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I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and cr

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

andrewgioia 4y ago
Whether it was right for them to do or not, I left their platform because of it paying their ridiculous $79 transfer fee or whatever it was. Now with Fidelity and have recommended them 3 times since I've switched.
- mirceal 4y ago
  Fidelity is the one I also use and recommended. The other one is maybe Schwab but the rest of them are 50 shades of Robinhood. If anyone else knows other serious, professional brokers do correct me.
  - Fomite 4y ago
    I'd add Vanguard to Schwab and Fidelity. But actually helping retail investors isn't particularly sexy.
kyriefh 4y ago
this is a good example of the importance of comms and user education. robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. however, they were the front end that uninformed users experienced it through and thus took a huge PR hit
- avgDev 4y ago
  Robinhood thrived initially because they targeted uneducated investors. I downloaded the app, and the confetti explosion after stock purchase really turned me off. They wanted to make it fun. They wanted to target the dopamine receptors targeted by gambling. All people who I interact with who are investing with robinhood have very little knowledge of the financial system. I hate making a generalization, but after the whole scandal it seems that robinhood investors were/are in fact not very knowledgeable about how trading works.
  - Miner49er 4y ago
    Yeah, but how are those uneducated investors supposed to learn? Robinhood lowered the barrier to entry to actually allow the normal person to invest/trade. Without it, I would know far less about the financial system then I do now. For me, Robinhood really did live up what it aims to do (democratize finance for all).
    - Fomite 4y ago
      Schwab will happily teach you, and then provide you access to the tools, rather than just asking you to install an app with instant push-button access to potentially life-ruining downside risk.
    - jjav 4y ago
      > Yeah, but how are those uneducated investors supposed to learn? By being presented with learning material on how trading works, instead of trying to hide reality behind a pretty GUI? That'd be my choice. For example on TDAmeritrade you only get a cash account by default, no margin or option trading. You can upgrade and there are multiple levels of margin upgrades in increasing steps of risk. To do an upgrade you have to at least read some material and answer some questions and check boxes. Sure you could lie through it, but at least they make it clear you're signing up for ever increasing risk at every level. When I first read that RobinHood was allowing people margin and option trading without even telling customers that those are enabled and what it means, I always felt it can only end badly.
- Palmik 4y ago
  They switched to reduce-only mode for GME, effectively going against the retail tide. The fact that other brokers did it is not an excuse. They should have known their user base better. And it's not like they did not have other options -- they could have posted more collateral, and given that they raised billions soon after, it was within the real of possibility for them.
  - namdnay 4y ago
    I don’t get your second paragraph. They had to raise collateral right now. Once they raised the billions they could and did
  - leereeves 4y ago
    > they could have posted more collateral, and given that they raised billions soon after, it was within the real [realm?] of possibility for them Money they raised later couldn't have been used as collateral until they actually raised it, even if the investors would still invest under those conditions.
    - kareemsabri 4y ago
      While I understand you can't post money you don't have, that doesn't absolve them of responsibility in their user's minds (nor should it).
  - gruez 4y ago
    >They should have known their user base better. Hindsight is 20/20. Prior to that event happening, was there credible evidence that an S&P 500 company was going to get pumped 10x in price by a bunch of investors coordinating on social media?
  - codyb 4y ago
    I'm not sure "understanding your user base better" makes billions of dollars appear in your bank accounts instantly, but I'm not a market maker so who knows
    - 4y ago
- autosharp 4y ago
  At first I assumed it was because of liquidity problems and not because they wanted to screw customers. But in the hearings later he refused to answer a bunch of easy questions. E.g. the following meme is literally what he said: https://www.reddit.com/r/wallstreetbets/comments/lngem6/do_you_think_he_realized_it_yes_or_no/ https://www.reddit.com/r/wallstreetbets/comments/lngem6/do_y... Q: "Do you realize that you literally manipulated the market. Yes or No?" Vlad: "Thank you for the great question. When I was a boy in Bulgaria [ladida]" If he had been honest in his dealings then he wouldn't have had to evade every question posed to him.
  - blahblah123456 4y ago
    Nah, not true. In a legal proceeding, always say the minimum. It's never to your benefit to talk to law enforcement (or congress in this case).
    - mirceal 4y ago
      forget legal proceedings. If RH did the right thing AND was transparent with their users there wouldn’t have been any legal proceedings
  - tyrfing 4y ago
    Can you link to the transcript or recording of this question and response? I am unable to find it.
- daniel-cussen 4y ago
  > robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. So why did you start out saying they didn't lock trading...to then say they did lock trading? Do some people will only read the first fifteen words of your post? Like are you aiming to fill the air with positive-sounding sounds that make Robinhood sound good? You think we don't think? Sometimes contradiction is good and helps with nuance and is meaningful. Here it's just gross, like I don't even have to quote two separate parts of what you said. But since I am entitled to quoting you twice to argue with you, but need no other piece of evidence, I'll just quote that same passage again. > robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter.
  - colinmhayes 4y ago
    I don't think it's fair to say robinhood locked trading here. The brokers increased the amount of collateral needed to buy GME and robinhood didn't have the money. They were unable to buy more GME until their loan came through
    - kareemsabri 4y ago
      That's not quite correct. The clearing house demanded more collateral from Robinhood based on market volatility, not specifically to trade GME. Robinhood negotiated less collateral by locking buying of GME, a highly volatile security. There is no other way to say it than that Robinhood locked trading of GME.
    - daniel-cussen 4y ago
      That's purely Robinhood's problem. And in fact that's because they weren't actually buying the shares like they said they were, otherwise there would be no problem. If they locked trading...get this...this is my logic...then it is in fact FAIR to SAY that they locked trading. It's only complex because they were cheating their customers, hence the decline of the platform, hence this chain of posts, hence the end of this sentence having spoken my piece.
jasode 4y ago
>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+billions https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders like George Soros) don't understand that the "Robinhood smartphone app" is a leaky abstraction over final trade settlement at traditional clearing houses. The real-world aspect that "leaked out" was that Robinhood didn't have enough billions in cash. So the ramifications to the UI/UX (the stuff the smartphone user sees) is that you can't transact GME. All that "trade settlement accounting" is too much complexity for non-professionals to understand so the easier narrative to believe is that Robinhood was part of a conspiracy theory to screw the little guy. Yes, being underfunded made them look bad. **EDIT to add extra link explaining why Robinhood has to post their own collateral to buy stocks on behalf of their customers: https://money.stackexchange.com/questions/136272/why-would-collateral-be-required-to-make-a-stock-purchase https://money.stackexchange.com/questions/136272/why-would-c...
- dnadler 4y ago
  I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place.
  - gruez 4y ago
    >I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'm not sure how you got the impression that the parent comment was laying the blame on the user. I interpreted it as excusing the behavior of robinhood. Blame isn't a zero sum game, it's possible to argue that robinhood is less blameworthy without saying that the retail traders are to blame. >I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place. What risk controls? As per the parent comment, it's an issue with settlement/collateral requirements, and robinhood not being prepared to satisfy them in light of a stock going 10x in a short period of time. I'm not sure how "risk controls" would have helped.
rdtwo 4y ago
Seems like that’s a general trend. Netflix, Amazon Google all loosing goodwill from customers
thawaya3113 4y ago
They did it so they wouldn’t collapse financially. And probably lose all licenses and privileges to make trades for the foreseeable future, ending them as a company.
PragmaticPulp 4y ago
I would be shocked if the GME / Reddit crowd made up more than a few percent of that decline. Robinhood has a lot of users across a lot of demographics. Reddit, however large, is more of a small microcosm of internet culture. I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom and a wonky stock market where it felt like everyone was getting rich from stocks and options. Now that the market is cooling off and a lot of their new users got burned when they learned that the market doesn't always go up, I suspect a lot of them are losing enthusiasm for frequent trading. They did their IPO at just the right time.
- mirceal 4y ago
  I would not be shocked. We need to consider who would use Robinhood to begin with and how likely are they to know be exposed to the whole GME saga. Personally I stopped using it. Had it for trying out new things / prototyping crazy ideas (yeah yeah disposable income and first world problems I now). From that point on I am using only a legit broker. When I want to trade I want to be able to trade. If you as a broker cannot do that - even under weird conditions - I will NOT use you. Also, at a meta level, the problem is that RH massaged the truth and didn’t straight up explain what was going on. If they did the right thing in keeping everyone in the loop this could have been a golden opportunity to consolidate their position.
- at-fates-hands 4y ago
  >> I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom. Agreed. The half dozen people I know who were kind of on the back end of this before they locked up trading made some money off it. Not a lot, but nothing to sneeze at either. Once the whole saga went nuclear, they decided to close out their accounts. Most waited for everything to settle out, sold off all their positions and cashed out. They haven't been back. It feels a lot like a normal trading cycle. I'm sure the same thing would've eventually happened where people found something else that caught their attention, but the whole GME saga I think speed up a lot of people into other things. COVID had a weird effect where people found a lot of things to do they normally would not have been doing. Now that things have subsided somewhat, people are moving on from those things and going back to the activities and hobbies they were doing pre-COVID.
bushbaba 4y ago
Isn't a large portion of their past revenue from Crypto trading. Which is significantly down from prior usage.
djyaz1200 4y ago
That action reinforced the exact opposite of the narrative they were trying to create with the Robinhood name. Instead of stealing from the rich and giving to the poor they were running a casino where if you win too much they stop the game.
parkingrift 4y ago
I understand why they did, and why they had to do it. And I still don't care. I liquidated my RH positions and left the platform forever. Unfair is unfair.
quickthrowman 4y ago
It was 100% necessary, they didn’t have the necessary cash to post margin with the clearinghouse. They would’ve been a failed brokerage if they kept allowing GME trades without being able to post the required margin, the SEC would’ve taken it over and people would’ve had to wait weeks/months to ACATS their shares and cash to another brokerage. Does that sound like a better outcome for Robinhood users? I didn’t think so.

andrewgioia 4y ago

Whether it was right for them to do or not, I left their platform because of it paying their ridiculous $79 transfer fee or whatever it was. Now with Fidelity and have recommended them 3 times since I've switched.

mirceal 4y ago
Fidelity is the one I also use and recommended. The other one is maybe Schwab but the rest of them are 50 shades of Robinhood. If anyone else knows other serious, professional brokers do correct me.
- Fomite 4y ago
  I'd add Vanguard to Schwab and Fidelity. But actually helping retail investors isn't particularly sexy.

kyriefh 4y ago

this is a good example of the importance of comms and user education. robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. however, they were the front end that uninformed users experienced it through and thus took a huge PR hit

avgDev 4y ago
Robinhood thrived initially because they targeted uneducated investors. I downloaded the app, and the confetti explosion after stock purchase really turned me off. They wanted to make it fun. They wanted to target the dopamine receptors targeted by gambling. All people who I interact with who are investing with robinhood have very little knowledge of the financial system. I hate making a generalization, but after the whole scandal it seems that robinhood investors were/are in fact not very knowledgeable about how trading works.
- Miner49er 4y ago
  Yeah, but how are those uneducated investors supposed to learn? Robinhood lowered the barrier to entry to actually allow the normal person to invest/trade. Without it, I would know far less about the financial system then I do now. For me, Robinhood really did live up what it aims to do (democratize finance for all).
  - Fomite 4y ago
    Schwab will happily teach you, and then provide you access to the tools, rather than just asking you to install an app with instant push-button access to potentially life-ruining downside risk.
  - jjav 4y ago
    > Yeah, but how are those uneducated investors supposed to learn? By being presented with learning material on how trading works, instead of trying to hide reality behind a pretty GUI? That'd be my choice. For example on TDAmeritrade you only get a cash account by default, no margin or option trading. You can upgrade and there are multiple levels of margin upgrades in increasing steps of risk. To do an upgrade you have to at least read some material and answer some questions and check boxes. Sure you could lie through it, but at least they make it clear you're signing up for ever increasing risk at every level. When I first read that RobinHood was allowing people margin and option trading without even telling customers that those are enabled and what it means, I always felt it can only end badly.
Palmik 4y ago
They switched to reduce-only mode for GME, effectively going against the retail tide. The fact that other brokers did it is not an excuse. They should have known their user base better. And it's not like they did not have other options -- they could have posted more collateral, and given that they raised billions soon after, it was within the real of possibility for them.
- namdnay 4y ago
  I don’t get your second paragraph. They had to raise collateral right now. Once they raised the billions they could and did
- leereeves 4y ago
  > they could have posted more collateral, and given that they raised billions soon after, it was within the real [realm?] of possibility for them Money they raised later couldn't have been used as collateral until they actually raised it, even if the investors would still invest under those conditions.
  - kareemsabri 4y ago
    While I understand you can't post money you don't have, that doesn't absolve them of responsibility in their user's minds (nor should it).
- gruez 4y ago
  >They should have known their user base better. Hindsight is 20/20. Prior to that event happening, was there credible evidence that an S&P 500 company was going to get pumped 10x in price by a bunch of investors coordinating on social media?
- codyb 4y ago
  I'm not sure "understanding your user base better" makes billions of dollars appear in your bank accounts instantly, but I'm not a market maker so who knows
  - 4y ago
autosharp 4y ago
At first I assumed it was because of liquidity problems and not because they wanted to screw customers. But in the hearings later he refused to answer a bunch of easy questions. E.g. the following meme is literally what he said: https://www.reddit.com/r/wallstreetbets/comments/lngem6/do_you_think_he_realized_it_yes_or_no/ https://www.reddit.com/r/wallstreetbets/comments/lngem6/do_y... Q: "Do you realize that you literally manipulated the market. Yes or No?" Vlad: "Thank you for the great question. When I was a boy in Bulgaria [ladida]" If he had been honest in his dealings then he wouldn't have had to evade every question posed to him.
- blahblah123456 4y ago
  Nah, not true. In a legal proceeding, always say the minimum. It's never to your benefit to talk to law enforcement (or congress in this case).
  - mirceal 4y ago
    forget legal proceedings. If RH did the right thing AND was transparent with their users there wouldn’t have been any legal proceedings
- tyrfing 4y ago
  Can you link to the transcript or recording of this question and response? I am unable to find it.
daniel-cussen 4y ago
> robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. So why did you start out saying they didn't lock trading...to then say they did lock trading? Do some people will only read the first fifteen words of your post? Like are you aiming to fill the air with positive-sounding sounds that make Robinhood sound good? You think we don't think? Sometimes contradiction is good and helps with nuance and is meaningful. Here it's just gross, like I don't even have to quote two separate parts of what you said. But since I am entitled to quoting you twice to argue with you, but need no other piece of evidence, I'll just quote that same passage again. > robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter.
- colinmhayes 4y ago
  I don't think it's fair to say robinhood locked trading here. The brokers increased the amount of collateral needed to buy GME and robinhood didn't have the money. They were unable to buy more GME until their loan came through
  - kareemsabri 4y ago
    That's not quite correct. The clearing house demanded more collateral from Robinhood based on market volatility, not specifically to trade GME. Robinhood negotiated less collateral by locking buying of GME, a highly volatile security. There is no other way to say it than that Robinhood locked trading of GME.
  - daniel-cussen 4y ago
    That's purely Robinhood's problem. And in fact that's because they weren't actually buying the shares like they said they were, otherwise there would be no problem. If they locked trading...get this...this is my logic...then it is in fact FAIR to SAY that they locked trading. It's only complex because they were cheating their customers, hence the decline of the platform, hence this chain of posts, hence the end of this sentence having spoken my piece.

jasode 4y ago

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+billions https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders like George Soros) don't understand that the "Robinhood smartphone app" is a leaky abstraction over final trade settlement at traditional clearing houses. The real-world aspect that "leaked out" was that Robinhood didn't have enough billions in cash. So the ramifications to the UI/UX (the stuff the smartphone user sees) is that you can't transact GME. All that "trade settlement accounting" is too much complexity for non-professionals to understand so the easier narrative to believe is that Robinhood was part of a conspiracy theory to screw the little guy. Yes, being underfunded made them look bad. **EDIT to add extra link explaining why Robinhood has to post their own collateral to buy stocks on behalf of their customers: https://money.stackexchange.com/questions/136272/why-would-collateral-be-required-to-make-a-stock-purchase https://money.stackexchange.com/questions/136272/why-would-c...

dnadler 4y ago
I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place.
- gruez 4y ago
  >I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'm not sure how you got the impression that the parent comment was laying the blame on the user. I interpreted it as excusing the behavior of robinhood. Blame isn't a zero sum game, it's possible to argue that robinhood is less blameworthy without saying that the retail traders are to blame. >I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place. What risk controls? As per the parent comment, it's an issue with settlement/collateral requirements, and robinhood not being prepared to satisfy them in light of a stock going 10x in a short period of time. I'm not sure how "risk controls" would have helped.

rdtwo 4y ago

Seems like that’s a general trend. Netflix, Amazon Google all loosing goodwill from customers

thawaya3113 4y ago

They did it so they wouldn’t collapse financially. And probably lose all licenses and privileges to make trades for the foreseeable future, ending them as a company.

PragmaticPulp 4y ago

I would be shocked if the GME / Reddit crowd made up more than a few percent of that decline. Robinhood has a lot of users across a lot of demographics. Reddit, however large, is more of a small microcosm of internet culture. I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom and a wonky stock market where it felt like everyone was getting rich from stocks and options. Now that the market is cooling off and a lot of their new users got burned when they learned that the market doesn't always go up, I suspect a lot of them are losing enthusiasm for frequent trading. They did their IPO at just the right time.

mirceal 4y ago
I would not be shocked. We need to consider who would use Robinhood to begin with and how likely are they to know be exposed to the whole GME saga. Personally I stopped using it. Had it for trying out new things / prototyping crazy ideas (yeah yeah disposable income and first world problems I now). From that point on I am using only a legit broker. When I want to trade I want to be able to trade. If you as a broker cannot do that - even under weird conditions - I will NOT use you. Also, at a meta level, the problem is that RH massaged the truth and didn’t straight up explain what was going on. If they did the right thing in keeping everyone in the loop this could have been a golden opportunity to consolidate their position.
at-fates-hands 4y ago
>> I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom. Agreed. The half dozen people I know who were kind of on the back end of this before they locked up trading made some money off it. Not a lot, but nothing to sneeze at either. Once the whole saga went nuclear, they decided to close out their accounts. Most waited for everything to settle out, sold off all their positions and cashed out. They haven't been back. It feels a lot like a normal trading cycle. I'm sure the same thing would've eventually happened where people found something else that caught their attention, but the whole GME saga I think speed up a lot of people into other things. COVID had a weird effect where people found a lot of things to do they normally would not have been doing. Now that things have subsided somewhat, people are moving on from those things and going back to the activities and hobbies they were doing pre-COVID.

bushbaba 4y ago

Isn't a large portion of their past revenue from Crypto trading. Which is significantly down from prior usage.

djyaz1200 4y ago

That action reinforced the exact opposite of the narrative they were trying to create with the Robinhood name. Instead of stealing from the rich and giving to the poor they were running a casino where if you win too much they stop the game.

parkingrift 4y ago

I understand why they did, and why they had to do it. And I still don't care. I liquidated my RH positions and left the platform forever. Unfair is unfair.

quickthrowman 4y ago

It was 100% necessary, they didn’t have the necessary cash to post margin with the clearinghouse. They would’ve been a failed brokerage if they kept allowing GME trades without being able to post the required margin, the SEC would’ve taken it over and people would’ve had to wait weeks/months to ACATS their shares and cash to another brokerage. Does that sound like a better outcome for Robinhood users? I didn’t think so.