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Yeah....except all the more legitimate brokerages didn't limit anything. TD Ameritrade made me place limit orders, but that is not even close to the same thing.

by pfisch 6y ago

Yeah....except all the more legitimate brokerages didn't limit anything. TD Ameritrade made me place limit orders, but that is not even close to the same thing. Fidelity was unaffected.

sroussey 6y ago
Public was limited by their clearinghouse. Several brokerages did this. Some did not, mostly since their clientele wasn’t buying these anyhow.
- pfisch 6y ago
  Name a big, reputable brokerage that did this.
  - tptacek 6y ago
    A nice thing about being a big, reputable brokerage is that you have access to big, reputable piles of cash to cover clearing collateral.
    - pfisch 6y ago
      If you are operating a brokerage that can't cover when people are buying stock with all cash then you should be in breach and be forced to shut down and/or forced into bankruptcy by owing all the stockholders of the stocks in question the actual damages you caused them. Your only real job is to operate fair and unbiased bid/ask spreads and execute trades fairly. If you aren't going to do that then you are running a scam on your customers. How is this fundamentally different then you placing a bet at a roulette table and the casino changing the rules mid-spin to make sure you will lose?
      - tptacek 6y ago
        A casino will absolutely shut a machine or a table down whenever the hell they want. I don't understand your argument. RH either has the money to put up collateral or they don't. They didn't this week. That seems like the end of the story. They can't just "choose" to have more cash on hand than they actually have.
      - kasey_junk 6y ago
        I think one thing people are very confused by is the “all cash” part of your sentiment. If you “deposit” money with Robinhood (or any other broker) and can trade it immediately (or any timeframe less than a few days) you are not trading cash. Cash takes days to move from 1 account to another without taking on credit risk. Similarly if you sell shares in 1 symbol and buy shares in another in less of a time frame than a few days you aren’t using cash. You are using credit (because it takes days for sales to settle). All of that credit risk is all currently legislated to go through a few bottlenecks who have the power to enforce their own credit rules. Analogies are dumb but it would be like if Amex called all the casinos and said “everyone has 90% less credit than they did 2 minutes ago”. If you had a roulette ball running based on your previous credit line at Amex you can bet the Casino would grab that ball. Especially if it had 200k Amex lendees in their pits.
        pfisch 6y ago
        In which case I can understand you not being able to buy, because you are buying on margin. That is not what I'm talking about though. I'm talking about 100% cash. If you are trading on margin you can get margin called. If you aren't though your broker has no right to do this kind of stuff. You are suggesting the casino would grab the ball for people who were not using amex. Deeply illegal.
        kasey_junk 6y ago
        Are you suggesting RH should have only restricted new positions to people that A) hadn’t added new money to their accounts and also B) hadn’t liquidated any other positions in the last 2 days? I suppose you could make that argument and if you wanted to encode that as law I wouldn’t vote against it, but recognize it’s going to manifest in brokerage behavior where you can’t trade as fast or you have to keep more cash in your brokerage account. [edit] I’d also love for you to cite what law a casino would be breaking by shutting down a game mid roll because I have no direct experience there but my mental model is that Casinos have wide latitude on allowing the games to run or not.
        6y ago
    - pfisch 6y ago
      A casino definitely can't shut down a blackjack game in the middle. That is not true. What are you even arguing here? That the purpose of a brokerage is to take customers money and play weird games with it to maximize profits and is allowed to just not have enough money to cover all cash purchases? That is like if a bank just didn't let customers withdraw their money, and kept operating like nothing was wrong. Clearly illegal.
      - tptacek 6y ago
        Robinhood stopped allowing you to play new games of blackjack. You're suggesting that, as a casino customer, you could say "you can't shut this table down! I was going to make back my money on the next hand!" which is pretty funny. I don't think this is at all like a bank that won't let you withdraw your money. I think it's like a brokerage that has to post 100% collateral --- out of their money --- for every share of GME that you ask it to buy, doesn't have the money to post that collateral, and thus can't buy any more GME for you.
        pfisch 6y ago
        No, that analogy doesn't fit. Fully half of robinhood users owned GME stock. They were in the middle of a bet. RH created a situation where the stock could only go down. "I think it's like a brokerage that has to post 100% collateral --- out of their money" How is this not the customers money? You deposited 100% of the collateral with RH. Banks can take your money and make loans with it so the bank can make profit, but only so long as they have your money for you when you want to use it.
        tptacek 6y ago
        Again, this is pretty funny. It really does sound like you're saying the casino can't kick you out if you're in the middle of playing some blackjack strategy. "I'm not done yet!" I'm pretty sure everyone retained their ability to get cash out of Robinhood, for whatever that's worth.
        6y ago

by pfisch 6y ago

Yeah....except all the more legitimate brokerages didn't limit anything. TD Ameritrade made me place limit orders, but that is not even close to the same thing. Fidelity was unaffected.

sroussey 6y ago

Public was limited by their clearinghouse. Several brokerages did this. Some did not, mostly since their clientele wasn’t buying these anyhow.

pfisch 6y ago
Name a big, reputable brokerage that did this.
- tptacek 6y ago
  A nice thing about being a big, reputable brokerage is that you have access to big, reputable piles of cash to cover clearing collateral.
  - pfisch 6y ago
    If you are operating a brokerage that can't cover when people are buying stock with all cash then you should be in breach and be forced to shut down and/or forced into bankruptcy by owing all the stockholders of the stocks in question the actual damages you caused them. Your only real job is to operate fair and unbiased bid/ask spreads and execute trades fairly. If you aren't going to do that then you are running a scam on your customers. How is this fundamentally different then you placing a bet at a roulette table and the casino changing the rules mid-spin to make sure you will lose?
    - tptacek 6y ago
      A casino will absolutely shut a machine or a table down whenever the hell they want. I don't understand your argument. RH either has the money to put up collateral or they don't. They didn't this week. That seems like the end of the story. They can't just "choose" to have more cash on hand than they actually have.
    - kasey_junk 6y ago
      I think one thing people are very confused by is the “all cash” part of your sentiment. If you “deposit” money with Robinhood (or any other broker) and can trade it immediately (or any timeframe less than a few days) you are not trading cash. Cash takes days to move from 1 account to another without taking on credit risk. Similarly if you sell shares in 1 symbol and buy shares in another in less of a time frame than a few days you aren’t using cash. You are using credit (because it takes days for sales to settle). All of that credit risk is all currently legislated to go through a few bottlenecks who have the power to enforce their own credit rules. Analogies are dumb but it would be like if Amex called all the casinos and said “everyone has 90% less credit than they did 2 minutes ago”. If you had a roulette ball running based on your previous credit line at Amex you can bet the Casino would grab that ball. Especially if it had 200k Amex lendees in their pits.
      - pfisch 6y ago
        In which case I can understand you not being able to buy, because you are buying on margin. That is not what I'm talking about though. I'm talking about 100% cash. If you are trading on margin you can get margin called. If you aren't though your broker has no right to do this kind of stuff. You are suggesting the casino would grab the ball for people who were not using amex. Deeply illegal.
        kasey_junk 6y ago
        Are you suggesting RH should have only restricted new positions to people that A) hadn’t added new money to their accounts and also B) hadn’t liquidated any other positions in the last 2 days? I suppose you could make that argument and if you wanted to encode that as law I wouldn’t vote against it, but recognize it’s going to manifest in brokerage behavior where you can’t trade as fast or you have to keep more cash in your brokerage account. [edit] I’d also love for you to cite what law a casino would be breaking by shutting down a game mid roll because I have no direct experience there but my mental model is that Casinos have wide latitude on allowing the games to run or not.
        6y ago
  - pfisch 6y ago
    A casino definitely can't shut down a blackjack game in the middle. That is not true. What are you even arguing here? That the purpose of a brokerage is to take customers money and play weird games with it to maximize profits and is allowed to just not have enough money to cover all cash purchases? That is like if a bank just didn't let customers withdraw their money, and kept operating like nothing was wrong. Clearly illegal.
    - tptacek 6y ago
      Robinhood stopped allowing you to play new games of blackjack. You're suggesting that, as a casino customer, you could say "you can't shut this table down! I was going to make back my money on the next hand!" which is pretty funny. I don't think this is at all like a bank that won't let you withdraw your money. I think it's like a brokerage that has to post 100% collateral --- out of their money --- for every share of GME that you ask it to buy, doesn't have the money to post that collateral, and thus can't buy any more GME for you.
      - pfisch 6y ago
        No, that analogy doesn't fit. Fully half of robinhood users owned GME stock. They were in the middle of a bet. RH created a situation where the stock could only go down. "I think it's like a brokerage that has to post 100% collateral --- out of their money" How is this not the customers money? You deposited 100% of the collateral with RH. Banks can take your money and make loans with it so the bank can make profit, but only so long as they have your money for you when you want to use it.
        tptacek 6y ago
        Again, this is pretty funny. It really does sound like you're saying the casino can't kick you out if you're in the middle of playing some blackjack strategy. "I'm not done yet!" I'm pretty sure everyone retained their ability to get cash out of Robinhood, for whatever that's worth.
        6y ago