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> they're willing to brazenly manipulate the market like this Evidence? The interview below (with CEO of broker Webull) claims that the clearing firms cannot (

by FabHK 6y ago

> they're willing to brazenly manipulate the market like this Evidence? The interview below (with CEO of broker Webull) claims that the clearing firms cannot (or don't want to) cover the increased cost when clearing these trades, and told many brokers that they won't open positions anymore, due to the two day settlement delay. In other words, an entirely innocuous explanation.

whoisninja 6y ago
if hedge funds were long, it would have happened? it is short-sellers who need to pay up the margin calls etc. the way short selling works, it can create crazy leverage it is definitely a lie
- JumpCrisscross 6y ago
  > if hedge funds were long, it would have happened? Yes. DTCC changes collateral requirements on securities all the time [1]. The collateral requirements they put on GME aren't even that egregious. Robinhood just didn't want to pay up. [1] Literally, every day. But the haircuts they apply to the last day's market prices are also quite variable.
  - FabHK 6y ago
    Mate, you can't just walk in here with detailed knowledge and settlement mechanics and all. It's a revolution against the conspiracy! </s>
  - zaroth 6y ago
    What does DTCC collateral requirements have to do with retail investors trying to buy shares in a cash account? Stopping margin trading, absolutely. Stopping short selling, of course. But we’re not talking about either of those things. We’re talking about cash-funded limit Buy orders on a duly listed publicly traded stock.
    - JumpCrisscross 6y ago
      > What does DTCC collateral requirements have to do with retail investors trying to buy shares in a cash account? See [1]. Long story short: Robinhood lets you buy and sell a share instantly. In the real world, those trades take days to settle and clear. To bridge the gap, Robinhood loans you the difference. And Robinhood, in turn, is "loaned" [2] some of that difference by the DTCC. So when the cost of that loan goes up, their costs go up, and they responded to that cost pressure by turning off trading. (There are other options.) [1] https://news.ycombinator.com/item?id=25950361 https://news.ycombinator.com/item?id=25950361 [2] In quotes because it's technically a collateral requirement. If you sell $100 of stock, DTCC may tell Robinhood it only needs to put up $2 of stock as collateral while Robinhood gets the rest from wherever it's getting it from so it can pass it along to the next person. The $98 is "loaned," as in it's owed to DTCC. If Robinhood fell down, DTCC would sell that collateral and buy the rest of the shares in the market. In this case, DTCC said "these shares are super risky, and may lose all their value in a heartbeat, I need you to hand me 100% of the shares you say you are selling when you sell them." And Robinhood said no. Because that's expensive. [a] DTCC says put up $100 per share because DTCC is not a lender either! It has lines of credit with various banks. And the banks bear the risk of the loan defaulting. So they're setting their rates and then DTCC draws from the cheapest line.
      - areoform 6y ago
        Thank you for discussing this and bringing your perspective. Question, why are we operating near-real-time settlement systems for securities if it doesn't eliminate such risks? I don't understand why these transactions aren't being netted and conducted as close to real-time as possible. This aspect of the economy seems like a significant vulnerability.
        FabHK 6y ago
        There is no real-time-settlement for securities, AFAIK. They're settled two biz days later. RH, of course, seemingly settles things immediately vis-a-vis its retail clients. That creates the whole web (well, not a web, really, but a snow flake with a central counterpart which branch off again) of credit and collateral, which generally works extremely well, but comes to its limits with irrational price action such as this. I don't see the lack of real-time-settlement as a vulnerability so much, but more the mismatch. But I'd suggest fixing it not by increasing the frequency of settlement, but by decreasing the frequency of trading (Tobin tax (which, funnily enough, is also called Robin Hood tax [1]); replace continuous trading with a couple of auctions a day; ???). [1] https://en.wikipedia.org/wiki/Tobin_tax https://en.wikipedia.org/wiki/Tobin_tax
dillondoyle 6y ago
Does citadel clear their own trades? I could be off here, but what I'm asking is getting at like if they are on all the sides of the transaction as market maker, participating or allow others to participate in 'betting', and clearing the trades themselves? Does a trade even need to clear if it's just moving internally changing col A owner ID from 1234 to 9999?
Phlarp 6y ago
Where are all the HFTs looking to take a rake for "creating market liquidity" Sure looks like a rigged game to me.
kosh2 6y ago
Can you explain why buying GME was more costly for them? I don't undestand that.
FabHK 6y ago
> “It’s not really Robinhood doing nefarious stuff,” said Bloomberg Intelligence analyst Larry Tabb. “It’s the DTCC saying ‘This stuff is just too risky. We don’t trust that these guys have the cash to be able to withstand settling these things two days from now, because in two days, who knows what the price could be, it could be zero.’” https://www.bloomberg.com/news/articles/2021-01-29/for-robinhood-a-dash-for-cash-after-traders-took-on-wall-street https://www.bloomberg.com/news/articles/2021-01-29/for-robin...

by FabHK 6y ago

whoisninja 6y ago

if hedge funds were long, it would have happened? it is short-sellers who need to pay up the margin calls etc. the way short selling works, it can create crazy leverage it is definitely a lie

JumpCrisscross 6y ago
> if hedge funds were long, it would have happened? Yes. DTCC changes collateral requirements on securities all the time [1]. The collateral requirements they put on GME aren't even that egregious. Robinhood just didn't want to pay up. [1] Literally, every day. But the haircuts they apply to the last day's market prices are also quite variable.
- FabHK 6y ago
  Mate, you can't just walk in here with detailed knowledge and settlement mechanics and all. It's a revolution against the conspiracy! </s>
- zaroth 6y ago
  What does DTCC collateral requirements have to do with retail investors trying to buy shares in a cash account? Stopping margin trading, absolutely. Stopping short selling, of course. But we’re not talking about either of those things. We’re talking about cash-funded limit Buy orders on a duly listed publicly traded stock.
  - JumpCrisscross 6y ago
    > What does DTCC collateral requirements have to do with retail investors trying to buy shares in a cash account? See [1]. Long story short: Robinhood lets you buy and sell a share instantly. In the real world, those trades take days to settle and clear. To bridge the gap, Robinhood loans you the difference. And Robinhood, in turn, is "loaned" [2] some of that difference by the DTCC. So when the cost of that loan goes up, their costs go up, and they responded to that cost pressure by turning off trading. (There are other options.) [1] https://news.ycombinator.com/item?id=25950361 https://news.ycombinator.com/item?id=25950361 [2] In quotes because it's technically a collateral requirement. If you sell $100 of stock, DTCC may tell Robinhood it only needs to put up $2 of stock as collateral while Robinhood gets the rest from wherever it's getting it from so it can pass it along to the next person. The $98 is "loaned," as in it's owed to DTCC. If Robinhood fell down, DTCC would sell that collateral and buy the rest of the shares in the market. In this case, DTCC said "these shares are super risky, and may lose all their value in a heartbeat, I need you to hand me 100% of the shares you say you are selling when you sell them." And Robinhood said no. Because that's expensive. [a] DTCC says put up $100 per share because DTCC is not a lender either! It has lines of credit with various banks. And the banks bear the risk of the loan defaulting. So they're setting their rates and then DTCC draws from the cheapest line.
    - areoform 6y ago
      Thank you for discussing this and bringing your perspective. Question, why are we operating near-real-time settlement systems for securities if it doesn't eliminate such risks? I don't understand why these transactions aren't being netted and conducted as close to real-time as possible. This aspect of the economy seems like a significant vulnerability.
      - FabHK 6y ago
        There is no real-time-settlement for securities, AFAIK. They're settled two biz days later. RH, of course, seemingly settles things immediately vis-a-vis its retail clients. That creates the whole web (well, not a web, really, but a snow flake with a central counterpart which branch off again) of credit and collateral, which generally works extremely well, but comes to its limits with irrational price action such as this. I don't see the lack of real-time-settlement as a vulnerability so much, but more the mismatch. But I'd suggest fixing it not by increasing the frequency of settlement, but by decreasing the frequency of trading (Tobin tax (which, funnily enough, is also called Robin Hood tax [1]); replace continuous trading with a couple of auctions a day; ???). [1] https://en.wikipedia.org/wiki/Tobin_tax https://en.wikipedia.org/wiki/Tobin_tax

dillondoyle 6y ago

Does citadel clear their own trades? I could be off here, but what I'm asking is getting at like if they are on all the sides of the transaction as market maker, participating or allow others to participate in 'betting', and clearing the trades themselves? Does a trade even need to clear if it's just moving internally changing col A owner ID from 1234 to 9999?

Phlarp 6y ago

Where are all the HFTs looking to take a rake for "creating market liquidity" Sure looks like a rigged game to me.

kosh2 6y ago

Can you explain why buying GME was more costly for them? I don't undestand that.

FabHK 6y ago

> “It’s not really Robinhood doing nefarious stuff,” said Bloomberg Intelligence analyst Larry Tabb. “It’s the DTCC saying ‘This stuff is just too risky. We don’t trust that these guys have the cash to be able to withstand settling these things two days from now, because in two days, who knows what the price could be, it could be zero.’” https://www.bloomberg.com/news/articles/2021-01-29/for-robinhood-a-dash-for-cash-after-traders-took-on-wall-street https://www.bloomberg.com/news/articles/2021-01-29/for-robin...