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Robinhood denies claims that it sold GameStop shares out from under its traders

539 points by Alupis 6y ago

xhkkffbf 6y ago
A margin call is a painful thing. Brokers have always reserved the right to sell shares to satisfy a loan. It's nothing new or unusual. If you want to gamble with the big dogs, well, this is the price you pay.
- SmokyBourbon 6y ago
  RTFA "But these investors told The Verge they didn’t have options in GameStop or AMC and hadn’t purchased the stocks on margin. They had purchased the shares outright, they said, and were planning to hold onto them."
  - Armic 6y ago
    All robinhood accounts are by default margin accounts: https://robinhood.com/us/en/support/articles/robinhood-accounts/#:~:text=When%20you%20sign%20up%20for,deposit%20(up%20to%20%241%2C000) https://robinhood.com/us/en/support/articles/robinhood-accou....
    - rococode 6y ago
      Enormous difference between having a margin account and trading on margin. A margin account simply means you're allowed to trade on margin, not that you have actually done so.
      - aphextron 6y ago
        >Enormous difference between having a margin account and trading on margin. A margin account simply means you're allowed to trade on margin, not that you have actually done so. You're technically trading on margin when you open a new account and trade before your cash has cleared. This is most likely what happened.
        cjcole 6y ago
        Ok, this makes sense, thanks. Still, this is a horrible message to show a user who is in that situation and who did not place a sell order themselves (message wording from the article): “We’ve received your order to sell [#] shares of [stock] at the best available price.” This is poor communication from RH. A preventable own goal.
      - thatguy0900 6y ago
        Yes, but money takes a few days to clear. If you open a robinhood account right now, deposit 1000$, then buy 500$ of stocks you will be buying on margin because the money hasn't cleared yet. How many people buying gme waited for the cash to actually be in their account before buying? In a strictly cash account you would be forced to wait, invisible margin accounts was one of robinhoods "innovations"
        duckfang 6y ago
        Gotta love how that HFT'ers and similar can buy, finalize, sell, finalize in microseconds... But our trades take days. Gee, I wonder why there's so much hate?
        thatguy0900 6y ago
        Your trades don't take days, depositing cash into your account does. I imagine that applies to them as well, they just all already have 2 billion in there. They will also have margin accounts that gives them instant funding, like you do. Addmitedly I doubt they get their margin orders canceled very much when they buy risky things.
        bigtunacan 6y ago
        This is directed at thatguy0900, but we have reached the reply nested limit... What you and many Robinhood users probably are missing is that your trade actually does take days. Actually go read the Robinhood settlement period info. https://robinhood.com/us/en/support/articles/withdraw-money-from-robinhood/#:~:text=Following%20a%20sale%2C%20your%20funds,will%20appear%20as%20withdrawable%20cash https://robinhood.com/us/en/support/articles/withdraw-money-.... This is not explained clearly, but it is essentially 3 days to settle (T+2). So if you sell a position you don't have the cash to buy for three days. If you have traded on Robinhood you have probably noticed that you "immediately" have the buying power from the shares you sold. That's not your cash, because it hasn't settled. For three days that's margin and therefore you could get a margin call. The instant deposit is limited to $1000 (margin). But there were people saying they were forced to sell out of much larger dollar holdings. Those were probably people that sold out of one stock holding and then immediately bought into GameStop, AMC, etc... So they likely believed they were buying with cash, but they were in reality buying on margin. Just to be clear, I don't think this is a good thing at all. A brokerage should not be invisibly providing you with margin, it should be very clear to users that this is happening.
    - thinkmassive 6y ago
      Hopefully this becomes more widely understood. It's definitely not obvious enough for their target market to understand, and it's not a stretch to say they try to obscure it.
    - jMyles 6y ago
      You're saying that you read this to mean that all trades, even done in what otherwise appear to be cash terms, can be margin called? If that's the actual intent of this document, it is substantially misleading.
      - Armic 6y ago
        Not quite - it seems like when you deposit cash, some up to all of it is made available immediately for trading if you're on the default account settings. My guess is that most users believe that when they buy stocks with this money, they think it is cash when it is in fact margin, and these are the people who got margin called.
  - robjan 6y ago
    They specify "options in GameStop or AMC" but if you have margin on any instruments or options which are at risk of being assigned you will also get margin called.
  - UShouldBWorking 6y ago
    I always thought Reddit started as a response to people replying without reading the article. It was I, I "read it". Of course now if for children to complain about their parents and boyfriends, but it used to be great. I would love a site like, I read it.com where you would be encouraged to write a short question about the article that needed to be anawered before being able to comment.
  - deleted 6y ago
    [deleted]
Hnsuz 6y ago
Lies lies.. Robin Hood bye bye
sneak 6y ago
Linked fron the article is another one saying Apple and Google are mass deleting negative reviews of the Robinhood app in their stores: https://www.theverge.com/2021/1/28/22255245/google-deleting-bad-robinhood-reviews-play-store https://www.theverge.com/2021/1/28/22255245/google-deleting-... It's sort of crazy how all of these different things are eroding trust in all of these systems simultaneously. Some can trade, but not others, happy customer reviews are legitimate, angry customer reviews are not. This is a weird time. I'm glad that this sort of normally-invisible manipulation is being brought to light, however. People shouldn't be trusting these rigged systems.
- kbar13 6y ago
  mass deletion of negative reviews is automatic and has been done before if it looks like spam / brigading (which this probably looks like). i think it's a reasonable explanation. https://android-developers.googleblog.com/2018/12/in-reviews-we-trust-making-google-play.html https://android-developers.googleblog.com/2018/12/in-reviews... https://9to5google.com/2018/12/17/play-store-anti-spam-reviews/ https://9to5google.com/2018/12/17/play-store-anti-spam-revie...
  - sneak 6y ago
    I don't think the negative reviews of Robinhood in the last day qualify as "spam" under any definition with which I am familiar. I also see nothing wrong with brigading, if you are an actual legitimate user of an app and are unhappy with it. Businesses solicit positive reviews all the time.
    - tptacek 6y ago
      Every notable online review venue works to resist canvassed reviews, which break the whole concept of online reviews.
      - sokoloff 6y ago
        Almost every free iPhone app I install has a "enjoying our app? Rate it in the app store!" interstitial at some point in the user journey. Is that "working to resist canvassed reviews"? (I agree they should; I don't agree they are resisting it.)
motohagiography 6y ago
The last year has illustrated a new kind of "platform risk," where I think we always tried to diversify exposure to them in architecture, security, and supply chains, but it's as though it has finally trickled down to individuals.
- TameAntelope 6y ago
  The new risk that's I'm seeing exposed here is populist outrage can tank your business even if you've done nothing wrong, but operate in a space that isn't intuitive or won't allow you to act intuitively. Finance is complicated, and often unintuitive and yes, the rules here tend to favor the large movers (at least larger than retail investors). How do you operate a business for retail investors in an environment where the rules will force you to screw over your retail customers (one could argue the "real" customers are the consumers of the retail investor's trade information but let's set that aside for a second) once in awhile?
  - whatshisface 6y ago
    You explain the rules to them as clearly as possible when they join, and put in alarm bells to sound when your margin account is getting low. Robinhood could have had a ticker on their homepage showing how close they were to being forced to stop trading, for example.
    - deleted 6y ago
      [deleted]
  - alexpetralia 6y ago
    Yes, Dominion Voting Systems got hit by this as well.
    - 435243543543 6y ago
      Do you remember the hatred and conspiracy theories directed at Diebold during the Bush years? Why does Dominion suddenly deserve a pass?
xapata 6y ago
Isn't that a standard practice for brokerages -- loan out the shares that your clients are holding? I remember Ally Invest sent me some notice that I'd be receiving a cut of the profits when they loan out my shares.
- llampx 6y ago
  Its not standard in that you can choose not to lend out the shares, and for the GME situation, you expressly DON'T want the shares to be lent out to the shorters.
  - xapata 6y ago
    Yeah, but you might have to explicitly opt out. It's probably in the fine print of your terms of service.
- secondcoming 6y ago
  IANAL but I think they can only do that if you've bought those shares on margin. They _may_ still be able to loan out shares you've 100% paid for unless you explicitly tell them not to. Denying RH the ability to loan out shares was a tactic discussed on WSB
  - bigtunacan 6y ago
    They can loan your shares out whether they are bought with cash or margin. Some brokerages allow you to opt of loaning your shares to short sellers. Robinhood pays you part of the interest made if they lend your shares out, but as far as I know there is no way to opt-out of share lending on Robinhood.
ibraheemdev 6y ago
I'm confused. Why is everyone getting mad at Robinhood? Wasn't it the market makers who stopped them from trading GME? And doesn't Robinhood have the right to sell margin stocks bought on margin?
- NoOneNew 6y ago
  They didnt allow people to buy GME. Only sell. Forced one sided positioning. It's rather frowned upon. That's where a big portion of hate comes from.
  - bpodgursky 6y ago
    Ok, but if they had banned selling and there was a large price drop anyway (forcing investors to eat a loss, unable to sell), they would have been catastrophically screwed legally.
    - kinkrtyavimoodh 6y ago
      Robinhood doing anything unilaterally about this sounds and feels extremely sketchy and screams illegal to me (if it isn't it should be). It's one thing if the SEC stops all GME trade coz that would be fair across the board. But Robinhood effectively being able to block trades for retail while institutional investors do whatever screams market manipulation.
      - bpodgursky 6y ago
        Yeah, I'm not at all defending blocking buys, just saying that blocking both buys AND sells was completely out of the question.
  - sidibe 6y ago
    Did they block people from buying or did they block people from opening new positions?
    - 6y ago
crazynick4 6y ago
Rh was probably losing money on widening spreads. If a client buys and holds and volatility increases and spreads widen, when the client closes out the trade, Rh will eat the difference in the spreads. If a client opens a short position and spreads widen, RH will make a net gain when the client closes out. I think this is why they halted people from buying and probably why they closed out the trades for clients, I would guess it was during periods of lower volatility. I don't know how legal it is for them to do that but when volatility is high like this that's when a broker like RH can really go under.
- amluto 6y ago
  I am pretty sure Rh doesn’t take positions the way you’re describing.
  - crazynick4 6y ago
    I am pretty sure they're a broker who hedges their positions with a counterparty. Otherwise, they would be taking on the risk themselves? But I think my math was backwards on the closing transaction. If the spreads widen they would technically end up net positive.
    - tedunangst 6y ago
      They're a broker, not a market maker. They don't have positions.
ibraheemdev 6y ago
In an interview with the Robinhood CEO, the host mentioned that Robinhood is owned by a hedgefund which has a short position in GME. Vlad Tenev did not deny this claim, but I could not find any proof. Is this true?
enraged_camel 6y ago
Their "democratize finance" slogan serves the same purpose as, and means as much as, Google's "do no evil" slogan: it's a cynical ploy to trick naive rubes into joining and/or using the services of the company.
- awefasdfasdf 6y ago
  Right. Instead of behavioural surplus generated through search, it is generated through stock activity.
- acct776 6y ago
  From the makers of "Julian Assange is an Intelligence Agency", it's "Citizens Talking is Illegal"!
gruez 6y ago
If you read the other threads it's clear what's happening is that robinhood's product isn't designed to cope with high volatility[1]. Is this a flaw in their product? Yes. But then again, they are a discount brokerage for a reason. It's not any different than any other consumer product that shits the bed during 99.9 percentile events. [1] Specifically, they're required by the DTCC to put up a deposit on every trade their users make. During periods of low volatility this is fine because they can come up with the money, but when volatility goes up so do the deposit requirements, which can cause them to become insolvent. This is further compounded by the fact that their product invisibly hands out margin, eg. "instant" deposits of $1000, or giving you the money before it settles (2 days later).
- nightski 6y ago
  Obviously the situation needs to be investigated. But I think there is a real possibility they did nothing wrong here. Despite this, the main problem I see with Robinhood is that with it's gamified UI, ease of access, etc... these 99.9 percentile events are mainly what it is designed for. It's encouraging people to pick up the "hot stock" on social media on a whim. While there may not be legal repercussions for this, it's fundamentally incapable of it's core purpose. If you are new to RH you might not realize that the platform has outages all the time and it costs its users a lot of money. It is straight up dangerous to trade on this platform for the purpose which the UI glorifies. Index funds have done a lot more to democratize finance than RH in my personal view. While commission free sounds fantastic, it comes with some very large hidden costs.
  - newacct583 6y ago
    That I think is the real scandal here. Robinhood was built to market to (and in some sense coevolve with) the wallstreetbets culture of crowd-sourced market manipulation. And that was a great growth hack. Until it grew enough that the crowd source market manipulation was... actually manipulating significant markets. GME has been ballooned to the tune of something like $13B over the past few days, based almost entirely on a flawed understanding of short trading. And absent any discussion about Robinhood in particular, I think we need to be asking whether or not this crowd of people who didn't quite understand shorts were fed those lies at the direction of users who did. Someone has (or will have) made a ton of money here at the expense of the late-arriving GME traders. It seems like we should find out who.
cwkoss 6y ago
They don't want to democratize finance. They want to make naive retail investors feel excess confidence so they can sell more of their dumb order flow. Their interface is horrible for finding any information you'd actually want to use to make an investment decision. They are good for easy no-fee trading, but you constantly have to avoid UI dark patterns pointing you towards sub-optimal decisions.
- FireBeyond 6y ago
  Right. You can say its hyperbole or "locker room talk" but in situations like this, it's very clear that a large part of the financial sector is _absolutely sincere_ when they look at retail investors as what they literally call "dumb money", "dumb flow".
  - kasey_junk 6y ago
    “Dumb money” is a particularly poor bit of jargon but as it’s used in finance it doesn’t really mean that the finance sector thinks a person is a rube or stupid. It really means you think an order doesn’t imply any directionality in the order book. Most orders don’t! Most orders happen because of things outside of the markets (I’ve retired, I’m rebalancing my portfolio, my kid is going to school, I got paid so I’m buying into my retirement fund). Those orders are not indicators that the market is going to move. This is in contrast to a hedge fund unrolling their position. That act will impact the market. So for instance while Melvin was taking a bath closing out their shorts they were “smart”. But my index fund sell that made me money was “dumb”.
- bondarchuk 6y ago
  Their interface is just laughably, inexcusably bad. The stock price charts don't even have labels on the y-axis! No really, check it out! https://blog.robinhood.com/news/2017/10/31/robinhood-now-on-web https://blog.robinhood.com/news/2017/10/31/robinhood-now-on-...
deleted 6y ago
[deleted]
tombert 6y ago
Honest question; if I had a magic wand and tomorrow banned all short sales, what would be the negative side-effects? From a lay-person's perspective, short selling seems pretty horrible, but very often I find that there are variables to this that I do not fully understand, and I know some people here are more financially literate than I am.
- fairity 6y ago
  Shorting stocks, in general, is a beneficial action for the market because it helps prevent shares from becoming overvalued. I think this situation has actually highlighted the fact that shorting stocks needs to be easier. Currently, it's too easy to purposefully trigger a short squeeze. With the goal of efficient prices in mind, short squeezes are bad, and enabling shorting is good.
  - jMyles 6y ago
    > With the goal of efficient prices in mind, short squeezes are bad, and enabling shorting is good. Yeah? Aren't they equally useful as market messages? If I am willing to tie up some money holding an instrument afloat at overvalued prices longer than you are willing to remain in your short position, haven't we ultimately, together in our conflict, created a useful message about the underlying asset? Maybe I think Company G is worth $20 but not $40, but if you are selling it short at $5, and I'm prepared to be illiquid for a while, don't I send the correct market signal by squeezing you out of your short?
    - Hamuko 6y ago
      >If I am willing to tie up some money holding an instrument afloat at overvalued prices longer than you are willing to remain in your short position, haven't we ultimately, together in our conflict, created a useful message about the underlying asset? I'd say it really only sends a message about your assets.
    - fairity 6y ago
      > Maybe I think Company G is worth $20 but not $40, but if you are selling it short at $5, and I'm prepared to be illiquid for a while, don't I send the correct market signal by squeezing you out of your short? In this example, you'd be sending the "correct market signal" if you sold your shares as soon as it appreciated to $20. Anything more, and you're moving the market away from its efficient price. The problem with the squeeze is that certain participants are put into a position where they're being forced to buy. And, that creates an incentive for other shareholders to hold onto their shares well past their fair value. Holding onto shares well past their fair value is antithetical to efficient price discovery.
fairity 6y ago
RH and all brokerages should be held accountable for the losses their clients sustained due to these trade restrictions. But, I don't RH deserves to be singled out & vilified when many other brokerages ran into the exact same problem as RH and solved it with the same trade restrictions. Overall, I've been happy with the effect RH has had on retail investing. Primarily, other brokerages that used to charge me $5-8 commission per trade have now been forced to substantially lower their fees.
- kleer001 6y ago
  > all brokerages should be held accountable for the losses their clients sustained due to these trade restrictions. That's not how a market works in two distinct ways. 1 - buyer beware 2 - businesses cannot be not responsible for restrictions placed on them, see 1
nimos 6y ago
Saying you can only sell an asset but not buy is clearly going affect the price - regardless of the reason they did it. If a broker can't do their job they should be forced to shut down completely until they can. Its pretty clear they don't have the liquidity/assets to handle their customers transactions. Letting brokers manipulate asset prices so they can avoid shutting down is a dangerous precedence to set. Really hope IB/RH and everyone else involved gets blown up by this.
- valuearb 6y ago
  They didn’t manipulate squat, they were fighting to save their life. If they were manipulating GME price they would have tried to pump it higher because each time it crashed their DTCC margin requirements went up. Driving GME price down before all these trades clear likely kills Robinhood.
  - nimos 6y ago
    You really think stopping all buying and only allowing selling doesn't manipulate the price? I fully agree they were fighting to save their life. They can't handle their customer trades they should shut down until they can. Really they should have a system to only allow buying with settled funds. I'd be fine with that.
    - valuearb 6y ago
      Robinhood would have no customers if it implemented that system. And Robinhoods actions affect on GMEs price was likely small. The investing world is far larger than Robinhood, and Citadels own statistics show retail investors have been net sellers of GME since Monday. And again, every time that GMEs price crashed, Robinhood’s collateral requirements increased. Why would they try to kill themselves? Saying they manipulated GME trading is like saying one pirhana quitting the school is manipulating the feeding frenzy.
      - bordercases 6y ago
        What's so important with Robinhood making it out alive?
jariel 6y ago
Why does the media even remotely consider repeating the companies 'marketing mission' BS when reporting on them? CNN spent years with these fluffy articles basically promoting Robin Hood and their 'Occupy Wall St.' rubbish. "Democratize Finance" is PR, not reality, it shouldn't be contemplated as part of the story.
99_00 6y ago
The Gamestop incident is a very counter to the Robinhood brand so very damaging to the company.. Communication was not handled well. A good lesson for everyone. People shouldn't be trying to figure out what's going on by digging deep in forums and social media. CEO should have been front and centre the day it happened. Hindsight is 20/20. A lesson for all. Doesn't help that opportunistic politicians jump on it to raise their profile.
- tgb 6y ago
  I'll make a little prediction: the negative press Robinhood is receiving will be out-weighed by the fact that so many people are getting interested in stocks due to this. I think they'll be better off despite this debacle in a month. (Though this doesn't include the possibility that they broke a regulation and lose a court case or that congress is spurned into action and regulates them out of business somehow.)
  - bob1029 6y ago
    This is my take as well. Robinhood getting raked over the coals is a bi-annual tradition which has been practiced for several years now. It's not like they really had a choice or were fundamentally at fault for anything in this case. Contrast with prior incidents which were wholly related to bad engineering practices. Getting a margin call from the DTCC isn't an optional inconvenience. Perhaps Robinhood could have had more buffer available to deal with this scenario, and that may wind up being the regulatory outcome of all of this.
  - 99_00 6y ago
    Do they have any competition worth mentioning? If not, then I think you are right. I don't live in the US, but my countries Robinhood like trading app shot up to #1 in our app store.
- asah 6y ago
  I emptied my account, just like I did after the Wells scandals (plural). Years from now, maybe a new exec team, and I'll consider returning (though it's been many years for Wells, and I have no reason to reconsider...)
Areading314 6y ago
If its free, you're not a customer. You're the product.
ruph123 6y ago
What I don’t get is: Now the stock is clearly overvalued. Doesn’t this make shorting it now so much more attractive?
- malandrew 6y ago
  Technically yes, but as they say, the market can stay irrational longer than you can stay solvent. Anyone considering shorts should go spend some time in r/wallstreetbets and figure out if that is a group they'd want to play chicken against.
  - alexpetralia 6y ago
    It feels like standing in front of semi-trailer hurtling towards the edge of a cliff.
- aphextron 6y ago
  >What I don’t get is: Now the stock is clearly overvalued. Doesn’t this make shorting it now so much more attractive? It sure does. But good luck timing it. The whole point of a short squeeze is that the market can stay irrational for longer than you can stay solvent.
- hntrader 6y ago
  Yeah, it's more attractive to short it compared to 2 weeks ago, but consider: (1) Price is determined by supply and demand, not one person's evaluation/perception of value. DOGEUSD was useless 3 months ago and is still useless (even more useless than GME), but shorting it then would've blown you up because of demand exceeding supply. The volume of the incoming retail flow is hard to predict, if enough retail people ascribe aesthetic value to it, the price will go up. (2) Borrow is extremely expensive because of high demand for the relatively small float, so you need very significant edge to justify the high borrow costs.
hartator 6y ago
I don't get blocking buy on certain stocks for "liquidity requirements". When buying on Robinhood, I need to first wire them my money. Can't they use that cash to fund my own buys?
- bob1029 6y ago
  The entire thing is best viewed as a super-short-term credit basis between all participants. At no point is the financial system in a state of absolute settlement. It is continual flux. Best you can get is scoped, relative settlement with assumptions. DTCC is the most fundamental source of truth, but this is after the fact and not very useful when one needs to make an immediate decision.
  - alfalfasprout 6y ago
    Yeah, but settlement happens EOD not on each transaction (as the orders fill). As long as we're talking about trades not on margin then Robinhood should already have the requisite assets for clearing readily available. Margin is a totally different story.
- marcinzm 6y ago
  Doesn't Robinhood allow you to buy stocks before the transfer finishes? So you can buy right away rather than waiting 3+ days. They call it Robinhood Instant.
- bilbo0s 6y ago
  Can't they use that cash to fund my own buys Is this how people really think the markets work? If it is, it's no wonder that a lot of retail investors will be taken to the cleaners. What you just suggested is so illegal that no professional trader would have had the nerve to even mention it. I think it might be helpful if RH had some kind of trading tutorial that maybe went through the mechanics and rules so that people joining would have a better understanding. What I've been reading the last few days betrays a massive lack of understanding about how a lot of this works.
  - 6y ago
Triv888 6y ago
Next up: Google denies deleting thousands of 1-star reviews for the RH app in the Play Store...
kvetching 6y ago
There is plenty of screenshots floating around of people getting their shares sold. The peak at 9:30ish which caused them to stop selling the stock had some very interesting screenshots. Some people had their shares automatically sell because they had them set to sell at a high price, and somehow the market had demand at that high price.
- valuearb 6y ago
  How do we know these customers didn’t sell their own shares?
  - Dirlewanger 6y ago
    What's more likely: multiple Robinhood customers all colluded in a very short time to make it look like RH sold their shares without their consent, or RH actually did this? Occam's razor...
    - valuearb 6y ago
      What’s more likely. Customers regretting a bad trade use the hoary old claim a “glitch” to try to get broker to reverse it, post about it to try the ol social media shaming to ratchet up the pressure, and dozens of copycats do same? Or Robinhood decided to start driving GME price down with forced client sales to make the DTCC increase their collateral requirements and force them into bankruptcy so they can end this madness? What does Occam say?
      - Dirlewanger 6y ago
        Arguing in bad faith for retail investors isn't going to help. And if the latter is indeed true, it's textbook market manipulation by RH to save their own ass, and I hope RH is punished to the fullest extent of the law.
        valuearb 6y ago
        Most retail investors are just like WSB members, clueless newbs who know nothing about how the market works and it doesn’t take many to try the dumbest Hail Marys possible. Occams razor tells you it’s not market manipulation because Robinhood wouldn’t last long enough for the law to do anything. Do you really not understand how margin collateral requirements work, how close to bankruptcy this trade has pushed Robinhood, and how dangerous that is even for “winning” GME traders?
TheRealDunkirk 6y ago
> "And though traders may be outraged by the surprise, Robinhood’s terms of service grant it permission to close a trader’s position under a number of circumstances." The terms of service for EVERY service we use are entirely legal jargon for "we can do whatever the f*k we want to do with any data on our service, and you have no legal recourse." No matter what the company says about "privacy" or any other rights you think you have, buried in there somewhere is a clause that says that no matter what happens, you can't sue. What do you expect when you've abdicated the right to sue the company for something you think is illegal or injurious? It's supposed to be the bastion of last resort, to keep everyone honest. When the safety net of the legal system is gone (e.g., forced arbitration) -- or only used for one side, there's nothing to restrain these humungous companies which are running the world now. We're a long way past needing a legal reset on "terms of service."
- kahrl 6y ago
  Terms of Service do not trump federal law and SEC regulations.
  - NeutronStar 6y ago
    Yep. Just because it's written that they have a right to kill you and take your first unborn child doesn't mean they legally have a right to it.
- nicbou 6y ago
  In the EU, those would not be allowed. This is also prohibited by German laws, particularly with regards to apartment and employment contracts. > Under EU law, standard contract terms used by traders have to be fair. This doesn't change if they're called "terms and conditions" or are part of a detailed contract that you actually have to sign. The contract is not allowed to create an imbalance between your rights and obligations as a consumer and the rights and obligations of sellers and suppliers. This includes... > Terms which restrict how and where consumers can take legal action and obliging them to provide proof which is the responsibility of the other party to the contract. https://europa.eu/youreurope/citizens/consumers/unfair-treatment/unfair-contract-terms/index_en.htm https://europa.eu/youreurope/citizens/consumers/unfair-treat...
cmckn 6y ago
As I understand it, Robinhood had a cash problem because of the various collaterals required for high-risk securities during the clearing process. When each share traded needs a high amount of collateral (1:1, even), and you have a high number of those trades happening, you might not have the cash to pony up. I think this is a downside to their business model (and probably moreso their scale and age). There are many upsides to their business model. The interview I saw with their CEO on CNN was laughable. I would have a lot more respect for the company if the CEO could get in the weeds a bit more. The reality is that what Robinhood and most retail brokers provide is a convenient illusion, hiding the complexity of trading securities. Why can't they say that? Edit: I almost certainly don't know what I'm talking about; but hey, this has been a fun story to follow, eh?
- wavefunction 6y ago
  Robinhood wasn't fulfilling orders though as far as I understand it? More like lead generation for Citadel, their market-maker? That seems like an issue for Citadel to be concerned with rather than Robinhood.
  - astrange 6y ago
    Robinhood is their own clearing broker. They send some market orders through people like Citadel Securities because it improves the price, but not all of them. (Note, RH was fined by the SEC for possibly not improving the price as much as they could. But they were not giving you a bad price, it was still better than the NBBO price!)
- fsociety 6y ago
  I think the PR strategies of these companies is something along the lines of, say the vague things which have no risk of backlash as opposed to explaining what happened which has higher risk of backlash.
- viscanti 6y ago
  Apple trades an order of magnitude more per day than any of the stocks that were halted. Somehow the clearinghouses have no trouble with the Apple volume.
nabaraz 6y ago
Here is my quick math: Tradeable float: 47M Top 3 holders: Fidelity, Blackrock, and Vanguard: 27M Cohen: 9M Half of Robinhood users own at least one share: 5M (conservative) That leaves us with 6M shares, and with a short interest of 71M held short and ETFs like XRT buying them, it is likely there aren't enough shares. The only way to resolve this is i) Gamestop issue more shares/shelf-offering. ii) shorts go bankrupt and/or clearinghouse/brokers take the bill.
- dragontamer 6y ago
  Or you just borrow shares from Blackrock to sell to everyone else who wants shares. Aka: short selling. Yes, short-selling creates "virtual new shares". Its only an issue if the company gets acquired. The name of the game is to buy low sell high. Short selling inverts it by selling high and then buying low at a later date.
  - arcticbull 6y ago
    They're still short roughly 100% of float. That's almost 23 billion dollars. With this much short interest the borrow fee must be close to 100% APY [edit: 35% APY]. There's really no good way to wait it out for the shorties. They're getting squeezed by the borrow rates, margin, and WSB.
    - alexpetralia 6y ago
      Not all short sellers entered their position at $5. Many have come in at $100 and $200, etc. They will not necessarily not face the same short squeeze, but you're right they will probably still face the same borrow rates.
    - dragontamer 6y ago
      > They're still short roughly 100% of float. My overall point is that looking at the float is almost meaningless. Days to cover is arguably a more important figure (how easy is it to buy / sell GME? Since GME has such high volume in the past few days, its not really hard at all to find shares right now). You're right that the borrow-rate is also important to look at, but the short-float doesn't necessarily correlate with the borrow rate. You absolutely can't state facts like: > With this much short interest the borrow fee must be close to 100% APY. That's... just not how this works. EDIT: I looked up some public information: https://iborrowdesk.com/report/GME https://iborrowdesk.com/report/GME Seems to be 35%/year right now for GME shorts. If a GME short borrowed at $300, the stock price needs to fall to $200 by 2022 before they lose money. Do you really think GME can be propped up above $200 for a whole year? If they short sold months ago at lower borrow costs, they've basically would be in the position to wait it out longer than most bulls who are just messing with 3-month call options. > There's really no good way to wait it out for the shorties. Selling ITM calls (and maybe hedging slightly by buying an OTM call) seems to be the obvious bear trade that would be doing well under these circumstances. The theta on these call options are ridiculous. That brings theta over to your side.
Alupis 6y ago
Let me get this straight: 1) RH automatically makes every account a Margin account. 2) RH doesn't make this clear to their customers (buried in the TOS where they know newbie investors won't look, which makes up probably 99% of their customers). 3) RH allows people to initiate money transfers into RH, but also allows purchasing of stock immediately (on Margin) without informing the customer. 4) Investors believe they've outright purchased stock, because RH app shows the stock in their account, and money now gone (even though it's still pending the transfer). 5) RH then "margin calls" all of the people who had money transfers pending at the time of GME purchase. Ya... that seems pretty predatory in my opinion. Downright shady business... How can this not be construed as market manipulation, even if RH had to do this to save themselves yesterday. RH got themselves into this position in the first place...
- j2bax 6y ago
  It's just a minor UI discrepancy. Take it easy man!
  - manquer 6y ago
    One Robinhood user committed suicide because of a UX design and called it out in their suicide note. UX in financial application is tough , I wouldn't want ever to be handling ux for such applications
    - j2bax 6y ago
      Yeah no kidding. Hopefully people caught my sarcasm. This is an area where UX design is absolutely crucial.
- deleted 6y ago
  [deleted]
- kbar13 6y ago
  the instant availability of funds likely was a growth decision for better on boarding UX. imagine getting a referral from a friend who said hey get in on this stock, installing the app, and having to wait 2-5 business days for ACH to clear. guessing during normal operation this is an acceptable risk for robinhood and users, obviously this isn’t gonna fly when things go wild like the last couple of weeks
hinkley 6y ago
I hope some sociology students are documenting the hell out of this whole thing. There's so much juicy stuff going on. For a moment yesterday, I got sucked into this whole thing. I bought a few shares just to see if my brokerage still would allow it, then sold them a few % higher because it was bouncing all over. Then I remembered that I'd been asking myself how close the conversational tone in /r/wallstreetbets was to mob mentality/mass hallucination and thinking, "I'm no expert, but this doesn't look good." When the RH stuff started yesterday, I started thinking of another failure mode: horizontal aggression. If the incumbent can pit their opponents against each other, they can grind each other down while the incumbent sits back and waits for the blood to dry. It's hard not to see some of that going on too.
- ZephyrBlu 6y ago
  > Then I remembered that I'd been asking myself how close the conversational tone in /r/wallstreetbets was to mob mentality/mass hallucination and thinking, "I'm no expert, but this doesn't look good." At this point it really does look like a cult. People who don't seem to understand what they're getting themselves into seem to have bought in: https://www.reddit.com/r/wallstreetbets/comments/l80pae/dont_listen_to_lies_shorts_havent_even_begun/glavgcs/ https://www.reddit.com/r/wallstreetbets/comments/l80pae/dont...
deleted 6y ago
[deleted]
Jackson12 6y ago
Honestly this is a terrible look for Fintech. There's no conspiracy here. The legacy brokers who are way more tied to "Wall Street" have handled this a lot a better. These problems are being caused by incompetence at Robinhood. Someone needs to be held accountable.
ur-whale 6y ago
"Don't let the customer see how the sausage is made lest they rush to puke in the back alley" is rule #1 for very many businesses.
ineedasername 6y ago
This is all fundamentally a Thomas Hobbes scenario of the masses deciding the "state of nature" no longer suits them and they want to work together Basically Hobbes said "You might be strong, but someone will always be stronger. It makes sense to band together & agree on a few rules (form a government) so that we're stronger than any individual and we (mostly) won't get punched in the face. Otherwise, life is 'nasty, brutish, and short'" As long as you're not an anarchist or anarcho-capitalist, this should be pretty fundamental & you agree with it, though sure different people draw the line in different places on how many rules should be made and what they should be about, which is fine, people can disagree on that stuff, that's mostly a different topic. In the GameStop situation, we have a whole bunch of people saying: Hey, the state of nature in the investment world is that we're all separate and weak and we get pwned by the big players. Let's band together so we're not as weak. This is, essentially, what the large institutions are already doing. They're already a collection of people acting together. Which is what makes this situation so infuriating: I don't particularly like all of the ways that capital markets function, but they should be roughly democratic (small "d")_in terms of access, no separate rules for different groups. A group of people that call themselves "Citibank" or whatever should not retain a privileged position above a looser group that calls themselves "WallStreetBets". Yes, I understand the concepts behind T+2 and clearing houses calling for more collateral etc: but that's the problem right there. If those mechanisms are resulting in a privileged position for some institutions then it's those mechanisms that are flawed & antithetical to a democratically accessible market I think people that are trying to justify this by explaining about calls for collateral and so on are completely missing the point: Those mechanisms are creating financial victims of the retail investors who lost their shirts when the price tanked because rule makers decided you were only allowed to sell GME, not buy it. It's like saying (in possibly too extreme of an example, but I want to illustrate the point) that a murderer killing a cop is justified because if they didn't shoot the cop then they would be executed in the electric chair. That's not how it's supposed to work. Large institutions don't get to (well, I guess they do) shut down part of the market just because they'll lose money if they don't. That's the risk! It's not always a great system, but if anyone knows the rules and goes in eyes-wide-open, it's these institutions. No excuses, no "but but but collateral, T+2" and so on. You don't get to take other people's money (well, again, I guess you do) just because if you don't do it you'll lose a bunch of your own. This is insane.
nix0n 6y ago
Is it possible to buy stocks via a debit card transaction instead of waiting for ACH?
chishaku 6y ago
Will Robinhood survive the backlash?
jennyyang 6y ago
"There is no war in Ba Sing Se." It's pretty easy for RH to just dismiss this without doing any research but it's also pretty easy to figure out. Have RH sit down with people who say they were affected, and go through the transaction log. Honestly I wouldn't be surprised if there were a bug that caused unintentional selling like this, because it sounds like RH was acting on the boundaries of their abilities. This was an edge case that their systems weren't designed to handle, and they didn't have a good way to work around it besides shutting off trading.
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Bellamy 6y ago
How else have this feeling that this game called stock market is set up for the bigger players to win?
435243543543 6y ago
RH had a major outage last year probably due to a leap year bug. The founders are your typical SV "move fast, break things, write bad software" types. There hasn't been a good reason to use them since 2019, when the competition eliminated commissions.
rnikander 6y ago
Fidelity has zero commission stock trades. Commission on option contracts seem low (~0.65 per contract). I seemed to be getting slightly better prices with Fidelity than Robinhood. Even before this latest fiasco, I wasn't seeing the point of continuing to use Robinhood. Is there any?
- jaflo 6y ago
  While it might seem trivial, Robinhood's UX is a major plus for many.
chillpenguin 6y ago
Robinhood is really sketch. They collect your information and sell it to companies like Citadel which use it to out-trade us little guys. Honestly everyone should seriously stop using it.
Animats 6y ago
Useful reading: "Unauthorized trades". [1] http://www.securitiesexpertwitness.info/unathorized_trading.pdf http://www.securitiesexpertwitness.info/unathorized_trading....
tech770 6y ago
Strictly speaking this has nothing to do with tech. As of late HN frontpage are all news that are there because of popularity instead of being techy.
- a254613e 6y ago
  Strictly speaking HN is not a website for tech news/submissions only. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- xdavidliu 6y ago
  The news seems to be saying that Robinhood, a popular app, is able and willing to sell users' shares without their permission. This is a surprising and unpleasant quality of Robinhood, an app. Sounds like tech to me?
black_puppydog 6y ago
So if I'm reading the comments here correctly then the basic reason people got into this situation is because there's no way to actually transfer money into their account quickly and RH had to design around this? That's some pretty impressively^Wembarrassingly primitive transfer mechanisms right there. :D
nmca 6y ago
Somewhat offtopic I guess, but a huge part of this seems to be two-day settlement. Why on earth does the US still have two day settlement? Surely we're at a point where we ought to be able to send money nearly instantly for ~free. In the UK we have the faster payments network, but hell crypto whatever take your pick. Surely 2 days is not the right amount of time?
- nmca 6y ago
  Robinhoof at least seem to agree lol: https://blog.robinhood.com/news/2021/2/2/its-time-for-real-time-settlement https://blog.robinhood.com/news/2021/2/2/its-time-for-real-t...
jtlienwis 6y ago
This is nothing new. I had a Shearson account back in the early 1980s and bought an oil company stock that was undervalued. One of those leveraged buyouts occurred when I was on a short vacation, and I did not find about the expiration of a buyout offer (no broker bothered to call me). Later I found out that Shearson had sold a lot of shares from their customer accounts to get the benefit of the buyout offer, and replaced them with lower priced shares after the offer expired. Later, Sandy W., the head of Shearson was hailed as a financial genius. This was nearly 40 years ago.

539 points by Alupis 6y ago

A margin call is a painful thing. Brokers have always reserved the right to sell shares to satisfy a loan. It's nothing new or unusual. If you want to gamble with the big dogs, well, this is the price you pay.

SmokyBourbon 6y ago
RTFA "But these investors told The Verge they didn’t have options in GameStop or AMC and hadn’t purchased the stocks on margin. They had purchased the shares outright, they said, and were planning to hold onto them."
- Armic 6y ago
  All robinhood accounts are by default margin accounts: https://robinhood.com/us/en/support/articles/robinhood-accounts/#:~:text=When%20you%20sign%20up%20for,deposit%20(up%20to%20%241%2C000) https://robinhood.com/us/en/support/articles/robinhood-accou....
  - rococode 6y ago
    Enormous difference between having a margin account and trading on margin. A margin account simply means you're allowed to trade on margin, not that you have actually done so.
    - aphextron 6y ago
      >Enormous difference between having a margin account and trading on margin. A margin account simply means you're allowed to trade on margin, not that you have actually done so. You're technically trading on margin when you open a new account and trade before your cash has cleared. This is most likely what happened.
      - cjcole 6y ago
        Ok, this makes sense, thanks. Still, this is a horrible message to show a user who is in that situation and who did not place a sell order themselves (message wording from the article): “We’ve received your order to sell [#] shares of [stock] at the best available price.” This is poor communication from RH. A preventable own goal.
    - thatguy0900 6y ago
      Yes, but money takes a few days to clear. If you open a robinhood account right now, deposit 1000$, then buy 500$ of stocks you will be buying on margin because the money hasn't cleared yet. How many people buying gme waited for the cash to actually be in their account before buying? In a strictly cash account you would be forced to wait, invisible margin accounts was one of robinhoods "innovations"
      - duckfang 6y ago
        Gotta love how that HFT'ers and similar can buy, finalize, sell, finalize in microseconds... But our trades take days. Gee, I wonder why there's so much hate?
        thatguy0900 6y ago
        Your trades don't take days, depositing cash into your account does. I imagine that applies to them as well, they just all already have 2 billion in there. They will also have margin accounts that gives them instant funding, like you do. Addmitedly I doubt they get their margin orders canceled very much when they buy risky things.
        bigtunacan 6y ago
        This is directed at thatguy0900, but we have reached the reply nested limit... What you and many Robinhood users probably are missing is that your trade actually does take days. Actually go read the Robinhood settlement period info. https://robinhood.com/us/en/support/articles/withdraw-money-from-robinhood/#:~:text=Following%20a%20sale%2C%20your%20funds,will%20appear%20as%20withdrawable%20cash https://robinhood.com/us/en/support/articles/withdraw-money-.... This is not explained clearly, but it is essentially 3 days to settle (T+2). So if you sell a position you don't have the cash to buy for three days. If you have traded on Robinhood you have probably noticed that you "immediately" have the buying power from the shares you sold. That's not your cash, because it hasn't settled. For three days that's margin and therefore you could get a margin call. The instant deposit is limited to $1000 (margin). But there were people saying they were forced to sell out of much larger dollar holdings. Those were probably people that sold out of one stock holding and then immediately bought into GameStop, AMC, etc... So they likely believed they were buying with cash, but they were in reality buying on margin. Just to be clear, I don't think this is a good thing at all. A brokerage should not be invisibly providing you with margin, it should be very clear to users that this is happening.
  - thinkmassive 6y ago
    Hopefully this becomes more widely understood. It's definitely not obvious enough for their target market to understand, and it's not a stretch to say they try to obscure it.
  - jMyles 6y ago
    You're saying that you read this to mean that all trades, even done in what otherwise appear to be cash terms, can be margin called? If that's the actual intent of this document, it is substantially misleading.
    - Armic 6y ago
      Not quite - it seems like when you deposit cash, some up to all of it is made available immediately for trading if you're on the default account settings. My guess is that most users believe that when they buy stocks with this money, they think it is cash when it is in fact margin, and these are the people who got margin called.
- robjan 6y ago
  They specify "options in GameStop or AMC" but if you have margin on any instruments or options which are at risk of being assigned you will also get margin called.
- UShouldBWorking 6y ago
  I always thought Reddit started as a response to people replying without reading the article. It was I, I "read it". Of course now if for children to complain about their parents and boyfriends, but it used to be great. I would love a site like, I read it.com where you would be encouraged to write a short question about the article that needed to be anawered before being able to comment.
- deleted 6y ago
  [deleted]

Hnsuz 6y ago

Lies lies.. Robin Hood bye bye

sneak 6y ago

Linked fron the article is another one saying Apple and Google are mass deleting negative reviews of the Robinhood app in their stores: https://www.theverge.com/2021/1/28/22255245/google-deleting-bad-robinhood-reviews-play-store https://www.theverge.com/2021/1/28/22255245/google-deleting-... It's sort of crazy how all of these different things are eroding trust in all of these systems simultaneously. Some can trade, but not others, happy customer reviews are legitimate, angry customer reviews are not. This is a weird time. I'm glad that this sort of normally-invisible manipulation is being brought to light, however. People shouldn't be trusting these rigged systems.

kbar13 6y ago
mass deletion of negative reviews is automatic and has been done before if it looks like spam / brigading (which this probably looks like). i think it's a reasonable explanation. https://android-developers.googleblog.com/2018/12/in-reviews-we-trust-making-google-play.html https://android-developers.googleblog.com/2018/12/in-reviews... https://9to5google.com/2018/12/17/play-store-anti-spam-reviews/ https://9to5google.com/2018/12/17/play-store-anti-spam-revie...
- sneak 6y ago
  I don't think the negative reviews of Robinhood in the last day qualify as "spam" under any definition with which I am familiar. I also see nothing wrong with brigading, if you are an actual legitimate user of an app and are unhappy with it. Businesses solicit positive reviews all the time.
  - tptacek 6y ago
    Every notable online review venue works to resist canvassed reviews, which break the whole concept of online reviews.
    - sokoloff 6y ago
      Almost every free iPhone app I install has a "enjoying our app? Rate it in the app store!" interstitial at some point in the user journey. Is that "working to resist canvassed reviews"? (I agree they should; I don't agree they are resisting it.)

motohagiography 6y ago

The last year has illustrated a new kind of "platform risk," where I think we always tried to diversify exposure to them in architecture, security, and supply chains, but it's as though it has finally trickled down to individuals.

TameAntelope 6y ago
The new risk that's I'm seeing exposed here is populist outrage can tank your business even if you've done nothing wrong, but operate in a space that isn't intuitive or won't allow you to act intuitively. Finance is complicated, and often unintuitive and yes, the rules here tend to favor the large movers (at least larger than retail investors). How do you operate a business for retail investors in an environment where the rules will force you to screw over your retail customers (one could argue the "real" customers are the consumers of the retail investor's trade information but let's set that aside for a second) once in awhile?
- whatshisface 6y ago
  You explain the rules to them as clearly as possible when they join, and put in alarm bells to sound when your margin account is getting low. Robinhood could have had a ticker on their homepage showing how close they were to being forced to stop trading, for example.
  - deleted 6y ago
    [deleted]
- alexpetralia 6y ago
  Yes, Dominion Voting Systems got hit by this as well.
  - 435243543543 6y ago
    Do you remember the hatred and conspiracy theories directed at Diebold during the Bush years? Why does Dominion suddenly deserve a pass?

xapata 6y ago

Isn't that a standard practice for brokerages -- loan out the shares that your clients are holding? I remember Ally Invest sent me some notice that I'd be receiving a cut of the profits when they loan out my shares.

llampx 6y ago
Its not standard in that you can choose not to lend out the shares, and for the GME situation, you expressly DON'T want the shares to be lent out to the shorters.
- xapata 6y ago
  Yeah, but you might have to explicitly opt out. It's probably in the fine print of your terms of service.
secondcoming 6y ago
IANAL but I think they can only do that if you've bought those shares on margin. They _may_ still be able to loan out shares you've 100% paid for unless you explicitly tell them not to. Denying RH the ability to loan out shares was a tactic discussed on WSB
- bigtunacan 6y ago
  They can loan your shares out whether they are bought with cash or margin. Some brokerages allow you to opt of loaning your shares to short sellers. Robinhood pays you part of the interest made if they lend your shares out, but as far as I know there is no way to opt-out of share lending on Robinhood.

ibraheemdev 6y ago

I'm confused. Why is everyone getting mad at Robinhood? Wasn't it the market makers who stopped them from trading GME? And doesn't Robinhood have the right to sell margin stocks bought on margin?

NoOneNew 6y ago
They didnt allow people to buy GME. Only sell. Forced one sided positioning. It's rather frowned upon. That's where a big portion of hate comes from.
- bpodgursky 6y ago
  Ok, but if they had banned selling and there was a large price drop anyway (forcing investors to eat a loss, unable to sell), they would have been catastrophically screwed legally.
  - kinkrtyavimoodh 6y ago
    Robinhood doing anything unilaterally about this sounds and feels extremely sketchy and screams illegal to me (if it isn't it should be). It's one thing if the SEC stops all GME trade coz that would be fair across the board. But Robinhood effectively being able to block trades for retail while institutional investors do whatever screams market manipulation.
    - bpodgursky 6y ago
      Yeah, I'm not at all defending blocking buys, just saying that blocking both buys AND sells was completely out of the question.
- sidibe 6y ago
  Did they block people from buying or did they block people from opening new positions?
  - 6y ago

crazynick4 6y ago

Rh was probably losing money on widening spreads. If a client buys and holds and volatility increases and spreads widen, when the client closes out the trade, Rh will eat the difference in the spreads. If a client opens a short position and spreads widen, RH will make a net gain when the client closes out. I think this is why they halted people from buying and probably why they closed out the trades for clients, I would guess it was during periods of lower volatility. I don't know how legal it is for them to do that but when volatility is high like this that's when a broker like RH can really go under.

amluto 6y ago
I am pretty sure Rh doesn’t take positions the way you’re describing.
- crazynick4 6y ago
  I am pretty sure they're a broker who hedges their positions with a counterparty. Otherwise, they would be taking on the risk themselves? But I think my math was backwards on the closing transaction. If the spreads widen they would technically end up net positive.
  - tedunangst 6y ago
    They're a broker, not a market maker. They don't have positions.

ibraheemdev 6y ago

In an interview with the Robinhood CEO, the host mentioned that Robinhood is owned by a hedgefund which has a short position in GME. Vlad Tenev did not deny this claim, but I could not find any proof. Is this true?

enraged_camel 6y ago

Their "democratize finance" slogan serves the same purpose as, and means as much as, Google's "do no evil" slogan: it's a cynical ploy to trick naive rubes into joining and/or using the services of the company.

awefasdfasdf 6y ago
Right. Instead of behavioural surplus generated through search, it is generated through stock activity.
acct776 6y ago
From the makers of "Julian Assange is an Intelligence Agency", it's "Citizens Talking is Illegal"!

gruez 6y ago

If you read the other threads it's clear what's happening is that robinhood's product isn't designed to cope with high volatility[1]. Is this a flaw in their product? Yes. But then again, they are a discount brokerage for a reason. It's not any different than any other consumer product that shits the bed during 99.9 percentile events. [1] Specifically, they're required by the DTCC to put up a deposit on every trade their users make. During periods of low volatility this is fine because they can come up with the money, but when volatility goes up so do the deposit requirements, which can cause them to become insolvent. This is further compounded by the fact that their product invisibly hands out margin, eg. "instant" deposits of $1000, or giving you the money before it settles (2 days later).

nightski 6y ago
Obviously the situation needs to be investigated. But I think there is a real possibility they did nothing wrong here. Despite this, the main problem I see with Robinhood is that with it's gamified UI, ease of access, etc... these 99.9 percentile events are mainly what it is designed for. It's encouraging people to pick up the "hot stock" on social media on a whim. While there may not be legal repercussions for this, it's fundamentally incapable of it's core purpose. If you are new to RH you might not realize that the platform has outages all the time and it costs its users a lot of money. It is straight up dangerous to trade on this platform for the purpose which the UI glorifies. Index funds have done a lot more to democratize finance than RH in my personal view. While commission free sounds fantastic, it comes with some very large hidden costs.
- newacct583 6y ago
  That I think is the real scandal here. Robinhood was built to market to (and in some sense coevolve with) the wallstreetbets culture of crowd-sourced market manipulation. And that was a great growth hack. Until it grew enough that the crowd source market manipulation was... actually manipulating significant markets. GME has been ballooned to the tune of something like $13B over the past few days, based almost entirely on a flawed understanding of short trading. And absent any discussion about Robinhood in particular, I think we need to be asking whether or not this crowd of people who didn't quite understand shorts were fed those lies at the direction of users who did. Someone has (or will have) made a ton of money here at the expense of the late-arriving GME traders. It seems like we should find out who.

cwkoss 6y ago

They don't want to democratize finance. They want to make naive retail investors feel excess confidence so they can sell more of their dumb order flow. Their interface is horrible for finding any information you'd actually want to use to make an investment decision. They are good for easy no-fee trading, but you constantly have to avoid UI dark patterns pointing you towards sub-optimal decisions.

FireBeyond 6y ago
Right. You can say its hyperbole or "locker room talk" but in situations like this, it's very clear that a large part of the financial sector is _absolutely sincere_ when they look at retail investors as what they literally call "dumb money", "dumb flow".
- kasey_junk 6y ago
  “Dumb money” is a particularly poor bit of jargon but as it’s used in finance it doesn’t really mean that the finance sector thinks a person is a rube or stupid. It really means you think an order doesn’t imply any directionality in the order book. Most orders don’t! Most orders happen because of things outside of the markets (I’ve retired, I’m rebalancing my portfolio, my kid is going to school, I got paid so I’m buying into my retirement fund). Those orders are not indicators that the market is going to move. This is in contrast to a hedge fund unrolling their position. That act will impact the market. So for instance while Melvin was taking a bath closing out their shorts they were “smart”. But my index fund sell that made me money was “dumb”.
bondarchuk 6y ago
Their interface is just laughably, inexcusably bad. The stock price charts don't even have labels on the y-axis! No really, check it out! https://blog.robinhood.com/news/2017/10/31/robinhood-now-on-web https://blog.robinhood.com/news/2017/10/31/robinhood-now-on-...

deleted 6y ago

[deleted]

tombert 6y ago

Honest question; if I had a magic wand and tomorrow banned all short sales, what would be the negative side-effects? From a lay-person's perspective, short selling seems pretty horrible, but very often I find that there are variables to this that I do not fully understand, and I know some people here are more financially literate than I am.

fairity 6y ago
Shorting stocks, in general, is a beneficial action for the market because it helps prevent shares from becoming overvalued. I think this situation has actually highlighted the fact that shorting stocks needs to be easier. Currently, it's too easy to purposefully trigger a short squeeze. With the goal of efficient prices in mind, short squeezes are bad, and enabling shorting is good.
- jMyles 6y ago
  > With the goal of efficient prices in mind, short squeezes are bad, and enabling shorting is good. Yeah? Aren't they equally useful as market messages? If I am willing to tie up some money holding an instrument afloat at overvalued prices longer than you are willing to remain in your short position, haven't we ultimately, together in our conflict, created a useful message about the underlying asset? Maybe I think Company G is worth $20 but not $40, but if you are selling it short at $5, and I'm prepared to be illiquid for a while, don't I send the correct market signal by squeezing you out of your short?
  - Hamuko 6y ago
    >If I am willing to tie up some money holding an instrument afloat at overvalued prices longer than you are willing to remain in your short position, haven't we ultimately, together in our conflict, created a useful message about the underlying asset? I'd say it really only sends a message about your assets.
  - fairity 6y ago
    > Maybe I think Company G is worth $20 but not $40, but if you are selling it short at $5, and I'm prepared to be illiquid for a while, don't I send the correct market signal by squeezing you out of your short? In this example, you'd be sending the "correct market signal" if you sold your shares as soon as it appreciated to $20. Anything more, and you're moving the market away from its efficient price. The problem with the squeeze is that certain participants are put into a position where they're being forced to buy. And, that creates an incentive for other shareholders to hold onto their shares well past their fair value. Holding onto shares well past their fair value is antithetical to efficient price discovery.

fairity 6y ago

RH and all brokerages should be held accountable for the losses their clients sustained due to these trade restrictions. But, I don't RH deserves to be singled out & vilified when many other brokerages ran into the exact same problem as RH and solved it with the same trade restrictions. Overall, I've been happy with the effect RH has had on retail investing. Primarily, other brokerages that used to charge me $5-8 commission per trade have now been forced to substantially lower their fees.

kleer001 6y ago
> all brokerages should be held accountable for the losses their clients sustained due to these trade restrictions. That's not how a market works in two distinct ways. 1 - buyer beware 2 - businesses cannot be not responsible for restrictions placed on them, see 1

nimos 6y ago

Saying you can only sell an asset but not buy is clearly going affect the price - regardless of the reason they did it. If a broker can't do their job they should be forced to shut down completely until they can. Its pretty clear they don't have the liquidity/assets to handle their customers transactions. Letting brokers manipulate asset prices so they can avoid shutting down is a dangerous precedence to set. Really hope IB/RH and everyone else involved gets blown up by this.

valuearb 6y ago
They didn’t manipulate squat, they were fighting to save their life. If they were manipulating GME price they would have tried to pump it higher because each time it crashed their DTCC margin requirements went up. Driving GME price down before all these trades clear likely kills Robinhood.
- nimos 6y ago
  You really think stopping all buying and only allowing selling doesn't manipulate the price? I fully agree they were fighting to save their life. They can't handle their customer trades they should shut down until they can. Really they should have a system to only allow buying with settled funds. I'd be fine with that.
  - valuearb 6y ago
    Robinhood would have no customers if it implemented that system. And Robinhoods actions affect on GMEs price was likely small. The investing world is far larger than Robinhood, and Citadels own statistics show retail investors have been net sellers of GME since Monday. And again, every time that GMEs price crashed, Robinhood’s collateral requirements increased. Why would they try to kill themselves? Saying they manipulated GME trading is like saying one pirhana quitting the school is manipulating the feeding frenzy.
    - bordercases 6y ago
      What's so important with Robinhood making it out alive?

jariel 6y ago

Why does the media even remotely consider repeating the companies 'marketing mission' BS when reporting on them? CNN spent years with these fluffy articles basically promoting Robin Hood and their 'Occupy Wall St.' rubbish. "Democratize Finance" is PR, not reality, it shouldn't be contemplated as part of the story.

99_00 6y ago

The Gamestop incident is a very counter to the Robinhood brand so very damaging to the company.. Communication was not handled well. A good lesson for everyone. People shouldn't be trying to figure out what's going on by digging deep in forums and social media. CEO should have been front and centre the day it happened. Hindsight is 20/20. A lesson for all. Doesn't help that opportunistic politicians jump on it to raise their profile.

tgb 6y ago
I'll make a little prediction: the negative press Robinhood is receiving will be out-weighed by the fact that so many people are getting interested in stocks due to this. I think they'll be better off despite this debacle in a month. (Though this doesn't include the possibility that they broke a regulation and lose a court case or that congress is spurned into action and regulates them out of business somehow.)
- bob1029 6y ago
  This is my take as well. Robinhood getting raked over the coals is a bi-annual tradition which has been practiced for several years now. It's not like they really had a choice or were fundamentally at fault for anything in this case. Contrast with prior incidents which were wholly related to bad engineering practices. Getting a margin call from the DTCC isn't an optional inconvenience. Perhaps Robinhood could have had more buffer available to deal with this scenario, and that may wind up being the regulatory outcome of all of this.
- 99_00 6y ago
  Do they have any competition worth mentioning? If not, then I think you are right. I don't live in the US, but my countries Robinhood like trading app shot up to #1 in our app store.
asah 6y ago
I emptied my account, just like I did after the Wells scandals (plural). Years from now, maybe a new exec team, and I'll consider returning (though it's been many years for Wells, and I have no reason to reconsider...)

Areading314 6y ago

If its free, you're not a customer. You're the product.

ruph123 6y ago

What I don’t get is: Now the stock is clearly overvalued. Doesn’t this make shorting it now so much more attractive?

malandrew 6y ago
Technically yes, but as they say, the market can stay irrational longer than you can stay solvent. Anyone considering shorts should go spend some time in r/wallstreetbets and figure out if that is a group they'd want to play chicken against.
- alexpetralia 6y ago
  It feels like standing in front of semi-trailer hurtling towards the edge of a cliff.
aphextron 6y ago
>What I don’t get is: Now the stock is clearly overvalued. Doesn’t this make shorting it now so much more attractive? It sure does. But good luck timing it. The whole point of a short squeeze is that the market can stay irrational for longer than you can stay solvent.
hntrader 6y ago
Yeah, it's more attractive to short it compared to 2 weeks ago, but consider: (1) Price is determined by supply and demand, not one person's evaluation/perception of value. DOGEUSD was useless 3 months ago and is still useless (even more useless than GME), but shorting it then would've blown you up because of demand exceeding supply. The volume of the incoming retail flow is hard to predict, if enough retail people ascribe aesthetic value to it, the price will go up. (2) Borrow is extremely expensive because of high demand for the relatively small float, so you need very significant edge to justify the high borrow costs.

hartator 6y ago

I don't get blocking buy on certain stocks for "liquidity requirements". When buying on Robinhood, I need to first wire them my money. Can't they use that cash to fund my own buys?

bob1029 6y ago
The entire thing is best viewed as a super-short-term credit basis between all participants. At no point is the financial system in a state of absolute settlement. It is continual flux. Best you can get is scoped, relative settlement with assumptions. DTCC is the most fundamental source of truth, but this is after the fact and not very useful when one needs to make an immediate decision.
- alfalfasprout 6y ago
  Yeah, but settlement happens EOD not on each transaction (as the orders fill). As long as we're talking about trades not on margin then Robinhood should already have the requisite assets for clearing readily available. Margin is a totally different story.
marcinzm 6y ago
Doesn't Robinhood allow you to buy stocks before the transfer finishes? So you can buy right away rather than waiting 3+ days. They call it Robinhood Instant.
bilbo0s 6y ago
Can't they use that cash to fund my own buys Is this how people really think the markets work? If it is, it's no wonder that a lot of retail investors will be taken to the cleaners. What you just suggested is so illegal that no professional trader would have had the nerve to even mention it. I think it might be helpful if RH had some kind of trading tutorial that maybe went through the mechanics and rules so that people joining would have a better understanding. What I've been reading the last few days betrays a massive lack of understanding about how a lot of this works.
- 6y ago

Triv888 6y ago

Next up: Google denies deleting thousands of 1-star reviews for the RH app in the Play Store...

kvetching 6y ago

There is plenty of screenshots floating around of people getting their shares sold. The peak at 9:30ish which caused them to stop selling the stock had some very interesting screenshots. Some people had their shares automatically sell because they had them set to sell at a high price, and somehow the market had demand at that high price.

valuearb 6y ago
How do we know these customers didn’t sell their own shares?
- Dirlewanger 6y ago
  What's more likely: multiple Robinhood customers all colluded in a very short time to make it look like RH sold their shares without their consent, or RH actually did this? Occam's razor...
  - valuearb 6y ago
    What’s more likely. Customers regretting a bad trade use the hoary old claim a “glitch” to try to get broker to reverse it, post about it to try the ol social media shaming to ratchet up the pressure, and dozens of copycats do same? Or Robinhood decided to start driving GME price down with forced client sales to make the DTCC increase their collateral requirements and force them into bankruptcy so they can end this madness? What does Occam say?
    - Dirlewanger 6y ago
      Arguing in bad faith for retail investors isn't going to help. And if the latter is indeed true, it's textbook market manipulation by RH to save their own ass, and I hope RH is punished to the fullest extent of the law.
      - valuearb 6y ago
        Most retail investors are just like WSB members, clueless newbs who know nothing about how the market works and it doesn’t take many to try the dumbest Hail Marys possible. Occams razor tells you it’s not market manipulation because Robinhood wouldn’t last long enough for the law to do anything. Do you really not understand how margin collateral requirements work, how close to bankruptcy this trade has pushed Robinhood, and how dangerous that is even for “winning” GME traders?

TheRealDunkirk 6y ago

> "And though traders may be outraged by the surprise, Robinhood’s terms of service grant it permission to close a trader’s position under a number of circumstances." The terms of service for EVERY service we use are entirely legal jargon for "we can do whatever the f*k we want to do with any data on our service, and you have no legal recourse." No matter what the company says about "privacy" or any other rights you think you have, buried in there somewhere is a clause that says that no matter what happens, you can't sue. What do you expect when you've abdicated the right to sue the company for something you think is illegal or injurious? It's supposed to be the bastion of last resort, to keep everyone honest. When the safety net of the legal system is gone (e.g., forced arbitration) -- or only used for one side, there's nothing to restrain these humungous companies which are running the world now. We're a long way past needing a legal reset on "terms of service."

kahrl 6y ago
Terms of Service do not trump federal law and SEC regulations.
- NeutronStar 6y ago
  Yep. Just because it's written that they have a right to kill you and take your first unborn child doesn't mean they legally have a right to it.
nicbou 6y ago
In the EU, those would not be allowed. This is also prohibited by German laws, particularly with regards to apartment and employment contracts. > Under EU law, standard contract terms used by traders have to be fair. This doesn't change if they're called "terms and conditions" or are part of a detailed contract that you actually have to sign. The contract is not allowed to create an imbalance between your rights and obligations as a consumer and the rights and obligations of sellers and suppliers. This includes... > Terms which restrict how and where consumers can take legal action and obliging them to provide proof which is the responsibility of the other party to the contract. https://europa.eu/youreurope/citizens/consumers/unfair-treatment/unfair-contract-terms/index_en.htm https://europa.eu/youreurope/citizens/consumers/unfair-treat...

cmckn 6y ago

As I understand it, Robinhood had a cash problem because of the various collaterals required for high-risk securities during the clearing process. When each share traded needs a high amount of collateral (1:1, even), and you have a high number of those trades happening, you might not have the cash to pony up. I think this is a downside to their business model (and probably moreso their scale and age). There are many upsides to their business model. The interview I saw with their CEO on CNN was laughable. I would have a lot more respect for the company if the CEO could get in the weeds a bit more. The reality is that what Robinhood and most retail brokers provide is a convenient illusion, hiding the complexity of trading securities. Why can't they say that? Edit: I almost certainly don't know what I'm talking about; but hey, this has been a fun story to follow, eh?

wavefunction 6y ago
Robinhood wasn't fulfilling orders though as far as I understand it? More like lead generation for Citadel, their market-maker? That seems like an issue for Citadel to be concerned with rather than Robinhood.
- astrange 6y ago
  Robinhood is their own clearing broker. They send some market orders through people like Citadel Securities because it improves the price, but not all of them. (Note, RH was fined by the SEC for possibly not improving the price as much as they could. But they were not giving you a bad price, it was still better than the NBBO price!)
fsociety 6y ago
I think the PR strategies of these companies is something along the lines of, say the vague things which have no risk of backlash as opposed to explaining what happened which has higher risk of backlash.
viscanti 6y ago
Apple trades an order of magnitude more per day than any of the stocks that were halted. Somehow the clearinghouses have no trouble with the Apple volume.

nabaraz 6y ago

Here is my quick math: Tradeable float: 47M Top 3 holders: Fidelity, Blackrock, and Vanguard: 27M Cohen: 9M Half of Robinhood users own at least one share: 5M (conservative) That leaves us with 6M shares, and with a short interest of 71M held short and ETFs like XRT buying them, it is likely there aren't enough shares. The only way to resolve this is i) Gamestop issue more shares/shelf-offering. ii) shorts go bankrupt and/or clearinghouse/brokers take the bill.

dragontamer 6y ago
Or you just borrow shares from Blackrock to sell to everyone else who wants shares. Aka: short selling. Yes, short-selling creates "virtual new shares". Its only an issue if the company gets acquired. The name of the game is to buy low sell high. Short selling inverts it by selling high and then buying low at a later date.
- arcticbull 6y ago
  They're still short roughly 100% of float. That's almost 23 billion dollars. With this much short interest the borrow fee must be close to 100% APY [edit: 35% APY]. There's really no good way to wait it out for the shorties. They're getting squeezed by the borrow rates, margin, and WSB.
  - alexpetralia 6y ago
    Not all short sellers entered their position at $5. Many have come in at $100 and $200, etc. They will not necessarily not face the same short squeeze, but you're right they will probably still face the same borrow rates.
  - dragontamer 6y ago
    > They're still short roughly 100% of float. My overall point is that looking at the float is almost meaningless. Days to cover is arguably a more important figure (how easy is it to buy / sell GME? Since GME has such high volume in the past few days, its not really hard at all to find shares right now). You're right that the borrow-rate is also important to look at, but the short-float doesn't necessarily correlate with the borrow rate. You absolutely can't state facts like: > With this much short interest the borrow fee must be close to 100% APY. That's... just not how this works. EDIT: I looked up some public information: https://iborrowdesk.com/report/GME https://iborrowdesk.com/report/GME Seems to be 35%/year right now for GME shorts. If a GME short borrowed at $300, the stock price needs to fall to $200 by 2022 before they lose money. Do you really think GME can be propped up above $200 for a whole year? If they short sold months ago at lower borrow costs, they've basically would be in the position to wait it out longer than most bulls who are just messing with 3-month call options. > There's really no good way to wait it out for the shorties. Selling ITM calls (and maybe hedging slightly by buying an OTM call) seems to be the obvious bear trade that would be doing well under these circumstances. The theta on these call options are ridiculous. That brings theta over to your side.

Alupis 6y ago

Let me get this straight: 1) RH automatically makes every account a Margin account. 2) RH doesn't make this clear to their customers (buried in the TOS where they know newbie investors won't look, which makes up probably 99% of their customers). 3) RH allows people to initiate money transfers into RH, but also allows purchasing of stock immediately (on Margin) without informing the customer. 4) Investors believe they've outright purchased stock, because RH app shows the stock in their account, and money now gone (even though it's still pending the transfer). 5) RH then "margin calls" all of the people who had money transfers pending at the time of GME purchase. Ya... that seems pretty predatory in my opinion. Downright shady business... How can this not be construed as market manipulation, even if RH had to do this to save themselves yesterday. RH got themselves into this position in the first place...

j2bax 6y ago
It's just a minor UI discrepancy. Take it easy man!
- manquer 6y ago
  One Robinhood user committed suicide because of a UX design and called it out in their suicide note. UX in financial application is tough , I wouldn't want ever to be handling ux for such applications
  - j2bax 6y ago
    Yeah no kidding. Hopefully people caught my sarcasm. This is an area where UX design is absolutely crucial.
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kbar13 6y ago
the instant availability of funds likely was a growth decision for better on boarding UX. imagine getting a referral from a friend who said hey get in on this stock, installing the app, and having to wait 2-5 business days for ACH to clear. guessing during normal operation this is an acceptable risk for robinhood and users, obviously this isn’t gonna fly when things go wild like the last couple of weeks

hinkley 6y ago

I hope some sociology students are documenting the hell out of this whole thing. There's so much juicy stuff going on. For a moment yesterday, I got sucked into this whole thing. I bought a few shares just to see if my brokerage still would allow it, then sold them a few % higher because it was bouncing all over. Then I remembered that I'd been asking myself how close the conversational tone in /r/wallstreetbets was to mob mentality/mass hallucination and thinking, "I'm no expert, but this doesn't look good." When the RH stuff started yesterday, I started thinking of another failure mode: horizontal aggression. If the incumbent can pit their opponents against each other, they can grind each other down while the incumbent sits back and waits for the blood to dry. It's hard not to see some of that going on too.

ZephyrBlu 6y ago
> Then I remembered that I'd been asking myself how close the conversational tone in /r/wallstreetbets was to mob mentality/mass hallucination and thinking, "I'm no expert, but this doesn't look good." At this point it really does look like a cult. People who don't seem to understand what they're getting themselves into seem to have bought in: https://www.reddit.com/r/wallstreetbets/comments/l80pae/dont_listen_to_lies_shorts_havent_even_begun/glavgcs/ https://www.reddit.com/r/wallstreetbets/comments/l80pae/dont...

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Jackson12 6y ago

Honestly this is a terrible look for Fintech. There's no conspiracy here. The legacy brokers who are way more tied to "Wall Street" have handled this a lot a better. These problems are being caused by incompetence at Robinhood. Someone needs to be held accountable.

ur-whale 6y ago

"Don't let the customer see how the sausage is made lest they rush to puke in the back alley" is rule #1 for very many businesses.

ineedasername 6y ago

This is all fundamentally a Thomas Hobbes scenario of the masses deciding the "state of nature" no longer suits them and they want to work together Basically Hobbes said "You might be strong, but someone will always be stronger. It makes sense to band together & agree on a few rules (form a government) so that we're stronger than any individual and we (mostly) won't get punched in the face. Otherwise, life is 'nasty, brutish, and short'" As long as you're not an anarchist or anarcho-capitalist, this should be pretty fundamental & you agree with it, though sure different people draw the line in different places on how many rules should be made and what they should be about, which is fine, people can disagree on that stuff, that's mostly a different topic. In the GameStop situation, we have a whole bunch of people saying: Hey, the state of nature in the investment world is that we're all separate and weak and we get pwned by the big players. Let's band together so we're not as weak. This is, essentially, what the large institutions are already doing. They're already a collection of people acting together. Which is what makes this situation so infuriating: I don't particularly like all of the ways that capital markets function, but they should be roughly democratic (small "d")_in terms of access, no separate rules for different groups. A group of people that call themselves "Citibank" or whatever should not retain a privileged position above a looser group that calls themselves "WallStreetBets". Yes, I understand the concepts behind T+2 and clearing houses calling for more collateral etc: but that's the problem right there. If those mechanisms are resulting in a privileged position for some institutions then it's those mechanisms that are flawed & antithetical to a democratically accessible market I think people that are trying to justify this by explaining about calls for collateral and so on are completely missing the point: Those mechanisms are creating financial victims of the retail investors who lost their shirts when the price tanked because rule makers decided you were only allowed to sell GME, not buy it. It's like saying (in possibly too extreme of an example, but I want to illustrate the point) that a murderer killing a cop is justified because if they didn't shoot the cop then they would be executed in the electric chair. That's not how it's supposed to work. Large institutions don't get to (well, I guess they do) shut down part of the market just because they'll lose money if they don't. That's the risk! It's not always a great system, but if anyone knows the rules and goes in eyes-wide-open, it's these institutions. No excuses, no "but but but collateral, T+2" and so on. You don't get to take other people's money (well, again, I guess you do) just because if you don't do it you'll lose a bunch of your own. This is insane.

nix0n 6y ago

Is it possible to buy stocks via a debit card transaction instead of waiting for ACH?

chishaku 6y ago

Will Robinhood survive the backlash?

jennyyang 6y ago

"There is no war in Ba Sing Se." It's pretty easy for RH to just dismiss this without doing any research but it's also pretty easy to figure out. Have RH sit down with people who say they were affected, and go through the transaction log. Honestly I wouldn't be surprised if there were a bug that caused unintentional selling like this, because it sounds like RH was acting on the boundaries of their abilities. This was an edge case that their systems weren't designed to handle, and they didn't have a good way to work around it besides shutting off trading.

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Bellamy 6y ago

How else have this feeling that this game called stock market is set up for the bigger players to win?

435243543543 6y ago

RH had a major outage last year probably due to a leap year bug. The founders are your typical SV "move fast, break things, write bad software" types. There hasn't been a good reason to use them since 2019, when the competition eliminated commissions.

rnikander 6y ago

Fidelity has zero commission stock trades. Commission on option contracts seem low (~0.65 per contract). I seemed to be getting slightly better prices with Fidelity than Robinhood. Even before this latest fiasco, I wasn't seeing the point of continuing to use Robinhood. Is there any?

jaflo 6y ago
While it might seem trivial, Robinhood's UX is a major plus for many.

chillpenguin 6y ago

Robinhood is really sketch. They collect your information and sell it to companies like Citadel which use it to out-trade us little guys. Honestly everyone should seriously stop using it.

Animats 6y ago

Useful reading: "Unauthorized trades". [1] http://www.securitiesexpertwitness.info/unathorized_trading.pdf http://www.securitiesexpertwitness.info/unathorized_trading....

tech770 6y ago

Strictly speaking this has nothing to do with tech. As of late HN frontpage are all news that are there because of popularity instead of being techy.

a254613e 6y ago
Strictly speaking HN is not a website for tech news/submissions only. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
xdavidliu 6y ago
The news seems to be saying that Robinhood, a popular app, is able and willing to sell users' shares without their permission. This is a surprising and unpleasant quality of Robinhood, an app. Sounds like tech to me?

black_puppydog 6y ago

So if I'm reading the comments here correctly then the basic reason people got into this situation is because there's no way to actually transfer money into their account quickly and RH had to design around this? That's some pretty impressively^Wembarrassingly primitive transfer mechanisms right there. :D

nmca 6y ago

Somewhat offtopic I guess, but a huge part of this seems to be two-day settlement. Why on earth does the US still have two day settlement? Surely we're at a point where we ought to be able to send money nearly instantly for ~free. In the UK we have the faster payments network, but hell crypto whatever take your pick. Surely 2 days is not the right amount of time?

nmca 6y ago
Robinhoof at least seem to agree lol: https://blog.robinhood.com/news/2021/2/2/its-time-for-real-time-settlement https://blog.robinhood.com/news/2021/2/2/its-time-for-real-t...

jtlienwis 6y ago

This is nothing new. I had a Shearson account back in the early 1980s and bought an oil company stock that was undervalued. One of those leveraged buyouts occurred when I was on a short vacation, and I did not find about the expiration of a buyout offer (no broker bothered to call me). Later I found out that Shearson had sold a lot of shares from their customer accounts to get the benefit of the buyout offer, and replaced them with lower priced shares after the offer expired. Later, Sandy W., the head of Shearson was hailed as a financial genius. This was nearly 40 years ago.