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Thanks. I don't use Robinhood but I thought your buying fund there consisted of actually-deposited cash. In that case why can't they use a customer's money to

Thanks. I don't use Robinhood but I thought your buying fund there consisted of actually-deposited cash. In that case why can't they use a customer's money to cover the collateral? Is it a business practice or a requirement for some other reason?

kasey_junk 6y ago
A) no they, and most brokers will let you start trading as soon as you “deposit” money even though you have many days to reverse those deposits. But: B) your shares trading immediately is a fiction. It takes days for those trades to settle. And any subsequent trades you make with those funds are all subject to credit risk. The central clearing house collateral rules are about risk management around that multi day float. I think but am not an expert on this that the DTCC times explicitly require the capital to come from the brokerage not the clients. I don’t know why but can guess that it’s because it’s the brokerages taking on the risk not the individuals.
- skedaddle 6y ago
  Aah ok my mistake, it does look like the "cash" account type is not the default. Thanks for the info.