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How, pray tell, do you think a broker actually funds an unsettled obligation on a cash-secured customer trade?

• sokoloff 6y ago
  At this point, I wonder if you’re willfully not understanding the difference between customer funds for settlement and DTCC broker deposits to ensure an additional layer of customer protection/confidence, possibly because you think it shouldn’t be necessary. In some ways it’s worse than the Chesterton’s Fence parable. You don’t see the point of the fence, so you pretend that it already doesn’t exist. It seems perfectly fair to ask why this required broker deposit exists. It seems way less productive to ask whether it exists or to pretend it doesn’t.
  • totalZero 6y ago
    Perhaps the part that you're missing is that in addition to margin accounts, Robinhood also has accounts that are able to trade up to 1k before they are funded (that is to say, before the deposits clear). So Robinhood has to lay out its own money to clear those trades, as well as traditional margin trades where the customer has settled equity but the brokerage also carries risk. BTW, I don't know what that parable is but your invocation of it seems like a rather complex way of telling me that you think I'm being disingenuous.