4 ms·

https://finance.yahoo.com/video/heres-why-robinhood-restricting-users-173049721.html https://finance.yahoo.com/video/heres-why-robinhood-restrict... It sounds

https://finance.yahoo.com/video/heres-why-robinhood-restricting-users-173049721.html https://finance.yahoo.com/video/heres-why-robinhood-restrict... It sounds like FINCEN requirements require a 2-day settlement period. This period allows fractional trading to work (they pool orders and execute on day 2). Those same restrictions also appear to restrict a broker/dealer from using customer funds to cover this float. From there it's pretty easy to interpret the end results - risk rises, fees rise, and suddenly RH has to pony up massive amounts of liquidity to cover the DTC float. Fuckery is certainly possible. This explanation still begs the question; at what point can a business decide not to cover the 'cost of doing business' and instead, create explicit downward pricing pressure.

fny 6y ago
Ask yourself: why didn't they just freeze trading these securities instead of forcing liquidations across retail brokerages and putting everyone in sell only mode? They're covering for the market makers and shorts who are on the hook for all the options bought and shares shorted. Institutions could enough to ameliorate their pain while the only option given to everyone else was sell. They should have instead stopped trading so everyone could borrow whatever they needed to pay for the bets they lost.
- eachro 6y ago
  Who is "they" here?
- ericpauley 6y ago
  So you're arguing that, instead of just disabling buying, they should have disabled buying and selling? That would expose them to far more substantial and direct liability than disabling new positions.
  - fny 6y ago
    These securities should have been frozen so people could capitalize enough to supply the liquidity that was demanded instead of just letting institutions buy whatever they needed to cover their positions while forcing liquidations across the board.
    - ericpauley 6y ago
      Perhaps, but that’s not Robinhood’s call. Under the (likely) assumption that RH had liquidity issues, it’s hard to see what other choice they had.
- zodiac 6y ago
  What if they disabled trading, the stock slowly lost value, and people who were long the stock couldn't exit their position? Someone's gonna complain and ask "why didn't they just disallow buying but allow selling".
  - fny 6y ago
    This stock was short over 100% of the float and dealers were short gamma. They got out of this in the way that would guarantee they could save themselves, forced liquidation. They picked the least painful option for themselves. Three options existed: - Halt all trading - Halt buying - Halt selling Everyone is pissed no matter what. The first is perhaps the most fair. The last helps the big institutions in this circumstance, the second retail traders.

fny 6y ago

Ask yourself: why didn't they just freeze trading these securities instead of forcing liquidations across retail brokerages and putting everyone in sell only mode? They're covering for the market makers and shorts who are on the hook for all the options bought and shares shorted. Institutions could enough to ameliorate their pain while the only option given to everyone else was sell. They should have instead stopped trading so everyone could borrow whatever they needed to pay for the bets they lost.

eachro 6y ago
Who is "they" here?
ericpauley 6y ago
So you're arguing that, instead of just disabling buying, they should have disabled buying and selling? That would expose them to far more substantial and direct liability than disabling new positions.
- fny 6y ago
  These securities should have been frozen so people could capitalize enough to supply the liquidity that was demanded instead of just letting institutions buy whatever they needed to cover their positions while forcing liquidations across the board.
  - ericpauley 6y ago
    Perhaps, but that’s not Robinhood’s call. Under the (likely) assumption that RH had liquidity issues, it’s hard to see what other choice they had.
zodiac 6y ago
What if they disabled trading, the stock slowly lost value, and people who were long the stock couldn't exit their position? Someone's gonna complain and ask "why didn't they just disallow buying but allow selling".
- fny 6y ago
  This stock was short over 100% of the float and dealers were short gamma. They got out of this in the way that would guarantee they could save themselves, forced liquidation. They picked the least painful option for themselves. Three options existed: - Halt all trading - Halt buying - Halt selling Everyone is pissed no matter what. The first is perhaps the most fair. The last helps the big institutions in this circumstance, the second retail traders.