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I am aware of that, and that is Robinhood being unable to manage their collateral requirements in order to continue trading GME. There were other brokers that

I am aware of that, and that is Robinhood being unable to manage their collateral requirements in order to continue trading GME. There were other brokers that managed to do it just fine. Robinhood messed up here. Really I think the DTCC is who messed up, but that's a much larger discussion. The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell. Retail traders don't think of trying different brokers for availability like you might trying different toy stores. The point of having a large enough float is so that you can continue trading the stock. Market makers exist to provide liquidity. It's supposed to keep trading, and only some brokers like Robinhood were unable to manage this.

dragontamer 4y ago
Personally speaking, I blame the customers. They are paying for $0 trades to a very, very small trading firm with well-known trade-execution problems months / years before the GME instance. No serious trader actually trusted Robinhood, and nobody was surprised when Robinhood's trading ability was shown to be so weak in that timeframe. There were many respectable banks with much stronger finances who were able to support the GME-rush. It was just the small guys without much $$$$ who failed, like Robinhood. -------- If you did a bit of research, you would have found Interactive Brokers (for instance). I'm not a customer of IB, but they have plenty of online material for what exactly you're paying for. And that is, trade execution. It matters, especially in times of trouble / times of risk. The stronger the bank, the better their ability to continue operations during weird times. > The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell. Except they do. All the time when bubbles pop and other crisis form. Good luck selling stocks during the crash of (whatever). When the stock market is crashing, there's no buyers, so the price keeps dropping and dropping. Without any buyers, you will never be matched and you'll never be able to sell until its too late. Understanding these mechanics is very important to any market participant. "Flash crashes" with stop-loss orders are particularly lulzy. Your stock is automatically put up for a sale on a flash-crash. There's no buyers, so you sell the stock at a grossly lower price than expected (when some savvy buyer finally decides the price is low enough). That's when you're matched up. By the time you look at the stock, the "flash crash" is over, your stock is randomly sold and at a bad price. Etc. etc. Its annoying, but these sorts of events happen all the time, and its important to remember the mechanics of buying/selling stocks at all times when trading.
- Denvercoder9 4y ago
  IB might not be the best example, as they also restricted GME option trading to liquidation only.
  - dragontamer 4y ago
    > option trading Options are extremely different than the underlying stock. Options is everything we discussed except with way less volume and way more margin requirements. It doesn't seem like IB restricted GME-stock, only options-on-GME-stock, which is a very, very different instrument. ------ That being said, if I were a paying customer to IB and was hoping for good options-trades during that time, I guess I would have been pissed off. Still though, its a far more understandable issue to have a derivative-trade fall through rather than the underlying stock-trade fall through.
    - Denvercoder9 4y ago
      Yes, but the end result was still the same: customers couldn't trade what they wanted to, because the broker couldn't or didn't satisfy their collateral requirements.
  - MrMan 4y ago
    I think many brokers had these restrictions, so what is the point of this discussion
- BigBubbleButt 4y ago
  > Except they do. All the time when bubbles pop and other crisis form. Market halts are completely different from what we are discussing. And one of the purposes of market makers is to provide liquidity in extreme cases as you are describing (I'm not saying it works perfectly, but it's one of their reasons for existing). Anyway, I feel like we aren't quite getting our points across to each other. Not blaming you just saying let's agree to disagree.
  - dragontamer 4y ago
jallen_dot_dev 4y ago
> There were other brokers that managed to do it just fine. If Robinhood is taking a net inflow of shares, then logically other brokers must have a net outflow. So of course there would be other brokers with shares to buy. One reason you could go to some other broker and buy GME is because that broker had many other customers looking to offload an overhyped stock. You couldn't buy on Robinhood because their customer base was mostly retail traders looking only to buy.

dragontamer 4y ago

Personally speaking, I blame the customers. They are paying for $0 trades to a very, very small trading firm with well-known trade-execution problems months / years before the GME instance. No serious trader actually trusted Robinhood, and nobody was surprised when Robinhood's trading ability was shown to be so weak in that timeframe. There were many respectable banks with much stronger finances who were able to support the GME-rush. It was just the small guys without much $$$$ who failed, like Robinhood. -------- If you did a bit of research, you would have found Interactive Brokers (for instance). I'm not a customer of IB, but they have plenty of online material for what exactly you're paying for. And that is, trade execution. It matters, especially in times of trouble / times of risk. The stronger the bank, the better their ability to continue operations during weird times. > The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell. Except they do. All the time when bubbles pop and other crisis form. Good luck selling stocks during the crash of (whatever). When the stock market is crashing, there's no buyers, so the price keeps dropping and dropping. Without any buyers, you will never be matched and you'll never be able to sell until its too late. Understanding these mechanics is very important to any market participant. "Flash crashes" with stop-loss orders are particularly lulzy. Your stock is automatically put up for a sale on a flash-crash. There's no buyers, so you sell the stock at a grossly lower price than expected (when some savvy buyer finally decides the price is low enough). That's when you're matched up. By the time you look at the stock, the "flash crash" is over, your stock is randomly sold and at a bad price. Etc. etc. Its annoying, but these sorts of events happen all the time, and its important to remember the mechanics of buying/selling stocks at all times when trading.

Denvercoder9 4y ago
IB might not be the best example, as they also restricted GME option trading to liquidation only.
- dragontamer 4y ago
  > option trading Options are extremely different than the underlying stock. Options is everything we discussed except with way less volume and way more margin requirements. It doesn't seem like IB restricted GME-stock, only options-on-GME-stock, which is a very, very different instrument. ------ That being said, if I were a paying customer to IB and was hoping for good options-trades during that time, I guess I would have been pissed off. Still though, its a far more understandable issue to have a derivative-trade fall through rather than the underlying stock-trade fall through.
  - Denvercoder9 4y ago
    Yes, but the end result was still the same: customers couldn't trade what they wanted to, because the broker couldn't or didn't satisfy their collateral requirements.
- MrMan 4y ago
  I think many brokers had these restrictions, so what is the point of this discussion
BigBubbleButt 4y ago
> Except they do. All the time when bubbles pop and other crisis form. Market halts are completely different from what we are discussing. And one of the purposes of market makers is to provide liquidity in extreme cases as you are describing (I'm not saying it works perfectly, but it's one of their reasons for existing). Anyway, I feel like we aren't quite getting our points across to each other. Not blaming you just saying let's agree to disagree.
- dragontamer 4y ago

jallen_dot_dev 4y ago

> There were other brokers that managed to do it just fine. If Robinhood is taking a net inflow of shares, then logically other brokers must have a net outflow. So of course there would be other brokers with shares to buy. One reason you could go to some other broker and buy GME is because that broker had many other customers looking to offload an overhyped stock. You couldn't buy on Robinhood because their customer base was mostly retail traders looking only to buy.