[HN Gopher] Robinhood is still severely limiting trading
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Robinhood is still severely limiting trading
Author : drocer88
Score : 77 points
Date : 2021-01-29 20:13 UTC (2 hours ago)
(HTM) web link (www.cnbc.com)
(TXT) w3m dump (www.cnbc.com)
| subsubzero wrote:
| Thought experiment:
|
| Lets say everyone(or just the people who are in GME) decided to
| liquidate their holding on RH now, ie. they are fed up with that
| exchange for various reasons. From what I understand they would
| not be able to pay out funds to sellers? If so this would create
| a 1920's style run on their exchange that could spill over into
| other exchanges? I am genuinely curious as it would behoove RH to
| let people keep buying vs. sell only.
| tedunangst wrote:
| You wouldn't be able to transfer the money out until it
| settles.
| proverbialbunny wrote:
| Stock has a 2 day settlement period, so Robinhood could pay
| out, but it would have a 2 day delay before an ACH transfer
| would start when liquidating their account.
| vsareto wrote:
| Can anyone here verify that this was possible while markets were
| open? Buy call option, exercise, get more shares than RH's trade
| limit:
|
| https://old.reddit.com/r/wallstreetbets/comments/l82y7u/how_...
| valuearb wrote:
| Fastest way to put Robinhood into liquidation so you can get a
| fraction of your account value back years later.
| [deleted]
| bowmessage wrote:
| Getting flashbacks to Mt. Gox's behavior in early 2014...
| e-clinton wrote:
| If they legitimately are experiencing a liquidity crisis, then
| limit purchases on securities other than the ones retail
| investors are buying in their war with the hedge funds. Go limit
| Apple, Microsoft or Tesla.
| kinghajj wrote:
| Other brokerages still have restrictions as well. I haven't been
| able to write a covered call against my AMC shares. Hopefully
| they let us "normal" traders start writing options next week, and
| the premiums remain relatively high.
| valuearb wrote:
| Yea, I wonder if Robinhood can survive into next week. Clearly
| their DTCC collateral requirements are skyrocketing and tapping
| out their credit lines wasn't enough.
|
| 50-50 chance that Robinhood files bankruptcy and WallStreetBets
| traders get stuck waiting months or years for their positions to
| settle.
|
| That would be the ultimate irony after the tantrums they threw
| yesterday while Robinhood was drowning.
| jmalicki wrote:
| Is there any evidence that RH's collateral requirements
| specifically are increasing?
|
| The DTCC typically has a restricted list of specific securities
| with higher than usual collateral requirements, usually because
| of volatility - it seems that in RH's case, their use base
| mostly wants to trade stocks on this restricted list, causing
| severe issues for RH.
| vmsp wrote:
| Wouldn't that, basically, guarantee the short squeeze, though?
| If people can't access their broker, they can't sell.
|
| Or can Robinhood start liquidating their customer's positions
| without authorization?
| piva00 wrote:
| I think it all depends on how they will assign ownership to
| the assets. Stocks are, at sometimes, a surprisingly tricky
| case to determine ownership [0].
|
| [0] https://www.bloomberg.com/opinion/articles/2015-07-14/ban
| ks-...
| thebean11 wrote:
| I can't see this happening, why wouldn't investors just give
| them a bridge loan? They'd be insane to let their (massive)
| investment go to zero, when the alternative is an ultra-short
| term loan with basically no risk (the funds are just stuck at
| the clearinghouse as I understand it).
| jmalicki wrote:
| They did get new investment (the story isn't clear if it's a
| bridge loan or equity)
|
| https://techcrunch.com/2021/01/29/robinhood-
| raises-1b-after-...
| valuearb wrote:
| Maybe their investors can't come up with multiple billions in
| the next few days?
|
| And what if GME goes to $1,000 Monday, or $10? And Robinhood
| still gets liquidated? Where is there no risk?
| 015a wrote:
| In the past three days, they've taken a $2.5B emergency
| credit line from JP Morgan and $1B in emergency funding from
| their investors. This all happened before these trade
| restrictions.
|
| At the scale we're talking about here, it gets to a point
| very quickly where nothing can save them except government
| intervention. Robinhood may not be at that point yet (and I
| very much doubt the government would step in to help them),
| but its also the case that their eligibility for huge loans
| like they need is hurt because the measures they need to take
| to remain solvent (locking down trades) is also hurting their
| future revenue (users are concerned and may pull out). That's
| why liquidity events are so scary; everything just stops, and
| when you stop a market it sometimes can't ever get going
| again.
| tedunangst wrote:
| The risk is that the million or whatever new users who just
| funded their account with an ACH transfer from their checking
| account don't actually have those funds in their bank.
| ww520 wrote:
| Despite the restricted trades GME is doing well today. It will be
| a bloodbath for the shorts next week.
| SpicyLemonZest wrote:
| Why would next week in particular be a bloodbath for the
| shorts? I think you're falling victim to a sliding timeline
| here - when I asked people up until late Wednesday, they
| consistently said that today was the bloodbath day.
| paulpauper wrote:
| yup, so much for that media narrative blaming WSB and Robinhood
| for manipulating the market. Everyone expecting GME to tank but
| it refuse to. Shorts will keep being forced to cover at higher
| and higher prices.
| c0nducktr wrote:
| That restricted list has some odd ones in it. Starbucks and GM
| are both limited to 1 share per day. I really wonder what's going
| on behind the scenes.
| kenhwang wrote:
| Starbucks has high volume/volatiliy from its earnings call
| earlier this week. GM just dropped major news (only EVs by
| 2035) also causing some stock buzz.
| nodesocket wrote:
| They had AMD and Starbucks on the limit of one share ownership?
| Huh, these companies aren't even part of the Reddit frenzy.
| kenhwang wrote:
| AMD and SBUX just had earnings calls this week. They'll
| naturally have high volume and volatility.
| nodesocket wrote:
| I have been investing in the market for over 15 years. Since
| when do earnings announcements cause a brokerage to limit
| buying?
| 015a wrote:
| They're legitimately experiencing a liquidity crisis right now,
| and their CEO went on the news and lied about it to the public.
| I'm out of other explanations; GM moved 0.7% today, and it has
| trading restrictions? Are they afraid that people will mistype
| GME?
| meowkit wrote:
| Did he lie about it or was just not clear? RH and the other
| brokerages have said it was capital requirements imposed by the
| clearing houses, which makes sense given Fidelity and Vanguard
| were not having this issue. My question is why did the clearing
| houses make this decision? Whats the risk management logic
| here?
| lordnacho wrote:
| Well I don't want to say positive things about financial risk
| models, but it does make sense that they flash higher risk
| when the price has moved so much.
|
| Basically, if I'm lending you money to buy something and that
| thing is suddenly moving a whole lot more than it used to,
| it's prudent to ask for more collateral to cover your
| potential losses.
| viscanti wrote:
| Apple trades an order of magnitude more per day than any of
| the stocks that were halted. So why are there no liquidity
| issues there but there are with the stocks that keep being
| halted?
| tedunangst wrote:
| GME moved about 2/3 as much as AAPL today.
| evanpw wrote:
| On Tuesday, GME traded more volume than any other stock,
| and that's on a day when the total market volume was much
| higher than usual (Wednesday is now the all-time record for
| share volume).
| [deleted]
| karmicthreat wrote:
| Because your collateral requirement can vary based on the
| stock volatility.
| [deleted]
| 015a wrote:
| My guess is that Robinhood's deposits with the DTCC are
| running dry, so they're charging more to settle any
| transactions to manage their own risk. Robinhood then locks
| down a bunch of popular stocks in addition to the volatile
| ones.
|
| In a way, its a tragedy of the commons. It would be both sad
| and ironic if the only casualty of this black swan event were
| robinhood. But, they likely still have avenues open to them
| toward recovery.
| [deleted]
| karmicthreat wrote:
| Because if RH were to collapse the clearing house would be
| left holding the bag. And clearing houses don't have that
| kind of money. So DTCC (the main clearing house) going under
| would stop pretty much all trading in the US.
|
| So the clearing house requires 100% collateral for some
| stocks now instead of up to 5%. RH can't afford that and GME
| has been eating up 50% of RH daily trades.
| HenryKissinger wrote:
| > So DTCC (the main clearing house) going under would stop
| pretty much all trading in the US.
|
| What would be the impact of that on the global financial
| markets? On the real economy?
|
| I think we're going to see some difficult regulations on
| retail investors in the not too far future.
| karmicthreat wrote:
| Realistically? Nobody is going to let DTCC go under,
| ever. But they don't want to be the one begging for a
| government bailout either.
| [deleted]
| tedunangst wrote:
| My friend's uncle said he got a tip that what happened is
| citadel buys servers from intel who called robinhood on the
| rico line and told them to kill amd.
| noncoml wrote:
| Yeah, looks like they are stuck between a rock and a hard
| place.
|
| On one hand if they don't admit their liquidity problems,
| people will blame them for playing the HFs game.
|
| If they do admit, well.. it's pretty much game over for them.
|
| I wouldn't say their CEO lied yesterday. More like he talked a
| lot without really saying anything.
| 015a wrote:
| On CNBC yesterday, Vlad's exact words were "No, to be clear,
| there is no liquidity problem" [1].
|
| I'm willing to accept that it wasn't a total lie yesterday,
| and the situation has developed. I think we're past the point
| to where that statement would still be truthful today.
|
| [1] https://www.cnbc.com/2021/01/29/robinhood-ceo-vlad-tenev-
| tap...
| LatteLazy wrote:
| Forgive my ignorance: what's a liquidity crisis? They use
| client money for client equity orders so they don't need to
| front anything right?
| 015a wrote:
| I have a comment from earlier today on another post that I
| think is accurate enough:
| https://news.ycombinator.com/item?id=25958644
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(page generated 2021-01-29 23:02 UTC)