SEC rules on this is quite clear.
What's interesting to me is that the official SEC report on GameStop "squeeze" specifically called out that the rise in price WAS NOT due to short covering, but rather a large increase in retail buying and market makers balancing options. So the reported % short went from more than 100% to less than %20 with zero short covering and prices falling? Yeah, sure.