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Robinhood deactivated the BUY button because it didn't have enough liquidity to execute the trades. The apes blew through all of its pool of liquid money in a d

by vkou 2y ago

Robinhood deactivated the BUY button because it didn't have enough liquidity to execute the trades. The apes blew through all of its pool of liquid money in a day. You get what you pay for with a discount brokerage that you can load through a friggin' credit card. One thing that you don't pay for is 100% uptime for being able to do any trade you want, at any time you want. Contrary to what you see on your bank's/broker's website, it takes actual time for monetary transactions to settle, and the NYSE does not value charge-backable IOUs from retail investors at 1:1. It actually wants real money delivered to them when trading closes. Money that Robinhood did not have on short notice, no matter how many credit cards you maxed out to buy shares on it.

Animats 2y ago
> it didn't have enough liquidity to execute the trades. Robinhood needs FedNow support. That settles within 10 seconds. Then people can lose money faster.
- vkou 2y ago
  The problem is not RH paying its counterparties, the problem is me, a retail customer paying RH. It takes time for my money to settle with them, and they can't pay their counterparties until it does. They keep a pool of cash on hand to deal with this, but that pool was not big enough to absorb the GME mania. Robinhood eventually borrowed enough money to solve their liquidity problem, but by the time they did, the bubble popped, and the bagholders started screaming about fraud and collusion.
  - Animats 2y ago
    Few banks support consumer-initiated FedNow transfers. The main near-term application is receiving government payments: Medicare, tax refunds, and such. The US Treasury wants to convert over, to reduce customer service issues. ("Where's my Social Security check?") If it only takes seconds, customer service and actual money transfer are in sync. Banks are dragging their feet on customer-initiated transfers because of the fraud problem. If you send money by FedNow, it's gone. So there's a lot of scam potential. Wells Fargo supports bill pay via FedNow to known payees, which is useful. Pay a bill, and the payee gets paid immediately. Both sides can see the transaction as completed. That's useful. The ability to send your entire bank account to anybody in seconds with no way to reverse the transaction is rather risky.

by vkou 2y ago

Animats 2y ago

> it didn't have enough liquidity to execute the trades. Robinhood needs FedNow support. That settles within 10 seconds. Then people can lose money faster.

vkou 2y ago
The problem is not RH paying its counterparties, the problem is me, a retail customer paying RH. It takes time for my money to settle with them, and they can't pay their counterparties until it does. They keep a pool of cash on hand to deal with this, but that pool was not big enough to absorb the GME mania. Robinhood eventually borrowed enough money to solve their liquidity problem, but by the time they did, the bubble popped, and the bagholders started screaming about fraud and collusion.
- Animats 2y ago
  Few banks support consumer-initiated FedNow transfers. The main near-term application is receiving government payments: Medicare, tax refunds, and such. The US Treasury wants to convert over, to reduce customer service issues. ("Where's my Social Security check?") If it only takes seconds, customer service and actual money transfer are in sync. Banks are dragging their feet on customer-initiated transfers because of the fraud problem. If you send money by FedNow, it's gone. So there's a lot of scam potential. Wells Fargo supports bill pay via FedNow to known payees, which is useful. Pay a bill, and the payee gets paid immediately. Both sides can see the transaction as completed. That's useful. The ability to send your entire bank account to anybody in seconds with no way to reverse the transaction is rather risky.