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I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. And the Interactive Bro

by ummonk 6y ago

I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. And the Interactive Brokers chairman is explicit about why he chose to block buys.

gruez 6y ago
> I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. Is there any evidence for this, other than the general feeling of "rich people are powerful, therefore they must have been some meddling by them"? The formula for determining the deposit requirements is publicly documented: https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478, so the judgement call looks pretty straightforward to make.
- will_pseudonym 6y ago
  And who sets the formula, who lobbies for laws to be passed to require it, who runs and owns the clearing houses? Hint: It's in the thread you linked. > RH offered to open up stock market investing more broadly. They succeeded, clearly. But the regulations didn't change - there are still pro-Wall St, pro-incumbent rules and capital requirements. It's one of the most highly regulated industries in our nation. [0] > So @aoc is right to ask how it can be that Robinhood stopped its clients from buying certain securities. And what she'll find is that the reason is that Dodd-Frank requires brokers like RH to post collateral to cover their clients' trading risk pre-settlement. [1] > And it isn't the Fed or SEC who sets the rules. It's the Wall St owned central clearing entity itself, DTCC, that makes its own rules. So when the retail masses decided to squeeze the short-sellers, in the middle of crushing them, it was govt regulations which tripped them up. [2] This last tweet in the thread was made about 13h ago, about a day after the previous last tweet in the thread. It's quite interesting, if you ask me. > Update: the plot thickens ... @The_DTCC may have exercised its right to add additional margin charges for a set of these stocks. It's a Margin Liquidity Adjustment Charge. [3] [0] https://twitter.com/KralcTrebor/status/1354952710202814470 https://twitter.com/KralcTrebor/status/1354952710202814470 [1] https://twitter.com/KralcTrebor/status/1354952711217807364 https://twitter.com/KralcTrebor/status/1354952711217807364 [2] https://twitter.com/KralcTrebor/status/1354952712400601099 https://twitter.com/KralcTrebor/status/1354952712400601099 [3] https://twitter.com/KralcTrebor/status/1355175395642003456 https://twitter.com/KralcTrebor/status/1355175395642003456
- ummonk 6y ago
  The twitter thread you posted does have the evidence in the update https://twitter.com/KralcTrebor/status/1355172567242469377 https://twitter.com/KralcTrebor/status/1355172567242469377 And it's an open secret that Wall Street institutions colluding / bending ethics and the law is basically business as usual. (In this particular case I talked to a couple people I know who work in market makers and hedge funds and they took it as given that the requirements would have been put in place to protect short selling institutions)
- yomly 6y ago
  I find it curious when people give these institutions the benefit of the doubt. It flies in the face of the history of the industry and also what we know about basic human nature. I've moved around these types of social circles to know that any levers that can be pulled will be pulled. We also know that for large financial institutions, breaking the law is usually just a cost of doing business. Tangential, but GS was happy to facilitate 1MDB, and HSBC empower money launderers... In any case it is speculation so my opinion carries no real weight over yours, but it does make me wonder what has coloured my world view to be so cynical/nihilistic
  - gruez 6y ago
    >I find it curious when people give these institutions the benefit of the doubt. Is it any different than giving the election officials the benefit of the doubt rather than assuming that The Establishment rigged the election? not that I support the election fraud claims, but it's an interesting parallel to what's happening here.
    - yomly 6y ago
      Fair enough. Would rather not get into that one, but the world of finance doesn't exactly have a good track record of playing nice or even by the rules...
  - ummonk 6y ago
    I suspect people who give these institutions the benefit of the doubt haven’t actually moved around in those circles. I certainly would have given them the benefit of the doubt 5 years ago when I didn’t actually know anyone from those institutions.
- hahajk 6y ago
  > Depending on the net of buys/sells, RH is on the hook to pay or recieve that net cash. That’s credit risk. Except in RH case, their customers have already transferred money from their bank account to RH. RH should have 100% of the money they need for normal buys. The reasoning given doesn’t actually make sense. (unless it was margin accounts that were the problem, in which case RH should stop issuing margin. or the “instant deposit” feature. They could just disable that until they could afford it again.)
  - gruez 6y ago
    >Except in RH case, their customers have already transferred money from their bank account to RH. No, they have to front the money and they can't use customer's funds. https://finance.yahoo.com/video/heres-why-robinhood-restricting-users-173049721.html https://finance.yahoo.com/video/heres-why-robinhood-restrict... And we just can't afford-- well, we're not a clearing firm, but our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it. >(unless it was margin accounts that were the problem, in which case RH should stop issuing margin. or the “instant deposit” feature. They could just disable that until they could afford it again.) It's not as simple because due to settlement rules, a lot of normal transactions actually require margin. eg. selling stock A and buying stock B with the proceeds the same day. Due to T+2 settlement the money isn't actually yours until two days later.

by ummonk 6y ago

gruez 6y ago

> I guarantee you the interests of institutions on the short side of the stock factored in to the decision to raise deposit requirements. Is there any evidence for this, other than the general feeling of "rich people are powerful, therefore they must have been some meddling by them"? The formula for determining the deposit requirements is publicly documented: https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478, so the judgement call looks pretty straightforward to make.

will_pseudonym 6y ago
And who sets the formula, who lobbies for laws to be passed to require it, who runs and owns the clearing houses? Hint: It's in the thread you linked. > RH offered to open up stock market investing more broadly. They succeeded, clearly. But the regulations didn't change - there are still pro-Wall St, pro-incumbent rules and capital requirements. It's one of the most highly regulated industries in our nation. [0] > So @aoc is right to ask how it can be that Robinhood stopped its clients from buying certain securities. And what she'll find is that the reason is that Dodd-Frank requires brokers like RH to post collateral to cover their clients' trading risk pre-settlement. [1] > And it isn't the Fed or SEC who sets the rules. It's the Wall St owned central clearing entity itself, DTCC, that makes its own rules. So when the retail masses decided to squeeze the short-sellers, in the middle of crushing them, it was govt regulations which tripped them up. [2] This last tweet in the thread was made about 13h ago, about a day after the previous last tweet in the thread. It's quite interesting, if you ask me. > Update: the plot thickens ... @The_DTCC may have exercised its right to add additional margin charges for a set of these stocks. It's a Margin Liquidity Adjustment Charge. [3] [0] https://twitter.com/KralcTrebor/status/1354952710202814470 https://twitter.com/KralcTrebor/status/1354952710202814470 [1] https://twitter.com/KralcTrebor/status/1354952711217807364 https://twitter.com/KralcTrebor/status/1354952711217807364 [2] https://twitter.com/KralcTrebor/status/1354952712400601099 https://twitter.com/KralcTrebor/status/1354952712400601099 [3] https://twitter.com/KralcTrebor/status/1355175395642003456 https://twitter.com/KralcTrebor/status/1355175395642003456
ummonk 6y ago
The twitter thread you posted does have the evidence in the update https://twitter.com/KralcTrebor/status/1355172567242469377 https://twitter.com/KralcTrebor/status/1355172567242469377 And it's an open secret that Wall Street institutions colluding / bending ethics and the law is basically business as usual. (In this particular case I talked to a couple people I know who work in market makers and hedge funds and they took it as given that the requirements would have been put in place to protect short selling institutions)
yomly 6y ago
I find it curious when people give these institutions the benefit of the doubt. It flies in the face of the history of the industry and also what we know about basic human nature. I've moved around these types of social circles to know that any levers that can be pulled will be pulled. We also know that for large financial institutions, breaking the law is usually just a cost of doing business. Tangential, but GS was happy to facilitate 1MDB, and HSBC empower money launderers... In any case it is speculation so my opinion carries no real weight over yours, but it does make me wonder what has coloured my world view to be so cynical/nihilistic
- gruez 6y ago
  >I find it curious when people give these institutions the benefit of the doubt. Is it any different than giving the election officials the benefit of the doubt rather than assuming that The Establishment rigged the election? not that I support the election fraud claims, but it's an interesting parallel to what's happening here.
  - yomly 6y ago
    Fair enough. Would rather not get into that one, but the world of finance doesn't exactly have a good track record of playing nice or even by the rules...
- ummonk 6y ago
  I suspect people who give these institutions the benefit of the doubt haven’t actually moved around in those circles. I certainly would have given them the benefit of the doubt 5 years ago when I didn’t actually know anyone from those institutions.
hahajk 6y ago
> Depending on the net of buys/sells, RH is on the hook to pay or recieve that net cash. That’s credit risk. Except in RH case, their customers have already transferred money from their bank account to RH. RH should have 100% of the money they need for normal buys. The reasoning given doesn’t actually make sense. (unless it was margin accounts that were the problem, in which case RH should stop issuing margin. or the “instant deposit” feature. They could just disable that until they could afford it again.)
- gruez 6y ago
  >Except in RH case, their customers have already transferred money from their bank account to RH. No, they have to front the money and they can't use customer's funds. https://finance.yahoo.com/video/heres-why-robinhood-restricting-users-173049721.html https://finance.yahoo.com/video/heres-why-robinhood-restrict... And we just can't afford-- well, we're not a clearing firm, but our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it. >(unless it was margin accounts that were the problem, in which case RH should stop issuing margin. or the “instant deposit” feature. They could just disable that until they could afford it again.) It's not as simple because due to settlement rules, a lot of normal transactions actually require margin. eg. selling stock A and buying stock B with the proceeds the same day. Due to T+2 settlement the money isn't actually yours until two days later.