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Read up on what T+2 settlement period is. When you buy GME through Robinhood it is on hook for two days before it closes. To do this Robinhood has to post coll

Read up on what T+2 settlement period is. When you buy GME through Robinhood it is on hook for two days before it closes. To do this Robinhood has to post collateral with the clearinghouse (DTC) during that time. As BME volatility exploded the collateral demanded of Robinhood skyrocketed.

nightski 6y ago
Melvin received $2.75 billion in funding from Citadel/Point72 to cover it's failed short positions. You are telling me there is nothing RH could do to cover the collateral? This is what has me slightly skeptical. Seems like the bailouts are no problem when it comes to the major players but liquidity for plebs? Nah.
- majormajor 6y ago
  RH also raised a billion https://www.nytimes.com/2021/01/29/technology/robinhood-fundraising.html https://www.nytimes.com/2021/01/29/technology/robinhood-fund... I highly doubt either of those transactions happened at the press of a button, though. We just didn't see whatever behind the scenes drama occurred at Melvin.
- valuearb 6y ago
  Robinhood is not Melvin, different companies have different net asset based and borrowing ability. Melvin was also bailed out by Stephen Cohen, who the Melvin founder worked for. Cohen likely believed in the founder and already knew enough about their positions to be able to make such a huge investment in such a short time frame. Equity investments typically take too much time to complete due diligence when your firm is drowning in a hurricane. Robinhood was rumored to have tapped all their available credit lines for $1B before they ran out of cash. I suspect we will read about an equity infusion in the next few weeks, if they make it that long.
mikeryan 6y ago
I was amused watching Aaron Sorkin ask Vlad (RH CEO) what happened and if it was a liquidity problem. Then have Vlad explain that it was a liquidity problem (without using those words) then explicitly say it was NOT a liquidity problem when asked that directly. https://www.youtube.com/watch?v=cuCcchMOsKE https://www.youtube.com/watch?v=cuCcchMOsKE
- valuearb 6y ago
  Yea, I mean the words “liquidity problem” from a Wall Street or Brokers CEO’s lips is almost an immediate firm suicide.

nightski 6y ago

Melvin received $2.75 billion in funding from Citadel/Point72 to cover it's failed short positions. You are telling me there is nothing RH could do to cover the collateral? This is what has me slightly skeptical. Seems like the bailouts are no problem when it comes to the major players but liquidity for plebs? Nah.

majormajor 6y ago
RH also raised a billion https://www.nytimes.com/2021/01/29/technology/robinhood-fundraising.html https://www.nytimes.com/2021/01/29/technology/robinhood-fund... I highly doubt either of those transactions happened at the press of a button, though. We just didn't see whatever behind the scenes drama occurred at Melvin.
valuearb 6y ago
Robinhood is not Melvin, different companies have different net asset based and borrowing ability. Melvin was also bailed out by Stephen Cohen, who the Melvin founder worked for. Cohen likely believed in the founder and already knew enough about their positions to be able to make such a huge investment in such a short time frame. Equity investments typically take too much time to complete due diligence when your firm is drowning in a hurricane. Robinhood was rumored to have tapped all their available credit lines for $1B before they ran out of cash. I suspect we will read about an equity infusion in the next few weeks, if they make it that long.

mikeryan 6y ago

I was amused watching Aaron Sorkin ask Vlad (RH CEO) what happened and if it was a liquidity problem. Then have Vlad explain that it was a liquidity problem (without using those words) then explicitly say it was NOT a liquidity problem when asked that directly. https://www.youtube.com/watch?v=cuCcchMOsKE https://www.youtube.com/watch?v=cuCcchMOsKE

valuearb 6y ago
Yea, I mean the words “liquidity problem” from a Wall Street or Brokers CEO’s lips is almost an immediate firm suicide.