8 ms·

From what I understand Melvin Capital, one of the biggest short-sellers that got in trouble, is owned by Citadel, which is also Robinhood's largest customer (bu

by mcv 6y ago

From what I understand Melvin Capital, one of the biggest short-sellers that got in trouble, is owned by Citadel, which is also Robinhood's largest customer (buying user data, of all things) and maybe partial owner. I'm no lawyer, but to me it sounds like that might be a conflict of interests. By preventing people from buying shares, the short-sellers have less competition to buy the available shares, and will have an easier time getting them, while paying less for them. Robinhood seems to be manipulating the market to make it easier for Melvin Capital to cut their substantial losses.

whitepaint 6y ago
The thing is, all brokers are doing the same. How on earth is this possible?
- dnissley 6y ago
  I'm with Ally bank and right now they're telling people that it's their clearing firm (Apex Clearing Corp) that's blocking buys of GME and some other stocks. Could it be that other trading platforms use the same clearing firm?
  - misframer 6y ago
    Apex is the clearing firm for Tastyworks and Webull too. I got an email from Tastyworks about restrictions (which just got lifted).
  - neom 6y ago
    Interestingly, I bank with HSBC and I could buy and sell GME and AMC the whole time outside of when it was halted. I called them to ask why and they said they clear their own trades. Not sure how exactly that is possible though (if anyone can explain...)
    - kenhwang 6y ago
      Typically when you buy/sell a stock, it's not moving anywhere. Robinhood would try to sell the stock to someone on Robinhood buying the stock first. The big banks and brokerages have enough people buying/selling within its platform that it has enough supply to trade within itself. For a small brokerage, they would have to work with other brokerages to help them trade, as they wouldn't have enough shares they already hold to trade them within their users. So Robinhood asks Apex for more shares, and Apex has to ask HSBC/Fidelity/JPMC/Goldman if Apex doesn't have any. At some point, all the other institutions also don't want to give up their shares because they need to satisfy demand from their own users. Trading with other firms tends to be really slow too. It's a short squeeze too, by definition there's not enough stocks available for everyone who wants to buy. So some firms ran out and couldn't get more.
      - amluto 6y ago
        You may want to look up Reg NMS and the various rules about internalizers.
      - TedDoesntTalk 6y ago
        You left out the exchange. Why can't the small brokerages go directly to the exchange?
        kenhwang 6y ago
        Defeats the purpose of using a broker/clearing house, there are products that let you trade on the exchange directly. RH probably figured there's no point in integrating all the way to the end if no one would normally use it. Same with doing your own clearing, there's complexity involved with clearing and maybe you don't want to implement it all yourself when someone does it better for cheaper. It's like asking why we don't all program in assembly all the time, or even have the option to mix assembly into our high level code. It's just nice having layers of abstraction that handle the annoying stuff for you, even if there's a minor cost. Why have complexity you don't expect to need?
  - kenhwang 6y ago
    Robinhood uses Apex behind the scenes too. Apex is probably having trouble clearing these trades (given how one sided it is) and just decided to not trade them, resulting in the butterfly effect of multiple brokerages not trading these stock.
    - gruez 6y ago
      >Apex is probably having trouble clearing these trades (given how one sided it is) That's... not how stock markets work. For every buy there must be a seller. If there are too many buyers but not enough sellers the price simply goes up.
      - kenhwang 6y ago
        Sure, that's what would happen if buys and sells could reasonably be paired up. Robinhood/Apex could've just kept these buy orders open until it found a seller at any price and closed unfilled orders at the end of the day. That would probably be less preferable to all involved as I doubt these people were placing limit orders.
    - misframer 6y ago
      I don't think they use Apex anymore. https://blog.robinhood.com/news/2018/10/9/introducing-clearing-by-robinhood https://blog.robinhood.com/news/2018/10/9/introducing-cleari...
  - ClumsyPilot 6y ago
    trading212 wouldn't let me buy, but fairtrade app did.
- that_guy_iain 6y ago
  Cartels... It's got Anti-Trust written all over it. Not sure the US will do much though. Jesus, it kind of shows how corrupt the US really is. We're all basically watching a bunch of people commit crimes that from my quick Google carries a max sentence of 10 years with billons of dollars on the line and we're all pretty sure they're going to get away with it. Though, I do think if Biden makes sure the justice hammer comes down on this, it'll win over a bunch of Trump supporters.
  - outoftheabyss 6y ago
    It was a strong anti trump sentiment that united the democrats but it’s easy to forget that Biden is still met with some caution in his own party as being the establishment candidate, not necessarily a corporate stooge but no Bernie either, it would do more to dispel that within his own party.
    - that_guy_iain 6y ago
      Ẃhy would his own party be pissed that he made sure the justice department properly investigated bankers manipulating the market? Honestly, I think this is one of those issues that will unify everyone to a common cause, god damn rich people screwing the little guy.
      - outoftheabyss 6y ago
        Read my comment again.
        that_guy_iain 6y ago
        Yea. I misread, my bad.
  - sakopov 6y ago
    This. It's been an incredibly eye opening week. From news trumpeting that Melvin Capital closed their short position [1] -- which is questionable at best -- to all major US brokerages preventing retail traders from participating in securities that they shorted. This is so surreal that it almost seems like a conspiracy, but i think in reality it just shows how corrupt the market really is and how much power these hedge funds hold. I'm eager to see the fallout from all of this and if SEC will take action. I didn't know that hedge funds aren't obligated to disclose their short positions on 13f. Maybe, for starters, the SEC could prevent them from hiding their shorts. [1] https://www.reuters.com/article/us-gamestop-melvin-idUSKBN29X0EN https://www.reuters.com/article/us-gamestop-melvin-idUSKBN29...
- outoftheabyss 6y ago
  Reuters are claiming short sellers have lost 70billion usd, when they are the sums involved, anything is possible. There was someone claiming to be a robin hood employee, that the White House got involved. Obviously I would take this with an extreme pinch of salt but with those numbers there is every motivation from the powers that be
  - lovecg 6y ago
    If you’re talking about this article https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW https://www.reuters.com/article/us-retail-trading-shortbets-... the 70 billion number is loss on _all_ short sales YTD. GME is about 1 billion of that total.
- betterunix2 6y ago
  They all used the same logic to make this decision, that's how. They all saw suspicious patterns of trading by retail customers and made the typically overly cautious decision to restrict trading until they receive guidance from the powers that be.
  - deleted 6y ago
    [deleted]
  - justupvoting 6y ago
    You're going to have to source that claim, friend. There is nothing more fundamental than supply and demand. The action to allow people to sell but not buy is not overly cautious, it's obviously advantageous to the short interest.
- city41 6y ago
  Vanguard has not blocked anything. Just wanted to throw that out there as I really like them as a company.
  - diehunde 6y ago
    Also see GME in Fidelity
  - TedDoesntTalk 6y ago
    Right. I was able to buy/sell Nokia (NOK) and Build A Bear (BBW) today with no trouble. However, a colleague showed me they blocked BBW sales later (screenshot).
nomad225 6y ago
Other brokers are also blocking buys on different tickers. E-trade prevented me from buying $GME, and looks like they've blocked $AMC buys too. https://twitter.com/AstralTrading/status/1354884246389874689?s=20 https://twitter.com/AstralTrading/status/1354884246389874689...
efwfwef 6y ago
That's insane, tried to buy GME on robinhood and my trade just got cancelled...
fractionalhare 6y ago
> From what I understand Melvin Capital, one of the biggest short-sellers that got in trouble, is owned by Citadel No, Citadel does not own Melvin Capital. Melvin Capital received an investment from Citadel (the hedge fund, not the market maker) and Point72 this week. > Robinhood seems to be manipulating the market to make it easier for Melvin Capital to cut their substantial losses. Melvin already cut its losses this week, as was widely reported. There is no evidence for the counter claims that they're lying, which themselves originate on reddit. In particular: all the widely cited short interest figures on reddit which purport to show this are out of date (usually by weeks), and even if they were true, they would not be proof the short positions weren't closed.
- bluetonium 6y ago
  So just partially owns, then.
  - bilbo0s 6y ago
    The same way public retirement funds in Wisconsin "partially own" Apple.
    - myownpetard 6y ago
      Do public retirement funds in Wisconsin own >30% of APPL?
      - fractionalhare 6y ago
        As was reported, the capital raise Melvin received wasn't 30% of their total AUM even after the GME losses. And even if it were, it was also reported that Citadel and Point72 received non-controlling revenue share.
        myownpetard 6y ago
        I'm having trouble finding specific numbers, do you have a source? As far as I can tell they started the year with ~12.5B AUM, and have lost ~30% on the year and received a 2.75B cash infusion from Citadel et al, which I assume was at a discount given their position. So my rough estimate is around ~25-35%, given the uncertainty around those numbers.
kasey_junk 6y ago
Citadel invested in Melvin this week at a steep discount, they do not own the majority of Melvin (at least that hasn’t been publicly announced). Melvin announced they had cleared their position in GME days ago so is unlikely to be the driver for brokerage behavior today. Citadel does not buy user data from Robinhood, they are one of Robinhood internalizers. They pay for the privilege of either trading against Robinhood based orders or routing them to an exchange. Not allowing buys can happen for a wide variety of reasons from technical, business to legal to counterparty demands and isn’t necessarily signs of collusion. That said there is certainly the appearance of a conflict of interest and I’m sure Robinhood will be addressing that in court and to investigators presently.
- mcv 6y ago
  It seems we're both right in a way. Cory Doctorow has a through explanation here: https://pluralistic.net/2021/01/28/payment-for-order-flow/#wallstreetbets https://pluralistic.net/2021/01/28/payment-for-order-flow/#w... > "Robinhood partners with institutional investors and lets them spy on what the average joes are buying and selling. Sometimes, this is just "market intelligence" ("Hey, people like fidget spinners") but the main event is front-running." > "If you're paying Robinhood to tell you what assets its customers are about to buy, you can go out and buy them up first and sell them for a profit to Robinhood's customers." > "Or you can buy some of that asset up because you know its price will go up once Robinhood's customers orders are filled." > "Citadel Securities is Robinhood's main institutional investor partner."
  - kasey_junk 6y ago
    Cory Doctorows position is built on a flawed understanding of what payment for order flow is all about. Internalizers do not go out and buy the things they’ve peaked at during the internalization process.
- jojobas 6y ago
  The rumour is that Citadel renewed their shorts. https://twitter.com/justinkan/status/1354853920762253315?s=21 https://twitter.com/justinkan/status/1354853920762253315?s=2...
bmitc 6y ago
Here's an intereating tweet and the associated Reddit thread. https://twitter.com/justinkan/status/1354853920762253315?s=21 https://twitter.com/justinkan/status/1354853920762253315?s=2... https://www.reddit.com/r/wallstreetbets/comments/l747eg/citadel_reloaded_their_shorts_before_they_told/ https://www.reddit.com/r/wallstreetbets/comments/l747eg/cita... This seems, at first glance, to be clear and blatant market manipulation by Citadel and Robinhood.

by mcv 6y ago

whitepaint 6y ago

The thing is, all brokers are doing the same. How on earth is this possible?

dnissley 6y ago
I'm with Ally bank and right now they're telling people that it's their clearing firm (Apex Clearing Corp) that's blocking buys of GME and some other stocks. Could it be that other trading platforms use the same clearing firm?
- misframer 6y ago
  Apex is the clearing firm for Tastyworks and Webull too. I got an email from Tastyworks about restrictions (which just got lifted).
- neom 6y ago
  Interestingly, I bank with HSBC and I could buy and sell GME and AMC the whole time outside of when it was halted. I called them to ask why and they said they clear their own trades. Not sure how exactly that is possible though (if anyone can explain...)
  - kenhwang 6y ago
    Typically when you buy/sell a stock, it's not moving anywhere. Robinhood would try to sell the stock to someone on Robinhood buying the stock first. The big banks and brokerages have enough people buying/selling within its platform that it has enough supply to trade within itself. For a small brokerage, they would have to work with other brokerages to help them trade, as they wouldn't have enough shares they already hold to trade them within their users. So Robinhood asks Apex for more shares, and Apex has to ask HSBC/Fidelity/JPMC/Goldman if Apex doesn't have any. At some point, all the other institutions also don't want to give up their shares because they need to satisfy demand from their own users. Trading with other firms tends to be really slow too. It's a short squeeze too, by definition there's not enough stocks available for everyone who wants to buy. So some firms ran out and couldn't get more.
    - amluto 6y ago
      You may want to look up Reg NMS and the various rules about internalizers.
    - TedDoesntTalk 6y ago
      You left out the exchange. Why can't the small brokerages go directly to the exchange?
      - kenhwang 6y ago
        Defeats the purpose of using a broker/clearing house, there are products that let you trade on the exchange directly. RH probably figured there's no point in integrating all the way to the end if no one would normally use it. Same with doing your own clearing, there's complexity involved with clearing and maybe you don't want to implement it all yourself when someone does it better for cheaper. It's like asking why we don't all program in assembly all the time, or even have the option to mix assembly into our high level code. It's just nice having layers of abstraction that handle the annoying stuff for you, even if there's a minor cost. Why have complexity you don't expect to need?
- kenhwang 6y ago
  Robinhood uses Apex behind the scenes too. Apex is probably having trouble clearing these trades (given how one sided it is) and just decided to not trade them, resulting in the butterfly effect of multiple brokerages not trading these stock.
  - gruez 6y ago
    >Apex is probably having trouble clearing these trades (given how one sided it is) That's... not how stock markets work. For every buy there must be a seller. If there are too many buyers but not enough sellers the price simply goes up.
    - kenhwang 6y ago
      Sure, that's what would happen if buys and sells could reasonably be paired up. Robinhood/Apex could've just kept these buy orders open until it found a seller at any price and closed unfilled orders at the end of the day. That would probably be less preferable to all involved as I doubt these people were placing limit orders.
  - misframer 6y ago
    I don't think they use Apex anymore. https://blog.robinhood.com/news/2018/10/9/introducing-clearing-by-robinhood https://blog.robinhood.com/news/2018/10/9/introducing-cleari...
- ClumsyPilot 6y ago
  trading212 wouldn't let me buy, but fairtrade app did.
that_guy_iain 6y ago
Cartels... It's got Anti-Trust written all over it. Not sure the US will do much though. Jesus, it kind of shows how corrupt the US really is. We're all basically watching a bunch of people commit crimes that from my quick Google carries a max sentence of 10 years with billons of dollars on the line and we're all pretty sure they're going to get away with it. Though, I do think if Biden makes sure the justice hammer comes down on this, it'll win over a bunch of Trump supporters.
- outoftheabyss 6y ago
  It was a strong anti trump sentiment that united the democrats but it’s easy to forget that Biden is still met with some caution in his own party as being the establishment candidate, not necessarily a corporate stooge but no Bernie either, it would do more to dispel that within his own party.
  - that_guy_iain 6y ago
    Ẃhy would his own party be pissed that he made sure the justice department properly investigated bankers manipulating the market? Honestly, I think this is one of those issues that will unify everyone to a common cause, god damn rich people screwing the little guy.
    - outoftheabyss 6y ago
      Read my comment again.
      - that_guy_iain 6y ago
        Yea. I misread, my bad.
- sakopov 6y ago
  This. It's been an incredibly eye opening week. From news trumpeting that Melvin Capital closed their short position [1] -- which is questionable at best -- to all major US brokerages preventing retail traders from participating in securities that they shorted. This is so surreal that it almost seems like a conspiracy, but i think in reality it just shows how corrupt the market really is and how much power these hedge funds hold. I'm eager to see the fallout from all of this and if SEC will take action. I didn't know that hedge funds aren't obligated to disclose their short positions on 13f. Maybe, for starters, the SEC could prevent them from hiding their shorts. [1] https://www.reuters.com/article/us-gamestop-melvin-idUSKBN29X0EN https://www.reuters.com/article/us-gamestop-melvin-idUSKBN29...
outoftheabyss 6y ago
Reuters are claiming short sellers have lost 70billion usd, when they are the sums involved, anything is possible. There was someone claiming to be a robin hood employee, that the White House got involved. Obviously I would take this with an extreme pinch of salt but with those numbers there is every motivation from the powers that be
- lovecg 6y ago
  If you’re talking about this article https://www.reuters.com/article/us-retail-trading-shortbets-idUSKBN29X1SW https://www.reuters.com/article/us-retail-trading-shortbets-... the 70 billion number is loss on _all_ short sales YTD. GME is about 1 billion of that total.
betterunix2 6y ago
They all used the same logic to make this decision, that's how. They all saw suspicious patterns of trading by retail customers and made the typically overly cautious decision to restrict trading until they receive guidance from the powers that be.
- deleted 6y ago
  [deleted]
- justupvoting 6y ago
  You're going to have to source that claim, friend. There is nothing more fundamental than supply and demand. The action to allow people to sell but not buy is not overly cautious, it's obviously advantageous to the short interest.
city41 6y ago
Vanguard has not blocked anything. Just wanted to throw that out there as I really like them as a company.
- diehunde 6y ago
  Also see GME in Fidelity
- TedDoesntTalk 6y ago
  Right. I was able to buy/sell Nokia (NOK) and Build A Bear (BBW) today with no trouble. However, a colleague showed me they blocked BBW sales later (screenshot).

nomad225 6y ago

Other brokers are also blocking buys on different tickers. E-trade prevented me from buying $GME, and looks like they've blocked $AMC buys too. https://twitter.com/AstralTrading/status/1354884246389874689?s=20 https://twitter.com/AstralTrading/status/1354884246389874689...

efwfwef 6y ago

That's insane, tried to buy GME on robinhood and my trade just got cancelled...

fractionalhare 6y ago

> From what I understand Melvin Capital, one of the biggest short-sellers that got in trouble, is owned by Citadel No, Citadel does not own Melvin Capital. Melvin Capital received an investment from Citadel (the hedge fund, not the market maker) and Point72 this week. > Robinhood seems to be manipulating the market to make it easier for Melvin Capital to cut their substantial losses. Melvin already cut its losses this week, as was widely reported. There is no evidence for the counter claims that they're lying, which themselves originate on reddit. In particular: all the widely cited short interest figures on reddit which purport to show this are out of date (usually by weeks), and even if they were true, they would not be proof the short positions weren't closed.

bluetonium 6y ago
So just partially owns, then.
- bilbo0s 6y ago
  The same way public retirement funds in Wisconsin "partially own" Apple.
  - myownpetard 6y ago
    Do public retirement funds in Wisconsin own >30% of APPL?
    - fractionalhare 6y ago
      As was reported, the capital raise Melvin received wasn't 30% of their total AUM even after the GME losses. And even if it were, it was also reported that Citadel and Point72 received non-controlling revenue share.
      - myownpetard 6y ago
        I'm having trouble finding specific numbers, do you have a source? As far as I can tell they started the year with ~12.5B AUM, and have lost ~30% on the year and received a 2.75B cash infusion from Citadel et al, which I assume was at a discount given their position. So my rough estimate is around ~25-35%, given the uncertainty around those numbers.

kasey_junk 6y ago

Citadel invested in Melvin this week at a steep discount, they do not own the majority of Melvin (at least that hasn’t been publicly announced). Melvin announced they had cleared their position in GME days ago so is unlikely to be the driver for brokerage behavior today. Citadel does not buy user data from Robinhood, they are one of Robinhood internalizers. They pay for the privilege of either trading against Robinhood based orders or routing them to an exchange. Not allowing buys can happen for a wide variety of reasons from technical, business to legal to counterparty demands and isn’t necessarily signs of collusion. That said there is certainly the appearance of a conflict of interest and I’m sure Robinhood will be addressing that in court and to investigators presently.

mcv 6y ago
It seems we're both right in a way. Cory Doctorow has a through explanation here: https://pluralistic.net/2021/01/28/payment-for-order-flow/#wallstreetbets https://pluralistic.net/2021/01/28/payment-for-order-flow/#w... > "Robinhood partners with institutional investors and lets them spy on what the average joes are buying and selling. Sometimes, this is just "market intelligence" ("Hey, people like fidget spinners") but the main event is front-running." > "If you're paying Robinhood to tell you what assets its customers are about to buy, you can go out and buy them up first and sell them for a profit to Robinhood's customers." > "Or you can buy some of that asset up because you know its price will go up once Robinhood's customers orders are filled." > "Citadel Securities is Robinhood's main institutional investor partner."
- kasey_junk 6y ago
  Cory Doctorows position is built on a flawed understanding of what payment for order flow is all about. Internalizers do not go out and buy the things they’ve peaked at during the internalization process.
jojobas 6y ago
The rumour is that Citadel renewed their shorts. https://twitter.com/justinkan/status/1354853920762253315?s=21 https://twitter.com/justinkan/status/1354853920762253315?s=2...

bmitc 6y ago

Here's an intereating tweet and the associated Reddit thread. https://twitter.com/justinkan/status/1354853920762253315?s=21 https://twitter.com/justinkan/status/1354853920762253315?s=2... https://www.reddit.com/r/wallstreetbets/comments/l747eg/citadel_reloaded_their_shorts_before_they_told/ https://www.reddit.com/r/wallstreetbets/comments/l747eg/cita... This seems, at first glance, to be clear and blatant market manipulation by Citadel and Robinhood.