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I will not argue with you about what Robinhood did to any of the margin accounts, if people borrowed money to trade stocks and Robinhood think that's risky, the

I will not argue with you about what Robinhood did to any of the margin accounts, if people borrowed money to trade stocks and Robinhood think that's risky, they have the right to close positions as part of standard risk management. But I am against what they did to the cash accounts (and margin accounts not borrowing money to trade). It seems that you think it's a small portion of all of the accounts, which I disagree. Even if it's only a small portion, what Robinhood did to these cash accounts was unprecedented and unacceptable as a broker. For point 2, I think you are referring to the clearing process. Brokers were liable to cover if clearing houses do not[0]. But that is Robinhood's liquidity issue and not does justify Robinhood disabling cash accounts from buying stocks. [0]https://www.youtube.com/watch?v=7RH4XKP55fM&feature=youtu.be https://www.youtube.com/watch?v=7RH4XKP55fM&feature=youtu.be

nrmitchi 6y ago
I'm not spending the time to watch some Youtube video you're posting, especially if you don't link to a specific timestamp/context. I highly suspect that the link you're saying is that a broker would be responsible to cover loses on trades they made if the clearing house does not; not that the brokerage is required to accept unlimited risk just because someone wants them too. > But that is Robinhood's liquidity issue and not does justify Robinhood disabling cash accounts from buying stocks. Robinhood having a liquidity issue 100% justifies them not offering services that they may not be able to actually cover. Because the alternative is way, way worse. You want Robinhood to just... make up money that they owe people but don't actually have? I'm fairly confident that financial institutions can't just make up numbers in order to manipulate their way into compliance. I very much dislike Robinhood as a company, but what you're suggesting doesn't make sense.
- jiofih 6y ago
  > services that they may not be able to actually cover. That’s exactly the point the parent commenter is making: there is nothing to cover for stock purchases on accounts with a balance. No liquidity issues can arise from that. You can say it’s easier to just turn off everything at once, but there is no actual reason to prevent stock purchases without margin, the buyer bears all risk.
  - infinite8s 6y ago
    Except for rules put into place by Dodd-Frank make that a legal requirement for all brokers (to remove systemic risk from DTCC). You can argue that it doesn't make sense for fully covered cash accounts - but it's not a decision Robinhood could make on their own - they are mandated by law to post that collateral from their own operating capital, and not use client assets (like the cash in their account).

nrmitchi 6y ago

I'm not spending the time to watch some Youtube video you're posting, especially if you don't link to a specific timestamp/context. I highly suspect that the link you're saying is that a broker would be responsible to cover loses on trades they made if the clearing house does not; not that the brokerage is required to accept unlimited risk just because someone wants them too. > But that is Robinhood's liquidity issue and not does justify Robinhood disabling cash accounts from buying stocks. Robinhood having a liquidity issue 100% justifies them not offering services that they may not be able to actually cover. Because the alternative is way, way worse. You want Robinhood to just... make up money that they owe people but don't actually have? I'm fairly confident that financial institutions can't just make up numbers in order to manipulate their way into compliance. I very much dislike Robinhood as a company, but what you're suggesting doesn't make sense.

jiofih 6y ago
> services that they may not be able to actually cover. That’s exactly the point the parent commenter is making: there is nothing to cover for stock purchases on accounts with a balance. No liquidity issues can arise from that. You can say it’s easier to just turn off everything at once, but there is no actual reason to prevent stock purchases without margin, the buyer bears all risk.
- infinite8s 6y ago
  Except for rules put into place by Dodd-Frank make that a legal requirement for all brokers (to remove systemic risk from DTCC). You can argue that it doesn't make sense for fully covered cash accounts - but it's not a decision Robinhood could make on their own - they are mandated by law to post that collateral from their own operating capital, and not use client assets (like the cash in their account).