I think it's unlikely that Robinhood (or any brokerage) would compensate people for losses on hypothetical trades that could have been made during an outage. Such a policy would allow customers to pick their entry and exit points, and extract money from the brokerage at will.

Even if the trades were well-defined at the time the outage occurred, there would still be an asymmetry between people demanding compensation on their profitable trades while eschewing losses on their bad trades. It's doubtful any brokerage would be willing to eat that.

Execution risk is a risk.

Are expiring in-the-money options a "hypothetical trade" ?

Those are automatically exercised at expiration.

If the holder can afford to exercise, and I can assure you that most RH users cannot afford to exercise a single contract(at least on most commonly traded stocks).

Otherwise it's on the broker to sell it at close to someone who can afford to exercise. And who knows if RH pulled that off or not.

I haven't seen official statement, but I did see a couple reddit threads where Robinhood exercised ITM calls without enough funding in the account, then collected the shares and paid the cash difference.

https://www.reddit.com/r/wallstreetbets/comments/fcqkmo/so_r...

There's also some threads where it looks like it did not go so well...

https://www.reddit.com/r/wallstreetbets/comments/fd2eko/upda...

If their systems are down, were they actually exercised or is that managed by another brokerage?

That's an interesting question. I suppose it's hypothetical in the sense that they now have to look at "what if" those options had been exercised; but unlike a spot trade that someone "would have" done, Robinhood might already have had obligations on its end of the original options trade.

Absolutely. Why wouldn't they be?

Yeah seriously if you have > a few hundred in options on robinhood. And you’re waiting until the day they expire to unload them. You’re dumb or don’t care about your money.

No brokerage will do that. Here's an excerpt from the account agreement of Schwab, a respected discount broker:

> During periods of heavy trading and/or wide price fluctuations ("Fast Markets"), there may be delays in executing your order or providing trade status reports to you. […] Schwab is not liable to you for any losses, lost opportunities or increased commissions that may result from you being unable to place orders for these stocks through the Electronic Services.

This is absolutely not true. Broker-dealers and brokerages routinely credit clients for execution out of line with the market. Schwab does in fact give price adjustments for slowly or incorrectly handled orders.

The reason nobody will be compensated here is due to two things,

(1) There is no way to determine what a fair execution would have been, since clients couldn't submit orders in the first place.

(2) Clients will adversely select their losing trades for corrections and this would bankrupt Robinhood in about five minutes.

Source: work at a wholesaler.

I mean, you say its "absolutely not true" and yet that's literally verbatim from their Brokerage Account Agreement.

https://www.schwab.com/public/schwab/nn/agreements/schwab_br...

Maybe in some cases they go above and beyond their account agreement if they like you as a customer, but according to the agreement you sign with them its not their problem if things go bad in this way.

> There is no way to determine what a fair execution would have been, since clients couldn't submit orders in the first place.

On the flip side, clients have no guarantee that there would have been a counterparty for their order.

I had to wait on hold for well over an hour to get through to the HSBC trading desk, HSBC isn't going to compensate me.

Wait, people still trade over the phone?

Dunno about HSBC, but in Canada, often you have to call your broker when you want to sell a stock on a different market than you bought it.

E.g. Buying TD in Canada, and wanting to sell on NYSE for US$.

Unlikely to have compensation for trades, and only people with limit orders set before the outage would be able to claim damages.

It's no different than you breaking your phone or losing your network connection. Nothing is guaranteed to work all the time. RH might face fines for the extended nature of the outage though, specially since they've managed to avoid them for plenty of past mistakes so far.

If they compensate for missed trades due to service outages, then an attacker could take a position, repeatedly DDOS Robinhood until the position is favorable during a DDOS, and then demand reimbursement since they "would have" cashed out that favorable position.

It follows that Robinhood must never reimburse for outages.