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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 brokerag

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.

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.