5 ms·

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

• 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.
        • MattGaiser 6y ago
          It is also margin trading if you buy and sell before settlement. Buying a stock, selling it a day later, and using the funds to buy something else requires a margin account. https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations https://www.fidelity.com/learning-center/trading-investing/t...
          • kllrnohj 6y ago
            > It is also margin trading if you buy and sell before settlement Not always, see situation #3 https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_cashaccounts https://www.sec.gov/oiea/investor-alerts-and-bulletins/ib_ca... You need margin to engage in day-trading, but you can sell a settled stock & immediately use the funds to buy something else just fine as long as you then hold onto that purchase for 2 days.
  • ziml77 6y ago
    People hate the gatekeeping but then complain when they get bitten by something they didn't understand. There's only so much you can boil this stuff down and if they don't want gatekeeping then they need to accept personal responsibility when it turns out that they didn't know as much as they thought they did.
    • chii 6y ago
      > they need to accept personal responsibility when it turns out that they didn't know as much as they thought they did. aka, RH is between a rock and a hard place - either the clueless user suicides due to poor understanding, and causing bad PR, or they do what they're doing now.
      • sneak 6y ago
        One is their fault (being misleading), the other is not (the user not understanding).
        • jfoster 6y ago
          Is it so black & white? Is it not possible to design an interface that shows the true state but is also indicative of how things should eventually settle?
          • rhizome 6y ago
            The web is full of red circles with exclamation points.
      • rhizome 6y ago
        Or, you know, explain what's going on in the UI.
        • nemothekid 6y ago
          I think RH makes things sufficiently clear. The problem is RH is just a shitty platform that is susceptible to these kinds of problems due to high volatility which forces them into a regulatory corner every once in a blue moon. I was a user when they had that suicide situation and RH did do a better job of explaining your actual balance when you entered a somewhat complex trade that caused you to have a negative balance. Still a user, who didn't know what he was doing, entered a complex trade, saw something he didn't understand and ended his life. In response Robinhood could have: 1. Made the UI "easier" to understand (i.e. lie) for 99% of situations 2. Raise the entry requirements to ensure people knew what they were doing (Gatekeep) They chose (and continue to choose) 1, and I don't envy them - how would ever explain all the ways a margin account can put you in trouble on a 4 inch screen? Most users only care about "instant deposits" and will never get into trouble 99% of time. It took 2 "black swan" events (IIRC, the first suicide issue was during the first COVID market crash) for these issues to come to light.
  • joshspankit 6y ago
    They could certainly have won by being clear on each screen. They specifically positioned as the “everyman trading platform”, and so even from the drawing board they knew that the majority of app users would be people with little or no experience. All they had to do to win was to say “Hey, I know this balance looks bad, but it’s actually not the final number and here’s why”, and similarly: to be explicit about why they automatically make margin accounts, and then to again mention that when people purchase stocks.
    • nullc 6y ago
      I think you might underestimate how deeply and inexplicably confused people can get. I fielded a question from a friend who was furious that his broker wouldn't let him exercise a call yesterday ... a call that he was _short_. But he understood his position enough to understand exercising the call would be very profitable for him. Part of the reason that he thought he could excercise it was because there were notices about call exercise (presumably that it was still available for people who were already long the calls). It's extremely hard to anticipate all the ways someone might become confused and adding additional material to resolve a potential confusion risks introducing other new and novel confusion. There is a constant trade-off and probably the only universal fix is the ready availability of competent human support, which doesn't exactly fit inside the normal "app" business model. I think the goal of an actual "everyman trading platform" is essentially achieved by the sorts of interfaces offered on 401k accounts-- geared around not-more-than-daily trades of highly liquid securities (and if not outright curated, at least focusing on diverse relatively safe funds). What RH is doing might be marketed as an everyman trading platform but for many (most?) users it's just a casino.
      • joshspankit 6y ago
        > I think you might underestimate how deeply and inexplicably confused people can get. > ... > It's extremely hard to anticipate all the ways someone might become confused and adding additional material to resolve a potential confusion risks introducing other new and novel confusion. I actually support this argument. I also concede that it’s easy to point out the information in hindsight. But I will still argue that a vital part of building a company of RH’s size and branding is about taking the time to think deeply about the customer experience. To be the experts. To distill that expertise carefully when designing each service and each app screen. Just based on how RH potentially “sold shares out from under people”, and how the accounts are automatically margin accounts as apparently stated on some part of the user agreement; RH was specifically aware of how this would violate user expectation and they chose not to address it. It’s very difficult, I feel, for someone to argue on the basis of “well yes, of course they were margin accounts, it’s obvious to anyone who knows about how stock accounts work because <blank>” because RH was specifically designing their platform around people who don’t know how stock accounts work.
  • dataflow 6y ago
    Sure they can win here. Their advertisement for Gold literally says "access to margin" on one of its selling points. How is anyone without Gold supposed to read that without mistakenly concluding they don't have margin? That's misleading if not outright deceptive. They can easily "win" by... removing that clause, and (optionally, or not) replacing it with something like "access to margin beyond your portfolio value" or something. It's not that they're already doing things as well as they can and the problem is just too complicated to simplify further. They actively mislead people. And note that "borrowing money" does not imply "have margin" for people either. They might realize they're borrowing money, but not realize that has further implications they might not expect, like the broker being able to sell your stock without your approval. If they actually use the word "margin", people could at least look up what it means and likely realize it's a nontrivial topic. But just saying we'll make $X available to you makes it so much harder for them to understand there are non-obvious implications.
  • Spivak 6y ago
    Am I missing something here? The winning play is just not having the instant feature or at very least making it an “and also take out a loan” button. Then you have a $0 balance until your transfer settles and then it’s positive. No weirdness. You can’t blame people for their ignorance when you present them a fiction. If your cute little abstraction leaks then don’t do it.
    • nullc 6y ago
      Insufficient abstraction-- failing to hide the loan ahead of settlement-- was previously blamed for one of their users committing suicide...
      • lupire 6y ago
        They should be tagging the loan and pending settlements (like every bank does when you deposit a check!) not hiding it.
        • deleted 6y ago
          [deleted]
  • xiphias2 6y ago
    Actually RH already won: they just got $1B extra from the investors. Also I’m sure what retail investors experience now (dealing with lower lever details of the abstraction they were used to) was known by more experienced traders, but I still think that it’s better to lose money this way than trusting in a pension fund for 50 years that hides everything.
  • Aeolun 6y ago
    They can show how many funds are pending transfer at the same time they’re showing you your actual balance.
• MattGaiser 6y ago
  Any broker that lets you immediately use the cash from a sale to buy something new is also doing the same deception. If an account allows those, it is a margin account.
  • Alupis 6y ago
    The typical RH customer... the one that invests spare change, purchases fractions of a share, and thinks they can get rich off a $100 investment, is not going to know these nuances. There's good reasons the traditional brokerages have so many rules... The facts seem to be RH saw a opportunity to prey on uninformed individuals by making investing seem "cool" and "stupid easy". RH deliberately did not do a good job of A) Putting limits on newbies (like no margin!) so they do not get themselves into trouble and B) Explaining the more complicated concepts behind what RH was allowing literally any mirror-fogging human being to do.
    • Tenoke 6y ago
      Plenty of people trading for 10k at Schwab don't know either. Plenty of people don't know the details of their bank account, too. I do blame RH but not for this.. People are always going to be uninformed about some things, yes we should minimize that but we shouldn't make services available only to the rich because of it.
      • Alupis 6y ago
        I'm not aware of any other institution that allows to to take on debt by accident.
        • Tenoke 6y ago
          You've never heard of a reversed PayPal or bank transaction that leaves users with a negative balance?
        • kortilla 6y ago
          Banks (overdraft)
• db579 6y ago
  OK so as a none techie why is it not genuinely instant? Why can't my cash be exchanged for the stock in real time (where real time is defined as within a minute or two say).
  • astrange 6y ago
    It's cheaper to do it slower - banks don't have to constantly talk to each other all day. Russia actually gave up on same day settlement and called it a modernization. https://www.fintechfutures.com/2013/03/moscow-exchange-adopts-t2-settlement/ https://www.fintechfutures.com/2013/03/moscow-exchange-adopt... Also, you may still be able to pay for stocks with checks at some places, so the cash isn't always available.
    • FireBeyond 6y ago
      When I left Australia in 2006, inter bank transfers settled every four hours. Often by ISDN lines between banks. "Constantly talking" is a BS excuse. As far as I know (someone still there can correct me) inter bank transfers there are now down to 5 minutes. The US banking system is arcane and archaic. It's cheaper not to modernize to be sure. Forgive me for being frustrated at banks cheaping out on this when they average quarter of a trillion dollars in profit every year over the last few years.
      • manquer 6y ago
        In India IMPS or UPI tranfer is less than a second.NEFT is weekends every one hour. RTGS is more or less real time I routinely pay street vendors directly from my bank account to theirs for 10¢ transactions .
      • db579 6y ago
        Yep, in Europe inter-bank transfers are also instant and if the underlying reason for all these regulations, confusions and trading impact is that US institutions have just been too cheap to upgrade the legacy infrastructure running the biggest store and exchange of value in the world then frankly surprise and anger seems justified.
• kinkrtyavimoodh 6y ago
  I AM a techie and even I would take RH on their word when they say 'instant'. When I send money to India from a US bank account via an intermediary (so that neither the US bank nor the Indian bank are first-party to the transaction) it is removed from my US account (in USD) and reaches my Indian account (in INR) within seconds, and I can see the balance in my Indian account and spend it right away, so I have no reason to believe it can't happen domestically when it doesn't even involve a currency change. It's like this in most parts of the world. It's only the perversity of the American banking system where money transfers in this day and age routinely take 2-3 days and no one thinks there's anything bizarre about that.
  • mensetmanusman 6y ago
    It’s a balance, because instant transfer has some bad side effects. E.g. if a scammer steals all of your money, it would be good to have a day to try to cancel that...
    • philderbeast 6y ago
      reversing transactions is a thing even without putting an artificial delay in the transaction process.
  • didibus 6y ago
    > When I send money to India from a US bank account via an intermediary (so that neither the US bank nor the Indian bank are first-party to the transaction) it is removed from my US account (in USD) and reaches my Indian account (in INR) within seconds, and I can see the balance in my Indian account and spend it right away That's actually a lot more complicated. The Banks take loan with one another to make this happen as well from what I read.
    • kinkrtyavimoodh 6y ago
      It might be so, but I don't work in that field, so my perception will be guided by what I see. Which is my point, unless you are intimately familiar with how ACH etc works it's natural to assume that these transfers are near instantaneous.
• vineyardmike 6y ago
  it doesn't take techie knowledge, but I'll admit it takes financial knowledge. Which IMO you should have before you do anything "complex" like invest real money.