General Investing and Economics Discussion - No Politics

[RonJohn]

Selling gets you money back. Buying, especially on margin can causes issues when a stock is performing with so much volatility. Buyers on margin are using the house’s money. That’s also why I said “part of the butthurt” though...they aren’t without criticism.

I might be wrong, but what I understood is that Robinhood stopped ALL purchases, even if the person was paying full price in dollars. What I understood from the reporting of the other brokerage firms, they stopped margin, options, shorts, etc. but not fully funded purchases.

EDIT: The reporting was so vague that it was terribly hard to decipher exactly who was doing exactly what. The reporting mixed all of the brokerage firms into a group and then listed lots of conflicting things that were being done.

 

[herb]

I might be wrong, but what I understood is that Robinhood stopped ALL purchases, even if the person was paying full price in dollars. What I understood from the reporting of the other brokerage firms, they stopped margin, options, shorts, etc. but not fully funded purchases.

EDIT: The reporting was so vague that it was terribly hard to decipher exactly who was doing exactly what. The reporting mixed all of the brokerage firms into a group and then listed lots of conflicting things that were being done.

No, you are correct. It was criminal what they did. You could trade, but ONLY sell. The hedge funds could still BUY, but not the normies. So the hedge funds could drive the price down and cover some of their shorts (though It is till way oversold). Not to mention they unilaterally exercised options at the lowest point. All just so crooked. Why “free” isn’t always the best

 

[Milwaukee]

 

[Deleted member 2897]

Maybe the SEC and Congress will learn a few things about their ownregulations and how things work when they investigate.

Robinhood CEO refutes GameStop hedge fund 'conspiracy theory' and reveals what actually happened

Robinhood CEO Vlad Tenev tells Yahoo Finance what actually drove the decision to suspend GameStop trading.

www.yahoo.com

 

[LibertyTurns]

Maybe the SEC and Congress will learn a few things about their ownregulations and how things work when they investigate.

What comes out of this is the people with power get the regulations rewritten to benefit them & harm us. The politicians driving the bus get a cut of the new pie.

 

[RonJohn]

Maybe the SEC and Congress will learn a few things about their ownregulations and how things work when they investigate.

Robinhood CEO refutes GameStop hedge fund 'conspiracy theory' and reveals what actually happened

Robinhood CEO Vlad Tenev tells Yahoo Finance what actually drove the decision to suspend GameStop trading.

www.yahoo.com

From the article you posted, they say they were concerned about being able to deposit money in the clearing house. If the deposits to Robinhood had not cleared, that is a valid concern. If the purchases were made on margin, that is a valid concern. If a person had a cash balance in their account, why would it be a concern to Robinhood to move that investor's cash balance to the clearing house for the purchase?

 

[LibertyTurns]

From the article you posted, they say they were concerned about being able to deposit money in the clearing house. If the deposits to Robinhood had not cleared, that is a valid concern. If the purchases were made on margin, that is a valid concern. If a person had a cash balance in their account, why would it be a concern to Robinhood to move that investor's cash balance to the clearing house for the purchase?

In an attempt to make more money Robinhood became their own clearinghouse. They ran out of assets to cover the volume of transactions.

Same issue you have if you’re running a small business. You got 100 people wanting you to build them a new house but you can’t purchase any more supplies until someone pays you for what you’ve already done. You’re caught in a catch-22.

 

[RonJohn]

In an attempt to make more money Robinhood became their own clearinghouse. They ran out of assets to cover the volume of transactions.

Same issue you have if you’re running a small business. You got 100 people wanting you to build them a new house but you can’t purchase any more supplies until someone pays you for what you’ve already done. You’re caught in a catch-22.

From what I understand, they have been allowing investors to make trades before deposits are posted. Once they get notification of a bank transfer, the investor can make trades even though it might take a few days for the transfer to show up in their books. It is less like not being able to purchase more supplies until someone pays you, more like not being able to pay the immediate call from the hardware supply store for the supplies you have already purchased and received.

In this case with Robinhood prohibiting purchases, it isn't because of an SEC requirement as @bwelbo seems to be implying. Other firms still allowed purchases. It is at the least because Robinhood's business practices are not practical on a large scale. (As if in your example the builder promises to purchase supplies and build a house on a promise of later payment) At the most, I don't know that there was collusion to force the price to go down, but there is at least the appearance of impropriety.

 

[Deleted member 2897]

From what I understand, they have been allowing investors to make trades before deposits are posted. Once they get notification of a bank transfer, the investor can make trades even though it might take a few days for the transfer to show up in their books. It is less like not being able to purchase more supplies until someone pays you, more like not being able to pay the immediate call from the hardware supply store for the supplies you have already purchased and received.

In this case with Robinhood prohibiting purchases, it isn't because of an SEC requirement as @bwelbo seems to be implying. Other firms still allowed purchases. It is at the least because Robinhood's business practices are not practical on a large scale. (As if in your example the builder promises to purchase supplies and build a house on a promise of later payment) At the most, I don't know that there was collusion to force the price to go down, but there is at least the appearance of impropriety.

Sorry, I didn’t mean to imply that. The article does discuss where some SEC regulations came into play, but I was merely passing on what I thought was a good summary article.

 

[Techster]

Go little man!

 

[RonJohn]

Sorry, I didn’t mean to imply that. The article does discuss where some SEC regulations came into play, but I was merely passing on what I thought was a good summary article.

I am just a layman on SEC financial regulations, so take the following with a grain of salt. Maybe @dtm1997 or someone else can respond.

Robinhood was required to deposit money to the clearing house to cover purchases made. However, Robinhood was not required to sale on margin. Also, Robinhood was not required to allow purchases before deposits actually were finalized. That is one of the things that they tout to younger investors as being different and being for the "little guys".

It is too easy for them to say "SEC Regulations!!" to cover up for issues with their business model. Not being absolutely clear about those issues leads to more suspicion about allegations of actual manipulation. Telling their investors that their "easy for the little guy" model doesn't work on a big scale would be bad for their business. I think that vaguely touting SEC regulations is bad for them also as they have been criticized for making complex trades too easy for new investors that don't understand margins and options well. Those statements sound like Robinhood is telling them they don't know what they are doing.

 

[Deleted member 2897]

I am just a layman on SEC financial regulations, so take the following with a grain of salt. Maybe @dtm1997 or someone else can respond.

Robinhood was required to deposit money to the clearing house to cover purchases made. However, Robinhood was not required to sale on margin. Also, Robinhood was not required to allow purchases before deposits actually were finalized. That is one of the things that they tout to younger investors as being different and being for the "little guys".

It is too easy for them to say "SEC Regulations!!" to cover up for issues with their business model. Not being absolutely clear about those issues leads to more suspicion about allegations of actual manipulation. Telling their investors that their "easy for the little guy" model doesn't work on a big scale would be bad for their business. I think that vaguely touting SEC regulations is bad for them also as they have been criticized for making complex trades too easy for new investors that don't understand margins and options well. Those statements sound like Robinhood is telling them they don't know what they are doing.

If you read that yahoo article above, it explains a lot of the mechanics.

 

[RonJohn]

If you read that yahoo article above, it explains a lot of the mechanics.

I did read the article. It doesn't describe any regulation that required Robinhood to halt conducting trades. WeBull suspended trading because their clearing house called them and said they didn't have enough money to cover more trades on those stocks. Schwab and TD Ameritrade didn't suspend trading, only margin requirements. Robinhood created their own clearing house so that they can use client funds to cover trades. Robinhood either didn't have enough money to cover the trades, or they didn't want the stock prices to go up. Neither is good for their public perception.

 

[Lotta Booze]

Robinhood either didn't have enough money to cover the trades, or they didn't want the stock prices to go up. Neither is good for their public perception.

Made worse by the CEO of Robinhood going on MSNBC that night repeatedly saying they "did NOT have a liquidity issue". Something smells like BS

 

[ibeattetris]

Made worse by the CEO of Robinhood going on MSNBC that night repeatedly saying they "did NOT have a liquidity issue". Something smells like BS

They 100% were about to go under. That’s why they needed to take out loans in the order of hundreds of millions.

 

[dtm1997]

Sent to me by @deeznats

 

[LibertyTurns]

@RonJohn Maybe a bad analogy but Robinhood ran out of cash.

We could be cynical and think this is the first major in your face corrupt act of the new regime. After all Yellen is cozy with Citadel.

 

[dtm1997]

@RonJohn Maybe a bad analogy but Robinhood ran out of cash.

We could be cynical and think this is the first major in your face corrupt act of the new regime. After all Yellen is cozy with Citadel.

LOL! I'm sure a lot of politicians are cozy with Citadel. Not sure that's the rabbit hole you wanna go down, especially in a non-Politics thread on GT Swarm.

 

[forensicbuzz]

I am just a layman on SEC financial regulations, so take the following with a grain of salt. Maybe @dtm1997 or someone else can respond.

Robinhood was required to deposit money to the clearing house to cover purchases made. However, Robinhood was not required to sale on margin. Also, Robinhood was not required to allow purchases before deposits actually were finalized. That is one of the things that they tout to younger investors as being different and being for the "little guys".

It is too easy for them to say "SEC Regulations!!" to cover up for issues with their business model. Not being absolutely clear about those issues leads to more suspicion about allegations of actual manipulation. Telling their investors that their "easy for the little guy" model doesn't work on a big scale would be bad for their business. I think that vaguely touting SEC regulations is bad for them also as they have been criticized for making complex trades too easy for new investors that don't understand margins and options well. Those statements sound like Robinhood is telling them they don't know what they are doing.

I got a buddy who's an SEC auditor. I'll ask him what's going on and get back to the group if he tells me anything worth sharing.

 

[Techster]

Translation: We have liquidity issues.