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> The DTC said 'we need 100% collateral on these trades' (probably because they viewed there being a significant risk that someone, somewhere, would not be able

> The DTC said 'we need 100% collateral on these trades' (probably because they viewed there being a significant risk that someone, somewhere, would not be able to pay up for the trades they're making in a big way This sounds like nonsense to me. After all the job of the Clearing House is to make sure the cash is balanced correctly after the transactions. Or realistically speaking a never ending chain of transactions, thus correctly moving the cash behind back and forth in time. It's the secret of the clearing house why they have no problems that their institutional customers have single digit equity ratios (speaking about Basel II/III/...) all the time while most individuals deal with 100% equity ratio. Maybe the more reasonable explanation is that they were overwhelmed by so many small transactions.

valuearb 6y ago
GME was having 400% swings in a day, and being bought in a large part by brand new retail investors who had just opened accounts. That’s a perfect storm for nonpayment issues.
- blablabla123 6y ago
  > GME was having 400% swings in a day Well, if that's what people want. At that point in time it's about buying, not selling. > and being bought in a large part by brand new retail > investors who had just opened accounts. > That’s a perfect storm for nonpayment issues. Ok but they need to go through some sort of payment processing that checks the credit rating. Even if the credit card is close to the limit, we are probably talking about amounts smaller than 1000 $. Anyone able to visit the Reddit homepage and installing the Robinhood app should have that amount of cash in hardware. FWIW, normal eCommerce payment processors deal with nonpayment issues in the sub percent range.
  - valuearb 6y ago
    To be more clear DTCC gets its collateral from the broker, ie Robinhood, not the actual clients. And the broker is not allowed to use client funds for collateral. So the DTCC has to worry about Robinhood, and Robinhood has to worry about their clients.

valuearb 6y ago

GME was having 400% swings in a day, and being bought in a large part by brand new retail investors who had just opened accounts. That’s a perfect storm for nonpayment issues.

blablabla123 6y ago
> GME was having 400% swings in a day Well, if that's what people want. At that point in time it's about buying, not selling. > and being bought in a large part by brand new retail > investors who had just opened accounts. > That’s a perfect storm for nonpayment issues. Ok but they need to go through some sort of payment processing that checks the credit rating. Even if the credit card is close to the limit, we are probably talking about amounts smaller than 1000 $. Anyone able to visit the Reddit homepage and installing the Robinhood app should have that amount of cash in hardware. FWIW, normal eCommerce payment processors deal with nonpayment issues in the sub percent range.
- valuearb 6y ago
  To be more clear DTCC gets its collateral from the broker, ie Robinhood, not the actual clients. And the broker is not allowed to use client funds for collateral. So the DTCC has to worry about Robinhood, and Robinhood has to worry about their clients.