4 ms·

Author of the article here -- a key piece not covered is the relationship between Robinhood and the clearing houses. I've been learning more about that over th

Author of the article here -- a key piece not covered is the relationship between Robinhood and the clearing houses. I've been learning more about that over the past 24 hours thanks to reader comments on reddit. Some background info: https://www.washingtonpost.com/business/whats-the-dtcc-and-how-did-it-stop-gamestop-mania/2021/01/29/b23744bc-6257-11eb-a177-7765f29a9524_story.html https://www.washingtonpost.com/business/whats-the-dtcc-and-h... https://twitter.com/KralcTrebor/status/1355356755690139650 https://twitter.com/KralcTrebor/status/1355356755690139650 It looks like the Depository Trust & Clearing Corporation (DTCC) increased margin requirements on GME stock on Thursday -- which forced Robinhood to post more collateral -- which drove Robinhood's decision to prevent users from buying more GME shares. This adds another piece to the puzzle. We need more clarity on: Why did the DTCC make its decision? Was that decision properly communicated to the market, or did some firms get early access to the info? What conflicts of interest do they have? Was the DTCC lobbied by other Wall Street players to make that change on Thursday?

gruez 6y ago
>We need more clarity on: Why did the DTCC make its decision? Was that decision properly communicated to the market, or did some firms get early access to the info? What conflicts of interest do they have? Was the DTCC lobbied by other Wall Street players to make that change on Thursday? Isn't the formula public? https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478
- getToTheChopin 6y ago
  Yes, but there is a subjective element to the calculation. From the same author: https://twitter.com/KralcTrebor/status/1355544072652533760 https://twitter.com/KralcTrebor/status/1355544072652533760 > We don't have to guess at the formula. It's public, as are the rules and procedures for implementing them. I've read them. They have an add-on for situations like this. The add-on has a calc. That calc has a parameter they pick, which just multiplies it by whatever they want. > This discretionary part is intentional. It was open to public comment. People commented. DTCC responded. SEC approved. > DTCC is definitely going to see their discretionary use of this "knob" as the system working as designed.
sschueller 6y ago
DTCC needs to be investigated again. They were previously accused of allowing naked short selling[1] and their complete control of the system is problematic. [1] https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...
sillysaurusx 6y ago
Highly recommend this WeBull interview that covers all of that in extreme detail: https://www.youtube.com/watch?v=4RS4JIEVyXM&ab_channel=Benzinga https://www.youtube.com/watch?v=4RS4JIEVyXM&ab_channel=Benzi... You're right. But the problem is, DTCC is a monopoly. They cover 95% of trades on wall street. Would anyone, even the SEC, dare risk destabilizing the global financial market by constraining them from taking supposedly-prudent measures to limit their risk? Because that's how they'll spin it, perhaps.
- gruez 6y ago
  >Would anyone, even the SEC, dare risk destabilizing the global financial market by constraining them from taking supposedly-prudent measures to limit their risk? Because that's how they'll spin it, perhaps. I mean, it makes sense. Anytime financial regulations get removed the popular narrative is that it's done by greedy wall st companies who want to destabilize the financial system ...until this time, when it's pesky regulations keeping 99% from rising up against the 1%.
- getToTheChopin 6y ago
  Great video, thanks for sharing. I can't help but wonder if the DTCC was pressured into raising those GME collateral requirements up to 100%. After all, there is a subjective element to this decision. https://twitter.com/KralcTrebor/status/1355544072652533760 https://twitter.com/KralcTrebor/status/1355544072652533760 This would be a pretty "clean" way to limit the GME short squeeze -- it can then be blamed on risk management rules for the overall financial system.
valuearb 6y ago
We need more clarity on why you write such a misleading blog without knowing the facts.
- getToTheChopin 6y ago
  I didn't share this post on HN. I just wrote the article to summarize the ongoing story for my readers. This is a developing issue with new facts and explanations coming out every day. For what it's worth, I am trying to explain the facts in this case. A new section has been added: > Clearing Houses & the Plumbing Behind Financial Markets > To be clear, there isn’t any hard evidence that Citadel directly influenced Robinhood’s decision to prevent users from purchasing GME shares. The CEO of Robinhood has denied any connection whatsoever. Instead, the decision has been attributed to clearing house requirements and “market settlement mechanics”. > This claim by Robinhood does appear to be valid. The Depository Trust & Clearing Corporation (DTCC) — a “clearing house” where shares are exchanged between buyers and sellers — is a core part of modern financial architecture, which serves to reduce risk to the system if one broker were to go bust. The DTCC requires members to post collateral. As trading volume and volatility grows, the collateral requirements also increase. > However, it looks like the DTCC increased margin requirements on GME stock on Thursday — which forced Robinhood to post more collateral — which drove Robinhood’s decision to prevent users from buying more GME shares. > This adds another piece to the puzzle. > We need more clarity on: Why did the DTCC make its decision? Was that decision properly communicated to the market, or did some firms get early access to the info? What conflicts of interest do they have? Was the DTCC lobbied by other Wall Street players to make that change on Thursday?
  - valuearb 6y ago
    And now you are editing your blog after the fact to disguise the misleading allegations about Citadel you made.
    - getToTheChopin 6y ago
      That's not true. I went back in my revision history. Again for what it's worth (perhaps nothing), at 7:53AM ET this morning, I added this sentence: > Citadel is a hedge fund and market maker. Its success has vaulted founder Ken Griffin to a net worth of more than $20 billion. Technically, the two sides of Citadel (hedge fund / market maker) are split into two separate arms -- but they are both under one parent company and owned by Ken Griffin. This was posted on HN (again, not by me) after I added that sentence.

gruez 6y ago

>We need more clarity on: Why did the DTCC make its decision? Was that decision properly communicated to the market, or did some firms get early access to the info? What conflicts of interest do they have? Was the DTCC lobbied by other Wall Street players to make that change on Thursday? Isn't the formula public? https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478

getToTheChopin 6y ago
Yes, but there is a subjective element to the calculation. From the same author: https://twitter.com/KralcTrebor/status/1355544072652533760 https://twitter.com/KralcTrebor/status/1355544072652533760 > We don't have to guess at the formula. It's public, as are the rules and procedures for implementing them. I've read them. They have an add-on for situations like this. The add-on has a calc. That calc has a parameter they pick, which just multiplies it by whatever they want. > This discretionary part is intentional. It was open to public comment. People commented. DTCC responded. SEC approved. > DTCC is definitely going to see their discretionary use of this "knob" as the system working as designed.

sschueller 6y ago

DTCC needs to be investigated again. They were previously accused of allowing naked short selling[1] and their complete control of the system is problematic. [1] https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_Corporation https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...

sillysaurusx 6y ago

Highly recommend this WeBull interview that covers all of that in extreme detail: https://www.youtube.com/watch?v=4RS4JIEVyXM&ab_channel=Benzinga https://www.youtube.com/watch?v=4RS4JIEVyXM&ab_channel=Benzi... You're right. But the problem is, DTCC is a monopoly. They cover 95% of trades on wall street. Would anyone, even the SEC, dare risk destabilizing the global financial market by constraining them from taking supposedly-prudent measures to limit their risk? Because that's how they'll spin it, perhaps.

gruez 6y ago
>Would anyone, even the SEC, dare risk destabilizing the global financial market by constraining them from taking supposedly-prudent measures to limit their risk? Because that's how they'll spin it, perhaps. I mean, it makes sense. Anytime financial regulations get removed the popular narrative is that it's done by greedy wall st companies who want to destabilize the financial system ...until this time, when it's pesky regulations keeping 99% from rising up against the 1%.
getToTheChopin 6y ago
Great video, thanks for sharing. I can't help but wonder if the DTCC was pressured into raising those GME collateral requirements up to 100%. After all, there is a subjective element to this decision. https://twitter.com/KralcTrebor/status/1355544072652533760 https://twitter.com/KralcTrebor/status/1355544072652533760 This would be a pretty "clean" way to limit the GME short squeeze -- it can then be blamed on risk management rules for the overall financial system.

valuearb 6y ago

We need more clarity on why you write such a misleading blog without knowing the facts.

getToTheChopin 6y ago
I didn't share this post on HN. I just wrote the article to summarize the ongoing story for my readers. This is a developing issue with new facts and explanations coming out every day. For what it's worth, I am trying to explain the facts in this case. A new section has been added: > Clearing Houses & the Plumbing Behind Financial Markets > To be clear, there isn’t any hard evidence that Citadel directly influenced Robinhood’s decision to prevent users from purchasing GME shares. The CEO of Robinhood has denied any connection whatsoever. Instead, the decision has been attributed to clearing house requirements and “market settlement mechanics”. > This claim by Robinhood does appear to be valid. The Depository Trust & Clearing Corporation (DTCC) — a “clearing house” where shares are exchanged between buyers and sellers — is a core part of modern financial architecture, which serves to reduce risk to the system if one broker were to go bust. The DTCC requires members to post collateral. As trading volume and volatility grows, the collateral requirements also increase. > However, it looks like the DTCC increased margin requirements on GME stock on Thursday — which forced Robinhood to post more collateral — which drove Robinhood’s decision to prevent users from buying more GME shares. > This adds another piece to the puzzle. > We need more clarity on: Why did the DTCC make its decision? Was that decision properly communicated to the market, or did some firms get early access to the info? What conflicts of interest do they have? Was the DTCC lobbied by other Wall Street players to make that change on Thursday?
- valuearb 6y ago
  And now you are editing your blog after the fact to disguise the misleading allegations about Citadel you made.
  - getToTheChopin 6y ago
    That's not true. I went back in my revision history. Again for what it's worth (perhaps nothing), at 7:53AM ET this morning, I added this sentence: > Citadel is a hedge fund and market maker. Its success has vaulted founder Ken Griffin to a net worth of more than $20 billion. Technically, the two sides of Citadel (hedge fund / market maker) are split into two separate arms -- but they are both under one parent company and owned by Ken Griffin. This was posted on HN (again, not by me) after I added that sentence.