A lot of people are claiming “customer funds have to be segregated” and that “funds can’t be used to actually buy the security and are not released from the cus

A lot of people are claiming “customer funds have to be segregated” and that “funds can’t be used to actually buy the security and are not released from the customer account until the trade settles”. I think these are massive oversimplifications to the point of being useless or outright false. I suppose if you wanted to learn a little bit about how the regulations are actually written, you could start here: https://www.finra.org/sites/default/files/SEA.Rule_.15c3-3.pdf https://www.finra.org/sites/default/files/SEA.Rule_.15c3-3.p... These are just some of the requirements that brokers have to “reduce securities to possession or control” for both fully-paid or excess margin securities. Here’s my (mostly uneducated) opinion on what is really happening. It has roughly nothing to do with Robinhood not being able to execute Buy orders because they couldn’t post the funds required. Because fully-paid securities (non-margin) are paid for with customer funds, not floated by the broker while they settle. The problem was that too many shares have been lended out to short sellers out from under long positions that are now trying to sell. The hedge funds that borrowed and sold those shares simply don’t have the cash or credit to buy the shares back at the current market price that the rightful owner has rightfully now sold. Failing that the broker needs to find someone else willing the lend a share the the hedge fund. And who would want to lend a share of GME to an insolvent short seller?! So there is a deficiency, but the deficiency is because of hedge funds which are now $30B underwater while unrelated parties are trying to sell shares that have already been sold. Yes, this is a long way of saying there’s a short squeeze. But you know the saying “owe the bank $1 million you can’t pay, that’s bad news for you. Owe the bank $100 million you can’t pay, that’s bad news for the bank!” It’s a game of musical shares. The brokers that let the hedge funds load up on 140% short interest now need to either force-liquidate the hedge fund shorts to get back the share that’s being traded and needs to be delivered to Robinhood, or they need to find someone else to borrow the share from. When the broker fails to deliver the share at the time the original holder sells it, the broker is now on the hook for any price movement that occurs until they can deliver. Which of course the hedge fund can’t afford, so it’s lose-lose. In the end Robinhood disabled the buy button because all the shares being sold have been loaned out and shorted, there’s not enough shares available to borrow, and the hedge funds are way past bankruptcy at this point and hoping for some massive price reversal or else they take a lot of people down with them. The counterparty risks at this point are extreme. It’s not Robinhood that’s the problem, it’s the people selling Robinhood shares that they can’t actually show a clear title on. I think what Robinhood is worried about mostly at this point is contagion when the hedge funds holding 140% short interest can’t afford the $30B bill.