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> 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 tr
by 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.