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> Or is it normal for brokers to independently halt trades on stocks they deem too risky? Yes. It is exactly normal. One. Brokers are required to act in the b
by fennecfoxen 6y ago
> Or is it normal for brokers to independently halt trades on stocks they deem too risky?
Yes. It is exactly normal.
One. Brokers are required to act in the best interests of their clients. What is that? Well...
"A broker who becomes a fiduciary of his client must act with utmost good faith, reasonable care, and loyalty concerning the customer’s account, and owes a duty to keep informed regarding changes in the market which affect his customer’s interests, to act responsibly to protect those interests, to keep the customer informed as to each completed transaction, and to explain forthrightly the practical impact and potential risks of the course of dealing in which the broker is engaged."
— Rupert v. Clayton
Two. Robinhood is already under scrutiny already for trying to gamify trading, on the premise that it encourages people to treat things like a casino and lets them get hurt in the name of their own profit. They are on thin ice as it stands.
Three. This whole thing is going down like the Pequod, complete with the impassioned revenge monologue. "To the last I grapple with thee! From hell's heart I stab at thee! For hate's sake I spit my final breath at thee!"
If Robinhood didn't do something, they would soon learn what the true wrath of the regulators really looks like. Much, much better to drop Gamestop like a hot potato.
Some recent examples of similar actions: https://www.reuters.com/article/us-tvix-brokerages/schwab-considers-warnings-on-controversial-exchange-traded-products-idUSBRE82T1CE20120330 https://www.reuters.com/article/us-tvix-brokerages/schwab-co...
- moistrobot 6y agoBrokers are not fiduciaries. https://www.forbes.com/sites/forbesfinancecouncil/2020/06/17/know-the-differences-between-brokers-and-advisers-suitability-vs-fiduciary-standards/?sh=390362be25b5 https://www.forbes.com/sites/forbesfinancecouncil/2020/06/17...
- manigandham 6y agoBest interests means facilitating trades as best as possible, not trying to protect clients from their own trades. No broker is attempting to preserve your capital. What they will do is protect their capital over yours by raising margin requirements and initiating special rules to limit their risk. They don't care if you blow up your account, as long as you don't owe them at the end.