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I think with Robinhood Instant you can by stock before the bank transfer has cleared, so they need cash on hand to fill the orders. The rising demand x rising o

I think with Robinhood Instant you can by stock before the bank transfer has cleared, so they need cash on hand to fill the orders. The rising demand x rising order amount means they probably blew out their liquidity allowance. With new accounts starting with Instant capability, they are all on margin until the transfer clears.

Rapzid 6y ago
I know with Vanguard I can make trades without the funds in my money market. But that's perhaps because the trades can be covered by liquidating other holdings(I have x days to get the money in and they say they will liquidate to cover it if the money isn't there).
samtheprogram 6y ago
That would make sense, except they allowed sells instead of buys. Right?
- gruez 6y ago
  AFAIK they weren't limiting to sells. They were limiting to close your position, which for most people is "sell".
stainforth 6y ago
> their liquidity allowance. But only on specific stocks they selected? They still had liquidity for other stocks?
- amluto 6y ago
  I have no actual knowledge about securities clearing, but: If I were a clearer, and Robinhood were my client, and they had some collateral in deposit with me and a ridiculously large long position in GME in excess of the posted collateral, and GME were suddenly extremely volatile, then I would consider requiring more collateral and/or telling Robinhood that they may not purchase more GME. Because my #1 job as a clearer is to make sure that, at the end of the day, all the money I am owed is actually there. If GME crashes, then the total portfolio of Robinhood and its clients will lose a lot of value. In theory, Robinhood and its clearer has no skin the the GME game, but, in practice, there are quite a few examples of financial companies taking massive hits when their clients go under. So yes, the clearer could easily be willing to let Robinhood buy more stock that is seen as uncorrelated to GME but be extremely uncomfortable with the size of Robinhood’s position. This is similar to how Robinhood won’t let its clients hold positions when they have insufficient margin to cover the anticipated possible loss.
- dbt00 6y ago
  The reserve requirements scale with both volatility and price. The clearing house needs enough money from you to be able to go buy those shares in the open market 2 days from now if you vanish overnight tomorrow. If the stock is going up or down 2% a day, it's a lot easier to predict how much they would need than if it's going up or down 200% a day.

Rapzid 6y ago

I know with Vanguard I can make trades without the funds in my money market. But that's perhaps because the trades can be covered by liquidating other holdings(I have x days to get the money in and they say they will liquidate to cover it if the money isn't there).

samtheprogram 6y ago

That would make sense, except they allowed sells instead of buys. Right?

gruez 6y ago
AFAIK they weren't limiting to sells. They were limiting to close your position, which for most people is "sell".

stainforth 6y ago

> their liquidity allowance. But only on specific stocks they selected? They still had liquidity for other stocks?

amluto 6y ago
I have no actual knowledge about securities clearing, but: If I were a clearer, and Robinhood were my client, and they had some collateral in deposit with me and a ridiculously large long position in GME in excess of the posted collateral, and GME were suddenly extremely volatile, then I would consider requiring more collateral and/or telling Robinhood that they may not purchase more GME. Because my #1 job as a clearer is to make sure that, at the end of the day, all the money I am owed is actually there. If GME crashes, then the total portfolio of Robinhood and its clients will lose a lot of value. In theory, Robinhood and its clearer has no skin the the GME game, but, in practice, there are quite a few examples of financial companies taking massive hits when their clients go under. So yes, the clearer could easily be willing to let Robinhood buy more stock that is seen as uncorrelated to GME but be extremely uncomfortable with the size of Robinhood’s position. This is similar to how Robinhood won’t let its clients hold positions when they have insufficient margin to cover the anticipated possible loss.
dbt00 6y ago
The reserve requirements scale with both volatility and price. The clearing house needs enough money from you to be able to go buy those shares in the open market 2 days from now if you vanish overnight tomorrow. If the stock is going up or down 2% a day, it's a lot easier to predict how much they would need than if it's going up or down 200% a day.