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> Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to th

> Right now it appears that the public wants to be able to trade on their terms because there is this narrative that the little guy is finally sticking it to the big bad hedge funds. In reality there is probably very little truth to this. The fact that buying was limited yesterday is evidence that the little guy is actually winning here. Trading was stopped to save the hedge funds, because if they go under or lose too much, the clearinghouse has to front that. If the clearinghouse goes under the whole market will crash.

TameAntelope 6y ago
I cannot stress this strongly enough -- the fact that buying was limited yesterday is not evidence that the little guy is actually winning. As has been explained in multiple other places, the limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. That has nothing to do with "the little guy is winning" whatsoever, and in fact may indicate that "the little guy" is about to lose his shirt, due to lack of predictability. Trading was not stopped "to save the hedge funds". This is an outright lie that needs to be squashed. Stop saying this. I don't mean to be rude, but the narrative you're spreading is actively dangerous and not supported by any of the facts we have available to us.
- ForHackernews 6y ago
  Some variation of "If you owe a bank thousands, you have a problem, but if you owe a bank millions, the bank has a problem" probably applies here. If crazy retail investors can bankrupt Robinhood or other over-leveraged brokerage firms, that's also a win for the little guys. I don't think many HN posters with their stable, extremely well-paid technology careers can truly empathize with the strain of aggressive nihilism on display at WSB. "I'm only gambling with my future, so nothing to lose."
- TeMPOraL 6y ago
  Here's the thing, though - and please correct me if I'm wrong: it's not just Robin Hood. Many other trading apps blocked GME buys yesterday and today, and some of them are blaming this on banks and brokerages upstream of the apps. That to me looks like the clearing houses themselves are worried, which means the whole thing poses a risk (even if easily mitigated) to the greater market.
- camgunz 6y ago
  What you're saying may be true. But then I don't know why Robinhood wouldn't say that in their first statement addressing why they disabled buying [1]. [1]: https://blog.robinhood.com/news/2021/1/28/keeping-customers-informed-through-market-volatility https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
  - astrange 6y ago
    They’re poor communicators, or thought saying nothing would be better than saying they’d run out of money to cover counterparty risk.
- Miner49er 6y ago
  > limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. Yes RH had to cover more, because the clearinghouse was also starting to be stretched by the risk from the violatility. If the hedge funds go down, the clearinghouse wouldn't have been able to front their cash, and they would've gone down as well. You're also missing the point that the clearinghouse firms didn't just ask for more money from brokers. In many cases they told brokers to step selling these securities. There's increased risk on both sides, but the long side is at least finite (and probably there's not much margin). The short side is not. The unknown risk the clearinghouse needs to worry about is the short (hedge fund) side.
  - TameAntelope 6y ago
    > short (hedge fund) side. The claim that "the hedge funds" operate in unison and/or are all short is probably the largest misconception about this whole situation. Very "us vs. them" and also very wrong.
    - deleted 6y ago
      [deleted]
- wavefunction 6y ago
  If you broaden your understanding of WSB's definition of winning beyond "making a profit" or "maintaining value" to "taking a loss but having an entertaining ride along the way" then they're winning and have no way to "lose." Now the SEC or Professional Capitalists making easy money may not want WSB to turn corners of the market into a volatile form of entertainment but it's completely legal AFAIK and illustrates the disparity between what is claimed about the stock market by the wealthy and powerful and what the stock market actually is. If a Wall Street clique-member replaced WSB and behaved the same way it would be fine, at least from a hyperventilating "we have to think of the children/retail investors" standpoint.
- ditonal 6y ago
  Your "facts" are basically corporate PR statements from corporations that have a huge entrenched reason to distort the truth and have changed stories multiple times. I'd say your eagerness to accept RH's version of the truth as 100% credible is far more actively dangerous than what you responded to.
alkonaut 6y ago
Then the clearinghouse should fail, rather than the private actors saved. Once one accepts that "socialized risk and private profits" isn't acceptable, then one must also accept that either we must allow even the too big to fail actors to fail, or we must not accept any actor to be too big to fail at all. If public money is used to rescue a bank or clearinghouse, then the public should own it. A government institution can buy any failing bank/clearing house/ if it's so vital, and then the public owns it. Buying a commercial bank or clearing house at cents for the dollar and then selling it again in better times isn't necessarily a bad idea. It's certainly a better idea in terms of moral hazard than simply "bailing out" banks without ownership.
- Anon1096 6y ago
  There was no bailout here of the clearinghouses, and in fact your line of argumentation supports them. If you want institutions to be able to avoid getting liquidated for cents on the dollar or bailed out by the government, you need to also allow them to defend themselves in times of trouble. The clearinghouses are doing just that by forcing brokerages to get higher reserves.
fjabre 6y ago
This is not David vs Goliath. This is Goliath vs Goliath. A reddit mob armed with Macbook Pros and iPhone 11s does not equal 'the little guy.'
- wavefunction 6y ago
  Interesting that you assign expensive Mac products to WSB members. The most that can be said is that they likely have a mobile phone of some time.
  - deleted 6y ago
    [deleted]

TameAntelope 6y ago

I cannot stress this strongly enough -- the fact that buying was limited yesterday is not evidence that the little guy is actually winning. As has been explained in multiple other places, the limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. That has nothing to do with "the little guy is winning" whatsoever, and in fact may indicate that "the little guy" is about to lose his shirt, due to lack of predictability. Trading was not stopped "to save the hedge funds". This is an outright lie that needs to be squashed. Stop saying this. I don't mean to be rude, but the narrative you're spreading is actively dangerous and not supported by any of the facts we have available to us.

ForHackernews 6y ago
Some variation of "If you owe a bank thousands, you have a problem, but if you owe a bank millions, the bank has a problem" probably applies here. If crazy retail investors can bankrupt Robinhood or other over-leveraged brokerage firms, that's also a win for the little guys. I don't think many HN posters with their stable, extremely well-paid technology careers can truly empathize with the strain of aggressive nihilism on display at WSB. "I'm only gambling with my future, so nothing to lose."
TeMPOraL 6y ago
Here's the thing, though - and please correct me if I'm wrong: it's not just Robin Hood. Many other trading apps blocked GME buys yesterday and today, and some of them are blaming this on banks and brokerages upstream of the apps. That to me looks like the clearing houses themselves are worried, which means the whole thing poses a risk (even if easily mitigated) to the greater market.
camgunz 6y ago
What you're saying may be true. But then I don't know why Robinhood wouldn't say that in their first statement addressing why they disabled buying [1]. [1]: https://blog.robinhood.com/news/2021/1/28/keeping-customers-informed-through-market-volatility https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
- astrange 6y ago
  They’re poor communicators, or thought saying nothing would be better than saying they’d run out of money to cover counterparty risk.
Miner49er 6y ago
> limitations were as a result of Robinhood et. al. being unable to cover the risks involved in providing instant trading capabilities for a stock as volatile as the ones that got restricted. Yes RH had to cover more, because the clearinghouse was also starting to be stretched by the risk from the violatility. If the hedge funds go down, the clearinghouse wouldn't have been able to front their cash, and they would've gone down as well. You're also missing the point that the clearinghouse firms didn't just ask for more money from brokers. In many cases they told brokers to step selling these securities. There's increased risk on both sides, but the long side is at least finite (and probably there's not much margin). The short side is not. The unknown risk the clearinghouse needs to worry about is the short (hedge fund) side.
- TameAntelope 6y ago
  > short (hedge fund) side. The claim that "the hedge funds" operate in unison and/or are all short is probably the largest misconception about this whole situation. Very "us vs. them" and also very wrong.
  - deleted 6y ago
    [deleted]
wavefunction 6y ago
If you broaden your understanding of WSB's definition of winning beyond "making a profit" or "maintaining value" to "taking a loss but having an entertaining ride along the way" then they're winning and have no way to "lose." Now the SEC or Professional Capitalists making easy money may not want WSB to turn corners of the market into a volatile form of entertainment but it's completely legal AFAIK and illustrates the disparity between what is claimed about the stock market by the wealthy and powerful and what the stock market actually is. If a Wall Street clique-member replaced WSB and behaved the same way it would be fine, at least from a hyperventilating "we have to think of the children/retail investors" standpoint.
ditonal 6y ago
Your "facts" are basically corporate PR statements from corporations that have a huge entrenched reason to distort the truth and have changed stories multiple times. I'd say your eagerness to accept RH's version of the truth as 100% credible is far more actively dangerous than what you responded to.

alkonaut 6y ago

Then the clearinghouse should fail, rather than the private actors saved. Once one accepts that "socialized risk and private profits" isn't acceptable, then one must also accept that either we must allow even the too big to fail actors to fail, or we must not accept any actor to be too big to fail at all. If public money is used to rescue a bank or clearinghouse, then the public should own it. A government institution can buy any failing bank/clearing house/ if it's so vital, and then the public owns it. Buying a commercial bank or clearing house at cents for the dollar and then selling it again in better times isn't necessarily a bad idea. It's certainly a better idea in terms of moral hazard than simply "bailing out" banks without ownership.

Anon1096 6y ago
There was no bailout here of the clearinghouses, and in fact your line of argumentation supports them. If you want institutions to be able to avoid getting liquidated for cents on the dollar or bailed out by the government, you need to also allow them to defend themselves in times of trouble. The clearinghouses are doing just that by forcing brokerages to get higher reserves.

fjabre 6y ago

This is not David vs Goliath. This is Goliath vs Goliath. A reddit mob armed with Macbook Pros and iPhone 11s does not equal 'the little guy.'

wavefunction 6y ago
Interesting that you assign expensive Mac products to WSB members. The most that can be said is that they likely have a mobile phone of some time.
- deleted 6y ago
  [deleted]