[HN Gopher] Class Action Lawsuit Filed Against Robinhood
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Class Action Lawsuit Filed Against Robinhood
Author : po1nter
Score : 359 points
Date : 2021-01-28 19:39 UTC (3 hours ago)
(HTM) web link (www.yumpu.com)
(TXT) w3m dump (www.yumpu.com)
| janmo wrote:
| What did you expect? When it is free you are the product.
| Robinhood uses pay for order flow, a system invented by Bernie
| Madoof to generate revenue. It is really time to leave this
| broker.
| hayd wrote:
| It's not necessarily free
| https://robinhood.com/us/en/about/gold/
| paxys wrote:
| All the paid brokerages have done the same. This is really not
| about trading fees.
| optimalsolver wrote:
| Virtually all trading platforms have blocked users from opening
| positions on these symbols. Why is Robinhood being singled out?
|
| Also, considering 99.9% of people jumping on the bandwagon have
| absolutely no idea what they're doing, they'll probably thank RH
| down the road for preventing them from losing all their money.
| Red_Leaves_Flyy wrote:
| Robinhood was the first.
| avereveard wrote:
| blocking options calls from account that can't cover the
| position: good, probably saved people from getting into debt
|
| blocking purchases of shares from accounts that have enough to
| cover the contract: highly sketchy and worthy of deep scrutiny
|
| some broker did 1, some did 2, but form screenshots alone is
| hard to tell which did which
| Avalaxy wrote:
| DeGiro is still good. Bought GME there today.
| janmo wrote:
| I also use DEGIRO, and it is a good broker, it doesn't do
| this scammy pay for order flow thing that Robinhood and Trade
| republic are doing, that said, I didn't buy GME and I would
| not recommend buying it.
| mcv wrote:
| It is super risky, but there's a definite path to profit
| here: the short-sellers sold too much stock. 140% of the
| shares, it appears, which means shares were borrowed, sold,
| and then borrowed from the buyer it was sold to and sold
| again. And when all those shorts run out, the short-sellers
| need to have bought shares back again. With share prices
| this high, they're going to have to pay a lot of money for
| them, and people holding shares could make a ton of profit.
|
| But it's definitely risky. You could lose a lot of money.
| Many of the people buying are also doing it to stick it to
| the hedge funds and give them a taste of their own
| medicine.
| mcv wrote:
| Many trading platforms still allow trading. And there's no real
| reason not to, except to protect the hedge funds that fucked
| up.
|
| Edit: And I just found out my platform (Binck) doesn't accept
| trades anymore.
|
| Edit: Apparently they do accept trades, but only if your limit
| is close to the current price. I was increasing mine because it
| wasn't executing at the lower price. Eventually I did get in at
| the lower price. We'll see where this goes.
| the_drunkard wrote:
| > Virtually all trading platforms have blocked users from
| opening positions on these symbols.
|
| Can you be more specific? Robinhood & Webull are the only two
| that I'm aware of.
| nannal wrote:
| 212 did this aswell.
| [deleted]
| crookshanked wrote:
| TD Ameritrade is preventing me from opening positions right
| now.
| totony wrote:
| TD Canada has prevented some forms of orders (e.g. market
| buy), but not limit buy - I think this isn't so bad as
| their clients might expect the quoted price and get screwed
| at open because of volatility
| andrewmunsell wrote:
| Ally was as well (I am not sure who fills the orders), but
| Fidelity was still working for me.
| NotzoCoolKid wrote:
| Tastyworks also blocked opening new positions.
| oh_sigh wrote:
| tastyworks went to close-only @ 11:39AM per an email, and
| opened it back up at 3:12PM today. They blamed Apex clearing,
| which is the custodian for tastyworks accounts.
| alasdair_ wrote:
| Vanguard hasn't. Fidelity hasn't. TD Ameritrade hasn't (other
| than not allowing margin for shorts). I disn't check Schwab but
| I don't think they blocked purchases either.
| adrr wrote:
| I am so curious what the long term plan for GME is. Is it to
| hold the long term? If it's not, what are the plans to unwind?
| Beached wrote:
| shirt sellers borrow stock, then sell it. when the shirt is
| up, they are required to buy new stock and return the
| borrowed shares.
|
| if the stock price is higher when they borrow and sell, and
| lower when they buy and return, they make a profit equal to
| the difference. they lose money if the stock price goes up.
| all these people buying GME and driving the price up will
| hold GME stock, and the shirt sellers will be forced to
| purchase back the stock at premium prices. even if the stock
| price goes down slightly, the people buying up all the GME
| will still profit.
|
| but more importantly a lot of people's goal is to f over a
| major firm that constantly over leverages itself.
| adrr wrote:
| That's main goal. But what is long term goal of the
| position. After short sellers go bust. What are people
| going to do with their positions?
| tonfa wrote:
| There will always be more short sellers to bet on the
| overpriced stock to go down ;)
| sveme wrote:
| At some point those shorts are due - if the owner of the
| shorts doesn't hold the necessary stocks, it's going to be
| expensive.
|
| That's my understanding. What happens afterwards? No ideas.
| Some people want to see hedge funds burn, I would not mind
| that either.
| betterunix2 wrote:
| Short sales do not work like that. You can have a short
| position indefinitely, as long as you pay the margin
| interest and meet the margin maintenance requirements.
| Options positions are another story, in-the-money calls do
| require delivery of the shares by the expiration date, and
| next such date is tomorrow.
|
| Nobody is going to make the hedge funds burn. At this point
| the hedge funds are fleecing whoever was buying shares or
| options yesterday (who do you think they bought them
| from?).
| boatsie wrote:
| Exactly, "wall st" as a whole is making bank off this
| volatility, as well as Blackrock and Fidelity finds. The
| real way to actually stick it to wall st would be if all
| of main st sold all their equities..
| sveme wrote:
| Thanks for teaching me something I did not know! May the
| post above be forever a monument to my ignorance!
| nerdponx wrote:
| I believe the original r/WSB idea was to induce a short
| squeeze and cause Melvin Capital to lose their shirts.
|
| See: http://www.isthesqueezesquoze.com/
| adrr wrote:
| That's the main goal. But what's the plan afterwards? I see
| posts with people holding a non trivial amount of stock.
| Losing $100 to own hedgefunds is different than risking
| $10k+.
| throwaway0a5e wrote:
| This is the "buy high sell never" part of the meme.
|
| Imagine there are only two shares GME.
|
| You buy two GME for $1ea. Two short sellers needs 1 GME each
| lest they hemorrhage money on fees. You loudly announce your
| plan to hold half your GME forever. The short sellers trip
| over each other to pay you stupid money for the one GME you
| are selling. You then sit on the other GME for awhile, maybe
| sell it in a year or two for a buck. In any case despite
| buying two and selling one you've made a ton of profit.
|
| Now scale this up to several million people.
| tonfa wrote:
| > Now scale this up to several million people.
|
| And many more shares, most of them hold by corporate and
| institutions (some of those institutions will be happy to
| lend shares as well). Also more shares can be issued.
| TheCapn wrote:
| My understanding is the long term plan is to try and bankrupt
| some hedge funds or drive the SEC/regulatory bodies to
| enforce rules against the elite class of investors; its not
| entirely about profit for everyone.
|
| There's so much discussion on HackerNews today about people
| who are going to lose out on these stocks where I've seen a
| healthy amount of comments on Reddit in the last week of
| people buying stock merely "for the lulz". I think there's a
| non-insignificant amount of "investors" who have tossed
| paltry sums at $GME with no plans on making a return.
|
| Honestly, I'd have done the same, but I don't do any form of
| stock trading so I don't have accounts on any platforms to do
| it. I've done the same with various crypto shitcoins and made
| a few bucks off throwing $50 or $100 at something I don't
| expect to ever see return on too.
| adrr wrote:
| I am curious what the average holding is for GME. $100 * 2
| million WSB subscribers is $200m to make a stock go to $24b
| market cap. That isn't a lot of cash. People are posting
| screenshots with $10k+ holdings on WSB. Monday volume
| indicates a massive amount of stock movement.
| pgt wrote:
| Could someone please confirm this, but as I understand they
| blocked buys but not sells, or the other way around? Instead of
| freezing the stock, it drives the price in one direction.
| IgorPartola wrote:
| Correct. They blocked buys which would drive the price down,
| benefitting Citadel, their main source of revenue. I don't
| know if that's why they did this but that's what the lawsuit
| is for: to find out. At worst, Robinhood is going to close
| because of this and their and Citadel's execs might face
| prison for manipulating the market.
| pgt wrote:
| Thanks for confirming! What happens if this kind of thing
| happens due to an unintentional bug? Do execs go to jail
| for market manipulation?
| lovecg wrote:
| Not a lawyer, but I imagine it's similar to how
| industrial accidents are treated. If there was proper due
| diligence and precautions, and it was truly an "act of
| God" sort of thing, that's understandable. If on the
| other hand their processes are not up to snuff and they
| moved a bit too fast and broke one too many things, I
| imagine they wouldn't be treated as nicely.
| xeonoex wrote:
| Robinhood is what all the people jumping on the bandwagon used.
| And this coincided with a sharp price drop on all of these
| stocks blocked. The reason was "Due to ongoing volatility", but
| any trader will tell you volatility is how money is made. It
| took all of the normal people out of the game, and tried to
| scare them into selling so that the ones holding the shorts are
| in a better position.
|
| And to add to that, a company (Citadel) that pays Robinhood a
| large amount of money for their data is one of those with the
| short positions. So Robinhood itself has a stake in this.
|
| Disclaimer: I have no idea what I am talking about and this is
| only my opinion.
| lovecg wrote:
| > And to add to that, a company (Citadel) that pays Robinhood
| a large amount of money for their data is one of those with
| the short positions. So Robinhood itself has a stake in this.
|
| That's quite a claim. Got a source on that?
| xeonoex wrote:
| Again I have no idea what I'm talking about, but
|
| https://www.equities.com/news/robinhood-is-said-to-
| get-40-re...
|
| https://twitter.com/justinkan/status/1354853920762253315
|
| I'm no market expert, but I know that when cash is flowing
| between two companies, they generally have shared
| interests.
| marcinzm wrote:
| >Why is Robinhood being singled out?
|
| Likely because it has the most impacted users. I suspect other
| platforms will get lawsuits as well in time if this one
| proceeds.
| Triv888 wrote:
| I've been buying on TDA and Schwab today... I think that TDA
| only restricts you if you are on a margin account.
|
| I'm on a cash account because I like to avoid their "pattern
| day trader" protection.
| [deleted]
| jcranmer wrote:
| I've scanned the lawsuit (https://www.courtlistener.com/recap/gov
| .uscourts.nysd.553175...). I'm not a lawyer, but my first reading
| of it is that this is not a strong lawsuit.
|
| The complaint is largely framed around "Robinhood prevented us
| from executing trades against GME, and it is contractually
| required to execute all trades." However, the actual contract
| explicitly says the opposite: Robinhood can choose to limit
| execution at its own discretion. So in order to win, plaintiffs
| basically have to get the relevant clauses of the contract to be
| ruled illegal. The extent to which this is possible is dependent
| on securities law which I am _very_ unqualified to comment on,
| although I will note that the complaint does at least include
| some relevant allegations to what they need to do, which is
| better than other lawsuits I 've seen (oh hi Parler).
| sandworm101 wrote:
| For any contract with vague or difficult language, one has to
| read in a degree of reasonableness. The intention of that
| language was most likely to protect Robinhood if it took
| emergency actions, such as the circuit breakers on stock
| exchanges that will halt trading if it looks like the computers
| are doing something crazy (e.g. irrational sub-second
| runs/crashes of listed stocks). A court could reasonably say
| that what is happening with Gamestop today is similar to such
| situations, that Robinhood can protect itself and investors by
| not executing trades for the period of the crisis. What
| Robinhood definitely could not do under that language is, for
| example, halt all trading _except_ on Gamestop. That would
| definitely not be a reasonable emergency action.
| beezle wrote:
| Personally, in hindsight, I think the better course of action
| would have been to raise the margin requirement on those
| holdings to 100%. However, I imagine the SEC requires notice of
| more than overnight on such action which is probably why they
| have simply stopped trading those issues.
|
| The failure on the brokers then was in not gradually raising
| the margin requirements the past two weeks when it became
| obvious that this was a volatility disaster in the making.
|
| The failure of the regulators was, if correct, allowing shorts
| to be > 100% of the float. They were asleep and should have had
| a hammer on any dealers who were lending fictious shares.
| yaur wrote:
| They did that too
| banachtarski wrote:
| You're not a lawyer, which is why you don't understand that ToS
| writing _never_ protects you from actual criminality, which in
| this case appears to be a clear case of market manipulation
| (restricting trades to only sales and not buys? how much more
| blatant can you get).
| jcranmer wrote:
| Which is why the complaint spends all of (checks document) 1
| sentence alleging market manipulation:
|
| > Upon information and belief, Robinhood's actions were done
| purposefully and knowingly to manipulate the market for the
| benefit of people and financial intuitions who were not
| Robinhood's customers.
|
| And even then, there aren't enough other facts _in the
| complaint itself_ for me to feel comfortable justifying
| discovery. For example, they never mention that Robinhood
| allowed only sales, instead alleging that Robinhood
| disallowed all trades with GME.
|
| The best route plaintiffs have to win the lawsuit is to argue
| Robinhood's illegality here. They don't do that effectively
| in the complaint, which hurts their case (though they could,
| and probably should, amend their complaint accordingly).
| TristanBall wrote:
| Surely its a response to market manipulation? Which, almost
| by definition is going to require some level of intervention.
|
| My understanding is the forum members were colluding to drive
| up the price of particular securities? How is that not
| manipulation?
|
| Although I guess I would have preferred the relevent stock
| markets to step in with a complete trading halt on those
| securities if intervention was required.
| pr0zac wrote:
| So I generally agree with you and feel like there's some
| amount of market manipulation and wall street types taking
| advantage of normal retail investor folks going on here. That
| said, I'd like to challenge some of my axioms and strengthen
| my own beliefs so raising one question I don't have a good
| answer for.
|
| If Robinhood is doing what they claim, ie: is having issues
| fulfilling orders and/or is legitimately trying to protect
| retail investors by limiting purchases of a volatile asset,
| wouldn't it be worse if they prevented people from selling as
| well as buying? Is there some detail I'm missing that makes
| only limiting buy orders "blatant" proof of market
| manipulation and not the best possible option they had if
| they were acting in good faith?
|
| Note: even if my counter argument here is correct, I don't
| think that necessarily means nothing fishy going on since
| there are a lot of other questionable factors at play and
| even if they were acting in good faith within the "stock
| market game" that doesn't mean the game as a whole isn't
| rigged.
| f430 wrote:
| Market manipulation is still manipulation whether you've
| written it in your Terms of Service (which isn't the law btw
| like Craigslist do-not-scrape "law"). The basic spirit of the
| contract between a trade executor and the client does not allow
| for interference barring regulatory or SEC enforcement.
|
| Meaning RH took it on themselves to enforce a rule that its
| users had no idea of, hence the outrage.
|
| If it was well known (with clear warnings on the splash screen
| of RH highlighting their "special" rule) then the case might be
| different.
|
| If it gets rejected at this level then almost certainly SEC
| will be involved. If they side with RH then it would certainly
| destroy the trust of the retail trading industry. We also now
| seem to be witnessing a political opportunity for the Biden
| administration (ex. AOC's tweet throwing support for WSB).
|
| Essentially what we are seeing is a payback by the people who
| got outsmarted by a bunch of redditors and arguing that they
| cannot be allowed to fail for their own stupid trades (like
| shorting over 100% of the stock available), so they pulled all
| the tricks in the book to once again bend the market to their
| will like they always have.
|
| Anybody who thinks things will go as they have before are
| mistaken; We are in a very different political environment and
| stuff like this is the perfect opportunity for the Biden
| administration.
| enraged_camel wrote:
| >> Market manipulation is still manipulation whether you've
| written it in your Terms of Service (which isn't the law btw
| like Craigslist do-not-scrape "law").
|
| Yes. And intentionally interfering with supply and demand is
| the textbook definition of market manipulation -- it appears
| in SEC powerpoints and everything!
|
| https://www.sec.gov/files/Market%20Manipulations%20and%20Cas.
| ..
| beezle wrote:
| I'm sure this will all be downvoted because it will hurt
| peoples feelings.
|
| 1- RH, Etrade, etc are not manipulating anything. The ones
| who manipulated were the reddit and other chat rooms. If
| Costco doesn't want to stock your favorite item any more do
| you get to sue because you still want to buy it?
|
| 2- If the customers had no idea of the legal documents they
| signed when they opened their accounts, their bad, not the
| broker.
|
| 3- 'the trust of the retail trading industry' Certainly not
| retail investors (who are not the people doing this stuff).
| And I doubt also retail traders who are not engaged in mob
| trades based on what is coming out of internet chat
| rooms/boards. There was day trading prior to the advent of
| Robinhood and Covid-19, right?
|
| 4- First off, the shorts are done. That is a large part of
| why the price went to where it did. Second, the brokers are
| protecting themselves from default on margin loans as well as
| the headache and aggravation of closeouts when 'traders' moan
| about the fills.
|
| 5- Why on earth should the Biden administration go to bat for
| a retail trading mob? Many of whom are on record in the press
| as having used their stimulus and unemployment checks as
| capital?
|
| 6- Shorts are not only necessary for a market to function
| well, they are a common part of the market having nothing at
| all to do with a view on a company. The largest example of
| that are fund managers selling the stock of an aquiring
| company against a position they own in the company being
| purchased. Fund manager could mean pension fund manager,
| mutual fund manager, or, gasp, a hedge fund manager.
| Sohcahtoa82 wrote:
| > RH, Etrade, etc are not manipulating anything.
|
| I don't know how you could possibly argue that when RH is
| preventing the purchase of a stock, but not the selling
| (Which pushes the stock price down), and trying to use the
| argument of "we're trying to protect you from volatility!"
|
| > If Costco doesn't want to stock your favorite item any
| more do you get to sue because you still want to buy it?
|
| This is such an apples-to-oranges comparison here that I
| really don't feel you're arguing in good faith.
|
| > 2- If the customers had no idea of the legal documents
| they signed when they opened their accounts, their bad, not
| the broker.
|
| As others have said, EULA doesn't trump the law.
|
| > 3- Certainly not retail investors (who are not the people
| doing this stuff).
|
| Either I'm misunderstanding what you're saying here, or you
| are 100% incorrect. It is absolutely the retail investors
| that are buying the GME stock and doing this.
|
| > 4- First off, the shorts are done
|
| We don't know this yet.
|
| > Second, the brokers are protecting themselves from
| default on margin loans as well as the headache and
| aggravation of closeouts when 'traders' moan about the
| fills.
|
| Defaulting on margin loans is prevented by issuing a margin
| call. Some traders are moaning about their GME being
| liquidated because they bought on margin while going all-in
| on GME, but even on WSB, _most_ traders understand that 's
| how margin works.
|
| > 5- Why on earth should the Biden administration go to bat
| for a retail trading mob?
|
| For the same reason Ted Cruz is. RH is impeding the free
| market. It's pretty crazy right now. Ted Cruz, AOC, Ben
| Shapiro, and Donald Trump Jr are all upset with RH right
| now, though for different reasons. The leftists are upset
| that the hedge fund managers are pissed that the poors are
| beating them at their game, while the right is upset that
| RH is interfering with the free market.
|
| > 6- Shorts are not only necessary for a market to function
| well
|
| If it was merely a matter of investors being able to say "I
| think this company is going to fail, so I'm going to short
| it", then yes. But then that quickly creates extremely
| perverse incentives. Now, it becomes "I have invested my
| money into the failure of this company, so I'm going to
| short it even more and publish articles about how this
| company has no future."
|
| GameStop got a new CEO and had a path to recovery, and the
| hedge funds didn't like that since they were already
| shorting, so they doubled-down on the shorting. The funds
| are using their money to kill a company. While this is
| technically legal, I think it's incredibly immoral and
| unethical.
| f430 wrote:
| What is alleged is that Citadel took on more short
| position after disabling RH.
|
| If this isn't market manipulation then I don't know what
| the hell is the point of having SEC and regulatory
| enforcement.
|
| The whole system is in existential crisis. This is now a
| spin zone: If the Biden administration shows leniency
| towards Wall Street, his popular base will revolt,
| especially after AOC has sent out that tweet.
| dang wrote:
| For pointers to other vertices of this story graph, see
| https://news.ycombinator.com/item?id=25933543.
|
| The earlier thread about class action is
| https://news.ycombinator.com/item?id=25945447. Not sure if these
| are the same class action or just the same class action class.
| slg wrote:
| I'm not sure disallowing buying this stock is worthy of a
| lawsuit. However forcibly closing people's positions who already
| are long on GME like some are reporting on Twitter[1] certainly
| seems like a great reason to be sued.
|
| [1] - https://twitter.com/joemccann/status/1354859879337320452
| PKop wrote:
| Of course it is because that directly affects current holders
| of the shares. They're closing off the market from people
| buying the asset these people hold. Sure you can sell, but what
| does that have to do with the fact they are causing your asset
| to fall in value due to direct manipulation?
|
| If this wasn't a corrupt rigging to benefit the hedge funds,
| they wouldn't be doing it.
| andrewmunsell wrote:
| Every case I've seen where they've closed out a position, it
| was on margin, which makes it perfectly acceptable to do. I do
| not agree with Robinhood's actions today, but this is a very
| important distinction versus closing out a position that
| someone took out with cash.
| simonsaidit wrote:
| The positions getting closed was a consequence of preventing
| people to buy id argue. They could have closed them anyway
| but probably at a higher price
| paulgb wrote:
| It's really kind of ironic. People are knee-jerk blaming RH
| for closing margin positions because they didn't fully
| understand how they work and the risks involved.
| Simultaneously, the same people are blaming RH for stepping
| in the way of what very certainly would have turned into a
| bad trade for a lot of people.
|
| I don't take RH's side but it's hard to see a winning play
| for them, it's damned-if-you-do-damned-if-you-don't.
| skeeter2020 wrote:
| I agree with you. In general I think poorly for RH in
| several major aspects, but I'm not sure if most of the
| complaints here understand how a margin account works, nor
| how a broker - order house relationship creates a liquid
| market. There's definitely shennigans going on here but
| it's not obvious they are illegal. Hate the game not the
| player.
| Tenoke wrote:
| >People are knee-jerk blaming RH for closing margin
| positions because they didn't fully understand how they
| work
|
| People are typically given a choice to sell other assets,
| deposit more or close in these situations rather than
| getting their stock sold at the brief lowest possible price
| driven by the very broker closing the position. Also,
| typically it's only a portion that gets liquidated rather
| than everything on margin.
| bdonlan wrote:
| The lowest possible price is also the point where the
| value of your portfolio is lowest and the margin call is
| most severe. It is completely normal for brokers to
| immediately close positions when you are highly leveraged
| and the market is moving quickly on a direction which
| might leave your portfolio at a negative value - they
| don't want to be left holding the bag if you take too
| long to respond. Generally your broker will only give you
| time to correct things when volatility is low enough that
| things won't change over the next few hours.
| Tenoke wrote:
| Fair enough. If it was all margin calls from accounts
| bellow the limit that's acceptable but if they liquidated
| everything on margin that would still be pretty
| questionable.
| betterunix2 wrote:
| Not that questionable when volatility is extreme. The
| risk that the price is dramatically lower when the market
| opens tomorrow may be too large, and they would rather
| not be stuck with their customers' debt when that
| happens.
| [deleted]
| beezle wrote:
| That is not always the case, certainly not in modern
| times. If you have a full service broker and there
| appears to be sufficient time to contact you, they may do
| so and give you a chance to pick what to close out.
|
| However, very few people use full service brokers.
| Everything is now automated. The best you can hope for is
| that the broker provides a mechanism _prior_ to the need
| to close any position to signify which should be the last
| one hit to pay the margin loan. As a specific example,
| Interactive allows their clients to pre-select one
| holding as the absolute last one to close.
|
| (edit spelling)
| paulgb wrote:
| People typically get a meal on an international flight,
| but not if they fly RyanAir.
|
| If you run a super discount brokerage platform, you don't
| have the luxury of reaching out to all your customers to
| find out what course of action they want to take.
|
| I'm not sure if RH violated their own terms here, if they
| did then sure, they deserve a lawsuit. I suspect they
| didn't, and this is just a case of people being in over
| their head.
| slg wrote:
| I wasn't aware of that aspect and that does change things. It
| still can be pretty shady though depending on the total
| borrowed on margin versus the total value of the stock owned.
| If someone borrowed $1000 on margin and bought stock that is
| now worth $2000, I'm not sure why Robinhood would have
| justification to sell off everything.
| dawnerd wrote:
| I doubt 99% of their users know the account is margin by
| default. Also on the surface looks like they disabled the
| option to 'downgrade' to a cash account.
|
| It also seems pretty scummy to not make this very clear that
| they can sell without asking.
|
| To a normal person this comes off really wrong (and really it
| is, let's be honest).
| beezle wrote:
| All brokers are mandated to provide the legal terms of the
| account and margin accounts include language concerning a)
| the risks and b) what options the broker has available
| should your account fall below their required margin (which
| might be higher than the regulatory minimum).
|
| Brokerage accounts, mortgages, credit cards are not click-
| thru agreements. There is real money involved and real risk
| to both parties. Not reading the terms before signing and
| using is an unacceptable excuse for future loss or
| hardship.
| dawnerd wrote:
| So by that logic predatory lending is completely fine
| because they technically disclose their terms. Gotcha.
|
| Just because something is in the fine print doesn't make
| it okay, especially if its marketing completely
| differently.
| SpicyLemonZest wrote:
| Completely agreed. Margin accounts are a strange,
| convoluted construct, and it was wrong for Robinhood to try
| and present them as easy or normal.
| taurath wrote:
| Imagine signing up for a broker and then being told you can't
| buy TSLA or DIS because its been doing too well - are they even
| a broker at all?
| slg wrote:
| Does a broker have a legal obligation to allow you to
| purchase any stock? I am genuinely asking as IANAL. I can't
| go into an Apple Store and demand they sell me a Google
| Pixel. It seems like these places should have every right to
| choose what services they offer or products they sell.
|
| I wouldn't do business with Robinhood for a number of reasons
| that go back before this recent spat of issues, I am just not
| sure preventing purchasing GME is the worst aspect of this.
| llampx wrote:
| What kind of strawman is that? They let you buy GME until
| yesterday. Stop being intellectually dishonest.
| PKop wrote:
| Are they entitled to prevent people from buying the shares
| you hold? If people can't buy them, this obviously causes
| the price to fall. They are making the price of what you
| hold fall...they deserve to be sued good and hard for this.
| slg wrote:
| >Are they entitled to prevent people from buying the
| shares you hold?
|
| So if I am long on a stock that gets delisted from an
| exchange, can I sue that exchange because they are making
| it more difficult for people to buy that stock?
| mlthoughts2018 wrote:
| How is this related at all to the broker question?
| Exchanges and brokers are completely different concepts.
| slg wrote:
| Because the logic that comment used for a lawsuit was as
| follows:
|
| >They are making the price of what you hold fall...they
| deserve to be sued good and hard for this.
|
| That logic applies to a number of entities and not just
| brokers. If I can sue a broker for this reason, can I sue
| anyone for that reason?
| mlthoughts2018 wrote:
| That's not how laws work. Just because you personally see
| a way it can be philosophically generalized or
| conceptually generalized does not mean laws apply the
| same to all generalizations. Brokers, exchanges,
| investment firms, banks, etc., all have specific legal
| obligations based on different types of fiduciary duty,
| different service offerings, etc. It can easily be the
| case that an exchange entity has a legal ability to deny
| access through delisting while a broker entity does not
| have the right to deny service in some particular
| scenario.
|
| I am not saying what the case is for brokers today, but
| regardless, appealing to some notion of proof by
| contradiction because of generalizing a behavior is not a
| valid way to analyze the situation.
| slg wrote:
| >It can easily be the case that an exchange entity has a
| legal ability to deny access through delisting while a
| broker entity does not have the right to deny service in
| some particular scenario.
|
| I realize that. That previously quoted answer was in
| response to me asking "Does a broker have a legal
| obligation to allow you to purchase any stock?" Someone
| answered that with a broad response without referring to
| any laws. I'm not sure how that leaves me with a
| responsibility to do a full legal breakdown of the issue.
| PKop wrote:
| If your over-arching point is the legal system won't side
| with the RH users, I'm fine with that premise because I
| think "laws" are a meme, and the same powerful
| institutions screwing over the traders who went against
| them are the same ones who not only influence how laws
| are written but also enforced.
|
| I thought you were saying _in principle_ their was no
| basis for users to feel wronged by RH. But this is silly,
| because you and I both know without a shadow of a doubt
| that RH shut down buys to protect the underwater hedge
| funds. It 's obvious to anyone with a brain. And I'm
| confident it's obvious to you. And would be obvious to
| any judge, jury or lawyer. But does it matter that its
| true? No. Is there some legal basis that would encompass
| "you can't shut down trading to protect some hedge fund
| that you are connected with". I'm certain there is, but
| it probably won't matter. Because "the law" and "rule of
| law" is a meme. Power is what matters. And the sovereign
| power decides what the law is... average joe traders
| don't have the power and hedge funds and finance in this
| case do.
| slg wrote:
| I wouldn't have used that exact phrasing, but yeah that
| is my general premise. "It is obvious" is an argument
| that might work on Reddit, Discord, Twitter, or HN, but
| there needs to be some bigger connection for the law to
| act rather than _they did something shady that benefitted
| someone they have a connection with and that shouldn 't
| be allowed_.
|
| It is similar to a lot of the complaints in the wake of
| 2008. You can't just lock people up for seemingly
| unethical behavior. You need to find evidence that
| specific laws were broken. If no laws were broke we need
| to move on and create new laws to prevent it the next
| time.
| betterunix2 wrote:
| "Does a broker have a legal obligation to allow you to
| purchase any stock?"
|
| No, I have seen all sorts of seemingly arbitrary
| restrictions since I started investing (back in college),
| on everything from mutual funds to ETPs to penny stocks.
| banachtarski wrote:
| Framed another way, can a broker prevent the purchase or
| sale of stock to bias the asset's movement in a particular
| direction to benefit themselves or a friendly third party?
|
| Of course not. This is any number of SEC violations
| Tenoke wrote:
| I guess the closed ones might've been only the positions on
| margin, which might be legal to close at their discretion?
| Cmortoc wrote:
| They're allowing the stock to sell, they only disabled
| purchases. This will clearly make the stock go back down,
| benefiting Robinhood's investors over their users.
| skeeter2020 wrote:
| let's try and keep this in perspective and avoid jumping to
| wild conclusions based on someone tweeting a screen shot.
|
| First, Robinhood does not make the market or fulfill the
| orders, so if their market-maker has no one selling a stock
| they have little option other than stopping people from
| making purchase orders. You need both sides for a liquid
| market.
|
| Second, IF these are margin positions then it is not only
| allowed and legal but also typical for the broker lending on
| margin to close out the position unilaterally. IF these are
| cash positions it is a completely different story.
| thatguy0900 wrote:
| If their market makers are preventing people from selling a
| stock surely they must prevent customers from selling
| stocks, right? But you can freely sell the stock.
| mikeryan wrote:
| This is what's pissing me off. I had a tiny "fuck it"
| position on BB with a stop-loss that kicked in. Now I can't
| get back in at the lower price and the one way ban is likely
| _why_ the stock fell under my sell price.
|
| No warning from Robinhood on the current issue either or I
| would have pulled my sell order.
| totalZero wrote:
| Forcibly closing under-margined securities positions is totally
| normal. In a cash account, it would certainly be suspect.
|
| Preventing opening buys hurts everyone who is long -- including
| a large number of Robinhood customers -- by barring trades that
| would provide liquidity to sellers and thus dampen the sellers'
| stock impact. So essentially, Robinhood chose a course of
| action that disproportionately imposes losses upon its own
| customers.
|
| The concept of price impact is part of the reason that stock
| buybacks are able to "return capital" to investors. Demand from
| buyers pushes prices upward.
|
| No idea if that is a central argument of the case.
| totaldude87 wrote:
| Also if Robinhood wins this, theoretically they can do the same
| to $AAPL, $MSFT, $AMZN , now how does the uber rich , fund
| managers, union funds, 401k etc etc would react? where does
| this stop. Its either a free trade market , or its not!
| totaldude87 wrote:
| Also if Robinhood wins this, theoretically they can do the same
| to $AAPL, $MSFT, $AMZN , now how does the uber rich , fund
| managers, union funds, 401k etc etc would react? where does this
| stop.
|
| Its either a free trade market , or its not!
| joering2 wrote:
| wow, that didn't take long so I was wrong about TV ads.
|
| https://news.ycombinator.com/item?id=25943676
|
| Next prediction: obviously Robinhood can kiss their IPO goodbye.
| They are hated by both sides now - bankers and investors.
| Frankly, I hope they will go under, get shut down but not before
| 20 AG and DOJ/SEC takes them to bleachers.
| curryst wrote:
| Does anyone know why Robinhood would block the symbols? If the
| SEC determines some manipulation happened, does Robinhood bear
| some liability?
|
| I'm not alleging a conspiracy or anything, it just seems odd to
| me that this kind of action comes preemptively from a broker. I
| would have expected the brokers to do nothing until the SEC
| indicates something one way or another, or for nothing to change
| if the SEC doesn't take a position either way.
|
| I feel like there's some part of this I'm missing.
| alasdair_ wrote:
| Citadel is RobinHood's biggest customer - they pay RH for order
| flow from "unsophisticated" investors.
|
| Citadel also owns a non-controlling interest in Melvin capital,
| a hedge fund that is/was massively short GME. Citadel gave them
| $2.7 billion earlier this week.
|
| It seems very likely that Citadel pressured RobinHood to stop
| all purchases so that Citadel's investment is secure.
|
| There are additional rumors that Citadel went short GME right
| before the brokers stopped allowing people to buy, only
| allowing them to sell.
| marcinzm wrote:
| As I understand it, Robinhood has VC investors and uses third
| parties to execute trades (that pay Robinhood for it) which
| stand to lose on GME. The talk being that they pressured
| Robinhood into this action so they wouldn't lose as much money.
| ngokevin wrote:
| Investors and key shareholders sacrificed Robinhood and are
| willing to eat lawsuits because hedge funds' GME positions
| tower over all of that.
| mcv wrote:
| From what I understand, Citadel, the mother company of Melvin
| Capital, one of the largest short-sellers that got in trouble,
| is responsible for 60% of Robinhood's revenue, buying user data
| from them.
|
| Robinhood might be protecting their largest customer.
|
| Edit: it's possible Citadel pays Robinhood for something else
| instead. And it's possible they don't fully own but only
| invested in Melvin. Still, there do seem to be pretty clear
| ties.
| avipars wrote:
| How could I join?
| logicslave wrote:
| Populism! Its popping up in every corner of American life
| totaldude87 wrote:
| Allowing a stock to become sell only will trigger a sell off and
| this WILL help the short sellers cover ( may be with reduced
| loss)..
|
| Just allowing selling of a stock makes, free markets a joke.
|
| I am seeing analogies like will apple store sell me a pixel 3a
| etc. This is not a product robinhood buys or sells , they make my
| transaction with a bigger shark (Citadel) who is in bed with the
| hedge fund who shorted ~112% of outstanding shares. When a group
| of people took advantage and created a squeeze, they block their
| ability to buy more to strengthen their squeeze.
| totalZero wrote:
| > Allowing a stock to become sell only will trigger a sell off
| and this WILL help the short sellers cover ( may be with
| reduced loss)
|
| Yes. Blocking opening buyers essentially means that closing
| short-sellers don't need to compete for supply.
| whitepaint wrote:
| Can someone, who has expertise in this field, explain what the
| hell happened? How on earth is it possible that all brokers at
| the same time disallowed to buy certain stocks? Who is
| responsible for this? The SEC, the FED, the White House, or..?
| Who gave the call? Who has that much power?
| betterunix2 wrote:
| In all likelihood the internal teams responsible for risk
| management and compliance all determined that this was likely
| criminal activity, and recommended trading restrictions until
| the SEC weighs in. Brokerages are typically over-cautious about
| this sort of thing because they do not want to invite
| additional scrutiny from the powers that be. The brokerages
| probably did not communicate these decisions to each other,
| they just all use similar logic and all arrived at similar
| conclusions. Those that did not make this decision probably did
| not observe suspicious trading patterns from their customers.
| paxys wrote:
| There is zero chance they all independently came to the same
| conclusion at the exact same time. There has to be a bare
| minimum amount of coordination involved, which is likely
| illegal. Either that or they got an order from the SEC/White
| House.
| betterunix2 wrote:
| Financial companies all use the same logic to make these
| sorts of decisions, so yes, there is a very good chance
| that they independently came to the same conclusion at the
| same time.
| wonderwonder wrote:
| If they got orders from the SEC they would likely be
| shouting it from the roof tops by now in a desperate
| attempt to shore up their reputation.
| paxys wrote:
| Doesn't have to be an official order
| mlthoughts2018 wrote:
| It's also not a clear conclusion even remotely at all.
| There's nothing remotely illegal about retail investors
| coordinating together to profit from a short squeeze
| opportunity.
| Ericson2314 wrote:
| Then they should have blocked all trading, not just buying.
| The benevolent story just doesn't hold up.
| [deleted]
| betterunix2 wrote:
| They blocked the opening of new positions. You can still
| buy if it results in a short position being closed. Pretty
| typical move, almost certainly done to protect themselves
| from scrutiny by the SEC and CFPB.
| ClumsyPilot wrote:
| they respond to 'likely criminal activity' with certain
| criminal activity?
| betterunix2 wrote:
| Nothing criminal about it, brokerages do this all the time.
| dpbriggs wrote:
| I'm genuinely curious: can you find examples of
| brokerages only allowing buying, or only allowing
| selling?
|
| I'm not talking about edge cases with margin calls.
| betterunix2 wrote:
| https://ibkr.info/article/2892
|
| https://us.etrade.com/l/f/disclosure-library/otc
|
| Would you like more?
| justupvoting wrote:
| These are examples of specific, ahead-of-time rules for
| entire _types_ of stocks, not a sudden, reactionary move
| against particular _names_.
| dpbriggs wrote:
| Keep them coming.
|
| I want other examples where it's appropriate for some
| brokers to restrict _buying_ but not selling, especially
| in the context of a short squeeze, with potential
| conflicts of interest.
|
| I understand that brokers can restrict trade on risky
| items as yes, it impacts their risk model. I'm failing to
| find justification for RH and others to restrict buying
| but not selling of GME.
|
| Your first link is for penny stocks, and the restrictions
| revolve around the usual pump-and-dump. You're allowed to
| go long, and can trade between days.
|
| Your second link is for OTC, and I fail to see how this
| is relevant to GME. GME is traded on formal exchanges,
| and brokers that haven't arbitrarily restricted buying
| aren't having any liquidity issues.
| dpbriggs wrote:
| Why block buying and not selling?
|
| Why did they all come to the same conclusion at the same
| time?
| betterunix2 wrote:
| They did not block selling, they blocked opening new
| positions. You can buy _if_ doing so closes a short
| position.
| dpbriggs wrote:
| And that's somehow fine?
|
| It's blatant protection for short positions. These
| brokers are hamming up the "we need to protect retail
| from volatility" narrative when they're clearly trying
| their best to stop their business partners from going
| bust.
|
| It's sickening.
| betterunix2 wrote:
| More like they wanted to preempt possible sanctions from
| the SEC for failing to take action when they observed
| suspicious behavior by their customers.
|
| Let's be clear about a few things. Brokerages do not care
| about protecting retail investors, they only protect
| their customers when forced to do so by regulators. What
| brokerages do is protect themselves from liability,
| financial losses, and scrutiny. They have no problem
| screwing over their customers when it suits them. They
| will raise margin requirements and force customers to
| take a loss as soon as their risk models say that they
| should do so. They will restrict trading whenever it
| looks like there is a scam, simply because it wards off
| possible investigations into their business.
|
| What they can get in trouble for, and RH did get a slap
| on the wrists for already, is working against their
| customers' interests for the benefit of their business
| partners. One brokerage I could believe, but I doubt that
| half a dozen would all do it at the same time and with
| the same securities.
| dpbriggs wrote:
| That's great, but they should be halting trade of the
| stock all together if they really believed retailers were
| manipulating the stock.
|
| I can see the nice narrative of allowing retailers to
| sell ("capture gains"), but it's indefensible to only
| allow selling.
|
| That's _blatant_ market manipulation.
| pfisch wrote:
| Except it is still ok to sell these stocks...ok bro...
| wonderwonder wrote:
| Citadel
| saddlerustle wrote:
| There's three phases of a trade: execution (handled by a
| broker), clearing (sometimes handled by the broker, otherwise
| handled by clearing firms like apex clearing or jp morgan
| clearing among others) and settlement (almost always DTC for US
| equities).
|
| Clearing and settlement involve counterparty risk - if a
| brokerage can't hand over the money come settlement, the
| settlement firm may be on the hook. The risk of this is
| proportional to volatility. Due to high volatility, DTC
| increased its settlement costs. This isn't usually a big deal
| to a clearing firm or a brokerage because retail brokers don't
| usually have huge exposure to a single equity.
|
| My bet is with the entire world suddenly memed into buying GME,
| settlement for retail brokers suddenly became very expensive
| and there wasn't an existing mechanism to pass on this cost
| down the chain, so halting orders was the only option on short
| notice.
| wonderwonder wrote:
| Who was actually buying the shares once retail buys were
| halted? Was it the short hedge funds? If so, then was this
| not a conspiracy to allow them to cover their shorts and
| initiate new ones knowing the price was going to be
| artificially forced to lower?
| etcet wrote:
| Due to the selling frenzy, GME is more volatile than ever but
| Robinhood is now allowing buys, so what has changed between
| this morning and now? It seems like the counterparty risk
| would be even higher than this morning?
| saddlerustle wrote:
| I'm guessing with politicians starting to take advantage of
| the outrage, someone in the chain decided it's better to
| eat the cost.
| beezle wrote:
| I said on another comment, brokers should have been raising
| margin reqs on these stocks the past few weeks as it became
| obvious this was a volatility nightmare in the making. That
| would have given them increased protection and dampened the
| enthusiasm.
|
| Also, I don't think any of these people crying foul consider
| that those who short stocks do so at constant peril of forced
| close outs because shares are no longer available to be
| borrowed. The notice involved can be minutes to hours.
| [deleted]
| theshrike79 wrote:
| People started losing money, LOTS of money. Phone calls were
| made and they reached the decision to shut down trading
| everywhere they could.
|
| We'll see how it worked in the coming weeks.
| lamontcg wrote:
| The problem is that if big short sellers like Melvin Capital go
| under that their counterparties are the brokers that will be
| ultimately holding most of the bag.
|
| This is what I couldn't understand about what the endgame of
| this would have to be. Because you can't really have a
| situation where all the shares are bought up sending the shares
| to infinity. At some point something breaks. Someone has to pay
| money for those shares.
|
| That could be that retail investors bolt for the door just like
| a bubble popping and because its difficult to maintain
| steadiness when you're looking at huge gains that aren't
| realized. And that is what they thought would happen.
|
| What would be more reasonable would be to liquidate Melvin
| Capital and anyone stupid enough to invest in them and the
| holders of GME shares would become creditors against that
| bankruptcy proceeding somehow. SEC would have to manage that
| unwinding somehow.
|
| But the problem is that the clearinghouses like Citadel are
| counterparties to Melvin Capital and they've privately bailed
| them out, taken over their shorts and will now hugely profit by
| suspending trading and riding those short positions down. This
| now entirely makes sense to me as what was inevitable, because
| while WSB was trying to destroy Melvin Capital they didn't
| understand that the implications of that were going to be
| destroying the clearinghouses through counterparty risk. And
| they were never going to let that happen, so they shut it all
| down and will eat the SEC investigation.
|
| This is a very interesting outcome just due to the moral hazard
| it creates with shorting.
|
| It is also a very interesting outcome because a lot of "little
| guys" just learned an object lesson in what happens when it
| looks like you are beating the "big guys". They won't let that
| happen. There's going to be a lot of political rage as a result
| of this. We're going to have to make a decision in the next 10
| years or so if we'd like to funnel that rage towards socialism
| or fascism, the status quo is going to continue to enrage
| people.
| [deleted]
| equality_1138 wrote:
| My take is that the stock was basically being manipulated by an
| angry mob. While I completely applaud their efforts and stand
| against the unfair advantage that institutional investors have,
| I can also see where their approach could trigger broader
| market instability. Let's assume it was a broad coalition that
| assessed the risk and decided extraordinary measures were in
| the public's interest.
| xeonoex wrote:
| "Manipulated by an angry mob" is one way to look at it, but
| "unsophisticated investors attempting to short squeeze
| billion dollar hedge funds" is another.
| psychlops wrote:
| They didn't. It was TD, Interactive Brokers, and Robinhood.
| Maybe more by now, but they acted alone.
|
| My guess is that market makers that these brokers sell orders
| to said no. Brokers make a lot of money selling retail orders
| to someone else.
| sakopov wrote:
| It's anecdotal but ETrade, TD, Ally Financial all started
| blocking buy orders at seemingly the same time - yesterday
| morning shortly after market open. The reason I know this is
| because I was on the phone with a friend at 9am Central and
| neither him nor I were able to purchase $GME, $BB or $GMC
| (he's on Ally and I'm on Etrade). Around the same time I
| started seeing messages on social media that TD was also
| blocking traders. I think you're right that the order likely
| came from MMs and everyone followed through.
| Avalaxy wrote:
| Trading212 was also halting trading.
| Armisael16 wrote:
| Most of the zero-commission brokerages sell their order flow to
| market makers. Those companies just decided they didn't like
| what the retail investors were doing and stopped accepting buy
| orders on those stocks.
| foxfired wrote:
| Even e-trade is blocking purchase orders:
|
| https://imgur.com/a/iHqwEyv
| mcv wrote:
| From what I understand Melvin Capital, one of the biggest short-
| sellers that got in trouble, is owned by Citadel, which is also
| Robinhood's largest customer (buying user data, of all things)
| and maybe partial owner. I'm no lawyer, but to me it sounds like
| that might be a conflict of interests.
|
| By preventing people from buying shares, the short-sellers have
| less competition to buy the available shares, and will have an
| easier time getting them, while paying less for them. Robinhood
| seems to be manipulating the market to make it easier for Melvin
| Capital to cut their substantial losses.
| nomad225 wrote:
| Other brokers are also blocking buys on different tickers.
| E-trade prevented me from buying $GME, and looks like they've
| blocked $AMC buys too.
|
| https://twitter.com/AstralTrading/status/1354884246389874689...
| bmitc wrote:
| Here's an intereating tweet and the associated Reddit thread.
|
| https://twitter.com/justinkan/status/1354853920762253315?s=2...
|
| https://www.reddit.com/r/wallstreetbets/comments/l747eg/cita...
|
| This seems, at first glance, to be clear and blatant market
| manipulation by Citadel and Robinhood.
| efwfwef wrote:
| That's insane, tried to buy GME on robinhood and my trade just
| got cancelled...
| fractionalhare wrote:
| _> From what I understand Melvin Capital, one of the biggest
| short-sellers that got in trouble, is owned by Citadel_
|
| No, Citadel does not own Melvin Capital. Melvin Capital
| received an investment from Citadel (the hedge fund, not the
| market maker) and Point72 this week.
|
| _> Robinhood seems to be manipulating the market to make it
| easier for Melvin Capital to cut their substantial losses._
|
| Melvin already cut its losses this week, as was widely
| reported. There is no evidence for the counter claims that
| they're lying, which themselves originate on reddit. In
| particular: all the widely cited short interest figures on
| reddit which purport to show this are out of date (usually by
| weeks), and even if they were true, they would not be proof the
| short positions weren't closed.
| bluetonium wrote:
| So just partially owns, then.
| bilbo0s wrote:
| The same way public retirement funds in Wisconsin
| "partially own" Apple.
| myownpetard wrote:
| Do public retirement funds in Wisconsin own >30% of APPL?
| fractionalhare wrote:
| As was reported, the capital raise Melvin received wasn't
| 30% of their total AUM even after the GME losses. And
| even if it were, it was also reported that Citadel and
| Point72 received non-controlling revenue share.
| myownpetard wrote:
| I'm having trouble finding specific numbers, do you have
| a source?
|
| As far as I can tell they started the year with ~12.5B
| AUM, and have lost ~30% on the year and received a 2.75B
| cash infusion from Citadel et al, which I assume was at a
| discount given their position. So my rough estimate is
| around ~25-35%, given the uncertainty around those
| numbers.
| fractionalhare wrote:
| In the sense that any Limited Partner partially owns an
| investment vehicle because they have a stake in it, yes.
| okprod wrote:
| Melvin founder was protege of Point72's SAC
| nickysielicki wrote:
| > Melvin already cut its losses this week, as was widely
| reported.
|
| This was widely reported, and Melvin might not be the big bag
| holder anymore, but the short interest hasn't subsided. It's
| actually grown.
|
| The squeeze never happened. _The squeeze never happened_.
|
| https://www.zerohedge.com/markets/we-have-some-bad-news-
| game...
| mariusvaporware wrote:
| The article above written by renowned financial
| journalist... Tyler Durden?
| xeonoex wrote:
| So Melvin Capital got a few billion from Citadel after the
| reddit short squeeze started? And we're not supposed to think
| anything about that is shady?
|
| And there is no proof Melvin cut their losses. There is no
| way to know for sure. The shorts are still there, whether
| they're Melvin or anyone else.
| fractionalhare wrote:
| I didn't say anything about what you're supposed to think.
| You can definitely believe it's shady.
|
| As for the proof about cutting losses - no, there's no
| proof. You can question every single fact you read about
| this story in the media if you want. The reasons most
| people have given for why they would lie about it instead
| of just do it kind of strain credulity for me. There are a
| lot of conspiracies being spread around with much regard
| for whether or not they are true instead of whether they
| _could_ be true.
| mewpmewp2 wrote:
| Logic says they are lying or trying to leave an
| impression as if they cut their losses, since if they
| truly already cut their losses why were they so adamant
| about telling their story and trying to get people out of
| the market. If they cut their losses they would have no
| incentive to tell people about it, they would just not
| comment and go on to new ventures.
| kasey_junk wrote:
| Citadel invested in Melvin this week at a steep discount, they
| do not own the majority of Melvin (at least that hasn't been
| publicly announced).
|
| Melvin announced they had cleared their position in GME days
| ago so is unlikely to be the driver for brokerage behavior
| today.
|
| Citadel does not buy user data from Robinhood, they are one of
| Robinhood internalizers. They pay for the privilege of either
| trading against Robinhood based orders or routing them to an
| exchange.
|
| Not allowing buys can happen for a wide variety of reasons from
| technical, business to legal to counterparty demands and isn't
| necessarily signs of collusion.
|
| That said there is certainly the appearance of a conflict of
| interest and I'm sure Robinhood will be addressing that in
| court and to investigators presently.
| mcv wrote:
| It seems we're both right in a way. Cory Doctorow has a
| through explanation here:
| https://pluralistic.net/2021/01/28/payment-for-order-
| flow/#w...
|
| > _" Robinhood partners with institutional investors and lets
| them spy on what the average joes are buying and selling.
| Sometimes, this is just "market intelligence" ("Hey, people
| like fidget spinners") but the main event is front-running."_
|
| > _" If you're paying Robinhood to tell you what assets its
| customers are about to buy, you can go out and buy them up
| first and sell them for a profit to Robinhood's customers."_
|
| > _" Or you can buy some of that asset up because you know
| its price will go up once Robinhood's customers orders are
| filled."_
|
| > _" Citadel Securities is Robinhood's main institutional
| investor partner."_
| kasey_junk wrote:
| Cory Doctorows position is built on a flawed understanding
| of what payment for order flow is all about.
|
| Internalizers do not go out and buy the things they've
| peaked at during the internalization process.
| jojobas wrote:
| The rumour is that Citadel renewed their shorts.
|
| https://twitter.com/justinkan/status/1354853920762253315?s=2.
| ..
| whitepaint wrote:
| The thing is, all brokers are doing the same. How on earth is
| this possible?
| dnissley wrote:
| I'm with Ally bank and right now they're telling people that
| it's their clearing firm (Apex Clearing Corp) that's blocking
| buys of GME and some other stocks.
|
| Could it be that other trading platforms use the same
| clearing firm?
| misframer wrote:
| Apex is the clearing firm for Tastyworks and Webull too. I
| got an email from Tastyworks about restrictions (which just
| got lifted).
| neom wrote:
| Interestingly, I bank with HSBC and I could buy and sell
| GME and AMC the whole time outside of when it was halted. I
| called them to ask why and they said they clear their own
| trades. Not sure how exactly that is possible though (if
| anyone can explain...)
| kenhwang wrote:
| Typically when you buy/sell a stock, it's not moving
| anywhere. Robinhood would try to sell the stock to
| someone on Robinhood buying the stock first. The big
| banks and brokerages have enough people buying/selling
| within its platform that it has enough supply to trade
| within itself.
|
| For a small brokerage, they would have to work with other
| brokerages to help them trade, as they wouldn't have
| enough shares they already hold to trade them within
| their users. So Robinhood asks Apex for more shares, and
| Apex has to ask HSBC/Fidelity/JPMC/Goldman if Apex
| doesn't have any. At some point, all the other
| institutions also don't want to give up their shares
| because they need to satisfy demand from their own users.
| Trading with other firms tends to be really slow too.
|
| It's a short squeeze too, by definition there's not
| enough stocks available for everyone who wants to buy. So
| some firms ran out and couldn't get more.
| amluto wrote:
| You may want to look up Reg NMS and the various rules
| about internalizers.
| TedDoesntTalk wrote:
| You left out the exchange. Why can't the small brokerages
| go directly to the exchange?
| kenhwang wrote:
| Robinhood uses Apex behind the scenes too. Apex is probably
| having trouble clearing these trades (given how one sided
| it is) and just decided to not trade them, resulting in the
| butterfly effect of multiple brokerages not trading these
| stock.
| misframer wrote:
| I don't think they use Apex anymore.
|
| https://blog.robinhood.com/news/2018/10/9/introducing-
| cleari...
| gruez wrote:
| >Apex is probably having trouble clearing these trades
| (given how one sided it is)
|
| That's... not how stock markets work. For every buy there
| must be a seller. If there are too many buyers but not
| enough sellers the price simply goes up.
| kenhwang wrote:
| Sure, that's what would happen if buys and sells could
| reasonably be paired up. Robinhood/Apex could've just
| kept these buy orders open until it found a seller at any
| price and closed unfilled orders at the end of the day.
| That would probably be less preferable to all involved as
| I doubt these people were placing limit orders.
| ClumsyPilot wrote:
| trading212 wouldn't let me buy, but fairtrade app did.
| that_guy_iain wrote:
| Cartels... It's got Anti-Trust written all over it. Not sure
| the US will do much though.
|
| Jesus, it kind of shows how corrupt the US really is. We're
| all basically watching a bunch of people commit crimes that
| from my quick Google carries a max sentence of 10 years with
| billons of dollars on the line and we're all pretty sure
| they're going to get away with it.
|
| Though, I do think if Biden makes sure the justice hammer
| comes down on this, it'll win over a bunch of Trump
| supporters.
| sakopov wrote:
| This. It's been an incredibly eye opening week. From news
| trumpeting that Melvin Capital closed their short position
| [1] -- which is questionable at best -- to all major US
| brokerages preventing retail traders from participating in
| securities that they shorted. This is so surreal that it
| almost seems like a conspiracy, but i think in reality it
| just shows how corrupt the market really is and how much
| power these hedge funds hold. I'm eager to see the fallout
| from all of this and if SEC will take action. I didn't know
| that hedge funds aren't obligated to disclose their short
| positions on 13f. Maybe, for starters, the SEC could
| prevent them from hiding their shorts.
|
| [1] https://www.reuters.com/article/us-gamestop-melvin-
| idUSKBN29...
| dragonwriter wrote:
| > Though, I do think if Biden makes sure the justice hammer
| comes down on this, it'll win over a bunch of Trump
| supporters.
|
| I'm not sure anyone who still can be considered a "Trump
| supporter" is swayable; on the other hand, if Biden is seen
| as politicizing prosecutorial decisiones it'll lose a bunch
| of Biden supporters.
|
| It's also questionable how much influences Biden's
| preferences have at Justice since his AG nominee hasn't
| been confirmed and everyone at levels requiring Senate
| confirmation there is a Trump carryover (though, to be
| fair, the Acting AG was appointed from within by Biden and
| wasn't out of order of seniority, IIRC, so he has exert
| what influence he can to select leadership given the
| constraints he faces.)
| outoftheabyss wrote:
| It was a strong anti trump sentiment that united the
| democrats but it's easy to forget that Biden is still met
| with some caution in his own party as being the
| establishment candidate, not necessarily a corporate stooge
| but no Bernie either, it would do more to dispel that
| within his own party.
| that_guy_iain wrote:
| Why would his own party be pissed that he made sure the
| justice department properly investigated bankers
| manipulating the market? Honestly, I think this is one of
| those issues that will unify everyone to a common cause,
| god damn rich people screwing the little guy.
| outoftheabyss wrote:
| Read my comment again.
| that_guy_iain wrote:
| Yea. I misread, my bad.
| outoftheabyss wrote:
| Reuters are claiming short sellers have lost 70billion usd,
| when they are the sums involved, anything is possible.
|
| There was someone claiming to be a robin hood employee, that
| the White House got involved. Obviously I would take this
| with an extreme pinch of salt but with those numbers there is
| every motivation from the powers that be
| lovecg wrote:
| If you're talking about this article
| https://www.reuters.com/article/us-retail-trading-
| shortbets-... the 70 billion number is loss on _all_ short
| sales YTD. GME is about 1 billion of that total.
| betterunix2 wrote:
| They all used the same logic to make this decision, that's
| how. They all saw suspicious patterns of trading by retail
| customers and made the typically overly cautious decision to
| restrict trading until they receive guidance from the powers
| that be.
| justupvoting wrote:
| You're going to have to source that claim, friend. There is
| nothing more fundamental than supply and demand. The action
| to allow people to sell but not buy is not overly cautious,
| it's _obviously advantageous_ to the short interest.
| [deleted]
| city41 wrote:
| Vanguard has not blocked anything. Just wanted to throw that
| out there as I really like them as a company.
| diehunde wrote:
| Also see GME in Fidelity
| TedDoesntTalk wrote:
| Right. I was able to buy/sell Nokia (NOK) and Build A Bear
| (BBW) today with no trouble. However, a colleague showed me
| they blocked BBW sales later (screenshot).
| [deleted]
| reilly3000 wrote:
| I'm very much with the WSB folks, but I have a theory about the
| trading halt that may be more innocent. RH's exposure to margin
| ensures that when GME inevitably plummets, they aren't on the
| hook for giant liability. They may behave the same way for any
| stock that broke circuit breakers that fast, and some of it legit
| is to protect the interests of their retail investors.
|
| That said, for Robinhood's business model, you're the product,
| not the investor. Outside of reputational damage they DGAF about
| the outcomes of individual investors as long as they don't have
| skin in the game.
| okprod wrote:
| RH using protecting retail investors' interests as an excuse
| now to force selling of shares
| ineedasername wrote:
| In addition to the class relief, they're also asking for an
| immediate injunction to reinstate GME. Good.
| totaldude87 wrote:
| all you need to prove is , how these things map together w.r.t
| GME
|
| 1) transactions between Robinhood and Citadel (even some % of
| their GME trades would have gone to Citadel) 2) The deal between
| hedge fund and citadel
|
| If you can prove that its because of #1 and #2 , RobinHood
| arrived at this decision, its game over?
|
| or is it?
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