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Might be missing something, if I deposit $100 and use it to purchase stock, they cannot use my $100? What does that even mean given that money is fungible?
by thebean11 4y ago
Might be missing something, if I deposit $100 and use it to purchase stock, they cannot use my $100? What does that even mean given that money is fungible?
- kasey_junk 4y agoMoney is fungible but how its accounted for isn’t. I’m not an expert in the regs around margin accounts but have worked in other spaces where my company was holding money for others. It is usually strictly regulated. In some jurisdictions you must hold it in specific accounts that have particular attributes and you must have dollar for dollar parity between the account and the money you collect. In almost every situation where you are holding money for someone else you aren’t allowed to use it to pay your own debts. And in this case the collateral obligation is on Robinhood not on their account holders.
- drexlspivey 4y agoWhen you deposit $100 dollars in Robin Hood they must keep that $100 in a bank account. If you later use those dollars to buy a stock they must post collateral to the clearing house but not the $100 dollars you deposited (those must sit in the bank account still). Your account however is being credited with the stock instantly. In two days when the trade settles they transfer the $100 dollars to the clearing house and get their colatteral back. The problem as you can see is that you deposited $100 and they have to use $15 (for example) more of their own cash. If overnight the 15% margin requirement changes to 30% and RH doesn't have a huge amount of cash sitting around they are going to get squeezed.