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DTCC 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 sto
by qaq 4y ago
DTCC 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 agoOK so a committee of people with financial stake in the matter make an arbitrary decision that incidentally benefits the companies they represent and screws the clients of brokers and thats transparent? The decision making process is def not transparent.
- JumpCrisscross 4y ago> a committee of people with financial stake in the matter make an arbitrary decision that incidentally benefits the companies they represent and screws the clients of brokers and thats transparent Rules were automatically applied. Rules someone with two years in operations should be able to model. The committee met to give Robinhood a bailout. By the rule book, the DTCC had the right to liquidate their collateral. The committee instead chose to take that counterparty risk on themselves, the risk that if Robinhood couldn’t raise emergency capital they’d have to pony up some of their own. And that committee meeting’s minutes are filed with regulators and actions publicly announced, so even there, tons of transparency.
- qaq 4y agoYou keep framing it like it was just RH it was a good number of players including IB. Meeting minutes do not cover things said in hallway :)