Robinhood Raises Another $2.4 Billion as Broker App Deals With Retail Trading Frenzy (cnbc.com) 79
As it sits amid the recent extreme bouts of market volatility, discount online brokerage Robinhood has been able to raise another $2.4 billion from investors, the company said Monday. From a report: That brings to $3.4 billion that the firm has been able to raise since last Thursday, a total that exceeds the amount it has raised in its entire history. "This funding is a strong sign of confidence from investors and will help us build for the future and continue to serve people through the exponential growth we've seen this year," the company said in a statement. The startup started easing trading restrictions on Monday, raising its trading limit on GameStop to four shares from a single share.
wow (Score:5, Funny)
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Well, if GameStop continues its trajectory, that may be all you need to pay for a university degree next year.
(It won't continue, folks. This gravy train will end at some point. The easy part is joining the bandwagon to drive the stock up. The hard part is knowing when to jump off before everyone else does.)
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The only trajectory it has is down the bottom fell out Friday https://www.nasdaq.com/market-... [nasdaq.com]
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Re: wow (Score:2)
Dogecoin, not bitcoin. Or have you not been following the news?
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Robbing the Hood (Score:5, Insightful)
a reminder (Score:5, Insightful)
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So what... #DeleteYourself?
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if a service is free, you are not the customer, you are the product.
True for most web-based apps. However, in this case, it's not. It's detailed here pretty well: https://www.webull.com/blog/5-... [webull.com]
In order to keep the lights on, we optimize the back-end revenue streams that every other broker (traditional or non) utilize to generate revenue. Simply put, these are Payment for Order Flow, Stock Loan, interest on free credit balances, and margin interest.
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Eh, like statistics, cliche’s are only accurate 84.2% if the time.
The state giving out free vaccinations doesn’t make you the product, unless you want to argue that you pay for them via taxes, and they aren’t truly free.
I don’t think I was a product using the free version of Evernote.
If you use good ad blockers/firewalls, you’re not much of a product to anyone. You benefit from the 95% of people who don’t care and ARE the product, then just piggyback on them while blocki
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if a service is free, you are not the customer, you are the product.
An incredibly simple minded view of the world. Here's a hint: when a service is not free you also are a product. B2B interests exist in an incredibly large number of industries. Hell one could argue that you the consumer are always the product for a company that primarily exists to sell your numbers and actions to investors and shareholders. Just because you're a product doesn't mean you're not also a consumer. Just because you're a consumer doesn't mean you're not also a product.
Go take some business 101 c
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Traders have no reason to stick with such a corrupt company!
You mean a company that wants to make sure they have the money to pay you out?
Do you even understand why they shut down the buys?
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Though don't be so cocky about how the let 'us' down, since their basic problem was that they gave users too much credit... so going down the 'they should have known how bad of clients we were!' is not a ringing endorsement.
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Robinhood acted within their terms of service. If you don't like it, find another platform, or build your own. I read this a lot on /. and Reddit.
Re: Robbing the Hood (Score:1)
TD was involved in this whole debacle and did the same that RH did to its customers - stop them from trading and force them to sell off the assets.
Not sure about the rest, but it wouldnâ(TM)t surprise me if theyâ(TM)re all in the same boat.
The government will just bail these people out, especially now that Dems are in control. In the mean time Iâ(TM)ll wait on my promised $2000/dependent stimulus, I mean the $1400/adult stim..., oh what, it will cut off at a sub-minimum wage household income,
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Confidence from investors (Score:5, Insightful)
"This funding is a strong sign of confidence from investors"
As in - the billionaire owners of the hedge funds express their thanks to Robinhood execs for assuring that the average investor continues to lose and learn "their place".
Robinhood might want to rebrand as "Dennis Moore" (ancient Monty Python reference).
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Leave the old woman out of this.
Re:Confidence from investors (Score:5, Funny)
For those who don't know the reference . . . I've been humming this all weekend:
Dennis Moore, Dennis Moore
Riding through the land
Dennis Moore, Dennis Moore
Without a merry band
He steals from the poor
And gives to the rich
Stupid bitch
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It's a strong sign of fear from hedge fund managers.
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Re: Confidence from investors (Score:2)
average investor continues to lose
I don't know which decade you pull your investing experience from, or if you're just a poor kid repeating something that sounds right in your head, but you are horrifically wrong.
Using VTI as an example because it's a very low expense ratio ETF representing the entire US stock market, it's sitting around 200% growth over the past ten years.
From this time last year it has grown 20%, and that's INCLUDING the big correction the first quarter last year.
The way this whole GameStop David v. Goliath story is told
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As in - the billionaire owners of the hedge funds express their thanks to Robinhood execs for assuring that the average investor continues to lose and learn "their place".
Nope. As in - the company needs funds to pay the herd people when they inevitably will sell their stocks for ridiculous prices. The shorting party (the one being squeezed), or actually their brokers, don't know if they can immediately cover the costs, which puts extreme risk on robinhood.
So when push come to shove, robinhood needs funding to not be exposed to the risk of the shorting party not paying then when the herd wants its money. They want to be able to actually pay their customers what they are due.
S
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the company needs funds to pay the herd people when they inevitably will sell their stocks for ridiculous prices
Those funds come from the buyers.
The shorting party (the one being squeezed), or actually their brokers, don't know if they can immediately cover the costs, which puts extreme risk on robinhood.
So don't sell shares to people that can't afford them.
Stopping buys was a countermeasure to not make the problem worse for them.
You just said that they were worried they couldn't assure payment to people selling shares, now you're claiming that they mitigated this risk by preventing people buying shares?
This does not make sense.
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So don't sell shares to people that can't afford them.
You misunderstand. This has nothing to do with what clients could or couldn't afford. This is what robinhood can or can't afford. Especially in paying back existing customers. They are protecting their users from buying stock that robinhood could not pay off were these users to sell the stock at a higher price. Basically robinhood protects its users from a failure of robinhood, which would come around if these users kept buying this stock.
So to be able to guarantee payment in case of sale by current users,
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They are protecting their users from buying stock that robinhood could not pay off were these users to sell the stock at a higher price. Basically robinhood protects its users from a failure of robinhood, which would come around if these users kept buying this stock.
That's utter fucking bollocks.
If Robinhood fails then the shareholders still hold shares.
"Don't buy this stock because we can't afford it if you sell it" is the most nonsense fucking argument I've heard all year.
someone needs to stand for that raise in price, in case the current holders wish to sell them
Bollocks. "Please sell my shares" gets "I found a buyer, here's your money" or "nobody was buying at that price, you still have your shares".
Nobody has to 'stand for' the price, either shares sell at that price or they don't. If they sell, you provide the cleared funds back to the seller. If they do
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That's utter fucking bollocks.
If Robinhood fails then the shareholders still hold shares.
No they fucking don't, you idiot.
All they own is an account on robinhood. They don't actually have any share in their hands. If robinhood is wiped then so are their shares. They could maybe sue robinhood but if robinhood doesn't have the means to provide the physical shares then they're screwed anyway.
If they sell, you provide the cleared funds back to the seller. If they don't, you give no money to the seller.
Yeah, and the problem is with the clearing. WTF do you suppose clearing means?
Also, selling wasn't a problem. Buying by the mob during a short squeeze is, at least as long as there is not enough funding.
Your entire argument seems to be based on Robinhood having to pay people because they bought shares. I remain confused by your position.
That i
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All they own is an account on robinhood
Whoa. This may explain my confusion.
Robinhood offer the ability to buy and sell shares. You're telling me that the shareholder is Robinhood and that they're offering people the chance to pretend they own Robinhood shares?
That's.. dodgy as fuck.
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You're telling me that the shareholder is Robinhood and that they're offering people the chance to pretend they own Robinhood shares?
No, officially the buyer is the owner. But the owner doesn't physically have the share. Even robinhood doesn't physically have the shares. The buyers and sellers don't even want that because it would take some time to physically transfer the papers from the seller to the buyer and in the meantime the price could have changed. So everyone agrees to a 'virtualized' system since this allows everyone to act as fast as possible. In short, this whole share business is one big game of IOU. But at the end of the da
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Ok, not having a share certificate is fine. But no, if the buyer is the shareholder, even at an electronic level, then if RH go bust then the shareholder still owns the share. Not RH.
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Sure, on paper they are the owners. But that is a paper between the buyers and robinhood. If robinhood goed belly up then the buyers will at best get a piece of the shards of robinhood. The buyers can't go to another exchange and demand they give them the shares that robinhood owed them.
So to be in a position to actually give these people, even in theory, their shares, robinhood needs to have the money to actually buy these stock themselves. Basically resolving the IOU's with their back party which is their
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No. He's saying that people were buying on margin.
That's a different issue.
A->B 'buy X'
B->A 'gimme cash'
A->B 'here is your cash'
B->MM 'buy X'
MM->B 'done.'
A now owns X.
B's job here is done. B's exposure is nil.
A's risk if B fails is nil, although there'll be paperwork.
If B is stupid and skips the 'gimme cash' step then they're fucking idiots.
If Robinhood had stopped people buying on margin, that would have been understood. They didn't. They stopped people buying completely.
I still haven't seen
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If Robinhood had stopped people buying on margin, that would have been understood. They didn't. They stopped people buying completely.
I think robinhood only does margin trades. As a day trader you can't make enough money without margin.
I know i haven't talked about margin (to keep it simple) but the only effect it has is that it loads the gun even more for robinhood.
If B is stupid and skips the 'gimme cash' step then they're fucking idiots.
That's not how it works. B actually provides a loan to A so A can amplify their trade. So B doesn't skip the 'gimme cash' step but they do trade with their own money pool for the most part. But of course they provide these loans to both sides so normally, when things are not t
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As a day trader you can't make enough money without margin.
As a day trader your potential gains are lower without trading on margin.
Of course you can make 'enough' money. If I borrow $10k to trade with then my gains and losses are no different to if I use $10k of my own money.
B actually provides a loan to A so A can amplify their trade. So B doesn't skip the 'gimme cash' step but they do trade with their own money pool for the most part.
A->B 'buy X'
B->A 'Sure, I will buy that using my own cash but you will owe me the money'
That's trading on margin. That's not what RH stopped.
Sold all my stocks after reading this... (Score:5, Insightful)
These apps aren't about democratising the stock market, they're about letting the filthy deplorables into a previously members-only casino, and pushing the turbo button on the bubble generator. A lot of people are going to make a lot of money, but a lot more people are going to lose everything.
The stock market is completely toast as it is, when even the sombre FT are running stories with titles like This is nuts, where are the profits? [ft.com], then you know there's a foamy market. There is a compete disconnect with company fitness and stock price. The question is not if everything is going to crash, but when.
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These apps aren't about democratising the stock market, they're about letting the filthy deplorables into a previously members-only casino, and pushing the turbo button on the bubble generator.
I doubt any of the decisions are that sinister. Robinhood simply found a way to make money on an underserved client base, and investors were intrigued by their potential return on investment. Just like Facebook, Twitter, or any other high tech startup, the damage they do to society was unlikely a driving force in their creation or funding. Those creating them and funding them just didn't care.
And whether or not we should expect companies to care about their benefit or harm to society, society certainly shou
The system has always been broken (Score:5, Interesting)
Most people assume that the way the system works is that as a companies revenue / earnings increases, there will be more investors buying shares than selling, and so the price will go up. The inverse is also assumed to be true. If the company is struggling, there will be more sellers than buyers, and the share price will go down.
This has never been the case. What actually happens is that regardless of the reason for it, as long as there are more investors are buying shares than selling, the share price will go up. That dynamic has almost nothing to do with how the company is actually performing. The only reason that the share price has any relation to the company's performance is that most investors are rational.
The initial GME / Reddit thing happened because of a kind of rational reason; Someone realized that the investors shorting the stock had overdone it and made themselves vulnerable. A massive hedge fund could have done the same thing if the people making decisions were willing to tolerate the risk. Retail investors kicking in pocket change at what was initially a junk stock are much more risk tolerant.
But now that it is succeeding against all reasonable expectations, the motive has mutated. It is no longer about a crowd of retail investors looking to exploit a mistake by the 'smart money'. Now it is a meme based war of 'the common man' vs 'big money'. So this will persist until enough retail investors blink and cash out to allow the smart money to no longer be overextended.
So think of the issue like a software bug in legacy software that has always been present but never fully exploited until now.
END COMMUNICATION
Re: The system has always been broken (Score:2)
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Bizzare things happening. (Score:5, Informative)
I am watching from the sidelines. I mean, I have some of my savings in an ETF following S&P 500, but, I do not like to play in a rigged game (starting with HFT and going to more devious semi-legal things that give insiders all the advantages) and I prefer to engage in things that are not just about money.
But I've been following the story and even though I know a lot about how things work, there are some things that "impressed" me, as I did not expect that level of obvious collusion.
The first of course was RobinHood stopping "buys" while allowing sells. Careful, we are not talking about RobinHood not allowing buys with margin, i.e. RobinHood loaning you money as they do normally, they blocked buying stock even if you just wanted to give away your own money, and left the "sell" button intact. If you haven't already the interview of the CEO on CNN [twitter.com] was amazing. The CEO is using generalities that RobinHood has to follow some sort of rules and regulations about "capital requirements", and Cuomo is straight telling him that makes no sense, what requirements exactly, by whom? Is it liquidity issues these "capital requirements" and the CEO just repeats the same things and can't explain anything. Mainly why they would not allow people with money in their account use it to buy stocks. And effectively the moment they blocked buys, they managed to get the stock to drop.
And it went on the next day, they allowed some buying, but as the stock was gaining they imposed a limit that you can't buy if you already have 2 stocks! Stock stop going up that fast, then they limited to 1, stock down again!
And today even more bizarre. Things. All the big financial news (bloomberg, CNBC etc) have front page articles about how wallstreetbets have "after GME, turned their gaze on Silver". And yet just opening the main wallstreetbets [reddit.com] page you can clearly see there are several pinned bold topics about how nobody should buy silver it is not wallstreetbets advice, and if you further read the topics they go on to show that the same shorters wallstreetbets are fighting with, have the biggest Silver ownership, so they would never suggest buying silver.
How did all these news organisations get these articles when even from a cursory browse on wallstreetbets it is obvious they did not start this and advise for the opposite?
So, yeah, I expected lots of things, but did not expect so many big news organisations to disseminate so obviously fake news to assist some funds. There is not even any tact in the methods!
Anyway, I expect this will not make a real dent in how Wall Street does things, they are too entrenched to be seriously regulated (unless it is for their benefit).
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The CEO is using generalities that RobinHood has to follow some sort of rules and regulations about "capital requirements", and Cuomo is straight telling him that makes no sense, what requirements exactly, by whom?
The SEC requires that the companies performing the trades have the cash reserves in order the pay for what their customers purchase (in the case the customer does not actually have the funds, or perhaps those funds are otherwise frozen due to court actions) until the transaction is *really* complete (your buy/sell is a promise, but has not yet been completed until all the i's are dotted, and the t's crossed, which may only occur after the days trading closes when all the transactions checks and cross-checks
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Pretty much this. Robinhood lacked sufficient liquidity and had very high risk exposure. The extra capital and their lines of credit stabilized things for now, but they have a very *complex* risk profile. It will be interesting to see how long it takes for that to stabilize.
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Then you have not listened to the interview. The CEO explicitly said there was no liquidity issue. So he was lying? We just don't know which way the lie was going?
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He chose his words carefully. Robinhood did not have sufficient cash to cover what the clearninghouse determined was the risk, which is why they needed to draw on their line of credit and raise additional capital. The fact that they had access to capital means that it was not a crisis, but it was a liquidity event none the less. I am sure the lawyers can play with the exact terms some, but to me liquidity is about cash (and marketable securities) on hand. Technically the money they raised was not to cov
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The CEO is using generalities that RobinHood has to follow some sort of rules and regulations about "capital requirements", and Cuomo is straight telling him that makes no sense, what requirements exactly, by whom?
The SEC requires that the companies performing the trades have the cash reserves in order the pay for what their customers purchase (in the case the customer does not actually have the funds, or perhaps those funds are otherwise frozen due to court actions) until the transaction is *really* complete (your buy/sell is a promise, but has not yet been completed until all the i's are dotted, and the t's crossed, which may only occur after the days trading closes when all the transactions checks and cross-checks are complete (very occasionally the books do not balance, and one has to go search for where the transactions went missing)). And there are ways to unwind transactions which occasionally happen when something bad happens, although the trading company may end up being on the hook to pay immediately (and then take court action to collect their funds at a later time) if the originator of the trade cannot complete their part. So robinhood has to have enough capital available to meet those capital requirements, just like every other firm does, and a lot of buy transactions means a lot of capital, and robinhood suddenly had a lot of transactions to have to be able to cover.
People don't understand how trade clearing works or anything about collateral or other financial regulations around clearing, and they don't want to know. They just want what they want when they want it.
Unfortunately the real world is a lot more complicated than that.
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So robinhood has to have enough capital available to meet those capital requirements, just like every other firm does, and a lot of buy transactions means a lot of capital, and robinhood suddenly had a lot of transactions to have to be able to cover.
This is a relatively small bubble. If they can't cover a buying frenzy from a group of message board fanatics calling themselves "retards", then they shouldn't be allowed to facilitate trades at all. Even if they were somehow overrun, you don't shut down just the one stock everyone is suddenly interested in. You need to shut down entirely and rethink your business model. What they did, regardless of any actual financial reason, is *clear* market manipulation. They should be investigated and punished even if
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https://finance.yahoo.com/news... [yahoo.com]
Re:Bizzare things happening. (Score:5, Informative)
But I've been following the story and even though I know a lot about how things work, there are some things that "impressed" me, as I did not expect that level of obvious collusion.
The first of course was RobinHood stopping "buys" while allowing sells. Careful, we are not talking about RobinHood not allowing buys with margin, i.e. RobinHood loaning you money as they do normally, they blocked buying stock even if you just wanted to give away your own money, and left the "sell" button intact. If you haven't already the interview of the CEO on CNN [twitter.com] was amazing. The CEO is using generalities that RobinHood has to follow some sort of rules and regulations about "capital requirements", and Cuomo is straight telling him that makes no sense, what requirements exactly, by whom? Is it liquidity issues these "capital requirements" and the CEO just repeats the same things and can't explain anything. Mainly why they would not allow people with money in their account use it to buy stocks. And effectively the moment they blocked buys, they managed to get the stock to drop.
I don't know the markets well enough but there do seem to be legit reasons why brokers want to restrict trades. A big part of it seems to be the fact that trades don't execute instantly so it's not exactly user's buying with their money. This explanation from a RobinHood competitor [yahoo.com]:
ANTHONY DENIER: Well, it wasn't our choice. Our clearing firm gave us a call and said we're going to have to stop allowing new opening positions in the three names, AMC, GME, and KOSS. Highly volatile, and what happens is this is not a political decision.
[...]
But in reality, what's going on is that there is a two-day settlement between if you buy the stock today, those brokerage firms that you bought that stock on have to fund that trade with the clearing central house called DTC for two whole days. And because of the volatility of stocks, DTC has made the cost of the collateral of the two-day holding period extremely expensive.
And we just can't afford-- well, we're not a clearing firm, but our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it. And they simply can't afford the cost of that trade clearance. That is the reason why these stocks are coming off. It has nothing to do with the decision or some sort of closed room cigar-- smoke-filled cigar room of Wall Street firms getting together to the dismay of the retail trader. This has to do with settlement mechanics of the market.
And RobinHood was far from the only firm restricting trades [marketwatch.com].
Of course, a legit motive existing doesn't mean that was the real motive. Hopefully investigators will dig around in this for a while.
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From what I read, including that link, I see that basically only Interactive Investors did the same, others like Charles Schwab etc just changed the margin requirements, which makes sense.
Out of curiosity when the stocks were blocked by RobinHood and dropping fast, I did log into an old SogoTrade account and tried to buy a GME share out of curiosity, and it went through fine. And that's a discount broker.
That 2-day float clearing house explanation has never been used before AFAIK, even during times of big m
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Re:Bizzare things happening. (Score:4, Informative)
What I don't understand is if Robin Hood doesn't have enough money to buy stocks, why would they restrict buying to certain stocks? Why not just shut down? Or restrict all stocks? It stinks to high heaven.
It's a fair question. The basic answer is that the amount of cash RobinHood is required to have on hand is set by a multiple of the expected shortfall [wikipedia.org] of their (pending) transactions.
To decide which stocks K_i are the most painful to allow transactions in, RobinHood takes a partial derivative D_i=d(ES)/dK_i for each available stock, and sorts them from largest to smallest. The worst ones (from their perspective of capital requirements) are at the top of that list.
Due to correlations and anticorrelations in the market, some stocks at the bottom of the list will even have negative partial derivative D_i, but the ones at the top will have partial derivatives hundreds or thousands of times larger than the median. These will generally be stocks that are (a) volatile, and (b) highly overweighted in the mix of pending transactions.
That perfectly describes GameStop, and (I am sure) many other meme stocks.
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Can anyone please explain to me why moving bits around the Internet still requires 2 days settlement when transaction times are measured in milliseconds on a slow day?
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Because shit goes wrong and you need to verify, audit and validate financial transactions, do AML and banned persons checks, confirm there's no fraud and then balance totals against each other so that only the difference in balance get shifted around.
You could accelerate a lot of this but any changes both cost money and also reduce revenue for people that will thus fight against that change.
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Because shit goes wrong and you need to verify, audit and validate financial transactions, do AML and banned persons checks, confirm there's no fraud and then balance totals against each other so that only the difference in balance get shifted around.
All of this can be automated. Computers are fast.
You could accelerate a lot of this but any changes both cost money and also reduce revenue for people that will thus fight against that change.
And that's why we can't have nice things.
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All of this can be automated. Computers are fast.
I've worked for a small and large banks, and for a credit agency. This can not all be automated.
Most of it can, but not all.
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I have some of my savings in an ETF following S&P 500, but, I do not like to play in a rigged game
This is where the bulk of my savings are, even though I agree corruption in the system creates a form of rake on those investments. It is unfortunately still the best way for average people to reap some of the gains of our economy over the past 50 years or so. Real estate doesn't provide the same rate of return, and is too locality specific (unless you go with real estate ETF's which have the same problem as S&P 500 indexes).
Some kind of government-run investment vehicle which is tied to GDP growth woul
He's full of shit. (Score:1)
If this were the SEC coming down from above and dictating: "GME is too volatile. Stop trading on it.", then that would have been that. Trading would have been stopped. Period. And we would not have still been able to buy on other platforms either. And if this "four shares" business were a regulatory move handed down by the SEC, We would be limited to those same four shares on every trading platform. But with Robinhood, and only Robinhood handing down these draconian restrictions... and Robinhood just
WSJ article explaining the restrictions (Score:5, Informative)
https://www.wsj.com/articles/w... [wsj.com]
When clients trade, especially on margin, they use the broker’s money to play. Imagine a client buys 100 shares of GameStop for $400 a share, using $20,000 of his own money and borrowing $20,000 from Robinhood. If the stock drops from $400 to $120 (as it did on Jan. 28), the client’s position may be sold for $12,000 due to the margin violation, leaving Robinhood trying to collect an unsecured $8,000 debt from “u/Thicc_Ladies_PM_Me.” Good luck. Multiply this by hundreds or thousands of similar clients. Option trading is worse because the leverage is much greater.
The broker’s risk is asymmetrical: If half its clients are winning big by buying during a short squeeze, while its short clients are suffering losses they can’t pay, the broker can’t offset these gains and losses, but must pay the winning clients while possibly eating the losing trades. It is rare, but brokers go bankrupt during market events like this.
Brokers therefore are subject to strict financial requirements, including that they maintain large security deposits at the clearinghouses. When risk rises, clearinghouses raise their requirements, even intraday. On Jan. 28, when GameStop dropped from $483 to $112, the clearinghouse DTCC raised requirements by an aggregate $7.5 billion. Brokers had to post that money to DTCC whether or not their clients had it.
Brokers facing liquidity crunches have two options: raise capital (which Robinhood apparently did) or reduce clients’ risky trading. This is a more plausible explanation for their actions last week than any desire to protect hedge funds. Brokers love their clients and want them to flourish. But they don’t want to go bankrupt.
The second factor possibly weighing on brokers’ minds is the prospect of eye-watering fines if clients engage in manipulative activity. Whereas social-media platforms are protected from liability for miscreant users, online brokerage platforms face opposite rules. Under federal anti-money-laundering regulations, firms must conduct “reasonable surveillance” for client fraud or criminality. The SEC and other regulators have fined banks and brokers (including E*Trade, Interactive and Schwab) hundreds of millions in total over recent years for failing to detect and prevent client misbehavior. While the legal standard is allegedly negligence (“reasonable surveillance”), regulators routinely employ 20/20 hindsight to second-guess broker due diligence of their clients after the fact, effectively imposing strict liability. To the regulators, fraudulent schemes are always perfectly obvious in retrospect.
Among client high jinks that brokers are to prevent is market manipulation. But to quote David St. Hubbins of Spinal Tap: “It’s such a fine line between stupid and clever, isn’t it?” So it is with market manipulation, which has no precise definition. Worse for brokers, clients don’t have to be found guilty of manipulation for the broker to be fined. “Potentially” suspicious activity is enough to put the broker in the soup.
Re:WSJ article explaining the restrictions (Score:5, Insightful)
Yes, but the rest of the time, they do their best to encourage "clients’ risky trading." RH was the first to have "free" trades and the first to make "options trading" available to the masses. Their whole business is built on encouraging risky behavior.
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There are some issues with your explanations.
Brokers don't limit trading like that in general market declines, which should put more pressure on them.
Brokers other than Robinhood raised their margin requirements, i.e. they just stopped allowing you to borrow, not outright block buying.
Your example of the " $483 to $112" drop is suspicious. You realise that drop happened AFTER and BECAUSE of the ban on buying, right?
Re: (Score:2, Insightful)
The issue is that Robinhood outright BLOCK the ability to buy the stock, even if you weren't trading on margin. Therefore this argument simply doesn't apply.
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The issue is that Robinhood outright BLOCK the ability to buy the stock, even if you weren't trading on margin. Therefore this argument simply doesn't apply.
You only believe this because you have no clue about how stock trade clearing works.
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Margin risk isn't the issue here, since RH last week decided to ban ALL buying, even buys with 100% cash. The broker has no risk when people use 100% cash to buy stocks.
You don't know how trade clearing works. The broker puts up collateral with the clearing agent until the trade settles, which happens at T+3.
Your money doesn't change hands until the trade clears.
What has Robinhood done? (Score:2)
What has Robinhood done to make it work 3.4 BILLION dollars? That's a serious question. What property or technology do they possess to make them worth so much?
Really ?!? (Score:2)
And when the class action suit... (Score:2)
With several MILLION plaintiffs lands, all that money is going "bye bye".
#STONKS
This works under the theory.. (Score:1)