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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 g

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?
- deleted 6y ago
  [deleted]
- karmicthreat 6y ago
  Because your collateral requirement can vary based on the stock volatility.
- tedunangst 6y ago
  GME moved about 2/3 as much as AAPL today.
- evanpw 6y ago
  On Tuesday, GME traded more volume than any other stock, and that's on a day when the total market volume was much higher than usual (Wednesday is now the all-time record for share volume).
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015a 6y ago
My guess is that Robinhood's deposits with the DTCC are running dry, so they're charging more to settle any transactions to manage their own risk. Robinhood then locks down a bunch of popular stocks in addition to the volatile ones. In a way, its a tragedy of the commons. It would be both sad and ironic if the only casualty of this black swan event were robinhood. But, they likely still have avenues open to them toward recovery.
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lordnacho 6y ago
Well I don't want to say positive things about financial risk models, but it does make sense that they flash higher risk when the price has moved so much. Basically, if I'm lending you money to buy something and that thing is suddenly moving a whole lot more than it used to, it's prudent to ask for more collateral to cover your potential losses.
karmicthreat 6y ago
Because if RH were to collapse the clearing house would be left holding the bag. And clearing houses don't have that kind of money. So DTCC (the main clearing house) going under would stop pretty much all trading in the US. So the clearing house requires 100% collateral for some stocks now instead of up to 5%. RH can't afford that and GME has been eating up 50% of RH daily trades.
- HenryKissinger 6y ago
  > So DTCC (the main clearing house) going under would stop pretty much all trading in the US. What would be the impact of that on the global financial markets? On the real economy? I think we're going to see some difficult regulations on retail investors in the not too far future.
  - karmicthreat 6y ago
    Realistically? Nobody is going to let DTCC go under, ever. But they don't want to be the one begging for a government bailout either.
- JMTQp8lwXL 6y ago
  Sounds like clearing houses need more insurance themselves.
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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?

deleted 6y ago
[deleted]
karmicthreat 6y ago
Because your collateral requirement can vary based on the stock volatility.
tedunangst 6y ago
GME moved about 2/3 as much as AAPL today.
evanpw 6y ago
On Tuesday, GME traded more volume than any other stock, and that's on a day when the total market volume was much higher than usual (Wednesday is now the all-time record for share volume).

deleted 6y ago

[deleted]

015a 6y ago

My guess is that Robinhood's deposits with the DTCC are running dry, so they're charging more to settle any transactions to manage their own risk. Robinhood then locks down a bunch of popular stocks in addition to the volatile ones. In a way, its a tragedy of the commons. It would be both sad and ironic if the only casualty of this black swan event were robinhood. But, they likely still have avenues open to them toward recovery.

deleted 6y ago

[deleted]

lordnacho 6y ago

Well I don't want to say positive things about financial risk models, but it does make sense that they flash higher risk when the price has moved so much. Basically, if I'm lending you money to buy something and that thing is suddenly moving a whole lot more than it used to, it's prudent to ask for more collateral to cover your potential losses.

karmicthreat 6y ago

Because if RH were to collapse the clearing house would be left holding the bag. And clearing houses don't have that kind of money. So DTCC (the main clearing house) going under would stop pretty much all trading in the US. So the clearing house requires 100% collateral for some stocks now instead of up to 5%. RH can't afford that and GME has been eating up 50% of RH daily trades.

HenryKissinger 6y ago
> So DTCC (the main clearing house) going under would stop pretty much all trading in the US. What would be the impact of that on the global financial markets? On the real economy? I think we're going to see some difficult regulations on retail investors in the not too far future.
- karmicthreat 6y ago
  Realistically? Nobody is going to let DTCC go under, ever. But they don't want to be the one begging for a government bailout either.
JMTQp8lwXL 6y ago
Sounds like clearing houses need more insurance themselves.

deleted 6y ago

[deleted]