Re:Robinhood is limiting purchases of stocks: AMC, Blackberr...
by hehehaha on Thursday January 28, 2021 @04:36PM
(#25949633)
MM is different from RH. RH would actually need to get collateral (or raise money) to allow its customers to trade GME at this volatility. I really think the anger should be directed at Wall Street and the Fed for creating a frothy investment environment and not doing anything about it. RH OTOH is trying to be a disruptive player.
Re:Robinhood is limiting purchases of stocks: AMC, Blackberr...
by socialist_coder on Thursday January 28, 2021 @06:33PM
(#25951059)
I understand that RH is not a MM. So then why does RH have to manage its risk from the holdings of it's own customers?
I am not a finance professional but I thought RH is just like a custodian and facilitator of trades. It's not on the other side of any of these trades. It never holds any positions. Why does it have to manage its risk and why does a GME event create extra risk for RH?
I thought this kind of risk is only for the MM's like Citadel.
Re:Robinhood is limiting purchases of stocks: AMC, Blackberr...
by socialist_coder on Thursday January 28, 2021 @09:20PM
(#25952841)
I think this explains it: https://news.ycombinator.com/item?id=25951475
Do we need market makers to let us always take a position in every single option when no real market for that option exists? I would argue no. It's completely artificial and they profit from it. If companies want to be market makers and profit from every single transaction, they need to be prepared to take a loss when the math doesn't swing their way.