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> there’s also the financial reality that not all trades are done with the immediate availability of the seller’s security, or the buyer’s cash, to achieve real

> there’s also the financial reality that not all trades are done with the immediate availability of the seller’s security, or the buyer’s cash, to achieve real time trade by trade settlement so a margin call is essential. I thought settlement was just swapping money for securities; I did not realize that the margin call was key part of the process.

toomuchtodo 6y ago
JumpCrisscross' comment [1] in a previous thread [2] is required reading as to why real time settlement is unlikely and undesirable, but end of day settlement is reasonable and likely where the industry will end up (if regulators and participants encourage the clearinghouse). [1] https://news.ycombinator.com/item?id=26007414 https://news.ycombinator.com/item?id=26007414 [2] https://news.ycombinator.com/item?id=26005457 https://news.ycombinator.com/item?id=26005457
- dylan604 6y ago
  I take these type of responses you are linking to as someone trying to protect the establishment. I'm required to have enough money in my account for transactions that I wish to make. If I don't have it, I don't get to buy it. If I want to pay later for something I want to buy today, there is forms of credit. If a clearing house doesn't have money to do the transactions that they are offering, then that is their problem. If they need to dip into a line of credit, then they can do so at their expense. If you "need a minute" at the end of the day to figure out what you have done during the day, then you are doing something wrong.
  - lazide 6y ago
    You’re probably not aware of what is actually going on with your bank account. You can, and likely do enter into all kinds of transactions where money in the account being required is an illusion. You can write checks all day long against an empty account. You can use a debit card against an account with say $1000 in it, and then transfer the money out before the charge hits in many cases. Debit and credit card transactions have up to 30 days to post to handle things like network outages and billing work with vendors. We’re slowly getting to faster clearing transactions, but there is a lot of work (much of it social and business process) that needs to happen before it actually works that way most of the time. Folks like RH and retail shops swallow the risk involved in this (and do have problems from time to time) because individual transactions are small and they make up for it with increased revenue by streamlining the process. Clearing houses are intermediaries that make sure both sides of the transaction are protected from brokers intentionally or unintentionally doing the equivalent of this, but with billions of dollars at stake. A type of escrow service, essentially. There is little benefit to making this go super fast, and plenty of potential scary side effects. The clearinghouse in this case wasn’t short cash - it was asking Robinhood to pay in it’s portion of the common insurance fund ALL brokers pay into in proportion to the risky things they are doing. Robinhood didn’t have the cash, so they negotiated doing less risky things instead.

toomuchtodo 6y ago

JumpCrisscross' comment [1] in a previous thread [2] is required reading as to why real time settlement is unlikely and undesirable, but end of day settlement is reasonable and likely where the industry will end up (if regulators and participants encourage the clearinghouse). [1] https://news.ycombinator.com/item?id=26007414 https://news.ycombinator.com/item?id=26007414 [2] https://news.ycombinator.com/item?id=26005457 https://news.ycombinator.com/item?id=26005457

dylan604 6y ago
I take these type of responses you are linking to as someone trying to protect the establishment. I'm required to have enough money in my account for transactions that I wish to make. If I don't have it, I don't get to buy it. If I want to pay later for something I want to buy today, there is forms of credit. If a clearing house doesn't have money to do the transactions that they are offering, then that is their problem. If they need to dip into a line of credit, then they can do so at their expense. If you "need a minute" at the end of the day to figure out what you have done during the day, then you are doing something wrong.
- lazide 6y ago
  You’re probably not aware of what is actually going on with your bank account. You can, and likely do enter into all kinds of transactions where money in the account being required is an illusion. You can write checks all day long against an empty account. You can use a debit card against an account with say $1000 in it, and then transfer the money out before the charge hits in many cases. Debit and credit card transactions have up to 30 days to post to handle things like network outages and billing work with vendors. We’re slowly getting to faster clearing transactions, but there is a lot of work (much of it social and business process) that needs to happen before it actually works that way most of the time. Folks like RH and retail shops swallow the risk involved in this (and do have problems from time to time) because individual transactions are small and they make up for it with increased revenue by streamlining the process. Clearing houses are intermediaries that make sure both sides of the transaction are protected from brokers intentionally or unintentionally doing the equivalent of this, but with billions of dollars at stake. A type of escrow service, essentially. There is little benefit to making this go super fast, and plenty of potential scary side effects. The clearinghouse in this case wasn’t short cash - it was asking Robinhood to pay in it’s portion of the common insurance fund ALL brokers pay into in proportion to the risky things they are doing. Robinhood didn’t have the cash, so they negotiated doing less risky things instead.