4 ms·

Where are you reading that they messed up their collateral calculations?

Traster 6y ago
They ended up in a situation where they had to prevent trading, draw down their entire credit lines and then do another funding round to shore up $3.4Bn - it's pretty clear they fucked up their collateral.
- swampthing 6y ago
  Do you consider them having their collateral requirements changed on them at 3am to be them messing up? If your bank tells you your mortgage payment is going to be 10x this month, and you have to scramble to cover that, did you mess up your personal finances?
  - ashtonkem 6y ago
    If you run a brokerage, you should know that collateral requirements can change based on market conditions.
    - swampthing 6y ago
      If you own a car, you should know that you could be in a catastrophic accident at any time based on the behavior of others. If you are driving lawfully and someone t-bones you out of nowhere and you die, did you make a mistake in your driving?
      - ashtonkem 6y ago
        A better analogy is that you should know that driving is dangerous and therefore keep insurance. But again, dealing with changing margin requirements is a core part of the job when you run a brokerage, especially for margin accounts. They didn’t do their jobs right, and they want to blame someone else.
        swampthing 6y ago
        It sounds like you think that what happened is related to margin accounts. I don't think that is accurate (see the blog post this thread is on). Robinhood does keep the equivalent of auto insurance, by the way of the deposits they make with the DTC (and probably other measures). So the analogy is that you keep insurance, and you suffer some catastrophic accident due to some crazy driver coming out of nowhere. Are you at fault? But I do agree that they didn't do their job, with respect to PR / communications. And I agree that this blog post seems designed to mitigate the effects of that.
        ashtonkem 6y ago
        I'm not sure why you're acting like this is just something that came out of the blue and hit RH without any possible warning. They purposefully courted new, low information traders and gamified trading. Even before GME you could find complaints and warnings about how Robinhood was gamifying trading. And now they're surprised that this results in new trader behavior? Come on. To complete the analogy, this is like deciding to go out and do unnecessary driving after midnight on new years eve. Maybe they're not legally at fault if they get hit by a drunk driver, but they sure as hell put themselves at a higher risk of this happening.
        swampthing 6y ago
        Because that is basically what happened. There is a reason why WSB and GME have been in the news. It's because what happened is surprising. Sure, in hindsight, you can identify causes for the phenomenon. But if you rewind back to January 1, I don't think most of us would have predicted this at any level of certainty beyond a theoretical possibility. I agree with you that Robinhood did put itself at higher risk of this happening, but I don't think that means they did something wrong. Just like I don't think most people would blame the innocent driver in your hypothetical. Who, if we were to make the analogy more applicable, might be an Uber driver trying to make some extra cash.
        ashtonkem 6y ago
  - ineedasername 6y ago
    Collateral requirements are quite a bit more fluid than a mortgage and Robinhood was not asked, AFAIK, to give 10x collateral so the comparison doesn't fit. Even still: Yes-- good budgeting with savings should allow you to face an obstacle like a 10x mortgage payment. I'm not particularly frugal but I could, at a pinch, gather that much money. Assuming you're putting aside the recommended 6 months living expenses for an emergency, the non-mortgage part of that savings should cover the other 4 months. RH is in a business that requires the deepest pockets of literally any industry on the planet. If they don't have that capital, they don't get to play, and that's their fault.
  - CaptainZapp 6y ago
    The bread and butter of any financial company is risk management. That includes foreseeing a pandemic as well as modelling the possibility of sudden stock volatility at 3am. If you don't envision such a clearly possible scenario as a bank , or a broker (your mortgage payment suddenly going to be x10 is not such a clearly possible scenario) you severely fucked up in your chosen field of business, period.
ineedasername 6y ago
Because they had to limit trades due to an inability to provide enough collateral to mitigate the risks of trades in select volitile stocks.

They ended up in a situation where they had to prevent trading, draw down their entire credit lines and then do another funding round to shore up $3.4Bn - it's pretty clear they fucked up their collateral.

swampthing 6y ago
Do you consider them having their collateral requirements changed on them at 3am to be them messing up? If your bank tells you your mortgage payment is going to be 10x this month, and you have to scramble to cover that, did you mess up your personal finances?
- ashtonkem 6y ago
  If you run a brokerage, you should know that collateral requirements can change based on market conditions.
  - swampthing 6y ago
    If you own a car, you should know that you could be in a catastrophic accident at any time based on the behavior of others. If you are driving lawfully and someone t-bones you out of nowhere and you die, did you make a mistake in your driving?
    - ashtonkem 6y ago
      A better analogy is that you should know that driving is dangerous and therefore keep insurance. But again, dealing with changing margin requirements is a core part of the job when you run a brokerage, especially for margin accounts. They didn’t do their jobs right, and they want to blame someone else.
      - swampthing 6y ago
        It sounds like you think that what happened is related to margin accounts. I don't think that is accurate (see the blog post this thread is on). Robinhood does keep the equivalent of auto insurance, by the way of the deposits they make with the DTC (and probably other measures). So the analogy is that you keep insurance, and you suffer some catastrophic accident due to some crazy driver coming out of nowhere. Are you at fault? But I do agree that they didn't do their job, with respect to PR / communications. And I agree that this blog post seems designed to mitigate the effects of that.
        ashtonkem 6y ago
        I'm not sure why you're acting like this is just something that came out of the blue and hit RH without any possible warning. They purposefully courted new, low information traders and gamified trading. Even before GME you could find complaints and warnings about how Robinhood was gamifying trading. And now they're surprised that this results in new trader behavior? Come on. To complete the analogy, this is like deciding to go out and do unnecessary driving after midnight on new years eve. Maybe they're not legally at fault if they get hit by a drunk driver, but they sure as hell put themselves at a higher risk of this happening.
        swampthing 6y ago
        Because that is basically what happened. There is a reason why WSB and GME have been in the news. It's because what happened is surprising. Sure, in hindsight, you can identify causes for the phenomenon. But if you rewind back to January 1, I don't think most of us would have predicted this at any level of certainty beyond a theoretical possibility. I agree with you that Robinhood did put itself at higher risk of this happening, but I don't think that means they did something wrong. Just like I don't think most people would blame the innocent driver in your hypothetical. Who, if we were to make the analogy more applicable, might be an Uber driver trying to make some extra cash.
        ashtonkem 6y ago
- ineedasername 6y ago
  Collateral requirements are quite a bit more fluid than a mortgage and Robinhood was not asked, AFAIK, to give 10x collateral so the comparison doesn't fit. Even still: Yes-- good budgeting with savings should allow you to face an obstacle like a 10x mortgage payment. I'm not particularly frugal but I could, at a pinch, gather that much money. Assuming you're putting aside the recommended 6 months living expenses for an emergency, the non-mortgage part of that savings should cover the other 4 months. RH is in a business that requires the deepest pockets of literally any industry on the planet. If they don't have that capital, they don't get to play, and that's their fault.
- CaptainZapp 6y ago
  The bread and butter of any financial company is risk management. That includes foreseeing a pandemic as well as modelling the possibility of sudden stock volatility at 3am. If you don't envision such a clearly possible scenario as a bank , or a broker (your mortgage payment suddenly going to be x10 is not such a clearly possible scenario) you severely fucked up in your chosen field of business, period.

ineedasername 6y ago

Because they had to limit trades due to an inability to provide enough collateral to mitigate the risks of trades in select volitile stocks.