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They're also a joke because they are, as far as I'm concerned, not a "brokerage". They are an app designed to convince people that they understand how to trade

They're also a joke because they are, as far as I'm concerned, not a "brokerage". They are an app designed to convince people that they understand how to trade stocks, in order to sell them stocks. A real brokerage should, in my opinion, and some sort of duty to act in the best interest of its clients. A brokerage should not have huge backlash because its users got margin called, and those users didn't even know what a margin call was. They should not have huge backlash because its users stop-loss orders were triggered, and then executed at a lower price. This is just confusion that shouldn't exist, because a reasonable brokerage shouldn't be luring people into these risky positions just to make a buck on the sale.

bobsmooth 6y ago
Getting margin called is one thing. Being prevented from buying a stock is something completely different.
- nrmitchi 6y ago
  Being prevented from being able to buy a stock if the brokerage can not afford to legally sell it to you is the expected outcome. If you want to argue that Robinhood should have been bigger, and thus had more flexibility and been able to handle this, sure. Why not. But then you're complaining that the company you're dealing with isn't big enough to float your risky position. Would you have preferred the alternative where Robinhood risks exploding, has no liquidity, triggers a rush where everyone tries to get their stock out of Robinhood at the same time, fails, and every Robinhood customer is stuck waiting on SPIC for some undetermined amount of time? Or would you have preferred the alternative where Robinhood didn't allow you to sell either? And then it the stock went down during that time, you can't try to get out? Robinhood is a shitty company for a lot of reasons, but preventing themselves from being over-extended into bankruptcy isn't really one of those reasons.
  - franklampard 6y ago
    > float your risky position Nobody is complaining Robinhood disabled naked calls/puts on volatile stocks. How is not illegal for Robinhood to disable cash accounts from buying stocks? Your cash is transferred and deposited. If the stock price crashed, it crashed, investors still own the stocks with their cash paid.
    - nrmitchi 6y ago
      A large part of Robinhood's entire product is papering over the difference between a cash account and a margin account, and hiding the intracacies and timing of the underlying market. > Your cash is transferred and deposited. When you open a new account, and start a transfer from your bank, that is not instantaneous. "Cash" doesn't magically appear in Robinhoods' account. Until that deposit clears, you are effectively operating on margin. If you recently sold something on Robinhood, and want to buy something else, "cash" isn't in your account yet, because that original sale hasn't settled. Robinhood is papering over that as well. This one in particular I'm not saying they shouldn't paper over, since I believe it's less of a risk. But each of these "Robinhood covering your unsettled positions" adds a little bit of risk. This risk adds up. The suggestion of Robinhood only letting people trade with cash that is fully settled into their accounts would completely swap the underlying paradigm of Robinhood's product. Even so, new trades you want to make would have to settle. And as discussed elsewhere, Robinhood has to funds and deposits to cover potential risk associated with those trades until they settle. There is a lot under the hood that is abstracted away by Robinhood, and now those intricacies are leaking out (and completely mis-understood, because one of the premises of Robinhood's product is that you shouldn't have to understand, or even know about, them)
      - franklampard 6y ago
        You have many misunderstandings and I am happy to clear them. 1. No, not all Robinhood accounts are margin accounts, a simple google search tells you that: https://robinhood.com/us/en/support/articles/robinhood-accounts/ https://robinhood.com/us/en/support/articles/robinhood-accou... 2. Yesterday, all Cash accounts were disabled from trading GME, that’s a fact and please defend that again. 3. Trading with a margin accounts and trading on margin is different. I can have a margin account and borrow $0 on margin to trade.
  - bobsmooth 6y ago
    A brokerage being unable to perform its sole function is, by definition, a shitty company.

bobsmooth 6y ago

Getting margin called is one thing. Being prevented from buying a stock is something completely different.

nrmitchi 6y ago
Being prevented from being able to buy a stock if the brokerage can not afford to legally sell it to you is the expected outcome. If you want to argue that Robinhood should have been bigger, and thus had more flexibility and been able to handle this, sure. Why not. But then you're complaining that the company you're dealing with isn't big enough to float your risky position. Would you have preferred the alternative where Robinhood risks exploding, has no liquidity, triggers a rush where everyone tries to get their stock out of Robinhood at the same time, fails, and every Robinhood customer is stuck waiting on SPIC for some undetermined amount of time? Or would you have preferred the alternative where Robinhood didn't allow you to sell either? And then it the stock went down during that time, you can't try to get out? Robinhood is a shitty company for a lot of reasons, but preventing themselves from being over-extended into bankruptcy isn't really one of those reasons.
- franklampard 6y ago
  > float your risky position Nobody is complaining Robinhood disabled naked calls/puts on volatile stocks. How is not illegal for Robinhood to disable cash accounts from buying stocks? Your cash is transferred and deposited. If the stock price crashed, it crashed, investors still own the stocks with their cash paid.
  - nrmitchi 6y ago
    A large part of Robinhood's entire product is papering over the difference between a cash account and a margin account, and hiding the intracacies and timing of the underlying market. > Your cash is transferred and deposited. When you open a new account, and start a transfer from your bank, that is not instantaneous. "Cash" doesn't magically appear in Robinhoods' account. Until that deposit clears, you are effectively operating on margin. If you recently sold something on Robinhood, and want to buy something else, "cash" isn't in your account yet, because that original sale hasn't settled. Robinhood is papering over that as well. This one in particular I'm not saying they shouldn't paper over, since I believe it's less of a risk. But each of these "Robinhood covering your unsettled positions" adds a little bit of risk. This risk adds up. The suggestion of Robinhood only letting people trade with cash that is fully settled into their accounts would completely swap the underlying paradigm of Robinhood's product. Even so, new trades you want to make would have to settle. And as discussed elsewhere, Robinhood has to funds and deposits to cover potential risk associated with those trades until they settle. There is a lot under the hood that is abstracted away by Robinhood, and now those intricacies are leaking out (and completely mis-understood, because one of the premises of Robinhood's product is that you shouldn't have to understand, or even know about, them)
    - franklampard 6y ago
      You have many misunderstandings and I am happy to clear them. 1. No, not all Robinhood accounts are margin accounts, a simple google search tells you that: https://robinhood.com/us/en/support/articles/robinhood-accounts/ https://robinhood.com/us/en/support/articles/robinhood-accou... 2. Yesterday, all Cash accounts were disabled from trading GME, that’s a fact and please defend that again. 3. Trading with a margin accounts and trading on margin is different. I can have a margin account and borrow $0 on margin to trade.
- bobsmooth 6y ago
  A brokerage being unable to perform its sole function is, by definition, a shitty company.