7 ms·

I don't have a Robinhood account, and I'm not involved in the GME/WSB stuff, but I would think twice about opening a Robinhood account now. Indeed, it's been e

by vertis 6y ago

I don't have a Robinhood account, and I'm not involved in the GME/WSB stuff, but I would think twice about opening a Robinhood account now. Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct. But then badly behaved businesses like Godaddy don't seem to suffer or go out of business, so I suspect Robinhood won't have too many long term problems.

maest 6y ago
This is not the first time RH has gone down during critical moments in the market. Yet their userbase grows and their users come back. They'll be fine.
- teddyfrozevelt 6y ago
  Maybe it's stupid, but I could forgive the outages, maybe because I wasn't doing any time critical trades when they happened. But deliberately limiting trades on dozens of stocks is so far past the line for me that I'm leaving Robinhood as soon as I find another brokerage I like.
- wutbrodo 6y ago
  During the other times, was their the perception that they were screwing their users over due to pressure by large financial institutions? That's a pretty salient difference for their brand.
- codesternews 6y ago
  This time it is different. Previously they had glitches etc. This time they by choice restricted users which lead their users loose. Whole concept they broke. If any investor still uses robinhood they are stupid. Your money and stock is not safe with Robinhood. They can restrict you any time.
  - ditonal 6y ago
    Totally right, and furthermore, Robinhood is facing some serious solvency issues. Their PR releases claiming this was clearing house related was already highly dubious, and is self-contradicting because they are blaming it on a liquidity issue while saying it's not a liquidity issue. But this is happening at the same time was mass account withdrawals/closures, and we're now learning this not only threatens their general solvency but ability to execute trades. This could easily cause a feedback loop that empties their accounts, at which point people are going to be unable to withdraw their cash which is goign to cause a bank run and drill the nails into their coffin even further. Healthy companies don't need to emergency borrow a billion dollars. If you have less than $250,000 on Robinhood, your account is FDIC insured so you'll eventually get your money back...but I think most people would prefer not to go through that process. Robinhood is on a death spiral and prudent financial advice is to move any assets you have off of it as soon as possible.
    - quercusa 6y ago
      FDIC is for banks. SIPC (of which RH is a member) is for brokerage houses. https://www.sipc.org/about-sipc/ https://www.sipc.org/about-sipc/
      - deleted 6y ago
        [deleted]
    - doanerock 6y ago
      "250,000 on Robinhood, your account is FDIC insured" That is only for the cash on hand, the securities are covered by SIPC.
    - JMTQp8lwXL 6y ago
      The solvency issue is the root cause leading me to leave Robinhood personally. The limitation on market orders was the symptom; the cause was a rotten core. This is the true reason why everyone should leave Robinhood. I do not want to deal with realizing FDIC/SIPC insurance preferably ever in my lifetime.
      - 6y ago
  - tptacek 6y ago
    Your claim that RH restricted users by choice seems false. RH is required by NSCC/DTCC rules to post collateral for trades in the process of settlement. As a result of volatility, the collateral requirements for meme stocks shot up from something like single digits to something perhaps approaching 100%. Robinhood was apparently forced to draw down a $600MM line of credit just to cover the trades it had already allowed.
    - capableweb 6y ago
      Sounds like Robinhood was setup to fail from the beginning, if so. If you make it as easy as possible to do trades but then start getting "rate-limited" essentially, it was never gonna scale in the first place. Gonna be interesting to see what gets to replace Robinhood for easy and reliable trades in the future.
      - tptacek 6y ago
        Don't let me come across like I'm defending Robinhood, which is an online casino dressed up to look like an investment application.
    - inkaudio 6y ago
      This is for stock sales which they did not restrict. Robinhood stopped the purchase of stock which does not require a collateral because the money is coming directly from the users cash balance. Don’t believe whatever they say, RH action was specifically to stop the short squeeze.
      - jonp888 6y ago
        This is just not true. They do have to post collateral for purchases, and the customer's own money cannot be used as the collateral.
        skedaddle 6y ago
        Just curious -- why not?
- deleted 6y ago
  [deleted]
- deleted 6y ago
  [deleted]
- jb775 6y ago
  This wasn't "going down", it was active blocking of specific stocks because RH exposed themselves to massive risk by assuming the hedge funds they were pimping their customers out to would never be swiftly bankrupted. RH was essentially letting their users pay full price for a stock, then lending that stock to hedge funds so they could use it against the actual stock owner by selling it short. Since the borrowed stock has already been resold (the stock the HF didn't own to begin with), now the question is if the HF can even afford to buy them all back. This is why the entire market dropped the other day, because HFs were selling off other positions to come up with the money. Sell offs could get a lot worse considering $GME is still currently shorted over 100%. If the govt steps in to save the hedge funds at the expense of millions of average Joe's, or if the hedge funds pull some sort of bankruptcy loophole card resulting in the average Joe's holding the bag while they continue on, we could see people revolt against the entire financial system as we know it.
gruez 6y ago
>Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct. Wait what? Is there a list somewhere? AFAIK interactive brokers (which doesn't engage in PFOF) also shut down trading.
- vertis 6y ago
  Yes, this[1] was the one that I found when searching. It shows that Robinhood is it's own, but as we know they route to Citadel. A bunch of others had a problem when Apex Holdings told them to restrict trading (or something along those lines). [1]: https://investorjunkie.com/stock-brokers/broker-clearing-firms/ https://investorjunkie.com/stock-brokers/broker-clearing-fir...
  - Daho0n 6y ago
    How come it works from all the way over here in Scandinavia? No problems with GME while RH was shutting it down. Also, Robin Hood - the irony. They are clearly for the rich against the poor. More like the sheriff of nottingham!
    - gruez 6y ago
      >How come it works from all the way over here in Scandinavia? No problems with GME while RH was shutting it down. Maybe because there's already a high barrier to trading US stocks (or stocks in general), so there wasn't enough people piling on to strain the brokerage's balance sheets?
      - egwor 6y ago
        Agreed. Probably highly likely that few others using that broker were involved.
    - Gwypaas 6y ago
      Because we buy stocks on the open market paying courtage for someone to execute the trade.
bena 6y ago
I've seen people who opened RobinHood accounts after all of this debacle with the forced selling of shares, etc.
tw8345 6y ago
Im shutting down my TD ameritrade account because of this. I did not want to trade any of these wacky stocks but its clear to me that in the event of a material market movement or event they will block trades or fail to execute. Thats a real big problem

by vertis 6y ago

maest 6y ago

This is not the first time RH has gone down during critical moments in the market. Yet their userbase grows and their users come back. They'll be fine.

teddyfrozevelt 6y ago
Maybe it's stupid, but I could forgive the outages, maybe because I wasn't doing any time critical trades when they happened. But deliberately limiting trades on dozens of stocks is so far past the line for me that I'm leaving Robinhood as soon as I find another brokerage I like.
wutbrodo 6y ago
During the other times, was their the perception that they were screwing their users over due to pressure by large financial institutions? That's a pretty salient difference for their brand.
codesternews 6y ago
This time it is different. Previously they had glitches etc. This time they by choice restricted users which lead their users loose. Whole concept they broke. If any investor still uses robinhood they are stupid. Your money and stock is not safe with Robinhood. They can restrict you any time.
- ditonal 6y ago
  Totally right, and furthermore, Robinhood is facing some serious solvency issues. Their PR releases claiming this was clearing house related was already highly dubious, and is self-contradicting because they are blaming it on a liquidity issue while saying it's not a liquidity issue. But this is happening at the same time was mass account withdrawals/closures, and we're now learning this not only threatens their general solvency but ability to execute trades. This could easily cause a feedback loop that empties their accounts, at which point people are going to be unable to withdraw their cash which is goign to cause a bank run and drill the nails into their coffin even further. Healthy companies don't need to emergency borrow a billion dollars. If you have less than $250,000 on Robinhood, your account is FDIC insured so you'll eventually get your money back...but I think most people would prefer not to go through that process. Robinhood is on a death spiral and prudent financial advice is to move any assets you have off of it as soon as possible.
  - quercusa 6y ago
    FDIC is for banks. SIPC (of which RH is a member) is for brokerage houses. https://www.sipc.org/about-sipc/ https://www.sipc.org/about-sipc/
    - deleted 6y ago
      [deleted]
  - doanerock 6y ago
    "250,000 on Robinhood, your account is FDIC insured" That is only for the cash on hand, the securities are covered by SIPC.
  - JMTQp8lwXL 6y ago
    The solvency issue is the root cause leading me to leave Robinhood personally. The limitation on market orders was the symptom; the cause was a rotten core. This is the true reason why everyone should leave Robinhood. I do not want to deal with realizing FDIC/SIPC insurance preferably ever in my lifetime.
    - 6y ago
- tptacek 6y ago
  Your claim that RH restricted users by choice seems false. RH is required by NSCC/DTCC rules to post collateral for trades in the process of settlement. As a result of volatility, the collateral requirements for meme stocks shot up from something like single digits to something perhaps approaching 100%. Robinhood was apparently forced to draw down a $600MM line of credit just to cover the trades it had already allowed.
  - capableweb 6y ago
    Sounds like Robinhood was setup to fail from the beginning, if so. If you make it as easy as possible to do trades but then start getting "rate-limited" essentially, it was never gonna scale in the first place. Gonna be interesting to see what gets to replace Robinhood for easy and reliable trades in the future.
    - tptacek 6y ago
      Don't let me come across like I'm defending Robinhood, which is an online casino dressed up to look like an investment application.
  - inkaudio 6y ago
    This is for stock sales which they did not restrict. Robinhood stopped the purchase of stock which does not require a collateral because the money is coming directly from the users cash balance. Don’t believe whatever they say, RH action was specifically to stop the short squeeze.
    - jonp888 6y ago
      This is just not true. They do have to post collateral for purchases, and the customer's own money cannot be used as the collateral.
      - skedaddle 6y ago
        Just curious -- why not?
deleted 6y ago
[deleted]
deleted 6y ago
[deleted]
jb775 6y ago
This wasn't "going down", it was active blocking of specific stocks because RH exposed themselves to massive risk by assuming the hedge funds they were pimping their customers out to would never be swiftly bankrupted. RH was essentially letting their users pay full price for a stock, then lending that stock to hedge funds so they could use it against the actual stock owner by selling it short. Since the borrowed stock has already been resold (the stock the HF didn't own to begin with), now the question is if the HF can even afford to buy them all back. This is why the entire market dropped the other day, because HFs were selling off other positions to come up with the money. Sell offs could get a lot worse considering $GME is still currently shorted over 100%. If the govt steps in to save the hedge funds at the expense of millions of average Joe's, or if the hedge funds pull some sort of bankruptcy loophole card resulting in the average Joe's holding the bag while they continue on, we could see people revolt against the entire financial system as we know it.

gruez 6y ago

>Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct. Wait what? Is there a list somewhere? AFAIK interactive brokers (which doesn't engage in PFOF) also shut down trading.

vertis 6y ago
Yes, this[1] was the one that I found when searching. It shows that Robinhood is it's own, but as we know they route to Citadel. A bunch of others had a problem when Apex Holdings told them to restrict trading (or something along those lines). [1]: https://investorjunkie.com/stock-brokers/broker-clearing-firms/ https://investorjunkie.com/stock-brokers/broker-clearing-fir...
- Daho0n 6y ago
  How come it works from all the way over here in Scandinavia? No problems with GME while RH was shutting it down. Also, Robin Hood - the irony. They are clearly for the rich against the poor. More like the sheriff of nottingham!
  - gruez 6y ago
    >How come it works from all the way over here in Scandinavia? No problems with GME while RH was shutting it down. Maybe because there's already a high barrier to trading US stocks (or stocks in general), so there wasn't enough people piling on to strain the brokerage's balance sheets?
    - egwor 6y ago
      Agreed. Probably highly likely that few others using that broker were involved.
  - Gwypaas 6y ago
    Because we buy stocks on the open market paying courtage for someone to execute the trade.

bena 6y ago

I've seen people who opened RobinHood accounts after all of this debacle with the forced selling of shares, etc.

tw8345 6y ago

Im shutting down my TD ameritrade account because of this. I did not want to trade any of these wacky stocks but its clear to me that in the event of a material market movement or event they will block trades or fail to execute. Thats a real big problem