5 ms·
So this report pretty much disproves all of the assumptions that the meme stock conspiracy theorist have been making: Robinhood had to disable opening new posi
by this_user 4y ago
So this report pretty much disproves all of the assumptions that the meme stock conspiracy theorist have been making:
Robinhood had to disable opening new positions, because they are unable to meet their margin requirements. They only survived, because they were granted a discretionary rebate. Otherwise, the DTCC could have taken control of their entire portfolio, and could have liquidated everything to protect its other member firms.
RH had poor internal practices, and did not fully understand how these margin amounts were calculated, nor had they implemented best practices for modelling those. Additionally, they technological infrastructure had already been at the edge of breaking down under the load for days even before the meme stock event.
Citadel Securities had nothing to do with RH not accepting new buy orders. In fact, they were the only one of RH's six market makers who never asked them to route away orders. The only thing the did negotiate for was a reduction of PFOF rebates, because RH was using its own, non-standard approach for calculating those that resulted in RH receiving a huge increase in rebates.
- boeingUH60 4y agoI wouldn't trust any word of the meme stock conspiracy theorists. If you can stomach it, visit r/SuperStonk, and it's basically like QAnon of Finance...with many posts screaming Ken Griffin bad!
- savant_penguin 4y agoSir this is a casino
- PartiallyTyped 4y ago> Robinhood had to disable opening new positions, because they are unable to meet their margin requirements. It wasn't just RH that blocked buy orders. Revolut did as well, and at least 2 others if my memory serves me correct.
- qaq 4y agoDTCC is not a government entity and not very transparent. One other thing people overlook is that RH and others make money among other things by landing out stocks to short so had huge exposure to counter party risk on the meme stocks they have lent out to shorts. Which made their interests even less aligned with their customers.
- collegeburner 4y agoDTCC does this kind of limitation because the finance industry is still terrified after Sarbanes Oxley Dodd Frank and similar legislation. The goal is to create some self-regulation so that the feds don't come in and fuck everything up even worse.
- qaq 4y agoSure and yet rules are no very transparent and Citadel representative is member of DTCC board
- JumpCrisscross 4y ago> DTCC is not a government entity and not very transparent This is patently false. Not only are the rules clearly written, they will actually help you with your margin model if you ask nicely. They’re unpredictable when they deviate from the model, but that’s to accommodate people who didn’t follow the rules in the first place, e.g. Robinhood.
- qaq 4y agoWhich part is patently false? DTCC is not a government entity thats a fact Vast majority of board members of DTCC represent entities that were in one way or another on the hook if Melvin and others were to fold. (lent them money, on the hook for lent shares to short etc.) The restriction were put in place by many brokers not just RH
- JumpCrisscross 4y agoThe lack of transparency bit. All the brokers had margin requirements escalated according to formulas written years, in some cases decades, ago. Robinhood was given additional discretion to come up with capital versus being shut down, as the rules would have required absent discretionary intervention.
- qaq 4y ago
- astrange 4y agoThe funny part of the Reddit conspiracy theory was “they blocked buying but not selling, so the price went down”. Who were you selling to if buys were disabled?
- ball_of_lint 4y agoPeople on Robinhood were unable to buy, but other brokers and non-retail investors were still able to.