A lot of the anger with Robinhood comes down to the mistaken belief by many people that money moves instantly, trades happen instantly.
Robinhood UI is struggling to convey actual current value vs accrued unsettled value vs unrealized value.
These are non-trivial concepts. The time component of money confuses a lot of situations. Eg Most people treat retainers as revenue before it is earned; even SaaS companies treat MRR as earned before the time period elapsed and service is rendered. However this isn’t strictly correct or legal.
With a lot of these new Web services like Rh, GoPuff, Yelp, etc. it can be hard to get a hold of a real person in a timely manner.
The article in the top post is missing details. Robinhood actually demanded $170k from him to settle his account. It wasn't a UI issue.
Email is part of UI / UX. Either they were programmed loosely or the email was poorly worded.
Robinhood has similar moral liability of a payday lender: it's not wholly their fault if people choose to make bad choices for themselves, but they are partially responsible for enabling them and/or obsfuscating terms.
But in this instance, we're talking about pretty standard industry processes and practices.
If you hand someone a gun with the expectation they know how to use it, and the first thing they do is blow their brains out... not sure how that's on you?
> Monday’s lawsuit said Robinhood had an obligation to know its customers and ensure its trading strategies were appropriate, but instead the broker preyed on inexperienced investors.
Does robinhood actually have this obligation? Not knowing anything, I would assume they don't actually have to do this. Appropriate is subjective and nonsensical imo. Did the guy do something inappropriate? On one hand I think no, it wasn't especially crazy as a financial move. On the other hand, should a 20 year old who doesn't know anything be able to get involved in 100k margins? Idk. I do think robinhood preys on inexperienced investors. I'm interested to see how it can be argued as illegal.
Current law limits what many people can do in terms of the stock market specifically to protect unsavvy investors. What Robinhood is doing is no different than a 3rd party acting as a go between the stock market and an unsavvy investor but telling the unsavvy investor they went 700k+ in the hole.
The internet is slowly moving away from being the wild west, and things like this is a part of it.
As the circumstances show, this young man did not have a proper understanding of what his trades (including the not-yet-settled part) meant and what the actual financial consequences and risks were at that point of time when he (mistakenly) felt that they are horrific enough to take his life. Robinhood should have tested for that capability and, given the absence of it, ensured that he can not trade options on their platform and be limited to simpler, more understandable investment products. If they intentionally make this verification superficial so that they can get more unsophisticated investors trading tricky products on their platform, that is praying on investors and should be prohibited.
Re: your second paragraph, consumers / retail traders in Europe have to prove basic understanding of the stock market and the risks involved before they are allowed to trade stock (MIFID II [1]).
I've been involved in building a stock trading platform for a bank, both before this was a thing and while it was being implemented. I'm a customer there nowadays, and with my knowledge level I'm not allowed to trade in stock options. Probably for the best. I'm doing well enough with a low risk index tracker on the one hand, and 'play money' on the other that I can risk losing.
Incredible.
For example - brokerages keep you from trading on margin unless you have x money and y experience trading on margin and/or options.
You CANNOT invest into SpaceX (not pioneering SpaceX here, just an example) unless you are an accredited investor, that is, if you aren't RICH. Google does though.
These are serious disadvantages.
The real question is whether you want to be babied and coddled by people in power.
Edit: Deleted "controversial" topic sentence.
Believing that the government should restrict access to guns has nothing to do with being "babied and coddled by people in power" and everything to do with not wanting to be shot by someone else.
I do feel that a lot of the restrictions on amateur trader have the effect of barring "normal" people from making some of the best investments. I ought to be allowed to fail like the best of them. the catch here is that I don't bear all the risk if I fail. if I lose everything on a stupid trade, I am entitled to lean on my fellow taxpayers for support. some balance needs to be struck between allowing me to fail and requiring other people to pick me back up if I do.
The negative externalies of investment losses are costs to the public safety net, political distraction and the risk of a public bail out if the losses hit critical voting blocks.
You cannot be trusted with margin / options if you haven't proven that you know the risks. If I were a broker, I wouldn't let you trade if you wouldn't be able to cover a loss on options - I'm sure brokers have been defrauded before by people just disappearing or going bankrupt.
You can't play with millions if all you have to your name is a $600 stimulus check and a sock of rainy day money. That's irresponsible.
Stick to what you can afford and what you know about.
Nice powertrip. My turn.
I am a CFA w/ a Series 6/7/63 that has degree in Finance/Accounting/Stats and has written automated trading bots.
This was NOT enough experience for Fidelity to let me trade options (ironically, after I traded options for their clients working for them for 2 years in my youth), but my friend who listed no experience and a high net worth got margin and options trading enabled in his account.
There is a VERY fine line between "for your own protection" and "so that people who already have resources have more options."
Yes, there are gambles that can give great returns if you're lucky. And may even make sense as part of a diversified portfolio. That's the idea with VC of course. Though VC returns aren't actually that great in general.
Where I at least part ways is the people here who argue vehemently that there should be no line given that people can go to Vegas and gamble away their life savings. And, as I say, I don't actually think people are missing out on fantastic opportunities for unsophisticated small-time investors that they think they are.
Maybe there could be a bit of a higher bar of entry with a basic 10 questions forms to ensure that investors know the terminology. Akin to how you need to fill a questionnaire to determine your investor profile when investing through a mutual fund.