6 ms·

Robinhood is still severely limiting trading

103 points by drocer88 6y ago

vsareto 6y ago
Can anyone here verify that this was possible while markets were open? Buy call option, exercise, get more shares than RH's trade limit: https://old.reddit.com/r/wallstreetbets/comments/l82y7u/how_to_buy_gme_above_broker_limits/ https://old.reddit.com/r/wallstreetbets/comments/l82y7u/how_...
- valuearb 6y ago
  Fastest way to put Robinhood into liquidation so you can get a fraction of your account value back years later.
  - deleted 6y ago
    [deleted]
- ajsharp 6y ago
  That's just how a call option works. I don't know the specifics of custodianship around an executed option and what collateral the buyer's broker is responsible for upon execution, but it's probably equivalent to buying 100 shares. With respect to it being possible -- if RH denied options holders the right to execute they'd be prosecuted and fined an enormous amount. There is quite literally a contract that says the buyer has the right to acquire shares in a certain scenario -- the buyer's broker responsibility here is simply to facilitate, and is in no place legally to deny that right.
valuearb 6y ago
Yea, I wonder if Robinhood can survive into next week. Clearly their DTCC collateral requirements are skyrocketing and tapping out their credit lines wasn’t enough. 50-50 chance that Robinhood files bankruptcy and WallStreetBets traders get stuck waiting months or years for their positions to settle. That would be the ultimate irony after the tantrums they threw yesterday while Robinhood was drowning.
- vmsp 6y ago
  Wouldn't that, basically, guarantee the short squeeze, though? If people can't access their broker, they can't sell. Or can Robinhood start liquidating their customer's positions without authorization?
  - piva00 6y ago
    I think it all depends on how they will assign ownership to the assets. Stocks are, at sometimes, a surprisingly tricky case to determine ownership [0]. [0] https://www.bloomberg.com/opinion/articles/2015-07-14/banks-forgot-who-was-supposed-to-own-dell-shares https://www.bloomberg.com/opinion/articles/2015-07-14/banks-...
  - deleted 6y ago
    [deleted]
- thebean11 6y ago
  I can't see this happening, why wouldn't investors just give them a bridge loan? They'd be insane to let their (massive) investment go to zero, when the alternative is an ultra-short term loan with basically no risk (the funds are just stuck at the clearinghouse as I understand it).
  - jmalicki 6y ago
    They did get new investment (the story isn't clear if it's a bridge loan or equity) https://techcrunch.com/2021/01/29/robinhood-raises-1b-after-trading-halts-to-keep-its-platform-running/ https://techcrunch.com/2021/01/29/robinhood-raises-1b-after-...
    - ajsharp 6y ago
      According to the NYT story it sounds like a convertible note or something similar: "Investors who provide new financing to Robinhood will receive additional equity in the company. The investors will get that equity at a discounted valuation tied to the price of Robinhood shares when the company goes public, two of the people said." https://www.nytimes.com/2021/01/29/technology/robinhood-fundraising.html https://www.nytimes.com/2021/01/29/technology/robinhood-fund...
c0nducktr 6y ago
That restricted list has some odd ones in it. Starbucks and GM are both limited to 1 share per day. I really wonder what's going on behind the scenes.
- kenhwang 6y ago
  Starbucks has high volume/volatiliy from its earnings call earlier this week. GM just dropped major news (only EVs by 2035) also causing some stock buzz.
nodesocket 6y ago
They had AMD and Starbucks on the limit of one share ownership? Huh, these companies aren’t even part of the Reddit frenzy.
- kenhwang 6y ago
  AMD and SBUX just had earnings calls this week. They'll naturally have high volume and volatility.
  - nodesocket 6y ago
    I have been investing in the market for over 15 years. Since when do earnings announcements cause a brokerage to limit buying?
- ajsharp 6y ago
  Also AMD is pretty close to AMC lol. Seems absurd but they also restricted trading on GM.
015a 6y ago
They're legitimately experiencing a liquidity crisis right now, and their CEO went on the news and lied about it to the public. I'm out of other explanations; GM moved 0.7% today, and it has trading restrictions? Are they afraid that people will mistype GME?
- noncoml 6y ago
  Yeah, looks like they are stuck between a rock and a hard place. On one hand if they don't admit their liquidity problems, people will blame them for playing the HFs game. If they do admit, well.. it's pretty much game over for them. I wouldn't say their CEO lied yesterday. More like he talked a lot without really saying anything.
  - 015a 6y ago
    On CNBC yesterday, Vlad's exact words were "No, to be clear, there is no liquidity problem" [1]. I'm willing to accept that it wasn't a total lie yesterday, and the situation has developed. I think we're past the point to where that statement would still be truthful today. [1] https://www.cnbc.com/2021/01/29/robinhood-ceo-vlad-tenev-tapping-credit-lines-proactive-to-help-lift-gamestop-trading-limits.html https://www.cnbc.com/2021/01/29/robinhood-ceo-vlad-tenev-tap...
- meowkit 6y ago
  Did he lie about it or was just not clear? RH and the other brokerages have said it was capital requirements imposed by the clearing houses, which makes sense given Fidelity and Vanguard were not having this issue. My question is why did the clearing houses make this decision? Whats the risk management logic here?
  - viscanti 6y ago
    Apple trades an order of magnitude more per day than any of the stocks that were halted. So why are there no liquidity issues there but there are with the stocks that keep being halted?
bowmessage 6y ago
Getting flashbacks to Mt. Gox's behavior in early 2014...
ww520 6y ago
Despite the restricted trades GME is doing well today. It will be a bloodbath for the shorts next week.
- paulpauper 6y ago
  yup, so much for that media narrative blaming WSB and Robinhood for manipulating the market. Everyone expecting GME to tank but it refuse to. Shorts will keep being forced to cover at higher and higher prices.
- SpicyLemonZest 6y ago
  Why would next week in particular be a bloodbath for the shorts? I think you're falling victim to a sliding timeline here - when I asked people up until late Wednesday, they consistently said that today was the bloodbath day.
  - ww520 6y ago
    Because the short ratio is still over 100%. With the clearing house catching up on the settling trades over the weekend, the counterparty risk goes down, allowing the trading platforms to lift the trade restriction, and allowing hordes of WSB to continue to bid up GME. Other moneys will smell blood and join in as they have seen how well GME held up today despite the restricted trades.
    - SpicyLemonZest 6y ago
      That's just the story of any bubble. Lots of people will bid it up because they expect other people to join in, until at some point they stop believing others will join in. I can't disprove it, because bubbles do of course happen, but that doesn't say much about how long this particular one will continue. I guess what I'd encourage you to do is write some notes for yourself about exactly what you expect will happen, so that when the justifications for the bubble change again you'll be able to notice and hopefully get out in time.
  - polka_haunts_us 6y ago
subsubzero 6y ago
Thought experiment: Lets say everyone(or just the people who are in GME) decided to liquidate their holding on RH now, ie. they are fed up with that exchange for various reasons. From what I understand they would not be able to pay out funds to sellers? If so this would create a 1920's style run on their exchange that could spill over into other exchanges? I am genuinely curious as it would behoove RH to let people keep buying vs. sell only.
- tedunangst 6y ago
  You wouldn't be able to transfer the money out until it settles.
- proverbialbunny 6y ago
  Stock has a 2 day settlement period, so Robinhood could pay out, but it would have a 2 day delay before an ACH transfer would start when liquidating their account.
e-clinton 6y ago
If they legitimately are experiencing a liquidity crisis, then limit purchases on securities other than the ones retail investors are buying in their war with the hedge funds. Go limit Apple, Microsoft or Tesla.
kinghajj 6y ago
Other brokerages still have restrictions as well. I haven't been able to write a covered call against my AMC shares. Hopefully they let us "normal" traders start writing options next week, and the premiums remain relatively high.

103 points by drocer88 6y ago

Can anyone here verify that this was possible while markets were open? Buy call option, exercise, get more shares than RH's trade limit: https://old.reddit.com/r/wallstreetbets/comments/l82y7u/how_to_buy_gme_above_broker_limits/ https://old.reddit.com/r/wallstreetbets/comments/l82y7u/how_...

valuearb 6y ago
Fastest way to put Robinhood into liquidation so you can get a fraction of your account value back years later.
- deleted 6y ago
  [deleted]
ajsharp 6y ago
That's just how a call option works. I don't know the specifics of custodianship around an executed option and what collateral the buyer's broker is responsible for upon execution, but it's probably equivalent to buying 100 shares. With respect to it being possible -- if RH denied options holders the right to execute they'd be prosecuted and fined an enormous amount. There is quite literally a contract that says the buyer has the right to acquire shares in a certain scenario -- the buyer's broker responsibility here is simply to facilitate, and is in no place legally to deny that right.

valuearb 6y ago

Yea, I wonder if Robinhood can survive into next week. Clearly their DTCC collateral requirements are skyrocketing and tapping out their credit lines wasn’t enough. 50-50 chance that Robinhood files bankruptcy and WallStreetBets traders get stuck waiting months or years for their positions to settle. That would be the ultimate irony after the tantrums they threw yesterday while Robinhood was drowning.

vmsp 6y ago
Wouldn't that, basically, guarantee the short squeeze, though? If people can't access their broker, they can't sell. Or can Robinhood start liquidating their customer's positions without authorization?
- piva00 6y ago
  I think it all depends on how they will assign ownership to the assets. Stocks are, at sometimes, a surprisingly tricky case to determine ownership [0]. [0] https://www.bloomberg.com/opinion/articles/2015-07-14/banks-forgot-who-was-supposed-to-own-dell-shares https://www.bloomberg.com/opinion/articles/2015-07-14/banks-...
- deleted 6y ago
  [deleted]
thebean11 6y ago
I can't see this happening, why wouldn't investors just give them a bridge loan? They'd be insane to let their (massive) investment go to zero, when the alternative is an ultra-short term loan with basically no risk (the funds are just stuck at the clearinghouse as I understand it).
- jmalicki 6y ago
  They did get new investment (the story isn't clear if it's a bridge loan or equity) https://techcrunch.com/2021/01/29/robinhood-raises-1b-after-trading-halts-to-keep-its-platform-running/ https://techcrunch.com/2021/01/29/robinhood-raises-1b-after-...
  - ajsharp 6y ago
    According to the NYT story it sounds like a convertible note or something similar: "Investors who provide new financing to Robinhood will receive additional equity in the company. The investors will get that equity at a discounted valuation tied to the price of Robinhood shares when the company goes public, two of the people said." https://www.nytimes.com/2021/01/29/technology/robinhood-fundraising.html https://www.nytimes.com/2021/01/29/technology/robinhood-fund...

c0nducktr 6y ago

That restricted list has some odd ones in it. Starbucks and GM are both limited to 1 share per day. I really wonder what's going on behind the scenes.

kenhwang 6y ago
Starbucks has high volume/volatiliy from its earnings call earlier this week. GM just dropped major news (only EVs by 2035) also causing some stock buzz.

nodesocket 6y ago

They had AMD and Starbucks on the limit of one share ownership? Huh, these companies aren’t even part of the Reddit frenzy.

kenhwang 6y ago
AMD and SBUX just had earnings calls this week. They'll naturally have high volume and volatility.
- nodesocket 6y ago
  I have been investing in the market for over 15 years. Since when do earnings announcements cause a brokerage to limit buying?
ajsharp 6y ago
Also AMD is pretty close to AMC lol. Seems absurd but they also restricted trading on GM.

015a 6y ago

They're legitimately experiencing a liquidity crisis right now, and their CEO went on the news and lied about it to the public. I'm out of other explanations; GM moved 0.7% today, and it has trading restrictions? Are they afraid that people will mistype GME?

noncoml 6y ago
Yeah, looks like they are stuck between a rock and a hard place. On one hand if they don't admit their liquidity problems, people will blame them for playing the HFs game. If they do admit, well.. it's pretty much game over for them. I wouldn't say their CEO lied yesterday. More like he talked a lot without really saying anything.
- 015a 6y ago
  On CNBC yesterday, Vlad's exact words were "No, to be clear, there is no liquidity problem" [1]. I'm willing to accept that it wasn't a total lie yesterday, and the situation has developed. I think we're past the point to where that statement would still be truthful today. [1] https://www.cnbc.com/2021/01/29/robinhood-ceo-vlad-tenev-tapping-credit-lines-proactive-to-help-lift-gamestop-trading-limits.html https://www.cnbc.com/2021/01/29/robinhood-ceo-vlad-tenev-tap...
meowkit 6y ago
Did he lie about it or was just not clear? RH and the other brokerages have said it was capital requirements imposed by the clearing houses, which makes sense given Fidelity and Vanguard were not having this issue. My question is why did the clearing houses make this decision? Whats the risk management logic here?
- viscanti 6y ago
  Apple trades an order of magnitude more per day than any of the stocks that were halted. So why are there no liquidity issues there but there are with the stocks that keep being halted?

bowmessage 6y ago

Getting flashbacks to Mt. Gox's behavior in early 2014...

ww520 6y ago

Despite the restricted trades GME is doing well today. It will be a bloodbath for the shorts next week.

paulpauper 6y ago
yup, so much for that media narrative blaming WSB and Robinhood for manipulating the market. Everyone expecting GME to tank but it refuse to. Shorts will keep being forced to cover at higher and higher prices.
SpicyLemonZest 6y ago
Why would next week in particular be a bloodbath for the shorts? I think you're falling victim to a sliding timeline here - when I asked people up until late Wednesday, they consistently said that today was the bloodbath day.
- ww520 6y ago
  Because the short ratio is still over 100%. With the clearing house catching up on the settling trades over the weekend, the counterparty risk goes down, allowing the trading platforms to lift the trade restriction, and allowing hordes of WSB to continue to bid up GME. Other moneys will smell blood and join in as they have seen how well GME held up today despite the restricted trades.
  - SpicyLemonZest 6y ago
    That's just the story of any bubble. Lots of people will bid it up because they expect other people to join in, until at some point they stop believing others will join in. I can't disprove it, because bubbles do of course happen, but that doesn't say much about how long this particular one will continue. I guess what I'd encourage you to do is write some notes for yourself about exactly what you expect will happen, so that when the justifications for the bubble change again you'll be able to notice and hopefully get out in time.
- polka_haunts_us 6y ago

subsubzero 6y ago

Thought experiment: Lets say everyone(or just the people who are in GME) decided to liquidate their holding on RH now, ie. they are fed up with that exchange for various reasons. From what I understand they would not be able to pay out funds to sellers? If so this would create a 1920's style run on their exchange that could spill over into other exchanges? I am genuinely curious as it would behoove RH to let people keep buying vs. sell only.

tedunangst 6y ago
You wouldn't be able to transfer the money out until it settles.
proverbialbunny 6y ago
Stock has a 2 day settlement period, so Robinhood could pay out, but it would have a 2 day delay before an ACH transfer would start when liquidating their account.

e-clinton 6y ago

If they legitimately are experiencing a liquidity crisis, then limit purchases on securities other than the ones retail investors are buying in their war with the hedge funds. Go limit Apple, Microsoft or Tesla.

kinghajj 6y ago

Other brokerages still have restrictions as well. I haven't been able to write a covered call against my AMC shares. Hopefully they let us "normal" traders start writing options next week, and the premiums remain relatively high.