34 ms·

They aren’t a grocery store. If they were out of GME stock to buy nobody would hold it against them. That wasn’t the case. I clearly don’t understand the regul

They aren’t a grocery store. If they were out of GME stock to buy nobody would hold it against them. That wasn’t the case. I clearly don’t understand the regulations around this. It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no? And it’s also a problem that their inability to trade that stock affects the price. So what is the correct solution here?

astrange 6y ago
They effectively were "out of GME stock". They usually have to put up 10% (or something) per share collateral with DTCC to send out more buys, but the volatility meant that it went up to 100% collateral, so they couldn't afford to allow purchases. This happens based on a formula where one of the factors is GME being the #1 stock being purchased that day on RH. > It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no? If a stock is volatile you should not be buying it, that's how you lose money. The people who profit are market makers like RH's Citadel, who get paid on every trade. > And it’s also a problem that their inability to trade that stock affects the price. So what is the correct solution here? Technological improvements like the one RH's CEO wrote this article about. Btw, for reasons I've forgotten RH's collateral issues got even worse as the price went down again - if it kept going up it'd actually be more possible for them to continue providing buys.
- IgorPartola 6y ago
  Ok so they essentially couldn’t trade outside their own system? Or are trades inside their own platform still subject to clearing through the clearing house?
  - astrange 6y ago
    I think they could have traded within their own platform (not 100% sure), but customer interest in buying was so high that they weren't able to fill trades that way. Other brokers had more sales and that's why they didn't have to restrict buys as hard, although they did still restrict them.

astrange 6y ago

They effectively were "out of GME stock". They usually have to put up 10% (or something) per share collateral with DTCC to send out more buys, but the volatility meant that it went up to 100% collateral, so they couldn't afford to allow purchases. This happens based on a formula where one of the factors is GME being the #1 stock being purchased that day on RH. > It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no? If a stock is volatile you should not be buying it, that's how you lose money. The people who profit are market makers like RH's Citadel, who get paid on every trade. > And it’s also a problem that their inability to trade that stock affects the price. So what is the correct solution here? Technological improvements like the one RH's CEO wrote this article about. Btw, for reasons I've forgotten RH's collateral issues got even worse as the price went down again - if it kept going up it'd actually be more possible for them to continue providing buys.

IgorPartola 6y ago
Ok so they essentially couldn’t trade outside their own system? Or are trades inside their own platform still subject to clearing through the clearing house?
- astrange 6y ago
  I think they could have traded within their own platform (not 100% sure), but customer interest in buying was so high that they weren't able to fill trades that way. Other brokers had more sales and that's why they didn't have to restrict buys as hard, although they did still restrict them.