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I was put off by the way he attacked Vlad Tenev. Tenev became a scapegoat for the GME fiasco, and, as the facts came out, it seemed he really didn't deserve to

I was put off by the way he attacked Vlad Tenev. Tenev became a scapegoat for the GME fiasco, and, as the facts came out, it seemed he really didn't deserve to. I get that Tenev's "we don't have liquidity problems" answer was a little disingenuous, but it also wasn't totally wrong if you include a bunch of fine print, and I get how it was necessary. In the end, it turned out that the whole T+2 system was stupid, and leaked through the abstractions built on top. He didn't have enough capital to handle a crazy outlier, and he went back to get more money for next time. What else was the guy supposed to do? So attacking Vlad for "ethics" was low. Remember that, before Robinhood, we all paid a bunch of trading fees. The dude has done some good. Chamath just piled on to an easy target. I don't like people who cast stones so they can look good. I don't know why I'm here doing Robinhood's PR for them. I guess Chamath's grandstanding just left a really bad taste.

paulgb 6y ago
His attack on Vlad was especially disingenuous given that he was SPACing a competitor (SoFi). Especially since he specifically targeted PFOF, which SoFi also engages in.
quickthrowman 6y ago
Re: fees The discount broker always gets paid. It might be from fees or it might be from PFOF and lending shares in margin accounts and pocketing the proceeds, but either way, they get their money. Other brokers like IKBR charge fees for all trades, but split the share lending proceeds with you 50/50.
toomuchtodo 6y ago
> In the end, it turned out that the whole T+2 system was stupid, and leaked through the abstractions built on top. While T+2 is antiquated, that doesn't excuse Robinhood giving margin accounts to unsophisticated participants (who don't understand the consequences of trading on margin), fronting them funds with "instant funding" while their ACH transfers are in flight, all while having limited capital on hand. Vlad could've come out honestly and pointed out their sleight of hand was also a contributor alongside clearinghouse requirements, but instead, smokescreen.
- google2142 6y ago
  Then you still don't understand the problem. This had nothing to do with consumer margin; they could have not offered margin as a product and still ended up in this situation. The TLDR is that DTCC requires cash from the brokerage firm for buying a stock until settlement clears, which means the money you pay to buy $100 worth of apple, a percentage of that amount must be paid directly by the brokerage i.e. not from the $100 you gave but from the businesses account. During the gamestop fiasco, the percentage of money required from the brokers increased in orders of magnitude for GME and other meme stocks which caused a pseudo liquidation issue, but not actually since no one's balances were at risk yet. It's ironic because this prevents small brokerages from building their own clearing houses and reducing competition in that space. Robinhood innovated to push the feature development cycle faster and got punished for it due to an archaic rule about settlement time. T+2 is really 99% of the reason this happened -- sure RH could have raised additional funds, but a black swan event isn't usually what a smaller bank plans for.
  - deleted 6y ago
    [deleted]
  - omeze 6y ago
    T+2 is an artifact of fund transfer settlement times isn’t it? Or to rephrase, why do we still have T+2 for equities?
    - Armisael16 6y ago
      Financial markets appreciate having a little time to call back mistakes. Also, transactions are a lot easier and cheaper if you can do them at the end of the day instead of immediately. We could probably switch to T+1 without significant problems. Real-time settlement would be a whole other kettle of fish.
    - totalZero 6y ago
      It used to be T+3. We switched to T+2 about 4 years ago. That amount of time gives firms the opportunity to borrow in the overnight market to get cash for purchases, and also allows short sellers a bit of time to secure borrow so that they can deliver shares. Even on T+2, hundreds of millions of dollars' worth of GME stock failed to deliver. Thus, I thumb my nose at the suggestion that T+1 (which is what we use in the options market) would have resolved the issue. In actuality, Vlad is correct that faster settlement would have liberated some of his firm's cash, but it's not a real solution considering that other parts of the settlement process would break. It's easier for him to point fingers than to admit "We were writing checks that our firm couldn't cash."

paulgb 6y ago

His attack on Vlad was especially disingenuous given that he was SPACing a competitor (SoFi). Especially since he specifically targeted PFOF, which SoFi also engages in.

quickthrowman 6y ago

Re: fees The discount broker always gets paid. It might be from fees or it might be from PFOF and lending shares in margin accounts and pocketing the proceeds, but either way, they get their money. Other brokers like IKBR charge fees for all trades, but split the share lending proceeds with you 50/50.

toomuchtodo 6y ago

> In the end, it turned out that the whole T+2 system was stupid, and leaked through the abstractions built on top. While T+2 is antiquated, that doesn't excuse Robinhood giving margin accounts to unsophisticated participants (who don't understand the consequences of trading on margin), fronting them funds with "instant funding" while their ACH transfers are in flight, all while having limited capital on hand. Vlad could've come out honestly and pointed out their sleight of hand was also a contributor alongside clearinghouse requirements, but instead, smokescreen.

google2142 6y ago
Then you still don't understand the problem. This had nothing to do with consumer margin; they could have not offered margin as a product and still ended up in this situation. The TLDR is that DTCC requires cash from the brokerage firm for buying a stock until settlement clears, which means the money you pay to buy $100 worth of apple, a percentage of that amount must be paid directly by the brokerage i.e. not from the $100 you gave but from the businesses account. During the gamestop fiasco, the percentage of money required from the brokers increased in orders of magnitude for GME and other meme stocks which caused a pseudo liquidation issue, but not actually since no one's balances were at risk yet. It's ironic because this prevents small brokerages from building their own clearing houses and reducing competition in that space. Robinhood innovated to push the feature development cycle faster and got punished for it due to an archaic rule about settlement time. T+2 is really 99% of the reason this happened -- sure RH could have raised additional funds, but a black swan event isn't usually what a smaller bank plans for.
- deleted 6y ago
  [deleted]
- omeze 6y ago
  T+2 is an artifact of fund transfer settlement times isn’t it? Or to rephrase, why do we still have T+2 for equities?
  - Armisael16 6y ago
    Financial markets appreciate having a little time to call back mistakes. Also, transactions are a lot easier and cheaper if you can do them at the end of the day instead of immediately. We could probably switch to T+1 without significant problems. Real-time settlement would be a whole other kettle of fish.
  - totalZero 6y ago
    It used to be T+3. We switched to T+2 about 4 years ago. That amount of time gives firms the opportunity to borrow in the overnight market to get cash for purchases, and also allows short sellers a bit of time to secure borrow so that they can deliver shares. Even on T+2, hundreds of millions of dollars' worth of GME stock failed to deliver. Thus, I thumb my nose at the suggestion that T+1 (which is what we use in the options market) would have resolved the issue. In actuality, Vlad is correct that faster settlement would have liberated some of his firm's cash, but it's not a real solution considering that other parts of the settlement process would break. It's easier for him to point fingers than to admit "We were writing checks that our firm couldn't cash."