9 ms·

It’s pretty obvious (at least to me when I signed up) that the “instant money transfer” means margin. Even if you don’t get the concept of “margin” specific to

It’s pretty obvious (at least to me when I signed up) that the “instant money transfer” means margin. Even if you don’t get the concept of “margin” specific to investing, you should get that you’re borrowing against the transfer when you use it. Edit: I just deposited more money into robinhood, and the screen says "your funds will be transfered in next several days... in meantime, we'll give you access to $X while you wait for the funds to clear" Also, the UI separates your cleared money, from the instant deposit money as 2 line items. It says that its not your money in the UI.

marcinzm 6y ago
In the age of the internet (well 30+ years into it even) thinking that digital funds can be transferred instantly seems a pretty sane assumption.
- ur-whale 6y ago
  It isn't. Settlement is complicated business. Complicated enough that it took the invention of Bitcoin to take it out of the bankers hands and move it to the digital realm. And even then, it was not instantaneous (10mn) until layer two solutions appeared. Thinking that "money can be transferred instantaneously because digital" is not a reasonable assumption.
  - fastball 6y ago
    In the UK bank transfers are instant.
    - ur-whale 6y ago
      They very likely aren't. They just appear to be to the retail crowd.
      - marcinzm 6y ago
        It seems to be in fact instant: https://en.wikipedia.org/wiki/Faster_Payments_Service https://en.wikipedia.org/wiki/Faster_Payments_Service
        ur-whale 6y ago
        There is precious little explanation in the article you cite on how this is actually implemented on the back-end. Banking plumbing is notoriously harder than most folks realize, and I wouldn't be surprised if there wasn't very hard (and very small) limits to how big of an amount / how many TPS you can actually execute with this system. I might be wrong, but I'd be surprised if you could move 10M pounds instantaneously with this.
        tonfa 6y ago
        Got curious, for SEPA there's next day settlement and 1B EUR limit. The instant SEPA transfers have a 100k limit.
        namibj 6y ago
        My understanding is that this is due to instant SEPA blocking chargebacks to some extend.
        fastball 6y ago
        Stop moving the goalposts.
  - Alupis 6y ago
    Just like with Tesla's AutoPilot, naming does matter. If you tell people your car has AutoPilot, what would a reasonable person assume? It can drive itself! And they did, and people have died. When RH tells Average Joe that the funds are "Instantly" available... that does indeed mean instant to most people.
    - fastball 6y ago
      Poor analogy. "Autopilot" comes from airplanes, where all it has done historically is "keep the plane going in a straight line". In contrast, Tesla's AutoPilot can do much more. Notably as well with autopilot in airplanes is that the pilot should always be in the cockpit, ready to take over... just like in a Tesla.
      - Alupis 6y ago
        You sound like someone educated about aviation - Average Joe is not. To Average Joe, "Autopilot" means it flies/drives itself.
        fastball 6y ago
        Average Joe knows that planes have autopilot... that's where Average Joe heard the term first. Do you really think Average Joe also thinks that planes entirely fly themselves and that pilots are just window-dressing?
        Alupis 6y ago
        Hang out in the Aviation StackExchange long enough and you'll see exactly that question come up. "Why do we even still have pilots?", or "What does a pilot actually do?". Yes, in general, people are ignorant of what pilots do and what AutoPilot can and cannot do. This is made even more confusing by recent progress in autopilot with some large jets getting auto-landing features. And yes... a pilot can program the FMS with waypoints, altitudes, etc, get into the air, push a button... and the plane will indeed fly itself. Modern jets even have automatic throttle/power control too. A better name for Tesla's system is what it actually is... Driver Asist. But that's not sexy... and we're far off into the weeds. "Instant" means instant. There is no way to paint it differently. It's disingenuous to call an ACH transfer "instant" instead of "It'll take several days during which time we'll lend you money", like RH did here.
  - harikb 6y ago
    "15 minutes" to settle cash for next trade is enough "instant" for most traders I think. The part that irritates people is the "2 business days" problem in the regular account. I have heard it is complicated, but can someone elaborate the "computing cost" of a regular (non-coin) digital transfer? Btw, transfers within 15 minutes are being done all over the world without the fancy blockchain and coin. I do understand the need for some transfers to be delayed , say liquidating all of one's investment to take a few days just for security reasons.
    - ur-whale 6y ago
      >can someone elaborate Well there's - for starters - : https://www.investopedia.com/terms/c/counterpartyrisk.asp https://www.investopedia.com/terms/c/counterpartyrisk.asp
      - freeone3000 6y ago
        All of that risk is associated with holding the goods and currency for this delayed period! It all makes sense, but, if ACH was 10 minutes instead of two days, the entire issue would barely matter.
  - kllrnohj 6y ago
    > Complicated enough that it took the invention of Bitcoin to take it out of the bankers hands and move it to the digital realm. That's not at all what bitcoin does or helps with. Settlement is not complicated. ACH is complicated, but ACH isn't just settlement. Bank to bank wire transfers are just settlement, and are regularly same-day (even same-hour) with immediate fund availability. Hell, FedWire has been doing real-time near-instant moving of money between accounts since 1920 https://en.wikipedia.org/wiki/Fedwire https://en.wikipedia.org/wiki/Fedwire
    - lupire 6y ago
      Imagine if making a bank transfer was as east as sending a spam email. FedWire works because those banks work very hard to trust each other.
      - adamjb 6y ago
        Europeans and Australians [0] don't have to imagine. I can literally do a bank transfer to an email address. [0] non-exhaustive list
        throwaheyy 6y ago
        That’s not the same as what parent comment was suggesting. You can’t send money to literally anyone using only an email address. You and the recipient still have to have regular bank accounts within the settlement system. The email address only serves as a more friendly identifier than the account number.
        adamjb 6y ago
        I should've been clearer: as long as the recipient has linked their email and/or mobile to their account (via PayID) settlement is instant and their email/mobile number can be used to address transfers
  - manquer 6y ago
    In a lot of countries bank transfer is near real time. Chip and pin is the standard for more than a decade. Checks are no longer al primary way to pay anymore. U.S. banks are very much lagging in technology
- brown9-2 6y ago
  Why? What service actually transfers your money instantly? None does.
  - zepolen 6y ago
    Cryptocurrency.
    - serf 6y ago
      which ones? btc transfers are pretty far from instant, by design.
      - zepolen 6y ago
        Nano. Feeless, instant and energy efficient.
      - thinkmassive 6y ago
        On chain, sure, but Lightning is pretty close to instant
        Vecr 6y ago
        Yeah, but with lightning you really need enough value along the network path(s) to execute a transaction, possibly causing a similar thing as this to happen. I still think it would be an improvement though, as enthusiastic buyers could expand the network and get their buys through.
        ric2b 6y ago
        > Yeah, but with lightning you really need enough value along the network path(s) to execute a transaction, possibly causing a similar thing as this to happen. It's atomic, it either completes 100% or it fails, there's no partial state where the money gets stuck in one of the middle-nodes.
Alupis 6y ago
Pretend you're not a techie and not aware of how ACH works. "Instant" means instant to most folks. Not, "we're going to lend you the money for several days and can then force sell your stocks whenever we want". RH app even pretends the money is actually in your account. There's a lot of deception that went into designing the app.
- nullc 6y ago
  RH can't win here: Previously they came under fire when a user committed suicide after the RH app showed a substantial negative balance due to an offsetting position that hadn't settled yet. If they reflected it accurately they'd be showing a negative balance until the funds arrived and some users would think they lost all their funds. The real mistake is that they're extending margin to uninformed and unsophisticated users. ... but pointing that out just brings accusations that it's gatekeeping or limiting access to people who aren't rich.
  - MattGaiser 6y ago
    Any broker that lets you do anything like day trading is essentially extending margin. A true cash account has quite a few restrictions: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations https://www.fidelity.com/learning-center/trading-investing/t...
    - nullc 6y ago
      Sure. And? It used to be the case (only a couple years ago--) that you had to have an account worth at least $10k and at least represent that you had some experience to get approved for margin at most brokerages. Although it's been a long time, I spent the first decade with a trading account without margin just fine.
      - ziml77 6y ago
        As far as I know Robinhood only lets you trade on margin if you have a pending transfer of money in. They also have a very low limit on that of $1000.
pnathan 6y ago
It was not obvious to me. What my perception was, was that you were being loaned money against the transfer you were sending in. It was not clear at all to me that it was a generic margin account. Because, among other things, I consider margin trading to be a higher risk activity than I care to engage in; if I had known that I was signing up for a margin account, I would have not signed up at all. That said, I've definitely been edu-ma-cated on this, and I"ll be reading brokerage ToS more carefully from now on.
- Tenoke 6y ago
  >What my perception was, was that you were being loaned money against the transfer you were sending in That is margin trading though. It sounds like you thought only some trading on a loan counts as margin per definition but you knew you weren't trading with your actual money but a loan which is the important part.
  - kllrnohj 6y ago
    https://www.investopedia.com/terms/m/margin.asp https://www.investopedia.com/terms/m/margin.asp margin trading overwhelmingly refers to paying a percentage as a collateral, not a stop-gap loan to cover ACH transfer delays. Yes you have to have a margin account to trade with immediately deposited funds (thanks ACH), but that's not the typical usage of the phrase and as such isn't what you'll find being described when you look up the term. Particularly since you can trade with unsettled funds using a cash account in some circumstances, see situation #3 here: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_cashaccounts https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ca...
  - pnathan 6y ago
    Ah - I have generally understood it as working on a percentage of the trade; being part and parcel of a leveraged strategy. It's one thing to loan me $100 when we have shaken hands and contractually already agreed that $100 is on its way. It's another thing to assume control of that $100 when the $100 already agreed to is on its way.
    - 6y ago
apsec112 6y ago
I'm a software engineer, so I think I'm more familiar with how apps work than most people, and this wasn't obvious to me! Good thing I only use Robinhood for money I don't care about losing.

marcinzm 6y ago

In the age of the internet (well 30+ years into it even) thinking that digital funds can be transferred instantly seems a pretty sane assumption.

ur-whale 6y ago
It isn't. Settlement is complicated business. Complicated enough that it took the invention of Bitcoin to take it out of the bankers hands and move it to the digital realm. And even then, it was not instantaneous (10mn) until layer two solutions appeared. Thinking that "money can be transferred instantaneously because digital" is not a reasonable assumption.
- fastball 6y ago
  In the UK bank transfers are instant.
  - ur-whale 6y ago
    They very likely aren't. They just appear to be to the retail crowd.
    - marcinzm 6y ago
      It seems to be in fact instant: https://en.wikipedia.org/wiki/Faster_Payments_Service https://en.wikipedia.org/wiki/Faster_Payments_Service
      - ur-whale 6y ago
        There is precious little explanation in the article you cite on how this is actually implemented on the back-end. Banking plumbing is notoriously harder than most folks realize, and I wouldn't be surprised if there wasn't very hard (and very small) limits to how big of an amount / how many TPS you can actually execute with this system. I might be wrong, but I'd be surprised if you could move 10M pounds instantaneously with this.
        tonfa 6y ago
        Got curious, for SEPA there's next day settlement and 1B EUR limit. The instant SEPA transfers have a 100k limit.
        namibj 6y ago
        My understanding is that this is due to instant SEPA blocking chargebacks to some extend.
        fastball 6y ago
        Stop moving the goalposts.
- Alupis 6y ago
  Just like with Tesla's AutoPilot, naming does matter. If you tell people your car has AutoPilot, what would a reasonable person assume? It can drive itself! And they did, and people have died. When RH tells Average Joe that the funds are "Instantly" available... that does indeed mean instant to most people.
  - fastball 6y ago
    Poor analogy. "Autopilot" comes from airplanes, where all it has done historically is "keep the plane going in a straight line". In contrast, Tesla's AutoPilot can do much more. Notably as well with autopilot in airplanes is that the pilot should always be in the cockpit, ready to take over... just like in a Tesla.
    - Alupis 6y ago
      You sound like someone educated about aviation - Average Joe is not. To Average Joe, "Autopilot" means it flies/drives itself.
      - fastball 6y ago
        Average Joe knows that planes have autopilot... that's where Average Joe heard the term first. Do you really think Average Joe also thinks that planes entirely fly themselves and that pilots are just window-dressing?
        Alupis 6y ago
        Hang out in the Aviation StackExchange long enough and you'll see exactly that question come up. "Why do we even still have pilots?", or "What does a pilot actually do?". Yes, in general, people are ignorant of what pilots do and what AutoPilot can and cannot do. This is made even more confusing by recent progress in autopilot with some large jets getting auto-landing features. And yes... a pilot can program the FMS with waypoints, altitudes, etc, get into the air, push a button... and the plane will indeed fly itself. Modern jets even have automatic throttle/power control too. A better name for Tesla's system is what it actually is... Driver Asist. But that's not sexy... and we're far off into the weeds. "Instant" means instant. There is no way to paint it differently. It's disingenuous to call an ACH transfer "instant" instead of "It'll take several days during which time we'll lend you money", like RH did here.
- harikb 6y ago
  "15 minutes" to settle cash for next trade is enough "instant" for most traders I think. The part that irritates people is the "2 business days" problem in the regular account. I have heard it is complicated, but can someone elaborate the "computing cost" of a regular (non-coin) digital transfer? Btw, transfers within 15 minutes are being done all over the world without the fancy blockchain and coin. I do understand the need for some transfers to be delayed , say liquidating all of one's investment to take a few days just for security reasons.
  - ur-whale 6y ago
    >can someone elaborate Well there's - for starters - : https://www.investopedia.com/terms/c/counterpartyrisk.asp https://www.investopedia.com/terms/c/counterpartyrisk.asp
    - freeone3000 6y ago
      All of that risk is associated with holding the goods and currency for this delayed period! It all makes sense, but, if ACH was 10 minutes instead of two days, the entire issue would barely matter.
- kllrnohj 6y ago
  > Complicated enough that it took the invention of Bitcoin to take it out of the bankers hands and move it to the digital realm. That's not at all what bitcoin does or helps with. Settlement is not complicated. ACH is complicated, but ACH isn't just settlement. Bank to bank wire transfers are just settlement, and are regularly same-day (even same-hour) with immediate fund availability. Hell, FedWire has been doing real-time near-instant moving of money between accounts since 1920 https://en.wikipedia.org/wiki/Fedwire https://en.wikipedia.org/wiki/Fedwire
  - lupire 6y ago
    Imagine if making a bank transfer was as east as sending a spam email. FedWire works because those banks work very hard to trust each other.
    - adamjb 6y ago
      Europeans and Australians [0] don't have to imagine. I can literally do a bank transfer to an email address. [0] non-exhaustive list
      - throwaheyy 6y ago
        That’s not the same as what parent comment was suggesting. You can’t send money to literally anyone using only an email address. You and the recipient still have to have regular bank accounts within the settlement system. The email address only serves as a more friendly identifier than the account number.
        adamjb 6y ago
        I should've been clearer: as long as the recipient has linked their email and/or mobile to their account (via PayID) settlement is instant and their email/mobile number can be used to address transfers
- manquer 6y ago
  In a lot of countries bank transfer is near real time. Chip and pin is the standard for more than a decade. Checks are no longer al primary way to pay anymore. U.S. banks are very much lagging in technology
brown9-2 6y ago
Why? What service actually transfers your money instantly? None does.
- zepolen 6y ago
  Cryptocurrency.
  - serf 6y ago
    which ones? btc transfers are pretty far from instant, by design.
    - zepolen 6y ago
      Nano. Feeless, instant and energy efficient.
    - thinkmassive 6y ago
      On chain, sure, but Lightning is pretty close to instant
      - Vecr 6y ago
        Yeah, but with lightning you really need enough value along the network path(s) to execute a transaction, possibly causing a similar thing as this to happen. I still think it would be an improvement though, as enthusiastic buyers could expand the network and get their buys through.
        ric2b 6y ago
        > Yeah, but with lightning you really need enough value along the network path(s) to execute a transaction, possibly causing a similar thing as this to happen. It's atomic, it either completes 100% or it fails, there's no partial state where the money gets stuck in one of the middle-nodes.

Alupis 6y ago

Pretend you're not a techie and not aware of how ACH works. "Instant" means instant to most folks. Not, "we're going to lend you the money for several days and can then force sell your stocks whenever we want". RH app even pretends the money is actually in your account. There's a lot of deception that went into designing the app.

nullc 6y ago
RH can't win here: Previously they came under fire when a user committed suicide after the RH app showed a substantial negative balance due to an offsetting position that hadn't settled yet. If they reflected it accurately they'd be showing a negative balance until the funds arrived and some users would think they lost all their funds. The real mistake is that they're extending margin to uninformed and unsophisticated users. ... but pointing that out just brings accusations that it's gatekeeping or limiting access to people who aren't rich.
- MattGaiser 6y ago
  Any broker that lets you do anything like day trading is essentially extending margin. A true cash account has quite a few restrictions: https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations https://www.fidelity.com/learning-center/trading-investing/t...
  - nullc 6y ago
    Sure. And? It used to be the case (only a couple years ago--) that you had to have an account worth at least $10k and at least represent that you had some experience to get approved for margin at most brokerages. Although it's been a long time, I spent the first decade with a trading account without margin just fine.
    - ziml77 6y ago
      As far as I know Robinhood only lets you trade on margin if you have a pending transfer of money in. They also have a very low limit on that of $1000.

pnathan 6y ago

It was not obvious to me. What my perception was, was that you were being loaned money against the transfer you were sending in. It was not clear at all to me that it was a generic margin account. Because, among other things, I consider margin trading to be a higher risk activity than I care to engage in; if I had known that I was signing up for a margin account, I would have not signed up at all. That said, I've definitely been edu-ma-cated on this, and I"ll be reading brokerage ToS more carefully from now on.

Tenoke 6y ago
>What my perception was, was that you were being loaned money against the transfer you were sending in That is margin trading though. It sounds like you thought only some trading on a loan counts as margin per definition but you knew you weren't trading with your actual money but a loan which is the important part.
- kllrnohj 6y ago
  https://www.investopedia.com/terms/m/margin.asp https://www.investopedia.com/terms/m/margin.asp margin trading overwhelmingly refers to paying a percentage as a collateral, not a stop-gap loan to cover ACH transfer delays. Yes you have to have a margin account to trade with immediately deposited funds (thanks ACH), but that's not the typical usage of the phrase and as such isn't what you'll find being described when you look up the term. Particularly since you can trade with unsettled funds using a cash account in some circumstances, see situation #3 here: https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_cashaccounts https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ca...
- pnathan 6y ago
  Ah - I have generally understood it as working on a percentage of the trade; being part and parcel of a leveraged strategy. It's one thing to loan me $100 when we have shaken hands and contractually already agreed that $100 is on its way. It's another thing to assume control of that $100 when the $100 already agreed to is on its way.
  - 6y ago

apsec112 6y ago

I'm a software engineer, so I think I'm more familiar with how apps work than most people, and this wasn't obvious to me! Good thing I only use Robinhood for money I don't care about losing.