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This sounds the real reason that RH limits the trading of a number of stocks today? If so, why didn't they give this straightforward reason? Instead, they resor

This sounds the real reason that RH limits the trading of a number of stocks today? If so, why didn't they give this straightforward reason? Instead, they resorted to vague excuses like misinformation and "for your own good".

jonas21 6y ago
They did: 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... But the conspiracy theories are more fun, so nobody really paid attention.
- dawnerd 6y ago
  That's still very vague. They had a chance to educate people, but nah can't do that.
- CrazyStat 6y ago
  That was their second post of the day. Their first post [1] made no mention of liquidity or clearinghouse deposit requirements, but rather framed the decision entirely in terms of "helping" customers deal with volatility. That post was at best misleading. [1] https://blog.robinhood.com/news/2021/1/28/keeping-customers-informed-through-market-volatility https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
  - Igelau 6y ago
    The first one looks like a form letter that they had on deck for "we need to stop trading right now" situations and they just plugged in the list of symbols. The second one is the more adequate explanation for when there was time to get actual humans involved.
  - kahrl 6y ago
    It was a lie.
- pinko 6y ago
  That blog post was much more vague, and harder to understand than the clear explanation two comments above. I can now see that they're obliquely referencing their collateral requirements, but that wouldn't have been clear to me before reading JumpCrisscross's comment. I think g9yuayon's point stands.
- g9yuayon 6y ago
  Yeah, you're right. I think this article lacks specifics, but they did mention capital requirements. I was referring to their previous blog entry: https://blog.robinhood.com/news/2021/1/28/keeping-customers-informed-through-market-volatility https://blog.robinhood.com/news/2021/1/28/keeping-customers-.... In addition, their founder @VLAD on Twitter cited misinformation as a reason. As for conspiracy, I'd venture to guess that inconsistencies/hypocrisies and opacity turned people into cynics. I'm not saying RH is hypocritical, by the way. Instead, the hypocrisies of other platforms made people trust RH less. For instance, I saw numerous accusations that RH was helping wall street by limiting buying but not selling.
- lopatin 6y ago
  Correct me if I'm wrong, but that was at the end of the trading day, when people already made it clear their original BS blog post wasn't convincing anyone. IMO Robinhood is clearly in the wrong. It may not be as malignant as the Citadel collusion theory, but they did in fact treat their own customers like idiots. And it backfired.
  - bostik 6y ago
    Not going to defend RH, but I have some insight with regards to corporate communications. A company in panic fire extuingisher mode has to put out some type of announcement. RH did. Twice in one day. I can believe the first one was a canned response, and the second one looks like a more thoughtful letter. But have you ever thought how much internal wrangling, or how many draft revisions even such a short piece has to go through? The company has to be very careful in what they say in their comms - plus even more cautious with their phrasing and wording used. These types of comms will be read by arms chair lawyers and real lawyers alike. The latter will look for opportunities. The former will read it like they were the devil's advocate themselves. Corporate comms teams have to put in a lot of effort, and go through numerous rapid iterations, to make sure their published material is factually accurate and anodyne. In a crisis situation, even more than usual.
- exclusiv 6y ago
  Well they sure made selling really easy during the architected dip. Why allow so many new users to buy those positions before they blocked buys if this was coming? I mean, the prices were elevated before it got to this. Seems like a situation of let's ride the free customer acquisition and figure it out later. They happily took the huge influx of new users that had no knowledge of this. And many got screwed. They couldn't average down on their position. And a ton of buyers were removed. So the price got out of control. Many panicked because of it. I'm not on RH but added more at 170 and it came with several partial fills of 1 and 2 stocks. That was RH users getting screwed as a ton of buyers were removed. Trading was not halted on the downward spiral. They could have said - hey guess what - 750k RH users (whatever it is) that own GME cannot buy this stock, so consider this before you sell. Some kind of warning that passed the attorneys. How could they not see this coming? Any way it went down - RH is done. I hope they "pivot" into a worse situation.
- Miner49er 6y ago
  This came out after the market closed, but the limitations were put in place before the market even opened. Plus, they never give a reason in this. They make vague references to things that could be a reason, but don't clearly state what the reason was. Leaving it unclear like this is horrible PR, and will continue to let the conspiracies spread.
fwip 6y ago
I'm not sure "we had to stop people from using our app because it was going to put us out of business" engenders much confidence in either the users or the shareholders.
jacquesm 6y ago
If a company says they are doing something 'for your own good' you can bet that it is 'for their own good'. This is based on a lifetime of observations without a single counter example, so it is still anecdata but quite a bit of it.
- rodgerd 6y ago
  Healthy, ethical companies will sometimes combine the two. I'm sure that Tim Cook, as a boomer-aged gay man, has a very gut-level understanding of the importance of privacy: he grew up when being beaten up or even lynched for his sexual orientation was normal in his country, and where it was a criminal offense. The fact that the company he's the CEO can leverage "good privacy" to boost their profits makes for a happy combination.
  - virtue3 6y ago
    Their ploy is entirely aimed at google. They fucked up cookie management and pulled the trigger on it early this year, in the middle of a pandemic. specifically around iframes. I got stuck with the ass end of that at my company. We worked in education. There were many healthcare software people that were also pissed about that. Sure fucked up cookie tracking for adds tho!
slg 6y ago
I wonder which belief is better for the long term health of Robinhood. Option 1: The public believes Robinhood is part of the larger finance industry cabal and will screw you over to protect their buddies. Option 2: The public believes Robinhood is in over its head, it doesn't have the financial backing to do the job they are given, and it can go insolvent at any moment. Considering the reputation and expectations for the finance industry, it might actually be better if the public believes option 1 even if option 2 is the real story.
- nprz 6y ago
  Both can be true. Citadel, the hedge fund that bailed out Melvin Capital (the hedge fund that over shorted GME) is Robin Hood's largest client. So it could be there was incentive for Robin Hood to ban trading on behalf of Citadel and they also don't have money to pay back the trades they make.
  - riskneutral 6y ago
    If Citadel is a client of Robinhood, then they are are under no obligation to buy Robinhood's product. It's possible that Citadel stopped buying the order flow from Robinhood because they had exposure to clients who in turn had short exposure to the stocks in question. Even in the absence of such an ulterior motive, Citadel is a market maker and it would be foolish for any market maker to do huge amounts of market making on a stock that it's the headlines and is unpredictably skyrocketing. Ultimately Robinhood cannot continue to offer free orders on a stock if Robinhood's clients are not willing to buy a order flow on a specific stock from a specific client because that client's order flow is toxic and making the stock too volatile to make an orderly market in. Declining to accept toxic order flows and withdrawing liquidity from volatile stocks is a reasonable and accepted practice for market makers. Robinhood users pay zero dollars in commissions, and they get what they pay for.
    - AmericanChopper 6y ago
      Just so we’re clear, it’s toxic for a big fund to be short squeezed, but not toxic for those big funds to do anything that makes them a profit?
Justsignedup 6y ago
Because it is the equivalent of "we literally don't have enough money in the bank to allow you to trade on these". Which will be a very problematic statement for a trade broker. The equivalent of panic if too many people withdraw from a bank. Few people are actually getting this information. So... its not horrible press for them. And if they say this. People would sue like MAD. Because it would be "RH didn't have enough money to trade on a thing they allow trading on. Therefore we missed out on potentially 5 million in profits when I was unable to trade ..." and so the lawsuits begin.
- deleted 6y ago
  [deleted]
- g9yuayon 6y ago
  I can accept that they ran out of cash. It's just like a company running out of servers when traffic spiked. On the other hand, moralizing their decision and citing misinformation and user-caring erodes trust.
  - fny 6y ago
    I can't. They all saw this coming from at least two days before, and they managed to fix this problem with a trading session. Rather than freeze the entire market on GME so no one could buy or sell, institutional traders were free to buy out of their positions while retail accounts were being liquidated in a coordinated fashion across all brokerages. It's very clear to me that insiders saw the how much hurt this short squeeze would bring the financial markets, and they all coordinated to relieve it. It's no coincidence so many hedge funds started degrossing, futures were down, and the VIX spiked to the moon exactly as $GME's price started accelerating... ...once brokerages bricked buying the VIX collapsed and markets rose. Infinity squeeze averted and all's well in Wall Street. No big institution is likely at risk anymore and retail traders along with smaller funds will be the bagholders.
    - deleted 6y ago
      [deleted]
roywiggins 6y ago
Not admitting you're running out of cash might be just reflexive.
MrMan 6y ago
Because they are a bush league broker
saddlerustle 6y ago
There were allegations RH did a large sell-off today of client's margin positions today presumably in order meet collateral requirements. It's possible they realised it'd really not be in their client's interest to telegraph that ahead of time.
- onlyrealcuzzo 6y ago
  Can a broker margin call whenever it wants? I would imagine this is regulated and there are specific circumstances.
eli 6y ago
Crisis communications is easy to mess up and companies do not prepare for it in advance. I imagine it's a lot like the very first time an app you've built crashes really bad. Without any planning it's easy to panic and actually make things worse.
jklein11 6y ago
The only communication I saw from Robinhood is that they had to stop trading due to volatility. I think people jumped to the conclusion that it was them trying to act in their users interests.
- TheKarateKid 6y ago
  The volatility was going on for days, yet they said nothing. They programmed their platform to block trading in advance, yet gave no prior announcement or warning. A well-known investor with integrity publicly mentioned personal issues with the co-founders' integrity in the past.
nprz 6y ago
Also why would they not send a message out ahead of time if this was the case? Surely they were aware of this potential risk? Completely unacceptable to not inform users ahead of time.
throwaway4good 6y ago
But they did - if you see the RH CEO on CNBC - this is what he is trying to explain.

jonas21 6y ago

They did: 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... But the conspiracy theories are more fun, so nobody really paid attention.

dawnerd 6y ago
That's still very vague. They had a chance to educate people, but nah can't do that.
CrazyStat 6y ago
That was their second post of the day. Their first post [1] made no mention of liquidity or clearinghouse deposit requirements, but rather framed the decision entirely in terms of "helping" customers deal with volatility. That post was at best misleading. [1] https://blog.robinhood.com/news/2021/1/28/keeping-customers-informed-through-market-volatility https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
- Igelau 6y ago
  The first one looks like a form letter that they had on deck for "we need to stop trading right now" situations and they just plugged in the list of symbols. The second one is the more adequate explanation for when there was time to get actual humans involved.
- kahrl 6y ago
  It was a lie.
pinko 6y ago
That blog post was much more vague, and harder to understand than the clear explanation two comments above. I can now see that they're obliquely referencing their collateral requirements, but that wouldn't have been clear to me before reading JumpCrisscross's comment. I think g9yuayon's point stands.
g9yuayon 6y ago
Yeah, you're right. I think this article lacks specifics, but they did mention capital requirements. I was referring to their previous blog entry: https://blog.robinhood.com/news/2021/1/28/keeping-customers-informed-through-market-volatility https://blog.robinhood.com/news/2021/1/28/keeping-customers-.... In addition, their founder @VLAD on Twitter cited misinformation as a reason. As for conspiracy, I'd venture to guess that inconsistencies/hypocrisies and opacity turned people into cynics. I'm not saying RH is hypocritical, by the way. Instead, the hypocrisies of other platforms made people trust RH less. For instance, I saw numerous accusations that RH was helping wall street by limiting buying but not selling.
lopatin 6y ago
Correct me if I'm wrong, but that was at the end of the trading day, when people already made it clear their original BS blog post wasn't convincing anyone. IMO Robinhood is clearly in the wrong. It may not be as malignant as the Citadel collusion theory, but they did in fact treat their own customers like idiots. And it backfired.
- bostik 6y ago
  Not going to defend RH, but I have some insight with regards to corporate communications. A company in panic fire extuingisher mode has to put out some type of announcement. RH did. Twice in one day. I can believe the first one was a canned response, and the second one looks like a more thoughtful letter. But have you ever thought how much internal wrangling, or how many draft revisions even such a short piece has to go through? The company has to be very careful in what they say in their comms - plus even more cautious with their phrasing and wording used. These types of comms will be read by arms chair lawyers and real lawyers alike. The latter will look for opportunities. The former will read it like they were the devil's advocate themselves. Corporate comms teams have to put in a lot of effort, and go through numerous rapid iterations, to make sure their published material is factually accurate and anodyne. In a crisis situation, even more than usual.
exclusiv 6y ago
Well they sure made selling really easy during the architected dip. Why allow so many new users to buy those positions before they blocked buys if this was coming? I mean, the prices were elevated before it got to this. Seems like a situation of let's ride the free customer acquisition and figure it out later. They happily took the huge influx of new users that had no knowledge of this. And many got screwed. They couldn't average down on their position. And a ton of buyers were removed. So the price got out of control. Many panicked because of it. I'm not on RH but added more at 170 and it came with several partial fills of 1 and 2 stocks. That was RH users getting screwed as a ton of buyers were removed. Trading was not halted on the downward spiral. They could have said - hey guess what - 750k RH users (whatever it is) that own GME cannot buy this stock, so consider this before you sell. Some kind of warning that passed the attorneys. How could they not see this coming? Any way it went down - RH is done. I hope they "pivot" into a worse situation.
Miner49er 6y ago
This came out after the market closed, but the limitations were put in place before the market even opened. Plus, they never give a reason in this. They make vague references to things that could be a reason, but don't clearly state what the reason was. Leaving it unclear like this is horrible PR, and will continue to let the conspiracies spread.

fwip 6y ago

I'm not sure "we had to stop people from using our app because it was going to put us out of business" engenders much confidence in either the users or the shareholders.

jacquesm 6y ago

If a company says they are doing something 'for your own good' you can bet that it is 'for their own good'. This is based on a lifetime of observations without a single counter example, so it is still anecdata but quite a bit of it.

rodgerd 6y ago
Healthy, ethical companies will sometimes combine the two. I'm sure that Tim Cook, as a boomer-aged gay man, has a very gut-level understanding of the importance of privacy: he grew up when being beaten up or even lynched for his sexual orientation was normal in his country, and where it was a criminal offense. The fact that the company he's the CEO can leverage "good privacy" to boost their profits makes for a happy combination.
- virtue3 6y ago
  Their ploy is entirely aimed at google. They fucked up cookie management and pulled the trigger on it early this year, in the middle of a pandemic. specifically around iframes. I got stuck with the ass end of that at my company. We worked in education. There were many healthcare software people that were also pissed about that. Sure fucked up cookie tracking for adds tho!

slg 6y ago

I wonder which belief is better for the long term health of Robinhood. Option 1: The public believes Robinhood is part of the larger finance industry cabal and will screw you over to protect their buddies. Option 2: The public believes Robinhood is in over its head, it doesn't have the financial backing to do the job they are given, and it can go insolvent at any moment. Considering the reputation and expectations for the finance industry, it might actually be better if the public believes option 1 even if option 2 is the real story.

nprz 6y ago
Both can be true. Citadel, the hedge fund that bailed out Melvin Capital (the hedge fund that over shorted GME) is Robin Hood's largest client. So it could be there was incentive for Robin Hood to ban trading on behalf of Citadel and they also don't have money to pay back the trades they make.
- riskneutral 6y ago
  If Citadel is a client of Robinhood, then they are are under no obligation to buy Robinhood's product. It's possible that Citadel stopped buying the order flow from Robinhood because they had exposure to clients who in turn had short exposure to the stocks in question. Even in the absence of such an ulterior motive, Citadel is a market maker and it would be foolish for any market maker to do huge amounts of market making on a stock that it's the headlines and is unpredictably skyrocketing. Ultimately Robinhood cannot continue to offer free orders on a stock if Robinhood's clients are not willing to buy a order flow on a specific stock from a specific client because that client's order flow is toxic and making the stock too volatile to make an orderly market in. Declining to accept toxic order flows and withdrawing liquidity from volatile stocks is a reasonable and accepted practice for market makers. Robinhood users pay zero dollars in commissions, and they get what they pay for.
  - AmericanChopper 6y ago
    Just so we’re clear, it’s toxic for a big fund to be short squeezed, but not toxic for those big funds to do anything that makes them a profit?

Justsignedup 6y ago

Because it is the equivalent of "we literally don't have enough money in the bank to allow you to trade on these". Which will be a very problematic statement for a trade broker. The equivalent of panic if too many people withdraw from a bank. Few people are actually getting this information. So... its not horrible press for them. And if they say this. People would sue like MAD. Because it would be "RH didn't have enough money to trade on a thing they allow trading on. Therefore we missed out on potentially 5 million in profits when I was unable to trade ..." and so the lawsuits begin.

deleted 6y ago
[deleted]
g9yuayon 6y ago
I can accept that they ran out of cash. It's just like a company running out of servers when traffic spiked. On the other hand, moralizing their decision and citing misinformation and user-caring erodes trust.
- fny 6y ago
  I can't. They all saw this coming from at least two days before, and they managed to fix this problem with a trading session. Rather than freeze the entire market on GME so no one could buy or sell, institutional traders were free to buy out of their positions while retail accounts were being liquidated in a coordinated fashion across all brokerages. It's very clear to me that insiders saw the how much hurt this short squeeze would bring the financial markets, and they all coordinated to relieve it. It's no coincidence so many hedge funds started degrossing, futures were down, and the VIX spiked to the moon exactly as $GME's price started accelerating... ...once brokerages bricked buying the VIX collapsed and markets rose. Infinity squeeze averted and all's well in Wall Street. No big institution is likely at risk anymore and retail traders along with smaller funds will be the bagholders.
  - deleted 6y ago
    [deleted]

roywiggins 6y ago

Not admitting you're running out of cash might be just reflexive.

MrMan 6y ago

Because they are a bush league broker

saddlerustle 6y ago

There were allegations RH did a large sell-off today of client's margin positions today presumably in order meet collateral requirements. It's possible they realised it'd really not be in their client's interest to telegraph that ahead of time.

onlyrealcuzzo 6y ago
Can a broker margin call whenever it wants? I would imagine this is regulated and there are specific circumstances.

eli 6y ago

Crisis communications is easy to mess up and companies do not prepare for it in advance. I imagine it's a lot like the very first time an app you've built crashes really bad. Without any planning it's easy to panic and actually make things worse.

jklein11 6y ago

The only communication I saw from Robinhood is that they had to stop trading due to volatility. I think people jumped to the conclusion that it was them trying to act in their users interests.

TheKarateKid 6y ago
The volatility was going on for days, yet they said nothing. They programmed their platform to block trading in advance, yet gave no prior announcement or warning. A well-known investor with integrity publicly mentioned personal issues with the co-founders' integrity in the past.

nprz 6y ago

Also why would they not send a message out ahead of time if this was the case? Surely they were aware of this potential risk? Completely unacceptable to not inform users ahead of time.

throwaway4good 6y ago

But they did - if you see the RH CEO on CNBC - this is what he is trying to explain.