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"It will be hard to prove users suffered as a result of Robinhood’s measures because GameStop and other stocks covered by the curbs fell sharply on Thursday aft

• gruez 6y ago
  Probably because those are theoretical losses. The previous paragraph is also relevant: >However, Robinhood is not legally bound to carry out every trade and the lawsuits will not succeed without evidence the company restricted trading for an improper reason, such as to favor certain investors, according to several legal experts. As mentioned in other threads, robinhood wasn't able to come up with the deposit needed for their customers trades. In that case I don't see how it's any different than a service outage causing you to lose money, but you don't have a SLA in place.
  • Alex3917 6y ago
    > As mentioned in other threads, robinhood wasn't able to come up with the deposit needed for their customers trades. That's not true, they only blocked trades on those specific stocks. If it was really a liquidity issue then they could have rate limited all trades equally regardless of the stock in question.
    • MattGaiser 6y ago
      Those particular stocks had their deposit requirements increase, not all stocks.
    • Anon1096 6y ago
      The deposit requirements on those stocks were increased from 2% to 100%.
    • gruez 6y ago
      Not really, because the amount of deposit you need to put up is proportional to the volatility, among other factors. Therefore it makes sense to shut down trading for the stocks that incur a disproportionately high amount of deposit requirements for them. I guess it's possible for them to say "fuck it" and let everything trade until they run out of money, but I don't think they have an obligation to do that.
    • ssorallen 6y ago
      The collateral required by Robinhood’s clearing house to trade these stocks was raised to 100%, and it takes 2 days for trades to clear. Required collateral for other equities was not raised so there was no reason any other equities needed to be limited.
    • freeone3000 6y ago
      You'll notice on Friday, a list of stocks with high volatility had restricted trading - including non-meme stocks, like AMD. It's a reaction to higher holding percentages.
    • nullc 6y ago
      The collateral requirements differ from stock to stock.
    • LegitShady 6y ago
      The liquidity claim on tv was never supported and was later retracted. David Portnoy also called it out directly as well. Liquidity was not the reason for Robin hoods actions.
  • loceng 6y ago
    Favor certain investors - like the ones shorting? This isn't going to be an obvious clear cut case, and there will be plenty of gaslighting as part of the TENS of billions of $ on the line.
    • gruez 6y ago
      Just because their decision favored another party doesn't mean it was malicious and they would be liable. If at&t had to shut down their network for 2 hours because of a botched firmware update, that would heavily favor the hedge funds (who probably have redundant connections), but that doesn't mean you can go after them for not being able to sell your GME stocks.
      • loceng 6y ago
        The communications records of everyone involved will paint that picture for us, as to whether favours were played or not.
        • tgsovlerkhgsel 6y ago
          Assuming someone was dumb enough to put any potential shady deal in writing. Wouldn't be the first time, but it requires a special kind of incompetence to do that.
    • FireBeyond 6y ago
      And to be clear, the ones shorting _against_ the position _your customers hold_.
  • bmitc 6y ago
    But there is the possibility that Robinhood was also cutting trading to appease Citadel, who to my understanding, just happened to re-engage their short positions right before Robinhood cut buying to Gamestop stock. If the story about Robinhood running out of money is true, why wouldn't they just ban buying on margin and not all buying? I don't understand that.
    • elliekelly 6y ago
      > If the story about Robinhood running out of money is true, why wouldn't they just ban buying on margin and not all buying? I don't understand that. Because DTCC requires cash collateral while the transaction is settled whether the transaction happens in a margin account or a cash account. There's no distinction from DTCC's perspective. DTCC (reportedly) increased the collateral on $GME transactions to 100% of the transaction price compared to the typical 1-3% of the price.
      • bmitc 6y ago
        Thanks for that information. I didn’t know that or about DTCC. Is raising the collateral on transactions like that typical?
        • gruez 6y ago
          Yes https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478
    • MattGaiser 6y ago
      Because anyone buying right away after funding an account or selling the same day as buying is buying on margin. Margin is used to make a lot of the "instant" stuff happen. True cash accounts make them difficult to use for the day trading these people like to do. https://finance.zacks.com/tax-rules-use-proceeds-stock-sales-buy-new-stocks-8465.html https://finance.zacks.com/tax-rules-use-proceeds-stock-sales... https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations https://www.fidelity.com/learning-center/trading-investing/t...
  • ALittleLight 6y ago
    I don't understand the "deposit needed" aspect. I can't buy 2 shares of AMC at 12 dollars each but can buy 200 shares of TSLA at 800 each? How does that work?
• jcranmer 6y ago
  > Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users? Very probably. The general principle of Article III jurisprudence is that you have to demonstrate concrete, particularized harm to bring a case, not generalized, theoretical harm. If your allegation is that your harm arises from "I could have made a killing if I bought and sold the stock at appropriate times," well that is theoretical harm (especially when you undercut buy alleging that you could have done so on other platforms). You'd probably have to allege that you attempted to buy (alternatively, sell) the stock and Robinhood prevented you from doing so, but the fact that you signed a contract saying that you acknowledge that Robinhood can prevent you from being certain stocks is going to be a challenging hurdle to overcome.
  • ummonk 6y ago
    The harm is more particularized for those whose stock was auto-sold at the dip for a margin call because they had bought the stock in an instant account.
    • gruez 6y ago
      Is there proof of this? This gets repeated a lot and the best "proof" I've seen was a wsb post claiming they got sold "without [their] permission", but stopped short of saying whether they were using margin or not.
      • nrmitchi 6y ago
        One piece of the "Robinhood Abstraction" that is popping up a lot right now is that the fact that a large majority would have been using margin, but not known it. Much of the nice and fast experience that Robinhood offers ("Just signed up? You can start trading!", "Initiated a transfer? Start trading now!", "Just sold something? Rebuy something else immediately!") are all powered by the fact that these are all technical using margin.
      • Jommi 6y ago
• newacct583 6y ago
  > Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users? Yes, because you'd have to prove that Robinhood volume alone caused that drop in price. Robinhood isn't that big, and GME volume was crazy on Thursday. It's equally likely (and equally impossible to prove) that Robinhood saved their users money by preventing them from investing in a stock that was already up 500% and clearly overvalued relative to its fundamentals. This is the part that gets me about this: even now, after the mania has passed, everyone still thinks that GME was somehow a "sure thing" investment driven by a clearly incorrect understanding of how short trading works. And even now, after the magical short call rapture that was supposed to have come on Friday never materialized, people still want to believe that it would have kept going up and up and up. Guys, it wouldn't. It's a bubble. They pop. Everyone trying to buy at the peak was making a terrible investment decision.
  • Daho0n 6y ago
    Let's see in a few months if it were the peak. I doubt that very much and my money is on it.
    • newacct583 6y ago
      I say this with genuine love in my heart, and hoping dearly for you to see this more clearly: you got scammed. Those early short positions[1] are closed out, losses have been taken, GME is going to burble along for a bit as the people who scammed you exit their own positions and then it's going to crash back down to $80 or less. It is no longer a short squeeze, this is a speculative bubble sustained by people like you who were lied to about it being a short squeeze. [1] Obviously people are taking out new shorts like crazy on this stock given the bubble.
  • pfortuny 6y ago
    All bubbles pop, all soap becomes a bubble. Your statement is true technically. There is no way to argue with that. The 1000000-dollar question is “when”. Zerohedge (banned here) has been forecasting the pop of SPX and Nasdaq for several years now...
• fractionalhare 6y ago
  Do you actually know of a specific firm that kept its short position open through to Thursday? They would have had to survive through Tuesday and Wednesday, which seems unlikely if they were one of the original sub-$10 shorts.
• LatteLazy 6y ago
  Yes, because if they'd bought more they'd have lost money, and RobinHood only stopped them buying. "but we could have driven the price up by cornering the market" I hear RobinHood/WSB users say. Maybe, but that would be illegal market manipulation. So if your case is that you lost out because RobinHood wouldn't facilitate a crime, you have a poor case.
  • PartiallyTyped 6y ago
    Ladder short attack caused the price to drop during the low volume. Every time artificial limits were imposed by RH, the price dropped in __all__ the restricted stocks. That is when they restricted shares to 0, or to 2, and subsequently to 1, and again to 0. On Friday, there were puts expiring and HFs stood to lose a lot, they didn't, and the answer is obvious as to why.
    • ycombobreaker 6y ago
      Everything I can find online about this "ladder short attack" points to the GME activity. Does anybody have any explanation for this that predates the last week? This is not the first short squeeze, nor the first outage for retail traders during a volatile period. The only explanation I see on reddit refers to hedge funds lowering their bids, which isn't sufficient to explain the market actually dropping (there were other buyers out there, and market makers). Anyone can put in a lowball bid but it doesn't matter if it's far off-book. What does make sense to me is that cutting off a substantial amount of retail flow would reduce buying pressure, causing all market participants to regain at least a little confidence in a reversion to the mean. It just seems pretty tinfoil-hatty to me to view this as some sort of elite cabal, as if RH and Citadel were somehow the only participants who could effect price changes.
      • LatteLazy 6y ago
        Agreed. I wondered if it was autocorrect but it's all over reddit too. As best as I can see, they're saying the price falls if hedge funds decide to lower the bid price. That doesn't make much sense to me, but I'm not (quite) all knowing so...
• WaldoLydecker 6y ago
  It’s the specific users who couldn’t make trades who would need to show damage in the action under discussion. Not the wider world.