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That's absolutely not true. You have to specifically opt-in to trading on margin, read disclosures, and have a minimum $2k balance. Instant deposit is not trad

That's absolutely not true. You have to specifically opt-in to trading on margin, read disclosures, and have a minimum $2k balance. Instant deposit is not trading on margin, it's trading on deposits that you make that are instantly available in Robinhood but take a day or two to clear ACH. That's all made clear up front on the screens about Instant Deposit, not buried in T&C.

nrmitchi 6y ago
https://robinhood.com/us/en/support/articles/robinhood-accounts/ https://robinhood.com/us/en/support/articles/robinhood-accou... "When you sign up for a new account, you’ll automatically start with a Robinhood Instant account, *which is a margin account*." > it's trading on deposits that you make that are instantly available If it's made instantly available, it is being loaned to you from Robinhood, but that is... still margin. It may be interest free margin, but it's still margin. It is money that has not settled into your account yet. If it's not on margin, you can't use it until it's settled. Hell if you sell a stock and then immediately buy a new one, that is also margin, because, again, the funds have not settled into your account yet. If you want a Cash account (a non-margin account), you can downgrade, and "You won’t have access to instant deposits or instant settlements". The fact that you have to do this manually however is, in my opinion, predatory, and setting up a house of cards that will eventually fall over, because users won't understand what is actually happening. But the fact that it's predatory doesn't make it not true.
- Quinner 6y ago
  If you want to call that margin, it's margin with 100% collateral. It's not margin in any meaningful sense. It's like if you handed your broker a check and said you wanted to make buy a stock for the value of the check. Would the trade clear before the check? Sure. Is that margin? I really struggle to see how.
  - nrmitchi 6y ago
    > it's margin with 100% collateral Except the collateral hasn't settled yet, so you can't guarantee what could happen. > It's like if you handed your broker a check and said you wanted to make buy a stock for the value of the check. There are tons of things that could happen here. The check could bounce. Your bank could go under. The check could be fake. You could have stolen the check from someone else, and when they see it clear, they'll call their bank and the funds will be withdrawn. > Would the trade clear before the check? Sure. Is that margin? Yes, it is. The broker may choose to loan you the money short term with the assumption that the check will clear, but they don't have to. They could just refuse to make the trade until the funds clear. If they did choose to buy the stock for you, they would be accepting that risk. If your money doesn't clear, they will be stuck with the stock. If this was a share of VTI, with low volatility, they'd likely be fine with it. Even if the check didn't clear, they could just re-sell the stock. It's super unlikely to drastically check in value in the 2 days before the check clears. If this was a share of GME today, they are buying it for you for $350. There is a change that your check doesn't clear. There is a chance that tomorrow GME is worth $50. If both of those things happen, your broker would have paid $350 for a stock that they didn't want, and can only sell for $50, and be stuck holding a $300 loss. Ie, they have loaned you money (even if it's short term and with no interest), but if the account doesn't actually get funded, or a previous trade doesn't actually settle[0], they are left holding the bag, the same as if it was "traditional" margin. [0] This is unlikely, but it could happen for a variety of reasons. I believe this would correlate with much larger issues with the state of the financial system, and in that case would just start compounding issues (because if your trade doesn't settle, then chances are a whole bunch of trades don't settle, and your broker will be left holding the bag for all of them)
    - didibus 6y ago
      This all actually seems amazing for the user? I'm confused why people are complaining about it?
      - nrmitchi 6y ago
        In typical times, yes, it is "amazing" for the user, in that they get to trade more often without worrying about the underlying complexity. People right now are complaining because they are (reportedly) being margin-called, largely yelling on the internet that they are being margin called but weren't using margin therefore Robinhood is conspiring with George Soros or some shit, even though they technically were trading with Robinhoods money. Should Robinhood be allowed to treat something as a trade on margin when the fact that it is on margin is papered over and the user clearly doesn't understand what they're doing? Probably not. But this isn't Robinhood "manipulating the market to support Hedge Funds (or whoever the new enemy is today[0]); this is Robinhood having a gold-plated pile of dog-shit that they've been selling as solid gold for the last couple of years, and now the cracks are showing. [0] I heard this morning that the new enemy who is trying to manipulate the market is the DTCC. Which is just... comical in my opinion, but hey, the internet is gunna internet I guess
totalZero 6y ago
You are correct. FINRA Rule 4210 defines the requirements for margin. Robinhood's FAQ on the subject was ostensibly written by someone who doesn't understand that "margin" is a word with specific meaning in the context of a highly regulated brokerage business. It's an account where you take risk with only partial equity, with the institution putting up the balance. From FINRA: "The term 'margin' means the amount of equity to be maintained on a security position held or carried in an account." Elsewhere on Robinhood's site, I was happy to find some acknowledgment of the regulatory requirements: "To purchase a security on margin, we require that you have at least $2,000 or 100 percent of the security’s purchase price (whichever value is less) deposited into your account. This is called the "margin minimum." If you are designated a pattern day trader, you must have $25,000 in portfolio value (minus any cryptocurrency positions) before you continue day trading. Note: If you are borrowing on margin and fall under $2k portfolio value, you are at risk of a margin call and potential liquidation" People here are downvoting you because they don't know the rules and they believe Robinhood's website when it says that Robinhood Instant is margin.

nrmitchi 6y ago

https://robinhood.com/us/en/support/articles/robinhood-accounts/ https://robinhood.com/us/en/support/articles/robinhood-accou... "When you sign up for a new account, you’ll automatically start with a Robinhood Instant account, *which is a margin account*." > it's trading on deposits that you make that are instantly available If it's made instantly available, it is being loaned to you from Robinhood, but that is... still margin. It may be interest free margin, but it's still margin. It is money that has not settled into your account yet. If it's not on margin, you can't use it until it's settled. Hell if you sell a stock and then immediately buy a new one, that is also margin, because, again, the funds have not settled into your account yet. If you want a Cash account (a non-margin account), you can downgrade, and "You won’t have access to instant deposits or instant settlements". The fact that you have to do this manually however is, in my opinion, predatory, and setting up a house of cards that will eventually fall over, because users won't understand what is actually happening. But the fact that it's predatory doesn't make it not true.

Quinner 6y ago
If you want to call that margin, it's margin with 100% collateral. It's not margin in any meaningful sense. It's like if you handed your broker a check and said you wanted to make buy a stock for the value of the check. Would the trade clear before the check? Sure. Is that margin? I really struggle to see how.
- nrmitchi 6y ago
  > it's margin with 100% collateral Except the collateral hasn't settled yet, so you can't guarantee what could happen. > It's like if you handed your broker a check and said you wanted to make buy a stock for the value of the check. There are tons of things that could happen here. The check could bounce. Your bank could go under. The check could be fake. You could have stolen the check from someone else, and when they see it clear, they'll call their bank and the funds will be withdrawn. > Would the trade clear before the check? Sure. Is that margin? Yes, it is. The broker may choose to loan you the money short term with the assumption that the check will clear, but they don't have to. They could just refuse to make the trade until the funds clear. If they did choose to buy the stock for you, they would be accepting that risk. If your money doesn't clear, they will be stuck with the stock. If this was a share of VTI, with low volatility, they'd likely be fine with it. Even if the check didn't clear, they could just re-sell the stock. It's super unlikely to drastically check in value in the 2 days before the check clears. If this was a share of GME today, they are buying it for you for $350. There is a change that your check doesn't clear. There is a chance that tomorrow GME is worth $50. If both of those things happen, your broker would have paid $350 for a stock that they didn't want, and can only sell for $50, and be stuck holding a $300 loss. Ie, they have loaned you money (even if it's short term and with no interest), but if the account doesn't actually get funded, or a previous trade doesn't actually settle[0], they are left holding the bag, the same as if it was "traditional" margin. [0] This is unlikely, but it could happen for a variety of reasons. I believe this would correlate with much larger issues with the state of the financial system, and in that case would just start compounding issues (because if your trade doesn't settle, then chances are a whole bunch of trades don't settle, and your broker will be left holding the bag for all of them)
  - didibus 6y ago
    This all actually seems amazing for the user? I'm confused why people are complaining about it?
    - nrmitchi 6y ago
      In typical times, yes, it is "amazing" for the user, in that they get to trade more often without worrying about the underlying complexity. People right now are complaining because they are (reportedly) being margin-called, largely yelling on the internet that they are being margin called but weren't using margin therefore Robinhood is conspiring with George Soros or some shit, even though they technically were trading with Robinhoods money. Should Robinhood be allowed to treat something as a trade on margin when the fact that it is on margin is papered over and the user clearly doesn't understand what they're doing? Probably not. But this isn't Robinhood "manipulating the market to support Hedge Funds (or whoever the new enemy is today[0]); this is Robinhood having a gold-plated pile of dog-shit that they've been selling as solid gold for the last couple of years, and now the cracks are showing. [0] I heard this morning that the new enemy who is trying to manipulate the market is the DTCC. Which is just... comical in my opinion, but hey, the internet is gunna internet I guess

totalZero 6y ago

You are correct. FINRA Rule 4210 defines the requirements for margin. Robinhood's FAQ on the subject was ostensibly written by someone who doesn't understand that "margin" is a word with specific meaning in the context of a highly regulated brokerage business. It's an account where you take risk with only partial equity, with the institution putting up the balance. From FINRA: "The term 'margin' means the amount of equity to be maintained on a security position held or carried in an account." Elsewhere on Robinhood's site, I was happy to find some acknowledgment of the regulatory requirements: "To purchase a security on margin, we require that you have at least $2,000 or 100 percent of the security’s purchase price (whichever value is less) deposited into your account. This is called the "margin minimum." If you are designated a pattern day trader, you must have $25,000 in portfolio value (minus any cryptocurrency positions) before you continue day trading. Note: If you are borrowing on margin and fall under $2k portfolio value, you are at risk of a margin call and potential liquidation" People here are downvoting you because they don't know the rules and they believe Robinhood's website when it says that Robinhood Instant is margin.