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So, every broker is on margin with DDTC, they don’t have to have 100pct cash for the dollar amount of the buy orders they send to DDTC, as long as they will hav

So, every broker is on margin with DDTC, they don’t have to have 100pct cash for the dollar amount of the buy orders they send to DDTC, as long as they will have the cash in 2 day. Some brokers like fidelity have hoards of 401k money and more likely to have 100pct cash for their orders. Trading brokers like IBKR RH keeps the minimum possible amount of cash with DDTC, and their automated systems adjusted up the minimum. This is more or less like the futures market, except futures trades settle at end of day (when CME closes for an hour at 5pm, and next day starts at 6pm lol) and DDTC is the equivalent of CME Who’s irresponsible here? DDTC for their lax cash requirements? Individual brokers that only keeps the minimum required cash? Futures cash requires 10pct or less, but no futures trader would only keep that much in their account, unless they don’t mind being wiped out and liquidated at end of day settlement (and then deposit more money the next day to trade again). Brokers cannot risk being wiped out at all.

deleted 6y ago
[deleted]
pishpash 6y ago
Doesn't regular Robinhood require settled cash to trade? Edit: Nope, looks like Robinhood "Instant" is now the default, margin account, but still limited to $1000 per account: https://robinhood.com/us/en/support/articles/robinhood-accounts/ https://robinhood.com/us/en/support/articles/robinhood-accou...
- loycombinate 6y ago
  1000 x13 millions users...
- ummonk 6y ago
  I think it doesn't matter, as they can't use the client's cash on it until the stock is delivered at the end of the T+2 settlement period.
- MrMan 6y ago
  This is about settlement on the back end.
Traster 6y ago
It's not clear to me that anyone is irresponsible here. Let's say that everyone on reddit got together and decided to turn every single appliance in the house onto full at exactly 5am. The electricity grid wouldn't be able to spin up capacity fast enough and would have to shed load, causing black outs everywhere. Do we say the energy company is irresponsible for not having enough capacity on hand at all times to handle an immediate spike to 100% usage? No, that would be ridiculous and insanely expensive. In the same way there are reams of regulations around the minimum requirements and the risks associated with these events. It's not even clear that continuing to allow low margin on these high volatility stsocks would've been good for consumers. The price would've got driven up further, the shorts would go bankrupt, the companies that loaned the shorts the stocks would recover pennies on the dollar, likely forcing them to sell off their position in GME to cover the losses driving the price through the floor, at which point all those RH traders who don't have quick accecss to the market would be left holding worthless stock, wiping out both their initial investment and probably getting margin called.
lukeramsden 6y ago
So, every broker is on margin with DDTC, they don’t have to have 100pct cash for the dollar amount of the buy orders they send to DDTC, as long as they will have the cash in 2 day. I'm assuming you mean the DTCC? This actually isn't true now, as the DTCC have reportedly upped their margin requirements for GME orders to *100%*. That's according to the CEO of WeBull. That's why these clearing houses, and by extension brokers, cannot afford to sell GME stock to retail traders.

deleted 6y ago

[deleted]

pishpash 6y ago

Doesn't regular Robinhood require settled cash to trade? Edit: Nope, looks like Robinhood "Instant" is now the default, margin account, but still limited to $1000 per account: https://robinhood.com/us/en/support/articles/robinhood-accounts/ https://robinhood.com/us/en/support/articles/robinhood-accou...

loycombinate 6y ago
1000 x13 millions users...
ummonk 6y ago
I think it doesn't matter, as they can't use the client's cash on it until the stock is delivered at the end of the T+2 settlement period.
MrMan 6y ago
This is about settlement on the back end.

Traster 6y ago

It's not clear to me that anyone is irresponsible here. Let's say that everyone on reddit got together and decided to turn every single appliance in the house onto full at exactly 5am. The electricity grid wouldn't be able to spin up capacity fast enough and would have to shed load, causing black outs everywhere. Do we say the energy company is irresponsible for not having enough capacity on hand at all times to handle an immediate spike to 100% usage? No, that would be ridiculous and insanely expensive. In the same way there are reams of regulations around the minimum requirements and the risks associated with these events. It's not even clear that continuing to allow low margin on these high volatility stsocks would've been good for consumers. The price would've got driven up further, the shorts would go bankrupt, the companies that loaned the shorts the stocks would recover pennies on the dollar, likely forcing them to sell off their position in GME to cover the losses driving the price through the floor, at which point all those RH traders who don't have quick accecss to the market would be left holding worthless stock, wiping out both their initial investment and probably getting margin called.

lukeramsden 6y ago

So, every broker is on margin with DDTC, they don’t have to have 100pct cash for the dollar amount of the buy orders they send to DDTC, as long as they will have the cash in 2 day. I'm assuming you mean the DTCC? This actually isn't true now, as the DTCC have reportedly upped their margin requirements for GME orders to *100%*. That's according to the CEO of WeBull. That's why these clearing houses, and by extension brokers, cannot afford to sell GME stock to retail traders.