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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 cleari

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)

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)