Re:Robinhood, in Need of Cash, Raises $1B from Its Investors
by jiofih on Friday January 29, 2021 @02:31PM
(#25961318)
> services that they may not be able to actually cover.
That’s exactly the point the parent commenter is making: there is nothing to cover for stock purchases on accounts with a balance. No liquidity issues can arise from that. You can say it’s easier to just turn off everything at once, but there is no actual reason to prevent stock purchases without margin, the buyer bears all risk.
Re:Robinhood, in Need of Cash, Raises $1B from Its Investors
by infinite8s on Friday January 29, 2021 @04:17PM
(#25962655)
Except for rules put into place by Dodd-Frank make that a legal requirement for all brokers (to remove systemic risk from DTCC). You can argue that it doesn't make sense for fully covered cash accounts - but it's not a decision Robinhood could make on their own - they are mandated by law to post that collateral from their own operating capital, and not use client assets (like the cash in their account).
> But that is Robinhood's liquidity issue and not does justify Robinhood disabling cash accounts from buying stocks.
Robinhood having a liquidity issue 100% justifies them not offering services that they may not be able to actually cover. Because the alternative is way, way worse. You want Robinhood to just... make up money that they owe people but don't actually have? I'm fairly confident that financial institutions can't just make up numbers in order to manipulate their way into compliance.
I very much dislike Robinhood as a company, but what you're suggesting doesn't make sense.