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What they did wrong was not having the resources to handle that volatile environment. I know other companies also halted trading, but many didn't. They are bitt

What they did wrong was not having the resources to handle that volatile environment. I know other companies also halted trading, but many didn't. They are bitting off more than they can chew.

CydeWeys 6y ago
Is that illegal though? I don't think so. And also, they were offering customers a courtesy to use unsettled funds to buy stocks immediately, rather than waiting two business days for funds to clear. Most customers generally appreciate this feature (I certainly do!). The only thing I'd say they did wrong (but not illegally so) was not having finer-grained controls ready to go to be able to shut down purchases of shares using unsettled funds and/or margin, while still allowing purchases by users with settled funds. This is a feature that some other brokers already have, i.e. you can buy large caps with unsettled funds but penny stocks require the use of settled funds.
- nrmitchi 6y ago
  In this situation, I don't think that the distinction between settled and unsettled funds would have mattered. Robinhood was still responsible for the clearinghouse-mandated deposit requirements, whether the purchase was from settled or unsettled funds. My understanding is that the deposit funds, and the funds-fronted-on-margin, are two different groups of money.
  - CydeWeys 6y ago
    But the point is that they can meet the deposit requirements on settled customer funds easily with those funds themselves, since those funds are actually settled. But on unsettled customer funds, they have to come up with their own money to bridge the gap until the customer funds settle.
    - nrmitchi 6y ago
      No, they can't. They can't use customer funds for DTCC deposit requirements. It's just not allowed. IIRC the deposit requirement was raised to 100%. Even if the customer funds were settled, and the customer wanted to buy 1 share of GME for $300, Robinhood would have to post $300 of it's own money, just in case. Now would Robinhood get that money back? Most likely, but that doesn't mean they don't have to have it to deposit in the first place.
      - CydeWeys 6y ago
        Hrm, so that makes Robinhood's situation even more impossible then. There's nothing they could've done to continue to allow people to buy $GME absent coming up with billions of dollars for a few days' worth of deposits.
      - chii 6y ago
        > the deposit requirement was raised to 100%. the question becomes - who/what had the power to raise this deposit ratio, and did parties that would stand to lose a lot if GME continued to rise had influence in making this deposit requirement higher?
        nrmitchi 6y ago
        The DTCC raised the requirement, and my understanding is that these requirements are generated formulaically; not publicly available, but is based on volume, volatility, etc of the individual underlying assets, and how exposed specific institutions are to that volatility. The DTCC wouldn't care one way or another if GME went up or down. They're goal is to make sure that different parties are able to settle their obligations with a very high degree of certainty, and ensure that investors won't lose their money with solvent brokerage firms or other intermediaries. If you're arguing that the DTCC is beholden to the whims of a (relatively) miniscule hedge fund, you're crossing into conspiracy theory territory.

What they did wrong was not having the resources to handle that volatile environment. I know other companies also halted trading, but many didn't. They are bitting off more than they can chew.

CydeWeys 6y ago

Is that illegal though? I don't think so. And also, they were offering customers a courtesy to use unsettled funds to buy stocks immediately, rather than waiting two business days for funds to clear. Most customers generally appreciate this feature (I certainly do!). The only thing I'd say they did wrong (but not illegally so) was not having finer-grained controls ready to go to be able to shut down purchases of shares using unsettled funds and/or margin, while still allowing purchases by users with settled funds. This is a feature that some other brokers already have, i.e. you can buy large caps with unsettled funds but penny stocks require the use of settled funds.

nrmitchi 6y ago
In this situation, I don't think that the distinction between settled and unsettled funds would have mattered. Robinhood was still responsible for the clearinghouse-mandated deposit requirements, whether the purchase was from settled or unsettled funds. My understanding is that the deposit funds, and the funds-fronted-on-margin, are two different groups of money.
- CydeWeys 6y ago
  But the point is that they can meet the deposit requirements on settled customer funds easily with those funds themselves, since those funds are actually settled. But on unsettled customer funds, they have to come up with their own money to bridge the gap until the customer funds settle.
  - nrmitchi 6y ago
    No, they can't. They can't use customer funds for DTCC deposit requirements. It's just not allowed. IIRC the deposit requirement was raised to 100%. Even if the customer funds were settled, and the customer wanted to buy 1 share of GME for $300, Robinhood would have to post $300 of it's own money, just in case. Now would Robinhood get that money back? Most likely, but that doesn't mean they don't have to have it to deposit in the first place.
    - CydeWeys 6y ago
      Hrm, so that makes Robinhood's situation even more impossible then. There's nothing they could've done to continue to allow people to buy $GME absent coming up with billions of dollars for a few days' worth of deposits.
    - chii 6y ago
      > the deposit requirement was raised to 100%. the question becomes - who/what had the power to raise this deposit ratio, and did parties that would stand to lose a lot if GME continued to rise had influence in making this deposit requirement higher?
      - nrmitchi 6y ago
        The DTCC raised the requirement, and my understanding is that these requirements are generated formulaically; not publicly available, but is based on volume, volatility, etc of the individual underlying assets, and how exposed specific institutions are to that volatility. The DTCC wouldn't care one way or another if GME went up or down. They're goal is to make sure that different parties are able to settle their obligations with a very high degree of certainty, and ensure that investors won't lose their money with solvent brokerage firms or other intermediaries. If you're arguing that the DTCC is beholden to the whims of a (relatively) miniscule hedge fund, you're crossing into conspiracy theory territory.