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The fact that other brokerages could handle the counterparty risk with stronger financials than Robinhood (eg: by continuing to permit securities purchases) doe
by 88913527 4y ago
The fact that other brokerages could handle the counterparty risk with stronger financials than Robinhood (eg: by continuing to permit securities purchases) does highlight reputational risk in that you're clearly running an inferior brokerage compared to the competition. Ordinary market conditions wouldn't add visibility to this fact, but unfortunately there was always the risk and the situation had occurred.
- toast0 4y agoWell sure, a new upstart brokerage doesn't have the spare capital when new collateral requirements are imposed with little warning. Otoh, they were able to get access to more capital in a couple days, so from a business continuity perspective it was fine. They still missed out on a couple days of trading though. I've never done business with Robinhood, but they never seemed to be a quality brokerage. I seem to recall they didn't support limit orders for some time (but I could be misremembering). I do thank them for their work in reducing retail comissions to zero though.