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You could call it that, but these are obligations that appear to have been unilaterally decided by the DTC without prior notice. As far as I can tell, any brok
by swampthing 6y ago
You could call it that, but these are obligations that appear to have been unilaterally decided by the DTC without prior notice. As far as I can tell, any brokerage using the DTC could potentially suffer the same fate if the stars aligned.
- lazide 6y agoRobinhood agreed to those terms as part of being a broker and using DTCC - it’s part of the common broker insurance pool agreement required to use the clearing house, and required when trading on highly volatile stock to reduce the risk to counterparties if the stock falls mid-transaction/clearing. It is for exactly the situation where a counterparty (like RH) goes bankrupt and can’t pay, which they nearly did. Knowing this in advance and preparing for it is exactly the business RH is in, and they should have been much better prepared for it. If they were unable to meet this requirement it is a clear default on their obligations as a broker, and they would be bankrupt at this point. It would be like if I was trading on margin, but had no idea what my margin collateral requirements were - one day prices drop on the stock I’ve been trading and my broker does a margin call, and I’m going ‘uh what do you mean?!?’ when they liquidate my holdings because I never paid attention to any of that paperwork they sent over. Is it my brokers fault then?