Re:Class Action Lawsuit Filed Against Robinhood
by totalZero on Thursday January 28, 2021 @03:29PM
(#25948627)
Forcibly closing under-margined securities positions is totally normal. In a cash account, it would certainly be suspect.
Preventing opening buys hurts everyone who is long -- including a large number of Robinhood customers -- by barring trades that would provide liquidity to sellers and thus dampen the sellers' stock impact. So essentially, Robinhood chose a course of action that disproportionately imposes losses upon its own customers.
The concept of price impact is part of the reason that stock buybacks are able to "return capital" to investors. Demand from buyers pushes prices upward.
No idea if that is a central argument of the case.
Preventing opening buys hurts everyone who is long -- including a large number of Robinhood customers -- by barring trades that would provide liquidity to sellers and thus dampen the sellers' stock impact. So essentially, Robinhood chose a course of action that disproportionately imposes losses upon its own customers.
The concept of price impact is part of the reason that stock buybacks are able to "return capital" to investors. Demand from buyers pushes prices upward.
No idea if that is a central argument of the case.