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Watching social media frame today as being orchestrated by some shadowy cabal was truly bizarre. Robinhood just didn’t have the capital to clear trades of supe

Watching social media frame today as being orchestrated by some shadowy cabal was truly bizarre. Robinhood just didn’t have the capital to clear trades of super volatile stocks. I think people would have understood if they just came out and said so yesterday.

renewiltord 6y ago
They came out and said they did it to protect users from volatile stocks. I’m sure we can hypothesize but why not just listen to what they say and judge them for it.
- cush 6y ago
  Welcome to capitalism, friend. Customers should be holding businesses accountable.
SV_BubbleTime 6y ago
> Watching social media frame today as being orchestrated by some shadowy cabal was truly bizarre. Makes me wonder how much of the rest of what social media “directs” and “nudges”. What other high profile events where all of social media happen to agree and line up on are not what they seem? Gell-Mann Amnesia is real.
smnrchrds 6y ago
Did TD Ameritrade, Charles Schwab, and Interactive Brokers face liquidity issues as well?
- _whiteCaps_ 6y ago
  https://twitter.com/Wealthsimple/status/1354860658723086338 https://twitter.com/Wealthsimple/status/1354860658723086338 WealthSimple is not restricting trades, but displays warning banners about GME: "GME is considered risky. Traders should expect high volatility. If you do choose to place an order, use a limit order with a set price."
  - adrr 6y ago
    They should turn off market orders for the stock. Treat it like after hours where volume is limited and stock is volatile.
- llbeansandrice 6y ago
  I don't know about the others, but TD Ameritrade did restrict trading (maybe just buying as well) but only if you were buying on margin. RH is getting ire because they restricted buying for everyone.
  - gmethowaway 6y ago
    Interactive Brokers blocked buying GME stock in non margin accounts. What I hear from twitter the same was for RH.
    - dannyw 6y ago
      Correct. If you are in Australia, file a complaint and then escalate to AFCA. This violates the Market Integrity rules which applies to IBKR Australia.
  - deleted 6y ago
    [deleted]
  - bunnyfoofoo 6y ago
    On TD Ameritrade, I had no issues buying and selling (in cash) shares of GME today. I did have to call a broker to sell covered NOK calls though as those gave errors when trying to open the position myself in thinkorswim.
  - cush 6y ago
    Big difference between halting or restricting volume and preventing a long...
- fma 6y ago
  I have Merrill Edge and for whatever reason they blocked buying GME shares...
worker767424 6y ago
> didn’t have the capital to clear trades of super volatile stocks As long as people executing buy orders have enough cash or margin in their account to cover the purchase, how is this a problem?
- dodobirdlord 6y ago
  Well, the margin in those accounts is specifically Robinhood’s problem.
  - gmethowaway 6y ago
    If margin is the only problem, why many brokers disallowed buying GME stock on non margin accounts?
- esoterica 6y ago
  It's not about the relationship between the end user and the broker, it's about the relationship between the broker and the clearing house. Trades take two days to settle, and the brokerage needs to post collateral with the clearing house to reassure them that they have enough funds to settle the trades. When volatility goes up, clearing houses demand more collateral to allow further trading, which the brokerage might be unwilling or unable to provide. This is independent of whether the end user is using margin.
  - skosch 6y ago
    Well, in a world where users had to have fully funded their accounts before making any orders, the clearinghouse would have nothing to worry about. So it's not exactly independent from whether end users are using margin. It looks like RH let hordes of new users onto the platform and allowed them to put in GME orders before having those users' cash in the bank. Now the clearinghouse sees the volatility, throws up its hands and goes "listen RH, no more of these crazy GME orders from you until you have the cash to pay for them". Understandable – but that should be RH's problem, not that of its users. What's not OK is RH's sledgehammer solution of disabling buying for all users, even those whose accounts are fully funded, not to mention force-selling people's shares against their will. IMHO they deserve all of the anger and lawsuits currently directed at them. (Edit: unless, of course, they are only force-selling stocks that were bought on margin in the first place, and if their T&C let them do that, in which case ¯\_(ツ)_/¯)
phkahler 6y ago
What does that even mean? Dont they hold investors cash, and use that to purchase shares when those investors want to buy? Is there another fiction at play here?
- thatguy0900 6y ago
  No, robinhood by default opens margin accounts, so they loan you money to buy stocks with. Those were the orders they forced out, as far as I'm aware they never messed with cash accounts beyond not letting them buy.
- dodobirdlord 6y ago
  Robinhood doesn’t buy and sell stocks, they just run an app. Downstream they have a relationship with Citadel, which does the actual trading. In theory it could have been Citadel that decided to stop allowing these trades, but Citadel has announced that they haven’t done that.
- greenshackle2 6y ago
  The available cash in a brokerage account can be a bit of a fiction, in that the brokerage may not literally hold it as cash, they may put it in a low-yield safe investment and keep the interest, and they may let you trade with unsettled funds from stock sales or bank transfers that haven't cleared yet. US stocks have T+2 settlement, when you buy or sell the money and stock are really only exchanged two days later by the clearinghouse. Until that happens, if they let you trade the proceeds immediately, you're kind of trading with a very short term loan that has your "sold" stock as collateral, it's technically not totally risk-free. You can buy with unsettled cash even in a cash account but there are a few rules to follow to avoid violations. In a margin account you may be trading with margin without realizing if you trade frequently and don't pay attention to settlement. Even if you're not trading margin the whole system is kind of running on short-term credit and there are capital requirements. The clearinghouse has to make sure the brokerage can fulfill all its obligations for all the unsettled stuff for the next N days even if it goes under tomorrow. (EDIT: The whole financial system tends to run like this.. you can spend the money from a deposited check long before it has cleared, etc.)
tootie 6y ago
Everyone said the same about reddit and didn't blink when the sub came back in 45 minutes. I think it's also grossly naïve that reddit is even the main player anymore. There's so much after hours trading going on that has to be institutional. DFV made a great call and everyone noticed.
- tayo42 6y ago
  Why does it have to be institutional? I made a pre market trade the other day. Figure other regular people can too
  - TheAlchemist 6y ago
    Because institutional also own >100% of the stock (that sounds silly indeed, but it's the case). See here: https://money.cnn.com/quote/shareholders/shareholders.html?symb=GME&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s...
cwhiz 6y ago
> Robinhood just didn’t have the capital to clear trades of super volatile stocks. This was not their stated reason for shutting down the trades. What is your source for this claim?
- franklampard 6y ago
  Melvin capital
- adrr 6y ago
  It’s in their blog. https://blog.robinhood.com/news/2021/1/28/an-update-on-market-volatility https://blog.robinhood.com/news/2021/1/28/an-update-on-marke...
  - cwhiz 6y ago
    That is not a source for what OP is saying has happened.
    - esoterica 6y ago
      > As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
  - Miner49er 6y ago
    It's not, they don't give any reasons in that blog post. They vaguely hint at things that could be the reason, but they never actually say those are the reason. This is either shady or horrible PR.
franklampard 6y ago
“Just didn’t have the capital to ...” so they screwed millions of investors? How on earth is this legal?
- disgruntledphd2 6y ago
  If they are lending you money (which is what margin is), then it's perfectly legal. You don't have a right to be lent money by anyone.
  - franklampard 6y ago
    but cash accounts were all affected
JumpCrisscross 6y ago
> people would have understood if they just came out and said so yesterday Agree. But generally speaking, financial services firms don't like to say "we ran out of money."
matwood 6y ago
> Watching social media frame today as being orchestrated by some shadowy cabal was truly bizarre. Once most of the brokerages started restricting, I assumed the SEC made the call. If it had just been RH, then some backroom deal might have been more plausible, though still unlikely given the regulations.
Miner49er 6y ago
Then why hasn't Robinhood came out and said this like other brokers have? I'm not necessarily trying to be a conspiracy theorist, but they have horrible PR.
cush 6y ago
Who said cabal? There's a basic conflict of interest between Robinhood and Citron. Of course it should be looked into...

renewiltord 6y ago

They came out and said they did it to protect users from volatile stocks. I’m sure we can hypothesize but why not just listen to what they say and judge them for it.

cush 6y ago
Welcome to capitalism, friend. Customers should be holding businesses accountable.

SV_BubbleTime 6y ago

> Watching social media frame today as being orchestrated by some shadowy cabal was truly bizarre. Makes me wonder how much of the rest of what social media “directs” and “nudges”. What other high profile events where all of social media happen to agree and line up on are not what they seem? Gell-Mann Amnesia is real.

smnrchrds 6y ago

Did TD Ameritrade, Charles Schwab, and Interactive Brokers face liquidity issues as well?

_whiteCaps_ 6y ago
https://twitter.com/Wealthsimple/status/1354860658723086338 https://twitter.com/Wealthsimple/status/1354860658723086338 WealthSimple is not restricting trades, but displays warning banners about GME: "GME is considered risky. Traders should expect high volatility. If you do choose to place an order, use a limit order with a set price."
- adrr 6y ago
  They should turn off market orders for the stock. Treat it like after hours where volume is limited and stock is volatile.
llbeansandrice 6y ago
I don't know about the others, but TD Ameritrade did restrict trading (maybe just buying as well) but only if you were buying on margin. RH is getting ire because they restricted buying for everyone.
- gmethowaway 6y ago
  Interactive Brokers blocked buying GME stock in non margin accounts. What I hear from twitter the same was for RH.
  - dannyw 6y ago
    Correct. If you are in Australia, file a complaint and then escalate to AFCA. This violates the Market Integrity rules which applies to IBKR Australia.
- deleted 6y ago
  [deleted]
- bunnyfoofoo 6y ago
  On TD Ameritrade, I had no issues buying and selling (in cash) shares of GME today. I did have to call a broker to sell covered NOK calls though as those gave errors when trying to open the position myself in thinkorswim.
- cush 6y ago
  Big difference between halting or restricting volume and preventing a long...
fma 6y ago
I have Merrill Edge and for whatever reason they blocked buying GME shares...

worker767424 6y ago

> didn’t have the capital to clear trades of super volatile stocks As long as people executing buy orders have enough cash or margin in their account to cover the purchase, how is this a problem?

dodobirdlord 6y ago
Well, the margin in those accounts is specifically Robinhood’s problem.
- gmethowaway 6y ago
  If margin is the only problem, why many brokers disallowed buying GME stock on non margin accounts?
esoterica 6y ago
It's not about the relationship between the end user and the broker, it's about the relationship between the broker and the clearing house. Trades take two days to settle, and the brokerage needs to post collateral with the clearing house to reassure them that they have enough funds to settle the trades. When volatility goes up, clearing houses demand more collateral to allow further trading, which the brokerage might be unwilling or unable to provide. This is independent of whether the end user is using margin.
- skosch 6y ago
  Well, in a world where users had to have fully funded their accounts before making any orders, the clearinghouse would have nothing to worry about. So it's not exactly independent from whether end users are using margin. It looks like RH let hordes of new users onto the platform and allowed them to put in GME orders before having those users' cash in the bank. Now the clearinghouse sees the volatility, throws up its hands and goes "listen RH, no more of these crazy GME orders from you until you have the cash to pay for them". Understandable – but that should be RH's problem, not that of its users. What's not OK is RH's sledgehammer solution of disabling buying for all users, even those whose accounts are fully funded, not to mention force-selling people's shares against their will. IMHO they deserve all of the anger and lawsuits currently directed at them. (Edit: unless, of course, they are only force-selling stocks that were bought on margin in the first place, and if their T&C let them do that, in which case ¯\_(ツ)_/¯)

phkahler 6y ago

What does that even mean? Dont they hold investors cash, and use that to purchase shares when those investors want to buy? Is there another fiction at play here?

thatguy0900 6y ago
No, robinhood by default opens margin accounts, so they loan you money to buy stocks with. Those were the orders they forced out, as far as I'm aware they never messed with cash accounts beyond not letting them buy.
dodobirdlord 6y ago
Robinhood doesn’t buy and sell stocks, they just run an app. Downstream they have a relationship with Citadel, which does the actual trading. In theory it could have been Citadel that decided to stop allowing these trades, but Citadel has announced that they haven’t done that.
greenshackle2 6y ago
The available cash in a brokerage account can be a bit of a fiction, in that the brokerage may not literally hold it as cash, they may put it in a low-yield safe investment and keep the interest, and they may let you trade with unsettled funds from stock sales or bank transfers that haven't cleared yet. US stocks have T+2 settlement, when you buy or sell the money and stock are really only exchanged two days later by the clearinghouse. Until that happens, if they let you trade the proceeds immediately, you're kind of trading with a very short term loan that has your "sold" stock as collateral, it's technically not totally risk-free. You can buy with unsettled cash even in a cash account but there are a few rules to follow to avoid violations. In a margin account you may be trading with margin without realizing if you trade frequently and don't pay attention to settlement. Even if you're not trading margin the whole system is kind of running on short-term credit and there are capital requirements. The clearinghouse has to make sure the brokerage can fulfill all its obligations for all the unsettled stuff for the next N days even if it goes under tomorrow. (EDIT: The whole financial system tends to run like this.. you can spend the money from a deposited check long before it has cleared, etc.)

tootie 6y ago

Everyone said the same about reddit and didn't blink when the sub came back in 45 minutes. I think it's also grossly naïve that reddit is even the main player anymore. There's so much after hours trading going on that has to be institutional. DFV made a great call and everyone noticed.

tayo42 6y ago
Why does it have to be institutional? I made a pre market trade the other day. Figure other regular people can too
- TheAlchemist 6y ago
  Because institutional also own >100% of the stock (that sounds silly indeed, but it's the case). See here: https://money.cnn.com/quote/shareholders/shareholders.html?symb=GME&subView=institutional https://money.cnn.com/quote/shareholders/shareholders.html?s...

cwhiz 6y ago

> Robinhood just didn’t have the capital to clear trades of super volatile stocks. This was not their stated reason for shutting down the trades. What is your source for this claim?

franklampard 6y ago
Melvin capital
adrr 6y ago
It’s in their blog. https://blog.robinhood.com/news/2021/1/28/an-update-on-market-volatility https://blog.robinhood.com/news/2021/1/28/an-update-on-marke...
- cwhiz 6y ago
  That is not a source for what OP is saying has happened.
  - esoterica 6y ago
    > As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
- Miner49er 6y ago
  It's not, they don't give any reasons in that blog post. They vaguely hint at things that could be the reason, but they never actually say those are the reason. This is either shady or horrible PR.

franklampard 6y ago

“Just didn’t have the capital to ...” so they screwed millions of investors? How on earth is this legal?

disgruntledphd2 6y ago
If they are lending you money (which is what margin is), then it's perfectly legal. You don't have a right to be lent money by anyone.
- franklampard 6y ago
  but cash accounts were all affected

JumpCrisscross 6y ago

> people would have understood if they just came out and said so yesterday Agree. But generally speaking, financial services firms don't like to say "we ran out of money."

matwood 6y ago

> Watching social media frame today as being orchestrated by some shadowy cabal was truly bizarre. Once most of the brokerages started restricting, I assumed the SEC made the call. If it had just been RH, then some backroom deal might have been more plausible, though still unlikely given the regulations.

Miner49er 6y ago

Then why hasn't Robinhood came out and said this like other brokers have? I'm not necessarily trying to be a conspiracy theorist, but they have horrible PR.

cush 6y ago

Who said cabal? There's a basic conflict of interest between Robinhood and Citron. Of course it should be looked into...