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>If I sell stock through my stockbroker, I can have funds in a bank account within hours. Wait, what? I'm pretty sure you're exaggerating there. Stocks have a

by SilasX 4y ago

>If I sell stock through my stockbroker, I can have funds in a bank account within hours. Wait, what? I'm pretty sure you're exaggerating there. Stocks have a two day settlement period. (I know because that knowledge gets firehosed every time Robinhood/GME comes up.) Last year when I sold stock in one account (Wealthfront), for the proceeds to deposited into another, it took four business days (edit: using ACH). When I complained on social media, my finance friends said that was typical. Now, it might have been faster with a wire, but it's not the hours you talk about. >That's not a limitation of USD, it's a limitation of sleazy crypto exchanges. It would still be an issue if you want to convert to USD purely on the blockchain because you're interacting with multiple smartcontracts. The USD would need to be a cryptocurrency that lives there.

Animats 4y ago
Robinhood didn't have enough cash on hand for the business they are in. It's not that brokers are required to wait for settlement. They can pay out as soon as the transaction is logged. They have the option of delaying until settlement, but big customers don't like that, so, usually, they don't. Online-only brokers tend to be sleazier about this.
- SilasX 4y ago
  So, in other words, if you want cash quickly, you can borrow against an asset? (In this case, the unsettled proceeds of the stock sale.) Good news: you can do that with smartcontracts too! (e.g. Compound/AAVE)
  - Animats 4y ago
    No, the broker is borrowing against their own assets. They already did the transaction. They just haven't been paid for it yet. It's their accounts receivable problem, not the customer's. That's what it means to be a broker, rather than an exchange. Since brokers usually have transactions flowing in both directions, it's usually a wash.
    - SilasX 4y ago
      Except that’s not “what being a broker is”, because not all brokers offer that, and not to all clients. And if you can remember back to your original comment, you were calling exchanges sleazy for not having insta-withdrawal (which they can’t in the regulated markets because of settlement time), and now you recognize this is a service provided by brokers as an abstraction on top of the actual exchange, not what said (non-shady) exchange actually offers. Furthermore, the broker is taking a risk by extending that credit. If it were riskless, there wouldn’t be the 2 day settlement period or the requirement to post collateral (whose necessity everyone accepts with an eyeroll at those who don’t get it on the Robinhood/GME threads).
gamblor956 4y ago
Using TD Ameritrade I can close out positions and get paid by EOD. ETrade and other brokers are similar (though the first outbound payment may take extra time since they need to run KYC checks).

by SilasX 4y ago

Animats 4y ago

Robinhood didn't have enough cash on hand for the business they are in. It's not that brokers are required to wait for settlement. They can pay out as soon as the transaction is logged. They have the option of delaying until settlement, but big customers don't like that, so, usually, they don't. Online-only brokers tend to be sleazier about this.

SilasX 4y ago
So, in other words, if you want cash quickly, you can borrow against an asset? (In this case, the unsettled proceeds of the stock sale.) Good news: you can do that with smartcontracts too! (e.g. Compound/AAVE)
- Animats 4y ago
  No, the broker is borrowing against their own assets. They already did the transaction. They just haven't been paid for it yet. It's their accounts receivable problem, not the customer's. That's what it means to be a broker, rather than an exchange. Since brokers usually have transactions flowing in both directions, it's usually a wash.
  - SilasX 4y ago
    Except that’s not “what being a broker is”, because not all brokers offer that, and not to all clients. And if you can remember back to your original comment, you were calling exchanges sleazy for not having insta-withdrawal (which they can’t in the regulated markets because of settlement time), and now you recognize this is a service provided by brokers as an abstraction on top of the actual exchange, not what said (non-shady) exchange actually offers. Furthermore, the broker is taking a risk by extending that credit. If it were riskless, there wouldn’t be the 2 day settlement period or the requirement to post collateral (whose necessity everyone accepts with an eyeroll at those who don’t get it on the Robinhood/GME threads).

gamblor956 4y ago

Using TD Ameritrade I can close out positions and get paid by EOD. ETrade and other brokers are similar (though the first outbound payment may take extra time since they need to run KYC checks).