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Why should broker allow margin trading at all? If it's about risk, then who's the decider/calculator of the risk? I think this is the reason why there is a dist
by aynyc 6y ago
Why should broker allow margin trading at all? If it's about risk, then who's the decider/calculator of the risk? I think this is the reason why there is a distrust from the next generation.
- swiley 6y agoThis really wouldn't be the first time Robinhood changed their software to prevent it's users from doing exceptionally stupid things with margin.
- JumpCrisscross 6y ago> who's the decider/calculator of the risk? The lender. As in all loans. As is in every detail described in one’s margin contract.
- aynyc 6y agoI looked at my margin document, other than Federal Reserve requirements and account restriction, there is no provision stating they can block a specific eligible stock as long as I meet their margin requirement.
- kgwgk 6y agoTheir margin requirement may be linked to the name so increasing the margin requirement to 100% would be a way to block the use of margin.
- aynyc 6y agoThat would block all margin trades, no? Not a specific instrument. I understand why they did it, but it leaves a very bad taste in my mouth.
- kgwgk 6y agoThey can set margin requirement separately for each stock. For example, with InteractiveBrokers "long stock positions [of AMC, BB, EXPR, GME, and KOSS] will require 100% margin and short stock positions will require 300% margin until further notice". https://twitter.com/IBKR/status/1354792600004386818 https://twitter.com/IBKR/status/1354792600004386818
- aynyc 6y agoI get that part, but why would 100% margin on buys eliminate the buys? If I have $100K cash, I can still buy $50K of XXX and meet the margin requirement. They are blocking buys, but not sells.
- kgwgk 6y agoWho is blocking buys? The context of this subthread is this message https://news.ycombinator.com/item?id=25942677 https://news.ycombinator.com/item?id=25942677 about brokers allowing the buying of GME but not on margin (and how they don't have to disallow the use of margin for every stock for that).
- JumpCrisscross 6y ago> there is no provision stating they can block a specific eligible stock as long as I meet their margin requirement That may explain why they had to block trading in the stock. Margin losses almost inevitable at this point. But legal said they couldn't block lending on a single name. Their TOS, however, permit them to suspend trading in single names.
- aynyc 6y agoAh, that actually make sense. I don't see how RH allows sell, but not buy. That's just insanely corrupt because it clearly manipulates the market.