3 ms·

There's a big difference between a stock freeze imposed by an exchange, and a broker prohibiting its clients from trading a given stock. If you're actively prev

There's a big difference between a stock freeze imposed by an exchange, and a broker prohibiting its clients from trading a given stock. If you're actively preventing your clients from selling the stock they own, that costs them actual money if the stock goes down and can very well end in expensive lawsuits. If you prevent them from buying more stock, they only lose the opportunity cost, which is generally much harder to recover by legal means.

f-securus 4y ago
If a broker that handles a very large portion of retail trades suddenly blocks purchasing a security that retail trading has driven the price up then it stops retail pressure and the stock price will obviously drop.... you could say Robinhood cost retail money by removing the upward pressure on the stock. The SEC report on the incident mentions the price rise was mostly due to retail FOMO, and not the suspected short squeeze that got the early folks attention. A laymen would look at what Robinhood did and think Robinhood cut the fuse to the short squeeze bomb.
- Denvercoder9 4y ago
  The problem with this analysis is that Robinhood didn't choose to block buy orders, they were forced to because they were no longer able to fulfill them. You can argue about whether Robinhood should've been better prepared for the volatility that arose (and that could be an interesting conversation by itself), but they weren't. GP claims "they shouldn't have done it", but continuing wasn't an option. The only other choice they had was to suspend trading in GME all together (both buy and sell orders), but I don't see how that wasn't strictly worse for them and their clients.
  - chii 4y ago
    it might have made robinhood look better to uninformed retail traders if they disabled both the sell button as well as the buy button.
    - freemint 4y ago
      No it wouldn't have. People who knew they could sell in theory and couldn't in practice would complain to and maybe sue for damages (justified or not) the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface.
      - Denvercoder9 4y ago
        > the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface As explained elsewhere in this thread, regulations don't allow this.

f-securus 4y ago

If a broker that handles a very large portion of retail trades suddenly blocks purchasing a security that retail trading has driven the price up then it stops retail pressure and the stock price will obviously drop.... you could say Robinhood cost retail money by removing the upward pressure on the stock. The SEC report on the incident mentions the price rise was mostly due to retail FOMO, and not the suspected short squeeze that got the early folks attention. A laymen would look at what Robinhood did and think Robinhood cut the fuse to the short squeeze bomb.

Denvercoder9 4y ago
The problem with this analysis is that Robinhood didn't choose to block buy orders, they were forced to because they were no longer able to fulfill them. You can argue about whether Robinhood should've been better prepared for the volatility that arose (and that could be an interesting conversation by itself), but they weren't. GP claims "they shouldn't have done it", but continuing wasn't an option. The only other choice they had was to suspend trading in GME all together (both buy and sell orders), but I don't see how that wasn't strictly worse for them and their clients.
- chii 4y ago
  it might have made robinhood look better to uninformed retail traders if they disabled both the sell button as well as the buy button.
  - freemint 4y ago
    No it wouldn't have. People who knew they could sell in theory and couldn't in practice would complain to and maybe sue for damages (justified or not) the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface.
    - Denvercoder9 4y ago
      > the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface As explained elsewhere in this thread, regulations don't allow this.