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it was absolutely the right thing to do, they would've been massively over-exposed, somehow it's painted as villainous and underhanded. If they had lots of dep

it was absolutely the right thing to do, they would've been massively over-exposed, somehow it's painted as villainous and underhanded. If they had lots of deposits and went under surely people would've been less than impressed and asking why they didn't take action sooner.

namdnay 5y ago
it was the right thing to do on the moment, but what was wrong was: a) cutting corners and ending up in that position b) not being completely transparent about what was happening
- jimmydorry 5y ago
  c) changing story multiple times in an attempt to save face. The CEO claimed they had no liquidity issues at all, then claimed they didn’t have enough money to meet margin requirements. Since then, we have found out that the DTCC that asked for more collateral recanted prior to market open but RH still discontinued retail buying anyway. Like an IT outages reflects poorly on a tech company, not being able to manage your books reflects poorly on a financial company.
- gruez 5y ago
  >a) cutting corners and ending up in that position What corners were cut? That they didn't prepare for a unprecedented buy wave in meme stocks along with a massive increase in deposit requirements?
  - namdnay 5y ago
    Opening (and pushing) call options to a broad userbase without first ensuring they had the capital reserves and the access to additional funding to top-up those reserves it's a bit easy for robinhood to say "fuck the old banks, we don't need to be part of their network, and we're going to open complex derivative trading to everyone", and then as soon as everyone starts buying massive amounts of call options, suddenly realising that they need massive collateral and they don't have any partners to rely on
    - gruez 5y ago
      > Opening (and pushing) call options to a broad userbase without first ensuring they had the capital reserves and the access to additional funding to top-up those reserves Them opening/pushing options to their userbase was a long term move, but GME blowing up and deposit requirements spiking up was a short term event. Therefore those events aren't really contradictory. >fuck the old banks, we don't need to be part of their network That was part of their messaging? I haven't been keeping up with their blog posts, but AFAIK their messaging is closer to "democratizing finance" rather than "fuck the old banks".
michaelt 5y ago
Well, if I gave my kid five bucks and sent them to the store to buy a gallon milk, there wouldn't be any 'credit' or 'exposure' or 'risk' or 'volatility' involved. Are we to believe these cutting edge financial institutions with their sub-millisecond high frequency trading, specialists in order execution, eight-figure salaries and dedicated high-speed microwave links are somehow unable trade cash for goods like every store does hundreds of times a day?
- TeMPOraL 5y ago
  Not to defend Robinhood, but the GME debacle was not like you sending your kid for milk; it was like everyone panicking and sending their kids to the same store, to buy a whole cart of milk each. As the early months of 2020 demonstrated, brick&mortar stores don't handle deviations from regular buying pattern well either, and having cash in hand doesn't change anything.
  - real-dino 5y ago
    That's not how brokers should work though, speaking in code, they are a wrapper around the market to make an interface that regular people can use. Price discovery means that buy/ask spread changes based on supply and demand, were this the case, and there was no collusion, then there would have been no need to shut down trading. The problem is the supply was inflated due to naked shorts, and Robin Hood's clearing house/business partner (Citadel) was caught with their pants down facilitating this naked shorting. Under normal market mechanics, there would be no panic. The price would have increased, early adopters would have gotten profit, late adopters would have missed out and lost as the correct price was found. The January blocking of trades was a desperate 'Hail Mary' to prevent an actual squeeze, and it *worked*. Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand. https://www.reddit.com/r/Superstonk/comments/oc4f79/well_there_it_is_more_mathevidence_pointing_to/ https://www.reddit.com/r/Superstonk/comments/oc4f79/well_the... Yes, this is conjecture, but the author is well respected, and if you can disprove any of it, reddit is very happy to help you strengthen/disprove it's case. It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.

namdnay 5y ago

it was the right thing to do on the moment, but what was wrong was: a) cutting corners and ending up in that position b) not being completely transparent about what was happening

jimmydorry 5y ago
c) changing story multiple times in an attempt to save face. The CEO claimed they had no liquidity issues at all, then claimed they didn’t have enough money to meet margin requirements. Since then, we have found out that the DTCC that asked for more collateral recanted prior to market open but RH still discontinued retail buying anyway. Like an IT outages reflects poorly on a tech company, not being able to manage your books reflects poorly on a financial company.
gruez 5y ago
>a) cutting corners and ending up in that position What corners were cut? That they didn't prepare for a unprecedented buy wave in meme stocks along with a massive increase in deposit requirements?
- namdnay 5y ago
  Opening (and pushing) call options to a broad userbase without first ensuring they had the capital reserves and the access to additional funding to top-up those reserves it's a bit easy for robinhood to say "fuck the old banks, we don't need to be part of their network, and we're going to open complex derivative trading to everyone", and then as soon as everyone starts buying massive amounts of call options, suddenly realising that they need massive collateral and they don't have any partners to rely on
  - gruez 5y ago
    > Opening (and pushing) call options to a broad userbase without first ensuring they had the capital reserves and the access to additional funding to top-up those reserves Them opening/pushing options to their userbase was a long term move, but GME blowing up and deposit requirements spiking up was a short term event. Therefore those events aren't really contradictory. >fuck the old banks, we don't need to be part of their network That was part of their messaging? I haven't been keeping up with their blog posts, but AFAIK their messaging is closer to "democratizing finance" rather than "fuck the old banks".

michaelt 5y ago

Well, if I gave my kid five bucks and sent them to the store to buy a gallon milk, there wouldn't be any 'credit' or 'exposure' or 'risk' or 'volatility' involved. Are we to believe these cutting edge financial institutions with their sub-millisecond high frequency trading, specialists in order execution, eight-figure salaries and dedicated high-speed microwave links are somehow unable trade cash for goods like every store does hundreds of times a day?

TeMPOraL 5y ago
Not to defend Robinhood, but the GME debacle was not like you sending your kid for milk; it was like everyone panicking and sending their kids to the same store, to buy a whole cart of milk each. As the early months of 2020 demonstrated, brick&mortar stores don't handle deviations from regular buying pattern well either, and having cash in hand doesn't change anything.
- real-dino 5y ago
  That's not how brokers should work though, speaking in code, they are a wrapper around the market to make an interface that regular people can use. Price discovery means that buy/ask spread changes based on supply and demand, were this the case, and there was no collusion, then there would have been no need to shut down trading. The problem is the supply was inflated due to naked shorts, and Robin Hood's clearing house/business partner (Citadel) was caught with their pants down facilitating this naked shorting. Under normal market mechanics, there would be no panic. The price would have increased, early adopters would have gotten profit, late adopters would have missed out and lost as the correct price was found. The January blocking of trades was a desperate 'Hail Mary' to prevent an actual squeeze, and it *worked*. Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand. https://www.reddit.com/r/Superstonk/comments/oc4f79/well_there_it_is_more_mathevidence_pointing_to/ https://www.reddit.com/r/Superstonk/comments/oc4f79/well_the... Yes, this is conjecture, but the author is well respected, and if you can disprove any of it, reddit is very happy to help you strengthen/disprove it's case. It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.