If RobinHood tells me how clearing houses work, they have a huge reason to lie to me.
Given what we say in cases like Enron, Bear Stearns, I am shocked and dismayed at the eagerness of Hacker News contributors to so readily accept whatever Robinhood tells them as 100% gospel.
Where were all these experts on clearing houses a week ago, warning of this exact risk? Because plenty of people had opinions on Gamestop, that maybe the SEC would halt trading altogether etc, but not a single person mentioned this clearing house liquidity issues until it happened. And I still really can't get a good explanation for why if I had 10k in my non-margin account that cleared over a year ago I can't use that to buy a stock(or withdraw for that matter, though hopefully that's temporary). OR, if people were allowed to sell stock, who were they selling to?? Clearly SOMEONE was allowed to buy! A lot of misdirection around things like margin accounts.
Robinhood didn't give any real explanation until many hours later. But they're apparently just "poor communicators." Amazing how a billion dollar company filled with conflicts of interest making a totally unprecedented restriction that actively helps their hedge fund investor simply can't possibly be committing any sort of fraud.
Because nobody's ever committed fraud before, a Robinhood press release must be treated as the "facts". This is insanity . Robinhood are not the "experts" in this case, their version of truth is probably the least reliable of all parties.
Interestingly, we weren't cutoff uniformly in all markets. NY desk was trading about 75% of regular volume for 4 days into the bankruptcy before someone (SEC?) told them to knock it off.
There's a lot going on in Robinhood's back office and legal teams of which we are not aware. While I'm as pissed as anyone that they shutoff trading, I'm open to the idea that the shutoff was for far more mundane reasons than collusion with Citadel and Point 72.
Robinhood did not halt trading or shut off trading.
Robinhood prevented _buying_ Gamestop and only allowed selling.
That’s entirely different. It can only do one thing - drive the price down which is market manipulation. It’s supposed to be illegal.
Reading the SEC's letter (in the OP), you can clearly see the SEC wants everyone to sell out of their position and make this whole thing go away. RH no doubt has an army of lawyers and compliance people whose entire jobs/careers is to predict what the regulator wants and proactively be their lapdog. (The regulators meanwhile are completely free to be Monday-morning quarterbacks and retroactively assess fines to anyone, despite providing no concrete guidance of what to do in an unprecedented situation like this one.)
If they hit their collateral limits, they have two options.
1. Stop all trading for a few days, as the trades settle, the funds clear, and the collateral requirements drop. Cue millions of pissed users who want to close their positions, but can't.
2. Only stop trades that increase their collateral requirements - buys.
There's also option 3 which is 'immediately get kicked off the settlement networks and go into bankruptcy, because they are trading past their collateral requirements.'
Which of these three options would manipulate the stock price less, and screw over fewer people, in your estimate?
This was actually a very fair, by-the-books standard trading halt. It just happened to benefit the short sellers who had been squeezed because they could easily find people willing to sell.
You definitely could still buy GME if you found some extremely random call option holder who needed to sell to cover their position. This would not be changing a net new position, just like selling to someone looking to cover a previous short, and this was never blocked - it’s just there was no volume for this, nobody owned calls and needed to sell.
If there are enough mechanisms of "Crony Capitalism" at play, to cause most of the trading apps in existence to halt trading, this is definitely something that needs to be investigated.
Likewise, if there are enough of these crony mechanisms involving collusion between Facebook, Twitter, Square, Stripe, and Visa targeting people, this also warrants investigation. It seems to be part and parcel the same sort of thing.
People have been calling stuff like this out since the 80's!
This is a fine way to settle debates about the health/viability of a publicly traded company, but it doesn't help much when the point of contention is a question of law.
Someone comes in and describes from first principles what a reasonable system would look like, and then someone else haughtily chastises them because that isn't how the existing system works. But if you read it as they intended it, i.e. as a policy proposal rather than a legal opinion, then the fact that it isn't the existing system is the point. The intention is to change the system to make it that way and the desired response is either support or a criticism of the mechanics of the proposal rather than its basis in existing law.
First, they believe that their system is how the world should work, and therefore how it would work if only someone, somewhere, weren't interfering. The result is conspiracy theories.
Second, they have not fully thought out the consequences, or don't care about them, and dismiss the historical consequences of similar systems in the past. Reasoning with people who ignore evidence in favor of their theorizing is difficult.
you must be new to the internet.
No, it's just that it's not interesting when an expert is right about their domain expertise so we don't talk about it.
The issue is people getting skewed by this and then inferring that it must mean, on average, that their outsider opinion is as valid as experts, but really, it's not.