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Trades aren't immediate they take T+2 to clear. During that time frame, Robinhood has to put up collateral.
by nojito 6y ago
Trades aren't immediate they take T+2 to clear. During that time frame, Robinhood has to put up collateral.
- IG_Semmelweiss 6y agoCorrect. And more to the point, RH cannot use customer funds to cover that timeframe. It must be its own funds. And the requirement of funds to be covering (collateral) can change on them with very little warning
- rattray 6y agoWho determines the collateral required?
- bradleybuda 6y agoIt’s federal law, part of the Dodd-Frank reforms in the wake of the 2008 financial crisis. I recommend this: https://twitter.com/kralctrebor/status/1354952686165225478?s=21 https://twitter.com/kralctrebor/status/1354952686165225478?s...
- IG_Semmelweiss 6y agoThe NSCC sets the framework, but it is spelled out in Dodd-Frank that they have to do so by law. There are some other items, but that's the basic idea - full details are here: https://dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf https://dtcc.com/-/media/Files/Downloads/legal/policy-and-co... If you want to dive further i recommend this thread : https://mobile.twitter.com/KralcTrebor/status/1354952686165225478 https://mobile.twitter.com/KralcTrebor/status/13549526861652...
- mzi 6y agoI only knows how it works in otc derivatives and then the collateral is equal to the cost of taking an offsetting position, and is calculated inter-day. But I would guess it is something similar on the stock market.
- disgrunt 6y agoIn this case, the NSCC, or the NAtional Securities Clearing Corporation.
- ImprovedSilence 6y agoThis is the right answer. And with the amount of volitility GME was seeing, and the amount of trades of it, created lots of money for the user, but RH was still days away from the transactions actually settling, thus they didnt have the cash from the sale yet.