Robinhood is said to draw on bank credit lines amid tumult

Re:Robinhood is said to draw on bank credit lines amid tumult by acover on Thursday January 28, 2021 @10:29PM (#25953478)

I'm not an expert but how I read it is: market makers currently can sell a stock without owning it. All is well as long as they buy it back by the end of the day as settlement takes 2 more days.

If settlement was instantaneous then the market makers would have to already own a bunch of the stock in order to sell any. Owning stock requires capital. Similarly if they wanted to buy more stock they'd need cash on hand.

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Re:Robinhood is said to draw on bank credit lines amid tumult by snoshy on Friday January 29, 2021 @01:39AM (#25954731)

Would they though? If settlement was instantaneous for market makers, then obviously settlement with the brokerages would also have to be instantaneous. Then it's no longer an issue of verifying anything, the risk of proving ownership would fall squarely on the brokerages or whoever is initiating the trade with the market maker in the first place.

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Re:Robinhood is said to draw on bank credit lines amid tumult by acover on Friday January 29, 2021 @08:23AM (#25956976)

I don't understand your question.

If settlement was instantaneous then to sell a stock on an exchange you'd have to have the stock. To buy you'd have to have cash.

Currently market makers don't have either.

[ Parent | on HN ]