🔥 When Exchanges Change the Rules Mid-Trade

The Casino Always Wins — Literally

Here's the dirtiest secret in trading: the rules aren't fixed.

You can study the markets. You can analyze every chart. You can risk-manage perfectly. You can be 100% right about the direction. And still lose. Not because you were wrong. But because they changed the rules while you were playing.

Imagine playing poker. You've got a royal flush. You go all-in. Then the dealer says: "New rule — flushes don't count anymore. House wins."

Sounds insane? This is exactly what happens in markets.

"Markets can remain irrational longer than you can remain solvent. But more importantly — markets can change the rules faster than you can close your position."

— Anonymous Hedge Fund Manager

Let's look at the most outrageous examples of exchanges, brokers, and regulators moving the goalposts on traders who were doing nothing wrong except winning too much.

GameStop 2021: "Sorry, We Removed the Buy Button"

January 2021. The world watched in disbelief as retail traders on Reddit's r/WallStreetBets pulled off the impossible.

GameStop ($GME) — a struggling video game retailer that hedge funds had shorted to oblivion — started squeezing. Hard. The stock went from $20 to $483 in three weeks. Hedge funds were bleeding billions.

Melvin Capital, the biggest short, lost 53% in January alone. Citadel and Point72 had to inject $2.75 billion just to keep them alive.

Retail was winning. Then...

January 28, 2021. Robinhood — the app that promised to "democratize finance" — removed the buy button for GME.

You could sell your shares. You just couldn't buy any. Neither could anyone else on Robinhood, Webull, Interactive Brokers, and others.

A market with only sellers and no buyers. What do you think happens to the price?

GME crashed 77% from its peak that day. Retail traders who bought at $300+ watched helplessly as they couldn't average down, couldn't hold the line. The squeeze was murdered.

"We had to protect the firm. We would have gone under. And if we went under, you'd have a much bigger problem."

— Thomas Peterffy, CEO of Interactive Brokers (on CNBC, January 28, 2021)

Translation: "You were winning so hard, it would have bankrupted us. So we stopped you from winning."

This is legal.

Nickel 2022: "Actually, Let's Cancel $3.9 Billion in Trades"

If GameStop made you angry, the nickel scandal will make your blood boil.

March 2022. Russia invades Ukraine. Commodities go haywire. Nickel — a metal used in EV batteries — starts spiking.

Xiang Guangda, nicknamed "Big Shot," was the biggest nickel producer in China and the world. He had a massive short position on nickel through the London Metal Exchange (LME). Basically, he was betting nickel prices would stay low.

They didn't.

Nickel went from $25,000 per ton to over $100,000 per ton in 24 hours. A 250% move. In a market that typically moves 2-3% on volatile days.

Big Shot's losses were mounting. Billions of dollars. His positions were so large, liquidating them would have crashed his company, his banks (including JPMorgan and other major institutions), and potentially destabilized the entire commodities market.

So what did the LME do?

They cancelled all trades from March 8.

The LME also suspended nickel trading for 8 days. When it reopened, they implemented daily price limits of just 5%. The squeeze was killed.

Hedge funds that were long nickel were furious. Several filed lawsuits. Elliott Management and Jane Street sued the LME for $472 million in lost profits.

"The LME's decision to cancel trades was unprecedented, unlawful, and designed to protect a single participant at the expense of all others."

— Elliott Management, in their lawsuit against the LME

The lesson? If you're a regular trader and you squeeze a market, you win. If you squeeze a market too hard and the loser is a Chinese billionaire with connections to major banks? The exchange will rewind time to save them.

Silver Thursday 1980: "You Can Only Sell Now"

Long before Reddit, there were the Hunt Brothers. Nelson Bunker Hunt and William Herbert Hunt were Texas oil billionaires who tried to corner the silver market in the late 1970s.

Their strategy was simple but audacious: buy all the silver. Create artificial scarcity. Watch prices moon. They accumulated over 100 million ounces of silver — roughly a third of the world's supply.

Silver went from $6 per ounce in 1979 to $50 per ounce in January 1980. An 8x return in a year.

The exchanges panicked. The Hunts were too successful. If silver kept rising, the shorts — including major banks and trading houses — would be wiped out.

So COMEX (the commodities exchange) did something extraordinary:

March 27, 1980 — Silver Thursday. The Hunts couldn't meet their margin calls. Silver crashed from $50 to $10 in weeks. The brothers lost over $1 billion (about $3.5 billion in today's money).

They eventually went bankrupt. Meanwhile, the shorts who were about to be destroyed? Saved by a rule change.

"We were playing by the rules. Then they changed the rules. When we were winning, suddenly what we were doing became illegal."

— Nelson Bunker Hunt, in Congressional testimony

The Volkswagen Short Squeeze (Almost) — 2008

In October 2008, Volkswagen briefly became the most valuable company in the world. Yes, during the financial crisis. Yes, a car company.

Hedge funds had shorted VW stock heavily, believing it was overvalued. What they didn't know: Porsche had been secretly accumulating VW shares through options. When Porsche revealed they controlled 74% of VW's stock, and the German government owned another 20%, shorts realized...

Only 6% of shares were actually tradeable.

VW stock rocketed from €200 to over €1,000 in two days. Shorts were getting destroyed. Hedge funds lost an estimated $30 billion.

Now here's the twist: German regulators intervened. They pressured Porsche to announce it would release 5% of shares to the market, reducing the squeeze pressure. The shorts were given a lifeline.

This wasn't a "rule change" in the traditional sense. But it was regulatory intervention to save shorts who had made a bad bet. When you're a big enough player, the rules bend.

Chinese Markets: Where Rules Change Daily

If you think Western markets are bad, Chinese markets are a masterclass in mid-game rule changes.

In 2015, when Chinese stocks crashed 40% in a month, the response was unprecedented:

• 1,400 companies (over half the market) suspended their own trading
• Major shareholders banned from selling for 6 months
• New IPOs frozen indefinitely
• Government funds ordered to buy stocks at any price
• "Malicious short sellers" threatened with arrest

Imagine being a fund that shorted Chinese stocks, being right about the crash, but unable to close your winning position because the government literally made selling illegal.

"In China, the market serves the state. Not the other way around. If your trade hurts the state's interests, your trade will be cancelled."

— Hong Kong-based Fund Manager

The Pattern: Who Gets Saved, Who Gets Screwed

Let's be clear about the pattern:

The justification is always the same: "systemic risk" and "market stability."

Translation: If the wrong people lose, it destabilizes things. If the right people lose? That's just the market working as intended.

How to Protect Yourself (Sort Of)

You can't prevent rule changes. But you can reduce your exposure to them:

And most importantly:

"Never bet so big on any single trade that a rule change — which you cannot predict or prevent — could blow you up. The market can take everything from you. Don't give it the chance."

— Paul Tudor Jones

The Uncomfortable Truth

Here's the uncomfortable truth that every trader needs to internalize:

Markets are not neutral. They are not purely mathematical. They are not fair. They are institutions run by humans who have their own interests, their own stakeholders, their own survival instincts.

When you trade, you're playing a game. But it's a game where:

• The house has an edge you can't see
• The rules can change without notice
• Your winning position can be invalidated if the wrong person is losing
• "Market integrity" means protecting the market structure, not protecting you

This isn't a reason not to trade. It's a reason to trade with your eyes open. To never get arrogant. To always leave room for the unthinkable.

Because in markets, the unthinkable happens. And when it does, you need to still be standing.