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A margin call that liquidates a customer is not only perfectly reasonable but responsible on the part of the broker. I would never hold it against Robinhood to

by Kranar 6y ago

A margin call that liquidates a customer is not only perfectly reasonable but responsible on the part of the broker. I would never hold it against Robinhood to liquidate positions or have restrictions on buying/selling stocks where the broker could be at risk. The problem is that Robinhood is selling positions that are fully covered by their clients as well as prohibiting the buying of shares even when the purchase is 100% covered by the user. I've been in this industry for 15 years now, including obviously the great recession, the flash crash, brexit, and a host of highly volatile events resulting in massive market swings and this is absolutely unheard of. I've never seen a broker prevent its clients from buying shares or liquidating shares that are fully accounted for and pose no risk to the broker.

rStar 6y ago
@Kranar exactly. the actions of the gme swarm are reasonable given the positions and the patterns of actions we all recognize from short sellers. until now, short sellers have pretty much been playing a game of poker where no one ever called their bluff. Of course, the short sellers that lost out on this can just blame it on covid and get bailed out.
- fnimick 6y ago
  They're not reasonable. Just because someone has a short position doesn't mean you can stake a position deliberately to trigger a squeeze and profit from the result. That's exactly what the GME swarm has been doing. "Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal." - https://www.sec.gov/investor/pubs/regsho.htm https://www.sec.gov/investor/pubs/regsho.htm I wouldn't be surprised if Robinhood and other brokers' compliance teams made the decision that the penalty for shutting down trading was less than the potential fallout for enabling illegal market manipulation behavior. Just because it's coordinated online between individuals doesn't mean that it's not illegal market manipulation.

by Kranar 6y ago

rStar 6y ago

@Kranar exactly. the actions of the gme swarm are reasonable given the positions and the patterns of actions we all recognize from short sellers. until now, short sellers have pretty much been playing a game of poker where no one ever called their bluff. Of course, the short sellers that lost out on this can just blame it on covid and get bailed out.

fnimick 6y ago
They're not reasonable. Just because someone has a short position doesn't mean you can stake a position deliberately to trigger a squeeze and profit from the result. That's exactly what the GME swarm has been doing. "Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal." - https://www.sec.gov/investor/pubs/regsho.htm https://www.sec.gov/investor/pubs/regsho.htm I wouldn't be surprised if Robinhood and other brokers' compliance teams made the decision that the penalty for shutting down trading was less than the potential fallout for enabling illegal market manipulation behavior. Just because it's coordinated online between individuals doesn't mean that it's not illegal market manipulation.