3 ms·
Since the collateral requirements were based on their net position, sells reduced their collateral requirements while buys increased it. This was a risk managem
by ABeeSea 6y ago
Since the collateral requirements were based on their net position, sells reduced their collateral requirements while buys increased it. This was a risk management decision and since they don’t profit directly from the price moving one way or another, it would be pretty hard to argue it wasn’t just risk management to protect the rest of their users from RH running out of cash and going into receivership.
- jec99 6y agoThe Webull CEO was saying that independent of this logic, there would never be a scenario where users be unable to close their accounts. For the user, it's much worse for RH to prevent me from accessing my money than to prevent me from opening new positions.
- LorenPechtel 6y agoRisk management in that they don't want to be left holding the bag when the investors go bankrupt.
- j_walter 6y agoOK, but they didn't let any users purchase the stock. Ones that have settled funds and don't trade on margin. I get not letting a brand new account with unsettled funds trade on margin for huge positions...but if I've got $100K cash in my account there should be no reason to limit my purchasing.
- playingchanges 6y agoIt is interesting to note that buying was also limited for cash accounts where collateral should not have been an issue.
- ABeeSea 6y agoThey can't use customer funds for collateral. If you give $100 to RH for a stock, RH gives $3 of their own money to the clearinghouse. Two days later you get your stock, the buyer gets your $100, and RH gets their $3 back. The $3 turned into the full $100 and RH can't use any of your $100 to pay it.