[HN Gopher] Robinhood is automatically initiating GME sell order...
___________________________________________________________________
Robinhood is automatically initiating GME sell orders on users'
behalf
Author : arkadiyt
Score : 254 points
Date : 2021-01-28 20:16 UTC (2 hours ago)
(HTM) web link (twitter.com)
(TXT) w3m dump (twitter.com)
| cj wrote:
| Sounds like a margin call [0] which is absolutely "business as
| usual" and not something to be upset over.
|
| Some of the margin calls may have been triggered earlier than
| investors may have anticipated given that (I believe) Robinhood
| recently adjusted their margin requirements for GME. (It's also
| normal for brokers to raise margin requirements on particularly
| risky stocks, which GME clearly is at the moment)
|
| [0] https://www.investopedia.com/terms/m/margincall.asp
| DevKoala wrote:
| This story has so many twists. I just bought some today to raise
| the middle finger after I noticed politicians batting for the
| hedge funds. I was confident I would lose it all, but now I am
| actually thinking this will go to court and I could make some
| money.
| Railsify wrote:
| This is not a margin call and I'm sure it's in the ToS. They sold
| your stock so the shorts could start their cover.
| spir wrote:
| Robinhood's behavior shows why blockchain-based finance, with its
| censorship resistance and permissionless participation, is the
| future.
|
| It's already the case that many of ethereum's DeFi apps can't
| betray users.
|
| Unlike a centralized financial institution, a DeFi app's smart
| contract code can be shown to be a public API that treats all
| users fairly and correctly, with no admin keys or back doors.
|
| Smart contracts can fail for other reasons, such as bugs or bad
| economics. But, what they can't do is call up their friends and
| ask them for some favoritism.
|
| In DeFi, we say that smart contracts that can't betray users are
| "credibly neutral". https://nakamoto.com/credible-neutrality/ (by
| Vitalik Buterin)
|
| As an example, one important DeFi app that is credibly neutral is
| Uniswap, a decentralized trading exchange that did $700M in
| volume yesterday. The main Uniswap app is here
| https://app.uniswap.org/. Financial stats for Uniswap are
| available here https://info.uniswap.org/. Yesterday, Uniswap made
| $2M in fees for its liquidity partners (anyone can provide
| liquidity). Fee data can been seen here https://cryptofees.info/.
|
| Many tokens on Uniswap are pump-and-dumps or projects that won't
| succeed. Anyone can list any token. Yet, users seem to love the
| control and reliability given to them by Uniswap and other DeFi
| apps.
| zby wrote:
| The only not silly response to that silly situation would be to
| GME to quickly sell enough stock to stabilize the price at some
| reasonably high valuation and them maybe use money from that to
| do some stock buybacks later if it falls to an unreasonable low
| level.
| ineedasername wrote:
| _we placed it to mitigate the risk on your account_
|
| Wow, that's pretty awful since liquidating the position may
| actually put the user at a net loss, which wouldn't avoid risk:
| It would actually "instantiate" the potential risk of having to
| sell the stock after falling below the purchase price.
|
| Why not give users the opportunity to provide more collateral for
| their margin?
| mleonhard wrote:
| The users have the option to buy the stock with their own money
| at any time. RobinHood loaned that money and decided that the
| risk of user default was too great, so they forced sale. I
| expect they did this only for the riskiest users who bought a
| lot of Gamestop stock on margin.
| eterm wrote:
| A realised loss is not a risk though. A position where there is
| margin and could be an even bigger loss is a risk.
| ivalm wrote:
| They are mitigating the risk to themselves since if the user
| turns insolvent RH will still be out the margined amount. If
| they cash the user out, even if user has 100% loss, they save
| themselves.
| Jommi wrote:
| Because they are using an app with no fees. This is what fees
| get you on some other platforms.
| snorrah wrote:
| How bad for RH is this exactly, if some people affected weren't
| margin trading?
|
| https://twitter.com/themaxburns/status/1354874931092348933
| ehsankia wrote:
| The automatic sell aside, isn't just restricting trades on the
| given stocks just bad enough already?
| [deleted]
| captainarab wrote:
| This is blatant anti-competitive behavior on the part of
| Robinhood and Citadel.
|
| As i say elsewhere - this margin call was FORCED by RH because
| they blocked users ability to buy shares as Citadel + others were
| ladder short selling to artificially lower the stock price of
| GME, forcing the margin call.
|
| This is horrific, criminal, and should be prosecuted.
|
| Ultimately, they know that their SEC Fine will be less than the
| $50B+ in losses they face from their irresponsible naked short
| selling.
|
| Did we learn nothing in 2008? Are we just going to continue to
| allow wall street to get away with fleecing everyone else in
| America / the world?
| tmaly wrote:
| https://www.reddit.com/r/occupywallstreet/
| hartator wrote:
| > Did we learn nothing in 2008?
|
| Yep, that we are going to have to pay their losses.
| miloignis wrote:
| Something else we learned from 2008 is that the government
| and taxpayers made money on the bailout because it was paid
| back with interest, see sources like:
| https://projects.propublica.org/bailout/
| quotemstr wrote:
| > Are we just going to continue to allow wall street to get
| away with fleecing everyone else in America / the world?
|
| Well yeah. Why would you expect anything else? And if anyone
| complains about it, the complaints will get scrubbed off the
| internet. And if you go to private messengers to complain, your
| session keys will get escrowed because "terrorism" or
| "misinformation" or something and you'll be banned. Keep in
| mind that the WallStreetBets Discord server was banned for
| "hate speech" right in the middle of all the recent drama. Does
| anyone actually believe that was the real reason?
|
| It's because of shenanigans like this that I'm categorically
| against any sort of control whatsoever over flows of
| information.
| adventured wrote:
| It won't be long before the Biden Administration is declaring
| members from WallStreetBets to be domestic terrorists acting
| in concert to attack the US financial system (it'll be part
| of the broader War on Domestic Terrorism program that they've
| begun). The powers that be in DC and on Wall Street will
| never allow this kind of action to go unchecked indefinitely.
|
| They'll probably make it a crime to organize large groups of
| individuals to herd buy/short a stock.
| quotemstr wrote:
| > They'll probably make it a crime to organize large groups
| of individuals to herd buy/short a stock.
|
| You'd better believe that _something_ will be done to
| ensure that the rabble can 't insult their betters like
| this ever again.
| joe_the_user wrote:
| A stock market is a high stakes gambling system. The smart and
| the powerful win. You'll never limit winners to just the smart.
| If you someone did for a period of time, those smart people
| would become powerful and decide to limit other smart people.
|
| But so what if you did allow just smart people win? Most people
| aren't that smart and you'd wind-up with a fleecing. So making
| this game fair isn't particularly in the average not-genius-
| with-nerves-of-steel person's interests. It's more in the
| average person's interests to have an index-traded-funds go up
| a reliable amount each year.
|
| Fleecing Reddit geeks isn't fleecing everyone in America.
|
| Edit: My point is - sure it might be against the rules but this
| affair is between smart speculators and big speculators. Saying
| it's crime against everyone is ridiculous.
| twox2 wrote:
| I disagree with you.
|
| "It's more in the average person's interests to have an
| index-traded-funds go up a reliable amount each year."
|
| You are saying that people are too dumb to decide what to do
| with their own money, and that's not your call.
|
| The reason this is a crime against everyone is because
| there's allegedly a "free market", but moments like this show
| that the emperor has no clothes and that in fact that's not
| the case.
| Railsify wrote:
| Has anyone confirmed this was a margin account? Let's confirm
| that before supporting the decision.
| [deleted]
| draw_down wrote:
| The stoppage of buying was pretty bad, but this is just.. I want
| to say unbelievable but it's quite believable if you know why
| Robinhood exists and who it exists for.
| ineedasername wrote:
| I've seen people say this is all part of a move by big finance to
| protect entrenched interests.
|
| I'm cynical enough to entertain that possibility, but what really
| would be the leverage/pressure they could put on Robinhood to
| accede to this? Presumably these moves will hurt Robinhood with
| their users and possibly introduce legal liability.
| jxi wrote:
| If they weren't leveraged, this is basically theft.
| jcfrei wrote:
| Most likely margin calls.
| paulgb wrote:
| Yep. I'll repeat what I said in another thread:
|
| 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.
| Jouvence wrote:
| Nonsense. People are allowed to make bad trades every second
| of every day without protection from the platform; but now
| they develop a conscience and save people from themselves? If
| this is true, RH and other platforms pulling smiliar stunts
| should be sued out of existence. Might not be a bad idea to
| significantly increase taxation on derivatives trading too.
| mikestew wrote:
| _but now they develop a conscience and save people from
| themselves?_
|
| No, RH is saving their own asses from the poor financial
| decisions of their clients. They don't want to be on the
| hook when those accounts crater along with GME.
|
| _If this is true, RH and other platforms pulling smiliar
| stunts should be sued out of existence._
|
| Take it up with the SEC. Oh, wait, the SEC is at least
| partially responsible for such rules being in place. It's a
| conspiracy, I tell ya!
| paulgb wrote:
| It's easy to develop a conscience (or the functional
| equivalent) when you know regulators and press have you in
| their sights, so yes.
| Alupis wrote:
| This is the same RH that extended Margin accounts to complete
| amateur investors with practically no vetting before-hand.
|
| People that think they'll get rich off pocket-change
| investments, are not in a position to understand trading on
| margin, nor it's risks.
| dismalpedigree wrote:
| I agree. Wall street is desperate but they are not that
| desperate. Don't do crazy things on margin.
| dalmo3 wrote:
| Could be, but the wording is super vague and obscure, though.
| captainarab wrote:
| Will repeat what I said above:
|
| This morning Robinhood conspired with Citadel to halt trading
| amid a short ladder sell to drive the price lower, allowing
| shorts to cover their losses with no competition.
|
| This is blatant market manipulation and anti competitive
| behavior, and must be stopped.
|
| Why does everyone insist on protecting billionaires who insist
| on playing the game with a different set of rules than the rest
| of us?
| captainarab wrote:
| I don't know why I am being downvoted for sharing the
| truth...
| GavinMcG wrote:
| Because you keep saying _someone_ did this without showing
| that someone to be who you 're accusing.
|
| And because spamming the same comment across the thread
| is... spammy.
| akavi wrote:
| > This morning Robinhood conspired with Citadel to halt
| trading
|
| Do you have evidence that happened, or are you arguing from
| pure cui bono circumstantiality?
| captainarab wrote:
| It's in the logs, go see for yourself?
|
| GME purchases blocked this morning on apps where Citadel is
| the clearing house.
|
| SOMEONE proceeds to ladder short sell GME to cause a
| massive price dump.
|
| Users are margin called from previously profitable
| positions (without being able to provide buying pressure
| needed to fight against a ladder short sell)
|
| Shorts are able to unethically cover your position.
|
| Read into this... it's all over the news and verifiable
| with documentation from various regulatory agencies.
| JohnHaugeland wrote:
| Every time someone asks you for evidence, you claim that
| you gave it somewhere else without linking to it, or
| pretend that you can psychically detect that someone is a
| "shill."
| mediaman wrote:
| Agreed, almost certainly the case.
|
| However, they should have inserted some notice in the UI that
| this was a result of a margin call that couldn't be met, given
| the level of knowledge of many of their users.
| bondarchuk wrote:
| Commenters saying that this is understandable and simply how
| margin trading works might be missing this part of the story:
|
| https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
|
| > _We also raised margin requirements for certain securities._
|
| Is that how margin trading always works? The broker can just
| without prior notification increase your collateral requirement
| and liquidate you instantly?
| imnotlost wrote:
| Of course, you're literally borrowing money from them to buy
| securities.
| bondarchuk wrote:
| Alright, I didn't know that. It does sound like a bad deal.
| Imagine if a bank suddenly changed the terms of your mortgage
| and repossessed the house. You're literally borrowing money
| from them after all.
| in3d wrote:
| Yes. Happens with regularity.
| akavi wrote:
| Are these users trading on margin?
| Animats wrote:
| Yes, that's the big question here. If it's a margin trade, the
| broker is also a lender and has some discretion. If it's a cash
| trade, the broker has no risk and should not interfere. Does
| anyone know? This matters.
| koolba wrote:
| 100% they're on margin. Otherwise the broker would have no
| right to make trades on their behalf.
|
| In contrast, once you're on margin you give them the right to
| liquidate any part of your portfolio, at any time, to cover
| your margin balance.
|
| What they can't do is liquidate _beyond_ the margin balance.
| Once they 've covered the balance they would have to stop
| closing out your positions.
| mikestew wrote:
| Yeah, brokerages will do that if the stock takes a big drop like
| it did today. Oh, did you not read that part of your margin
| agreement? According to thread, some are just now getting to that
| part. Those same folks shouldn't have been trading GME on margin.
|
| If it's any consolation, I've had Fidelity, IB, et. al., do the
| exact same thing when a trade turned sour. Difference is, I
| didn't run to Reddit to display my ignorance to the world.
| simonsaidit wrote:
| The difference here is they prevented people from starting new
| positions while still allowing closing them .. effectivly being
| the cause of the drop.
| stickfigure wrote:
| > cause of the drop
|
| Not sure I understand this perspective. GME was a balloon
| floating around in a needle shop.
| toolz wrote:
| You don't understand how disallowing people to buy into a
| stock causes the price to drop, or you disagree that
| disallowing the purchase of a stock causes the price to
| drop? From my perspective it seems rather straight forward
| that if you artificially limit demand and not supply,
| you'll almost always see price drop.
| stickfigure wrote:
| It's going to pop no matter what actions RH (or anyone
| else takes). Who cares which needle pops it?
| gruez wrote:
| Yeah, but the wishful thinking in the other threads I've
| seen was that by the time it popped, all (or most) of the
| holders would be the short sellers, not the wsb people who
| pumped it up. In that sense it would be "fine".
| simonsaidit wrote:
| I would think thats the obvious thing to happen when supply
| outweigh demand
| mikestew wrote:
| You think a lack of volume from retail traders on Robinhood
| is the cause of the drop? To put it mildly, that's a little
| naive.
| jagger27 wrote:
| Please feel free to explain what's so naive about that.
| ivalm wrote:
| I'm pretty sure all of the GME bubble is driven by retail,
| and since most retails prevented new buy orders then yeah,
| it affected the price action. Remember, GME is small.
| romwell wrote:
| > You think a lack of volume from retail traders on
| Robinhood is the cause of the drop? To put it mildly,
| that's a little naive.
|
| You think that the presence of volume from retail traders
| of Robinhood wasn't the cause of the increase to begin
| with? To put it mildly, that's delusional.
| f430 wrote:
| Market manipulation is still market manipulation whether you
| write them in tiny font letters or buried under a pile of legal
| verbosity.
|
| Spirit of the law is always considered in situations like this
| when it isn't explicitly made clear (like on the splash screen)
| will always fall under scrutiny and rejected at the jury level.
|
| You can sign away your life but it doesn't make it legal
| because there are fundamental laws that pertain to human rights
| in the West as such are security laws.
|
| RH broke the trust and if what we are hearing is true, they may
| have colluded with the conflict of interest parties that took
| massive short positions before pressuring RH to halt trades may
| lead to actual jail times for the people involved.
|
| In the past the Obama administration has been soft on
| wallstreet but the Biden administration has signaled they are
| willing to play big government. Especially as politicized as
| the whole GME/WSB has gotten, there's zero chance they will
| pass up on the opportunity to win the popular support.
| southeastern wrote:
| >Difference is, I didn't run to Reddit to display my ignorance
| to the world.
|
| Erm isn't the point of communities like Reddit to discuss? The
| implication that there's a certain class of people who are
| suited to stocks and a certain class that isn't is exactly why
| people are so impassioned about this right now.
| [deleted]
| ineedasername wrote:
| I though they would generally give you the opportunity to
| provide more collateral for your margin though. Or am I wrong
| on that?
| mikestew wrote:
| Used to be you had three days. I would fault no brokerage for
| not waiting three days for a Robinhood account holder to
| cough up the dough on a GME margin call. Hell, wait three
| _hours_ and RH might have to come back asking for more.
| Railsify wrote:
| Are you sure this was a margin account, not sure what info in
| the tweet supports that.
| robntheh00d wrote:
| The stock went south due to their halting purchases of the
| stock
|
| There's context to this that do not make this a textbook margin
| call scenario
| tibbon wrote:
| I honestly didn't read the agreements on Robinhood. Before you
| call me stupid or irresponsible, I'm going to say practically
| no one reads these agreements, and even fewer understand them.
|
| The NYT a few days ago had an opinion piece on how no one reads
| the TOS for things like this. A very choice line:
|
| > A 2012 Carnegie Mellon study found that the average American
| would have to devote 76 work days just to read over tech
| companies' policies. That number would probably be much higher
| today.
|
| https://www.nytimes.com/2021/01/23/opinion/sunday/online-ter...
|
| When I bought my house, the attorneys sat down with me and had
| me read through and explained to me every single term of the
| purchase agreement and my mortgage, checking that I understood
| them. Absolutely no one has done this for Facebook, throwing a
| few hundred into Robinhood, etc. It's not worth it, and the
| terms change with such frequency that it would be outdated
| immediately.
|
| I don't think having such impossible terms that you "agree" to
| are in good faith.
|
| I'm not ignorant, I'm pretty typical, and I'm not going to
| spend 1/3 of my time simply sitting reading TOS.
| eloff wrote:
| There is a big difference between a website TOS which is
| mostly legal ass covering and a loan agreement with is what
| margin is.
|
| If you take a loan and didn't check the interest rates, term,
| and basic conditions, that's on you.
| karaterobot wrote:
| Thank you for being honest about it. As far as I understand,
| not reading the terms of a contract you agree to is not a
| defense, assuming the TOS are presented clearly and you
| acknowledge your acceptance with some unambiguous action. You
| don't have to read the terms, but you are bound by them
| anyway if you agree to them.
| bilbo0s wrote:
| Here's the thing though, it's _always_ been this way with
| margin agreements. Even before tech cos with impenetrable ToS
| agreements.
|
| I'm beginning to wonder if the people who rushed into this
| "war" really ever knew what they were getting themselves
| into? Especially the ones who bought on margin. It's such a
| risk, and obvious loss in this situation, that I can't
| imagine any non-suicidal financial actor doing it?
| smachiz wrote:
| This isn't just TOS though. It's a pretty short and easy
| agreement that you're accepting.
|
| https://cdn.robinhood.com/assets/robinhood/legal/RHF%20and%2.
| ..
|
| You'll find a similar concise and clear statement from every
| broker when you enable margin trading.
| amenghra wrote:
| I would read each and every word of a four page document,
| especially if it's finance related. Unfortunately, some
| people won't read anything longer than a tweet.
| jscheel wrote:
| You are saying that you willfully entered into a loan
| agreement without reading the terms of the contract. I just
| don't see that as a defensible position. I don't know how
| Robinhood does it, but TD Ameritrade was _very_ clear with me
| what the terms of my margin account were. It 's one thing to
| ignore TOS on an application, it a whole other world to sign
| a loan agreement without reading the fine print.
| freeflight wrote:
| _> I 'm going to say practically no one reads these
| agreements, and even fewer understand them._
|
| This might be true for the myriad of _free_ online services
| and applications most people use on the daily.
|
| But with anything I plan to spend or invest my money in/give
| my real personal information to I will most certainly take
| care to properly read and understand what I'm agreeing to
| there.
|
| In that context, comparing your mortgage agreement with
| signing up for Facebook is apples to oranges. One of those is
| a very real very long-term financial liability directly and
| undeniably tied to your real identity with a legally binding
| contract, the other is a service that tries to monetize
| whatever data you give to them based on EULA and ToS that in
| many jurisdictions are not even legally enforceable.
| josho wrote:
| > I will most certainly take care to properly read and
| understand
|
| And when you don't understand the dense legalese how did
| you get clarification? Did you pay a few hundred dollars to
| have a lawyer review the contract and explain it to you?
| Perhaps call the company up to have a minimum wage call
| center employee explain it to you? Or just come up with an
| interpretation of the text that seems to make sense and
| conclude that must be what they mean?
|
| After awhile even doing that grows tiresome for all but the
| most important services. So, we really do need something
| better.
| freeflight wrote:
| > And when you don't understand the dense legalese how
| did you get clarification?
|
| By asking people knowledgeable in the field I trust, if
| it's big and relevant enough I might even invest in a
| lawyer, but at the very least I will put effort into
| trying to understand it.
|
| If that doesn't work then I will be way more skeptical of
| whatever I'm supposed to agree to because anything
| written to be purposefully vague, and difficult to
| understand, does not entail a lot of trust nor confidence
| in me.
|
| But not understanding, and making no efforts on your end
| to understand, is a very poor defense for entering
| anything legally binding: Making sure you understand is
| ultimately up to you and only you because at the end of
| the day it will be your ass and your assets on the line.
|
| Which is a mindset even shared by WSB: That submission is
| full of regulars reiterating how people have been told
| not to buy GME on margin exactly because of what ended up
| happening.
| marcinzm wrote:
| >I don't think having such impossible terms that you "agree"
| to are in good faith.
|
| These are standard terms and you are borrowing money from
| them so logically they will have a lot of say in terms of
| that money. Credit cards will have interest rates, collateral
| loans will have liens on property, etc, etc. Nothing about
| this is impossible.
|
| I do find it funny how the people who complain about this are
| also complaining about government oversight, robinhood
| stopping trades, etc. If you want full freedom then it's on
| you to pay attention to the details and not expect someone
| else to bail you out of your own ignorance.
| Lewton wrote:
| This is not about reading a TOS, this is about borrowing
| money from a brokerage and then losing them on the stock
| market
| mbreese wrote:
| _> When I bought my house, the attorneys sat down with me and
| had me read through and explained to me every single term of
| the purchase agreement and my mortgage_
|
| Really? Because that would make closing take forever. I mean,
| even after the purchase agreement and mortgage terms, there
| are a ton more documents to go through.
| stronglikedan wrote:
| They attorneys have done the same with me through all three
| of my closings, and yes, they do take forever, precisely
| for that reason.
| coding123 wrote:
| I'm guessing it was the mobile notary he might have thought
| was an attorney.
| tibbon wrote:
| No, this was my title attorney. Want his card?
| weird-eye-issue wrote:
| This is about having a very basic understanding of buying
| stocks on margin entails. It isn't your money, they do what
| they need to in order to protect themselves. You don't need
| to read their TOS because this isn't specific to Robinhood.
| It applies with every broker.
| schoen wrote:
| That makes sense, but presumably the financial industry
| pretty regularly needs to enforce specific terms in financial
| contracts. So here we're seeing -- from one day to another --
| people complaining that Robinhood and other financial
| intermediaries won't let unsophisticated traders easily
| access particular kinds of financial trades and products, and
| also that complicated terms may apply to those same trades
| and products. Couldn't these two issues be related?
|
| (I don't mean to accuse people of hypocrisy by mentioning
| this! I just mean that I genuinely think financial
| intermediaries are in a tough spot as they're pressured to
| allow everyone to trade things where quite a lot of customers
| don't quite know what they are or what they signify.)
| xzel wrote:
| TOS on websites aren't the same the agreement to a margin
| account. Not reading that would be like not reading your
| mortgage agreement or your auto loan agreement. I agree
| they're long and confusing but financial agreements are super
| important to read and if you can't understand it hire a
| younger/cheaper lawyer for an hour. Every contract I've
| signed for employment I've hired someone to confirm the law
| in that state and it really makes a difference knowing what
| is in there.
| tibbon wrote:
| > Every contract I've signed for employment I've hired
| someone to confirm the law in that state and it really
| makes a difference knowing what is in there.
|
| That's really cool to be able to do. For the average
| American, that's pretty much impossible to afford.
| [deleted]
| worik wrote:
| Yes. Is that one way of describing the "find a bigger fool"
| strategy of investing?
|
| Is that the purpose of these apps? To get uninformed
| liquidity into the market to benefit investment banks?
| bilbo0s wrote:
| As a general rule, we should always keep in mind that
| startups are founded to make money for the startup's
| founders. If other stakeholders such as customers,
| employees, investors, and so on are able to make money off
| of it, that's a plus. But we shouldn't expect founders to
| do anything other than act in a manner facilitating the
| generation of wealth for themselves.
|
| RH is no different than any other startup in this regard.
| They aren't going to open themselves up to the risk of not
| following a margin agreement in the name of "the
| revolution!" They are in the business of making money, even
| if that means users lose their shirts.
|
| And if people have been trading GME, AMC, et al on margin?
| (I mean, unless the government steps in or something?) I'm
| afraid a lot of them are going to be losing their shirts in
| the coming weeks.
| xibalba wrote:
| > practically no one reads these agreements, and even fewer
| understand them
|
| Argumentum ad populum. Not very convincing.
|
| There is a reason the finance industry is so heavily
| regulated, and, at least in terms of intent, it is not to
| allow the elites to hoard all of the capital (although that
| may be a side effect).
| tw04 wrote:
| >When I bought my house, the attorneys sat down with me and
| had me read through and explained to me every single term of
| the purchase agreement and my mortgage, checking that I
| understood them. Absolutely no one has done this for
| Facebook, throwing a few hundred into Robinhood, etc. It's
| not worth it, and the terms change with such frequency that
| it would be outdated immediately.
|
| I still have my binder from my closing. Worked in the
| mortgage industry for a while in college. If they truly had
| you read through every page with explanations it would have
| taken you multiple days to do your closing. I think you're
| misremembering.
|
| What they likely did was went through page by page, giving
| you a summary of each page as they went, and gave you the
| option to read it in its entirety or just sign based on their
| summary. You might have read through the first 4 pages before
| you realized you would be there for the aforementioned
| multiple days if you wanted to read through every line of
| every page.
| gnud wrote:
| Really? I _know_ I read everything, both for my loan and
| for the purchase, when I bought my apartment. It wasn't
| really that much. It took a few hours. I didn't read every
| law that the contract referred to, but I read the contract
| itself.
|
| Is a house really that much worse when it comes to
| paperwork? Or is the US just that much worse with this
| stuff?
| bcrosby95 wrote:
| I still have my closing documents from our house and it's
| about an inch and a half of paperwork.
| Jommi wrote:
| X Hours = x _h$ with probability you misunderstood
| something
|
| Compared to paying lawyer to explain it to you in let's
| say 1/10 of the time and better understanding
|
| X/10_h$ + lawyer fees
|
| Compared to not reading and just trusting
|
| No upfront cost, but probability of bad outcomes
| increases.
|
| I think when buying a house that makes sense.
|
| Buying 100$ worth stock? Not sure. 10k worth? Hmmm maybe
| dv_dt wrote:
| When i closed on my house I insisted the package be sent to
| me days ahead so I could read it over. Made everyone
| unhappy that was necessary including me. But I was in a
| position to do that and I did. I think most good notaries
| go over a verbal summary of the documents at the time of
| signing - but it's obviously not binding if there is a
| misunderstanding.
|
| Margin accounts someone could read over after the fact -
| but the length and lack of a critical summary on most
| agreements is ridiculous.
| okprod wrote:
| I think a lot of retail traders didn't read the ToS but also
| with this situation the notice about automatic liquidating
| doesn't reference margin.
| amluto wrote:
| This isn't some little detail hidden in the TOS. This is what a
| margin account _is_. If you do not have your required
| maintenance margin (and that may be a complicated calculation),
| the broker can and will sell things for you to protect
| themselves.
|
| This is, frankly, common sense. If you deposit $100, buy $300
| of stock, and that stock falls below $200, your account's
| equity will go below zero and your broker is in trouble. If
| this happens on a large enough scale, the market will be in
| trouble. The broker will try to protect itself by liquidating
| your position before this happens, and they may even be
| required to by market rules.
|
| (The actual calculation of required margin is quite complex for
| good reason.)
| Tenoke wrote:
| Are you sure you didn't just have a margin call up to the
| margin maintenance rather than get _everything_ on margin
| liquidated immediately like here?
| mikestew wrote:
| You know, you might be right. Last time I had a margin call
| was a long time ago. Then again, I don't recall ever trading
| a stock on margin that swings 100% either direction in one
| day.
|
| Speaking of margin calls, a brokerage _usually_ gives you the
| courtesy call saying, "either you liquidate (or give us more
| money to cover), or we'll do it for you", but on GME I could
| see skipping that call given the volatility.
| xibalba wrote:
| Interesting counter point to the "elites-pulling-levers-to-
| protect-hedgies" conspiracy theory:
| https://twitter.com/arampell/status/1354859474658312196?ref_...
| ummonk wrote:
| That's not a counter point. The IB Chairman explicitly said
| they put in the restrictions to protect market makers rather
| than their customers:
| https://www.youtube.com/watch?v=7RH4XKP55fM
| xibalba wrote:
| So, point blank, you believe these restrictions were
| implemented to protect hedge funds and financial elites?
|
| Do you not believe there could be simpler explanations to
| brokers halting buying of the meme-stonk tickers that are 1)
| explained by their own financial incentives and risks, and 2)
| not by a shadowy conspiracy of financial elites pulling
| levers behind the scenes?
| geek_at wrote:
| Wow if true, this is a huge violation of user trust
| arbitrage wrote:
| from robinhood? are you kidding, or what?
| dang wrote:
| Please stick to posting substantive comments.
| umvi wrote:
| > due to the unreasonable risk involved in brokering your
| position, we have closed your X shares of GME for an average
| price of Y
|
| What in the world??
|
| "In order to protect you from yourself, we have taken away your
| free will. Thanks!"
| arbitrage wrote:
| you are using their brokerage. their rules. free will has
| nothing to do with it.
| ehsankia wrote:
| Well they now have 1 star on both app stores and can say
| goodbye to their upcoming IPO. While it is true their rules
| may have specified such a situation (I'm not a lawyer and not
| sure how legal this is), they are still a platform that rely
| on user trust, and they just destroyed any they had. You
| can't really call yourself "robin hood" when you bow over to
| the first big guy that shows up.
| leesalminen wrote:
| It's not possible for someone like me to purchase a publicly
| traded security without going through a broker. So what
| you're saying is that market participants can only
| participate if they do what the people making the market
| want?
| avree wrote:
| Yes, that is how it works when you buy stock on margin and do
| not have the cash to cover. When the price dips, the risk
| increases to the broker, and so they may liquidate your
| position to cover.
| umvi wrote:
| I see. I think that's a critical piece of context missing in
| that tweet: "Note: these particular shares were bought on
| margin. Buying on margin is borrowing money from a broker to
| purchase stock"
|
| I thought RH was forcibly selling a customer's stocks that
| the customer had previously purchased with their own money.
| detaro wrote:
| Where does tat say "to protect you from yourself"? Reads to me
| a lot more as "since brokering your position is an unreasonable
| risk to us, we stop doing so" (and the right to do so is likely
| lined out in their ToS)
| leesalminen wrote:
| Could you expand on what the risk to Robinhood is here? From
| what I understand, users purchased stock for money. What is
| Robinhood holding here that can create risk for them?
| freeone3000 wrote:
| Some users purchased stock for money. Others purchased the
| right to buy stock later. Still others trade on margin, or,
| borrowed money. Robinhood offers all three, and it's not
| clear which this is, since it conflates the first and the
| third in the UI.
| leesalminen wrote:
| Ahhh, I see, understood. If RH (or any brokerage) tried
| to sell shares of stock I owned outright (i.e. exchanged
| USD for a share at market price) I would be livid. But it
| sounds like this article is maybe overblown.
|
| Thanks for the clarification!
| AngryData wrote:
| The company that owns Robinhood is the same company that
| was shorting all the GME stocks.
| leesalminen wrote:
| Right, I'm aware. I don't think that's a valid defense
| for what RH did today and was curious to hear if others
| thought there was a valid defense. If RH is just calling
| in open margin orders, then that's just the game. If RH
| is selling outright owned securities, that's wrong.
| eterm wrote:
| Browing the top of reddit right now is _really_ reminiscent of
| /r/The_Donald, particularly the shift from a bunch of 'ironic'
| jokers to conspiracy theories and shouty chest beating and calls
| for upvotes.
|
| I'd treat anything like this with a huge pinch of salt.
| czechdeveloper wrote:
| Is it conspiracy theory, when it's true?
| eigenvalue wrote:
| Losing a lot of money very quickly is a hell of a motivator for
| action.
| greenshackle2 wrote:
| Not just Reddit. It's here too. It's wild to see people being
| whipped into a frenzy in real time.
|
| I'm following the discussions a bit, lots of comments by people
| spreading conspiracy theories, comments asking for evidence are
| just downvoted, or met by the conspiracy theorist's favorite,
| "do your research", comments spreading disinformation like
| "citadel owns robinhood" with a tweet as the only source,
| people who have no idea how market functions talking about
| "naked shorting", etc. The disinformation spreads faster than
| it takes to rebut it.
| [deleted]
| Railsify wrote:
| Someone not wanting to explain what is in 50 news articles to
| new commenters does not make them a conspiracy theorist, why
| should they do your google searches for you?
| dageshi wrote:
| In the words of Agent Kay from MiB "A person is smart. People
| are dumb, panicky dangerous animals and you know it."
| captainarab wrote:
| this is despicable.
| stephanerangaya wrote:
| I saw this on Twitter and couldn't find any sources to confirm
| that the e-mail screenshot is real. Take this with a pinch of
| salt, it might be fake.
| ttt0 wrote:
| Blue checkmarks seem to confirm this:
|
| https://twitter.com/dreamwisp/status/1354865709998723072
|
| edit: My bad, it's "just" cancelling their orders, not selling
| anything on their behalf.
| aqme28 wrote:
| A canceled buy order is very different from an automatic
| sale. Buy orders can be canceled all the time for various
| reasons, though in this case it's likely Robinhood's well-
| documented purchase restrictions.
|
| Also that user does not have a blue check.
| ttt0 wrote:
| Yes, I noticed it and already edited my comment, my bad.
| The person below is a blue checkmark.
| joering2 wrote:
| From [1]: On September 2, 2020, the Wall Street Journal reported
| that Robinhood was under SEC investigation for failing to fully
| disclose selling clients' orders to high-speed trading firms,
| with a potential $10M+ fine.[6] Robinhood paid $65M to settle the
| SEC investigation on December 17, 2020.
|
| Gee.. I guess a slap on their wrist will make them behave NEXT
| time. How come people are not in jail for this?? I hope this time
| around politicans will make enough stink that SEC will actually
| forward indictments to DOJ.
|
| [1]
| https://en.wikipedia.org/wiki/Robinhood_(company)#SEC_Probe_...
| RGamma wrote:
| Is this the prelude to
| https://www.politico.com/magazine/story/2014/06/the-pitchfor...?
| avree wrote:
| He was margin called. This is literally how margin works, has
| nothing to do with GME or the Robinhood furor.
| sauwan wrote:
| Maybe. Would he have been margin called without their earlier
| action?
| mkipper wrote:
| Maybe not. But that doesn't make _this_ news.
|
| RH is getting sued for market manipulation. This is the
| inevitable result from that. RH may very well be guilty in
| all of this, but not for these margin calls.
| cwkoss wrote:
| The fact that this margin call happened at the bottom, but this
| user likely could not have closed their position themselves 15
| minutes earlier at a better price, seems like it should be
| illegal if it is not already.
| FabHK wrote:
| If you're long on margin, the position will of course be
| closed when the stock price drops (and the value of the
| position (= stock price * number of stocks minus margin loan)
| approaches zero), not when it rises.
|
| And it was impossible on RH and other brokers to buy more
| shares, selling (liquidating a long position) was always
| possible, AFAIK.
| okprod wrote:
| The screenshots I've seen aren't due to margin calls, also not
| end of day yet
| jsjohnst wrote:
| There is no "end of day" only requirement on margin calls. A
| brokerage firm could margin call you 2min after the market
| opened, as an example. The trigger is when your account is
| out of balance with the established risks the brokerage is
| willing to extend to you, which they can change the criteria
| at will.
|
| More details on margin calls here:
|
| https://www.thebalance.com/what-is-margin-call-358106
| Tenoke wrote:
| It seems like this was his whole position on margin, rather
| than bringing them back to the margin maintenance which isn't
| normal.
| hahla wrote:
| That was my thought process as well, but no where in the app
| message or email does it say the position was closed out due to
| a margin call.
| short_sells_poo wrote:
| If you have a margin account, the broker calculates a risk
| based margin and can close any position they wish if they
| deem it a risk. They don't have to give you any
| justification. With increased buying power comes increased
| risk.
|
| In some sense this was basically inevitable. Robinhood
| allowed (perhaps even encouraged) a huge mass of clueless
| investors to flood into the market. As long as the going was
| good, nobody complained, but as soon as things go south,
| people have started to learn expensive lessons.
|
| This is not the first time this has happened. Almost every
| single market stress for the past 20 years has caused grief
| to retail in some way as they were caught out on something
| they didn't know about.
|
| One clear example that comes to mind is when the Swiss
| national bank has removed the currency peg and a whole bunch
| of FX retail has made the expensive discovery that stop limit
| orders are not guaranteed to execute...
| dingaling wrote:
| Maybe it's a good time to stop calling them investors and
| instead call them speculators.
|
| They're not investing in anything, their money doesn't
| contribute to any form of progress.
| llampx wrote:
| Welcome to the stock market
| [deleted]
| quotemstr wrote:
| Robinhood's behavior here is wicked and wrong. Yes, Robinhood's
| EULA technically allows them to do this wicked thing. The same
| EULA says that Robinhood can't be sued over it or anything else.
|
| It's about time we talk about how it's not in the public's
| interest to allow companies to put arbitrarily user-hostile terms
| in their user agreements.
| SpicyLemonZest wrote:
| The challenge in this case is that many people _want_ this.
| They see it as only fair that the little guy should be allowed
| to invest on the same (sometimes user-hostile) terms as big
| institutions do. If you pass a new regulation saying that
| margin calls feel scummy so nobody can offer small investors a
| margin account, is that really a win for small investors?
| freeone3000 wrote:
| EULA allows them to close out a margin call, but not sell
| shares held for a client. Selling held shares without a
| standing order from the client is illegal, no matter what an
| EULA says.
| jrochkind1 wrote:
| Are you looking at a particular clause in the EULA? Where do we
| find the EULA?
| imperio59 wrote:
| It is in their T&Cs that they can do this if your account is
| trading on margin. If not, then it feels like there's a potential
| for a class action lawsuit.
| captainarab wrote:
| For anyone saying, "Most likely trading on margin"
|
| Remember:
|
| This morning Robinhood conspired with Citadel to halt trading
| amid a short ladder sell to drive the price lower, allowing
| shorts to cover their losses with no competition.
|
| This is blatant market manipulation and anti competitive
| behavior, and must be stopped.
|
| Why does everyone insist on protecting billionaires who insist on
| playing the game with a different set of rules than the rest of
| us?
| jrochkind1 wrote:
| OK, but they are almost certainly also trading on margin right?
|
| You trade with robinhood's money, then they can decide not to
| lend it to you anymore for nearly any reason they want.
| -\\_(tsu)_/-
| captainarab wrote:
| Sure, no argument from me on here.
|
| You have to admit, though - that is disingenuous. Those plays
| were profitable, no need to call them (unless there has been
| irresponsible behavior on the behalf of the broker)
| short_sells_poo wrote:
| That is entirely up to the broker. They make no guarantees
| to you that they'll underwrite your risk taking with no
| limits. If you don't want this to happen, go to a reputable
| broker and make sure you are not trading on margin. This is
| not rocket science, but does require a basic level of
| understanding.
| captainarab wrote:
| I agree that this is the technically correct definition
| of how margin is typically utilized, and that investors
| should be prepared for this in the case of high
| volatility.
|
| The fact does remain, though, that the way the data is
| presenting itself seems to indicate that there was
| disingenuous behavior on the behalf of market makers and
| a number of hedge funds. To be seen, I guess.
| jrochkind1 wrote:
| I mean, assuming manipulative self-interested
| disingenuous behavior on the part of market makers and
| hedge funds on a daily basis is usually a safe bet. Also
| on the part of nearly anyone interacting with the stock
| market who has the power to do it. It's kind of the whole
| game. True, that may not be how they teach it to you in
| high school.
| hartator wrote:
| > You trade with robinhood's money, then they can decide not
| to lend it to you anymore for nearly any reason they want.
|
| Can they? I thought margin calls were you personal debt. It's
| like the bank deciding to sell your house that you have
| mortgage on because they think the market is too volatile.
| Makes little senes.
| jrochkind1 wrote:
| > One of the most important things to understand about
| margin calls is that your brokerage firm has discretion as
| to when you are required to increase the equity in your
| margin account. Some firms will attempt to contact you to
| tell you additional equity is required, but they're not
| obligated to do so. Whether or not your firm has contacted
| you, they can take immediate action to increase the equity
| in your account if they decide the equity is too low and is
| not in line with the risk of your account. This means they
| can immediately sell out whichever securities they choose,
| regardless of the financial and tax obligations for you.
|
| https://www.fidelity.com/learning-center/trading-
| investing/t...
| arawde wrote:
| Citation?
| captainarab wrote:
| It's in the logs, go see for yourself? GME purchases blocked
| this morning on apps where Citadel is the clearing house.
|
| SOMEONE proceeds to ladder short sell GME to cause a massive
| price dump.
|
| Users are margin called from previously profitable positions
| (without being able to provide buying pressure needed to
| fight against a ladder short sell)
|
| Shorts are able to unethically cover your position.
|
| Read into this... it's all over the news and verifiable with
| documentation from various regulatory agencies.
| hems27 wrote:
| Citadel is not a clearing house...
| short_sells_poo wrote:
| Do you have any evidence of this or are you just spamming every
| thread with the same accusations?
| captainarab wrote:
| See my response below - do some due diligence on your own
| part instead of asking people to spoon feed you information,
| lol
| short_sells_poo wrote:
| No, you are making bold claims providing no evidence
| whatsoever. I can also just start spewing unfounded
| opinions that the illuminati are trying to defraud r/WSB.
| Everyone can do that.
|
| You are going around parroting the same stuff everywhere
| and making zero effort to at least provide links to
| credible sources to support your claim.
|
| I'm not saying you are wrong, I'm saying that if you want
| people to take you seriously (as opposed to looking like a
| shill), you have to do more than spam every possible
| discussion.
| captainarab wrote:
| also, you're an obvious hedge fund industry shill, see your
| comment history
| rich_sasha wrote:
| It is really interesting reading all this.
|
| Someone reuses passwords all over the internet, gets hacked and
| loses savings of a lifetime, HN says "OMG sooo stupid, you have
| to have minimal computer literacy in life" etc.
|
| People get burnt on literally run-of-the-mill situations with
| trading and get angry with the world, and vent in a rigged
| system.
|
| Of course there is space for outsiders to challenge the
| establishment, but assuming you grok finance because you
| installed Robinhood app is... naive!!!
| robot1 wrote:
| This is ONLY if you enable margin trading via Robinhood Gold -
| they increased their margin requirements recently on GME and this
| will not happen to you if you are trading on cash.
| sjs382 wrote:
| It's not just Robinhood Gold.
|
| All accounts are "Robinhood Instant" by default. You need to
| permanently opt-out of Robinhood Instant (or wait for
| deposits/trades to settle) to opt-out.
|
| Edit: to add a link. This info is fairly well buried:
| https://robinhood.com/us/en/support/articles/robinhood-accou...
| avree wrote:
| Yes, but "Robinhood Instant" is limited to a subset of the
| funds you are depositing. It is set up as a margin account to
| allow them to trade on your behalf before the money hits your
| Robinhood account. But the money will be hitting, so you will
| have cash to cover the trade. It's not the same as actual
| margin trading (where, for example, in this case, the user
| did not have cash to cover and so his position was liquidated
| by the broker.)
| plasma wrote:
| This feels like RH is going to go under if they don't make this
| move? Are they holding a lot of risk by not doing this or
| something?
|
| And what repercussions would they face, surely they've flagged
| that risk and are doing it anyway.
| czechdeveloper wrote:
| Doing this will already probably kill them, so they must be
| afraid of worse. Who would remmain using them after this?
| almost_usual wrote:
| > Who would remmain using them after this?
|
| Most users who don't know anything about WSB probably
| guerrilla wrote:
| Who's that? It's been headline news for at least three
| days.
| wyre wrote:
| Trump still has millions of supporters after years of
| negative headlines.
|
| Idk who is still going to use RH but I know they exist.
| pxtail wrote:
| I feel like that supporters count can increase due to all
| this mess around GME
| noitpmeder wrote:
| I will bet you anything this will actually help them overall.
| captainarab wrote:
| This is blatant anti-competitive behavior on the part of
| Robinhood and Citadel.
|
| Ultimately, they know that their SEC Fine will be less than the
| $50B+ in losses they face from their irresponsible naked short
| selling.
|
| Did we learn nothing in 2008? Are we just going to continue to
| allow wall street to get away with fleecing everyone else in
| America / the world?
| lainga wrote:
| Some people have speculated (big sign reading SPECULATION
| SPECULATION NO PROOF above this post) it might make sense if RH
| was trading for itself and taking the other side of its
| client's trades, like Goldman was accused of doing in '08. In
| which case they are in big hot water.
|
| ed. yes, on the chance that this wasn't just a margin call
| markdown wrote:
| > And what repercussions would they face
|
| Nothing worth worrying about. Every single case in the
| financial sector over the past two decades has resulted in
| fines that are a fraction of the profits. I mean, you had banks
| laundering money for cartels, Malasians were looted, etc etc...
| every single time they fine the culprits a tiny fraction of
| their profits.
|
| The US has made criminal activity profitable, even if you get
| caught.
|
| So Citadel and RH probably just made the smart move. Screw the
| rules, because the punishment for breaking them will be more
| than worth it.
| captainarab wrote:
| 100% agree.
|
| Pretty sad to see most of HN willfully ignoring this fact and
| jumping to the defense of Hedge Funds and the billionaire
| class.
| wyre wrote:
| Reading HN this whole month has been disheartening after
| reading so many comments defending the insurrection and
| Parler.
| shrimpx wrote:
| Although you have to see a bit of the irony in the
| similarity between Trump populists getting deplatformed
| and Redditors getting blocked from trading.
| [deleted]
| dang wrote:
| That's an inaccurate characterization, as anyone reading
| these threads can easily see.
| firebaze wrote:
| Smelled like scam, is a scam. So glad I didn't fall into the
| robinhood trap, I was really close to.
|
| Edit: yes this comment isn't related to the linked article.
| TheHypnotist wrote:
| You should really read up on finance before making any of these
| decisions. It's no scam, it's margin.
| firebaze wrote:
| I didn't lose a cent, i made over 60% the last few days. If i
| was using robinhood, i'd be blocked from doing that.
| mikestew wrote:
| Fidelity and every other brokerage of which I have knowledge
| would let you do the same thing (get into a bad trade, and then
| liquidate your position when you exceed margin limits). This
| isn't a "Robinhood" thing, this is an "ignorant gamblers who
| shouldn't be allowed anywhere near a margin account" thing.
| wegs wrote:
| Kinda....
|
| 1) I'd expect a credible brokerage to treat me like a human
| being. Call me up. Talk to me. Allow me to add money to my
| account if need be. Simply liquidating my position with no
| notice with an automated script isn't how I'd like my money
| to be treated.
|
| 2) This is among a rather large number of sketchy practices.
|
| I have no horse in this game. My money's mostly in index
| funds and mutual funds, with maybe 1% actively managed.
| There's a certain way I expect solid financial institutions
| to behave with my future. There's a different way fly-by-
| night institutions behave. This very much sets of my fly-by-
| night detector....
| dbnoch wrote:
| except for the line where they prevented trading on said
| stock.
| mikestew wrote:
| I believe you mean they prevented buying. Obviously the
| positions could be liquidated (sold).
| Animats wrote:
| Yes. Understand that if you buy on margin, and the stock goes
| down too much, _you owe the broker money_. The broker can ask
| you to deposit more money to cover a margin call, or sell out
| your position.
|
| What's unusual about RobinHood is that they make buying on
| margin very easy. It's a feature of a "Robinhood Gold"
| account.[1] "You can try Gold for free for the first 30 days.
| Sign up anytime from your account settings." This gets people
| trading on margin who probably shouldn't be trading on
| margin. Many of them are going to be busted down to zero.
| Those prices aren't going to stay up once the fad is over.
|
| Here's RobinHood's margin agreement.[2]
|
| [1] https://robinhood.com/us/en/support/articles/gold-
| overview/
|
| [2] https://cdn.robinhood.com/assets/robinhood/legal/RHS%20Cu
| sto...
| llampx wrote:
| They changed margin requirements intra-day, started
| liquidating positions no questions asked, and stopped buying
| of the stock. How many coincidences do you need to say that
| this was the planned outcome?
| runako wrote:
| Obviously, margin calls are legitimate. But Robin Hood obviously
| played an important role in the price direction that led to the
| margin calls. I honestly don't know how anyone could trust RH as
| a neutral party after this.
| ed25519FUUU wrote:
| What brokerage does a margin call when you're UP on your
| position? Don't they usually issue a margin call when the
| position falls below a certain amount, not goes above?
| eloff wrote:
| I wonder if that will make them liable when it goes to court.
| The combination of forced liquidation after banning buying the
| security seems super sketchy to me.
| ivalm wrote:
| It wasn't rh alone, it's also most other discount brokerages.
| woah wrote:
| The idiotic takes on this GME situation are beyond belief. What
| did people think was going to happen? GME goes to a million and
| everyone becomes a millionaire?
| runako wrote:
| > What did people think was going to happen?
|
| That brokerages would remain neutral and allow buy and sell
| orders of listed stocks like they do on other days. It's
| totally fair to acknowledge a sudden and unpublished rule
| change at the market open that foreseeably led to big price
| swings.
|
| At a minimum, the SEC needs to step in and describe the exact
| circumstances when brokerages are allowed to unilaterally halt
| sales of securities. Markets where people don't understand the
| rules are worse than casinos.
| southeastern wrote:
| I don't know where you got this-- I saw a lot of people who
| were investing not even for a profit but simply 'to be a part
| of a movement'. Yes I'm sure there are plenty of naive fools in
| the mix, it still is the stock market after all. But the
| complaint here isn't that a bunch of misinformed people thought
| they'd be millionaires-- it's that a bunch of people made a
| conscious decision to invest and now brokerages are
| manipulating the markets. Ironically some of them justify it as
| being BECAUSE 'retail investors don't know what they're doing'.
| There's a lot of condescension towards retail traders, which is
| weird when 12 years ago the 'smart' institutional investors and
| hedge funds managed to crash the global economy. Looking at the
| whole picture, I don't see why it's so ridiculous that people
| get a piece of the action when the majority are acknowledging
| they might not make any money at all on this
| Animats wrote:
| Hey, it worked for Bitcoin. I never expected that. I thought
| Bitcoin was overpriced at US$20.
| SamBam wrote:
| I think the Bitcoin example was exactly what the investors
| were thinking. A stock that magically always goes up and
| everybody gets rich.
|
| With a real stock, somebody has to be left holding the bag at
| the end. (Probably with BitCoin as well, but that's a
| separate discussion.)
|
| My understanding was that, with the short squeeze, for a
| certain number of those stocks the buyer would be the hedge
| funds. But it seems like at this point there must be way more
| stocks that the buyers have bought than the hedge funds have
| shorted, no?
| Apocryphon wrote:
| I mean, that's exactly what's been happening with Tesla for
| months.
| SamBam wrote:
| Do you believe that the Tesla buyers are trying to
| manipulate the market, and have no expectation that the
| company itself is valuable?
| Apocryphon wrote:
| Do you believe that GameStop buyers think that the
| company is as doomed as the short-sellers did? The origin
| for this whole thing was a DD post that argued that it
| was a value stock that was over-shorted. And there were
| institutional investors and analysts like Michael Burry
| who also saw this happening.
| [deleted]
| thebean11 wrote:
| This is probably legit, unlike delisting it. You are taking a
| loan from them with the understanding that they can (in some
| circumstances) liquidate your investment to lower their own risk.
| This absolutely seems like one of those circumstances.
| AnHonestComment wrote:
| A margin call on a stock you halted trading in smells like
| fraud.
|
| It's like the bank banning selling your home then repossessing
| it when the value falls.
|
| Crooked entirely.
| notJim wrote:
| AFAIK you could always sell the stock, just not buy it.
| ineedasername wrote:
| Especially if they don't at least provide the opportunity to
| collateralize the position so the user can avoid selling at a
| loss if they want to try & wait out the trade ban.
| Lewton wrote:
| I agree that it's crooked to block buying of gme stock, but
| the resulting margin calls are well within the risks you
| agree to once you start trading with borrowed money
| MrPatan wrote:
| Not exactly. It would be as if the bank that mortgaged your
| house then prevented people from buying it, then turned
| around to you and said "See? Nobody wants it! You need to
| lower the price. Oh! What's this? The price has gone down, I
| need to reposses it. Thanks, come again!
| thebean11 wrote:
| > It's like the bank banning selling your home then
| repossessing it when the value falls.
|
| Apples and oranges. If you bought a house on margin, the way
| a brokerage defines margin, they would absolutely be allowed
| to do that. Margin and mortgage are fundamentally different
| types of loans.
|
| I agree that halting buys was absolutely wrong. Definitely
| see where you're coming from, if you look at the two actions
| together..it doesn't paint a very pretty picture.
| cwkoss wrote:
| Isn't buying a house on margin... basically just a normal
| mortgage?
| Animats wrote:
| You don't get a margin call if your house or car is
| underwater. You can just keep making the payments until
| you own it.
| SamBam wrote:
| I'm ignorant. In your example, the bank manipulated the
| housing price and now owns the house, earning them an asset.
| The the Robinhood example, they (maybe) manipulated the
| price, and then forced you to sell, so you now have the
| money. They don't now own the proceeds from the sale (except
| what you already owed them). These don't seem similar.
| dang wrote:
| For pointers to other vertices of this story graph, see
| https://news.ycombinator.com/item?id=25933543.
| weird-eye-issue wrote:
| It is called a margin call. Nothing specific to Robinhood or to
| GME.
| steventmhess wrote:
| 13G recently filed shows larger holders liquidating -- couple
| that to the crap financials in GME, then you can see the writing
| on the wall. However, insiders will be roasted by the DOJ.
|
| Liquidate, restructure, hose commons.
|
| It's GME -- it's a dead company trapped in yesteryear.
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