4 ms·

Yes they do and it's in the TOS of every single retail brokerage account you sign up for.

toomuchtodo 6y ago
I won't disagree with this point (companies put forth garbage TOS on the regular), but I am curious to see how this stands up to renewed regulatory (FINRA, SEC) and Congressional scrutiny. Several brokerages (Fidelity, Vanguard) did not limit trading of GME in any way during high volatility last week, despite DTCC/NSCC's risk model calling for 100% collateral on GME for a duration of time.
- ABeeSea 6y ago
  Fidelity and Vanguard run their own clearinghouses and don’t touch DTCC. Robinhood technically does as well, but they still do the vast majority of their clearing through DTCC. Pretty likely RH will invest in their clearing operations this year.
  - toomuchtodo 6y ago
    That doesn't solve their undercapitalization issue [1]. RH has a license to perform their own clearing [2], but they're still going to have capital requirements governed by NSCC collateral requirements (which is put forth by Dodd-Frank) [3]. If regulators require capitalization to support outlier volatility market conditions instead of allowing brokerages to stop trades due to undercapitalization (whether because of credit line availability, the amount of the market they've captured, etc), ¯\_(ツ)_/¯. Would it be right and proper (for FINRA and/or Congress) to allow Robinhood to exist to push order flow to institutions only when seas are calm? That does not sound like a functional broker to me. [1] https://finance.yahoo.com/news/robinhood-said-draw-credit-lines-214509076.html https://finance.yahoo.com/news/robinhood-said-draw-credit-li... (Robinhood Is Said to Draw on Bank Credit Lines Amid Tumult) [2] https://blog.robinhood.com/news/2018/10/9/introducing-clearing-by-robinhood https://blog.robinhood.com/news/2018/10/9/introducing-cleari... (Introducing Clearing by Robinhood, October 2018) [3] https://dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf https://dtcc.com/-/media/Files/Downloads/legal/policy-and-co... (NSCC Disclosure Framework, PDF) Disclaimer: Thoughts and opinions are my own.
    - toomuchtodo 6y ago
      Edit window expired on the above comment. Robinhood is solving for capitalization with an equity raise [1] [2]. [1] https://blog.robinhood.com/news/2021/2/1/robinhood-raises-34-billion-to-fuel-record-customer-growth https://blog.robinhood.com/news/2021/2/1/robinhood-raises-34... (Robinhood Raises $3.4 Billion to Fuel Record Customer Growth) [2] https://news.ycombinator.com/item?id=25990453 https://news.ycombinator.com/item?id=25990453 (HN: Robinhood raises another $2.4B from shareholders)
- gruez 6y ago
  >Several brokerages (Fidelity, Vanguard) did not limit trading of GME in any way during high volatility last week, despite DTCC/NSCC's risk model calling for 100% collateral on GME for a duration of time. Maybe because those brokerages don't have a high concentration of wsb users, unlike robinhood or webbull?
  - toomuchtodo 6y ago
    Revisiting this subthread to confirm you're probably right, based on this comment: https://news.ycombinator.com/item?id=26013821 https://news.ycombinator.com/item?id=26013821 Robinhood could not have anticipated the clearinghouse requiring 100% collateral for a single named security due to the high FTD (failure to deliver) rate. Robinhood handled the situation poorly (PR and end user communications), but it's possible the clearinghouse would've tied any brokerage's hands with drastically increased collateral requirements when their model indicates a possible insolvency risk.

I won't disagree with this point (companies put forth garbage TOS on the regular), but I am curious to see how this stands up to renewed regulatory (FINRA, SEC) and Congressional scrutiny. Several brokerages (Fidelity, Vanguard) did not limit trading of GME in any way during high volatility last week, despite DTCC/NSCC's risk model calling for 100% collateral on GME for a duration of time.

ABeeSea 6y ago
Fidelity and Vanguard run their own clearinghouses and don’t touch DTCC. Robinhood technically does as well, but they still do the vast majority of their clearing through DTCC. Pretty likely RH will invest in their clearing operations this year.
- toomuchtodo 6y ago
  That doesn't solve their undercapitalization issue [1]. RH has a license to perform their own clearing [2], but they're still going to have capital requirements governed by NSCC collateral requirements (which is put forth by Dodd-Frank) [3]. If regulators require capitalization to support outlier volatility market conditions instead of allowing brokerages to stop trades due to undercapitalization (whether because of credit line availability, the amount of the market they've captured, etc), ¯\_(ツ)_/¯. Would it be right and proper (for FINRA and/or Congress) to allow Robinhood to exist to push order flow to institutions only when seas are calm? That does not sound like a functional broker to me. [1] https://finance.yahoo.com/news/robinhood-said-draw-credit-lines-214509076.html https://finance.yahoo.com/news/robinhood-said-draw-credit-li... (Robinhood Is Said to Draw on Bank Credit Lines Amid Tumult) [2] https://blog.robinhood.com/news/2018/10/9/introducing-clearing-by-robinhood https://blog.robinhood.com/news/2018/10/9/introducing-cleari... (Introducing Clearing by Robinhood, October 2018) [3] https://dtcc.com/-/media/Files/Downloads/legal/policy-and-compliance/NSCC_Disclosure_Framework.pdf https://dtcc.com/-/media/Files/Downloads/legal/policy-and-co... (NSCC Disclosure Framework, PDF) Disclaimer: Thoughts and opinions are my own.
  - toomuchtodo 6y ago
    Edit window expired on the above comment. Robinhood is solving for capitalization with an equity raise [1] [2]. [1] https://blog.robinhood.com/news/2021/2/1/robinhood-raises-34-billion-to-fuel-record-customer-growth https://blog.robinhood.com/news/2021/2/1/robinhood-raises-34... (Robinhood Raises $3.4 Billion to Fuel Record Customer Growth) [2] https://news.ycombinator.com/item?id=25990453 https://news.ycombinator.com/item?id=25990453 (HN: Robinhood raises another $2.4B from shareholders)
gruez 6y ago
>Several brokerages (Fidelity, Vanguard) did not limit trading of GME in any way during high volatility last week, despite DTCC/NSCC's risk model calling for 100% collateral on GME for a duration of time. Maybe because those brokerages don't have a high concentration of wsb users, unlike robinhood or webbull?
- toomuchtodo 6y ago
  Revisiting this subthread to confirm you're probably right, based on this comment: https://news.ycombinator.com/item?id=26013821 https://news.ycombinator.com/item?id=26013821 Robinhood could not have anticipated the clearinghouse requiring 100% collateral for a single named security due to the high FTD (failure to deliver) rate. Robinhood handled the situation poorly (PR and end user communications), but it's possible the clearinghouse would've tied any brokerage's hands with drastically increased collateral requirements when their model indicates a possible insolvency risk.