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Maybe this is an attempt to force that change to be faster? It really should be faster today, clearing sped up. The lag for bank account transactions makes sen

Maybe this is an attempt to force that change to be faster? It really should be faster today, clearing sped up. The lag for bank account transactions makes sense to wait to make sure money is there and no fraud. However, once money is in an account at an approved FDIC/SIPC insured (preferably both, Robinhood is only SIPC) brokerage it should be much faster, at least up to the FDIC/SIPC limits. There is really no reason why it shouldn't except to help market makers have the upper hand. This could be the root of what may need to change or was desired to change with this black swan event.

KirillPanov 6y ago
> to make sure money is there and no fraud "make sure there is no fraud" takes a LOOOONG time. It is the reason why a car bought from a dealer drives around without plates for a month. That's how long it takes the dealer to be totally sure the payment wasn't fraudulent.
- namibj 6y ago
  At least for cash and bearer instruments, you can acquire them in good faith, even if they turn out to be stolen. Well, in Germany, that is: https://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html#p3802 https://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb... While cash is the settlement vehicle of choice for dealer-less used car sales, certified checks (only legally issued by the federal bank) are preferred or even mandated for in-person government (surplus) auctions. If you talk to the dealer in advance, to make sure they know about these certified checks, I'd expect them (over here, in DE) to hand you the title in direct exchange for the check, within an hour of you first setting foot on to the lot (assuming you called in advance so they have time for you and the car you want).
  - KirillPanov 6y ago
    Sorry, I should've said "in the USA". Our banking system here sucks ass. What you say about certified checks is, in theory, possible here. In practice the sales drones who handle these transactions have never heard of this and will treat you like you're trying to scam them out of a car somehow. Also the title is never physically at the location where the car is sold from; the processing of titles for dealers has been outsourced to a handful of large companies who effectively act as warehouses for the physical title documents. Even if the sales drone wanted to go along and had enough clout to make it happen, it would still take an overnight-shipping delay to get the title to the buyer.
    - namibj 6y ago
      Yeah, hence me specifying Germany. I know, it's kinda sad, tbh. Get yourself a taste of SEPA to see what you could have/use instead of ACH. Nice to hear. And yeah, that's why I mentioned needing to call ahead to make sure that someone who can legally sign the contract is gonna be there and has sufficient understanding of how these certified checks look like/work. Fair. Is that only for new cars, or does that include (independent) used car dealerships?
- deleted 6y ago
  [deleted]
KMag 6y ago
Faster settlement means less time to discover and correct mistakes. At a high level, nobody really likes trades being broken, but it's kind of a necessary "evil" that helps stabilize the entire system. Let's say settlement happens in one minute, one morning a pension fund fat-fingers a price and loses 10 million USD to some student in her dorm room. That afternoon, the student then donates 1 million USD to an orphanage, pays off her grandparents' mortgage, buys 1 million USD worth of municipal bonds to finance a new baseball stadium, and buys several million USD in long-dated ETF call options. Some market-maker delta-hedges those options by buying the ETF. In response to the price move generated in the ETF, a large institution buys a basket of stocks and participates in the creation process with the ETF's issuer. Now, what happens when the fat-finger is discovered and disputed? Too many things have changed for the SEC to break all of the trades and other transactions after the settlement. The student no longer has enough money to make the pension fund whole (even if everyone involved could agree that the most fair thing to do would be to limit the student to 100k profit and transfer the rest back to the pension), so I guess they're stuck with the pensioners having to live with that 10 million USD loss. "Oops, next time, make sure your pension hires a more careful trader, I hope you've learned your lesson" isn't very helpful advice to a retiree who's now out on the street.
- yowlingcat 6y ago
  > "Oops, next time, make sure your pension hires a more careful trader, I hope you've learned your lesson" isn't very helpful advice to a retiree who's now out on the street. It's really not, isn't it? Almost like the dependency on human carefulness compromises the integrity of the whole system.
  - KMag 6y ago
    We've seen plenty of trading problems due to direct human error, and we've seen plenty of trading problems due to software bugs. If we got rid of breaking trades, it would presumably force everyone to use carefully specified systems and use avionics-like development practices. Maybe we'd even see machine-checked proofs being compiled to programs and smart contracts via the Curry-Howard correspondence. Long-term, it would probably be good. In the shot term, lots of fallible counterparties going bankrupt would be very destabilizing to the system.

KirillPanov 6y ago

> to make sure money is there and no fraud "make sure there is no fraud" takes a LOOOONG time. It is the reason why a car bought from a dealer drives around without plates for a month. That's how long it takes the dealer to be totally sure the payment wasn't fraudulent.

namibj 6y ago
At least for cash and bearer instruments, you can acquire them in good faith, even if they turn out to be stolen. Well, in Germany, that is: https://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html#p3802 https://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb... While cash is the settlement vehicle of choice for dealer-less used car sales, certified checks (only legally issued by the federal bank) are preferred or even mandated for in-person government (surplus) auctions. If you talk to the dealer in advance, to make sure they know about these certified checks, I'd expect them (over here, in DE) to hand you the title in direct exchange for the check, within an hour of you first setting foot on to the lot (assuming you called in advance so they have time for you and the car you want).
- KirillPanov 6y ago
  Sorry, I should've said "in the USA". Our banking system here sucks ass. What you say about certified checks is, in theory, possible here. In practice the sales drones who handle these transactions have never heard of this and will treat you like you're trying to scam them out of a car somehow. Also the title is never physically at the location where the car is sold from; the processing of titles for dealers has been outsourced to a handful of large companies who effectively act as warehouses for the physical title documents. Even if the sales drone wanted to go along and had enough clout to make it happen, it would still take an overnight-shipping delay to get the title to the buyer.
  - namibj 6y ago
    Yeah, hence me specifying Germany. I know, it's kinda sad, tbh. Get yourself a taste of SEPA to see what you could have/use instead of ACH. Nice to hear. And yeah, that's why I mentioned needing to call ahead to make sure that someone who can legally sign the contract is gonna be there and has sufficient understanding of how these certified checks look like/work. Fair. Is that only for new cars, or does that include (independent) used car dealerships?
deleted 6y ago
[deleted]

KMag 6y ago

Faster settlement means less time to discover and correct mistakes. At a high level, nobody really likes trades being broken, but it's kind of a necessary "evil" that helps stabilize the entire system. Let's say settlement happens in one minute, one morning a pension fund fat-fingers a price and loses 10 million USD to some student in her dorm room. That afternoon, the student then donates 1 million USD to an orphanage, pays off her grandparents' mortgage, buys 1 million USD worth of municipal bonds to finance a new baseball stadium, and buys several million USD in long-dated ETF call options. Some market-maker delta-hedges those options by buying the ETF. In response to the price move generated in the ETF, a large institution buys a basket of stocks and participates in the creation process with the ETF's issuer. Now, what happens when the fat-finger is discovered and disputed? Too many things have changed for the SEC to break all of the trades and other transactions after the settlement. The student no longer has enough money to make the pension fund whole (even if everyone involved could agree that the most fair thing to do would be to limit the student to 100k profit and transfer the rest back to the pension), so I guess they're stuck with the pensioners having to live with that 10 million USD loss. "Oops, next time, make sure your pension hires a more careful trader, I hope you've learned your lesson" isn't very helpful advice to a retiree who's now out on the street.

yowlingcat 6y ago
> "Oops, next time, make sure your pension hires a more careful trader, I hope you've learned your lesson" isn't very helpful advice to a retiree who's now out on the street. It's really not, isn't it? Almost like the dependency on human carefulness compromises the integrity of the whole system.
- KMag 6y ago
  We've seen plenty of trading problems due to direct human error, and we've seen plenty of trading problems due to software bugs. If we got rid of breaking trades, it would presumably force everyone to use carefully specified systems and use avionics-like development practices. Maybe we'd even see machine-checked proofs being compiled to programs and smart contracts via the Curry-Howard correspondence. Long-term, it would probably be good. In the shot term, lots of fallible counterparties going bankrupt would be very destabilizing to the system.