The other poster is saying outcomes matter more and that the perception and promises you make to users matter.
Both valid points, but Robinhood losing their ass to perception, their direct fault or being the victim of a crappy system, is just the way the cookie crumbles. There is a play here which Robinhood hasn't considered: own up to it and build a plan to be reliable to retail investors and use realistic messaging while doing so. Their CEO is apologized but they've failed to unveil how they intend to be an ally to retail investors in the future: https://news.yahoo.com/robinhood-ceo-apologizes-restricting-...
The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell. Retail traders don't think of trying different brokers for availability like you might trying different toy stores. The point of having a large enough float is so that you can continue trading the stock. Market makers exist to provide liquidity. It's supposed to keep trading, and only some brokers like Robinhood were unable to manage this.
They are paying for $0 trades to a very, very small trading firm with well-known trade-execution problems months / years before the GME instance. No serious trader actually trusted Robinhood, and nobody was surprised when Robinhood's trading ability was shown to be so weak in that timeframe.
There were many respectable banks with much stronger finances who were able to support the GME-rush. It was just the small guys without much $$$$ who failed, like Robinhood.
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If you did a bit of research, you would have found Interactive Brokers (for instance). I'm not a customer of IB, but they have plenty of online material for what exactly you're paying for.
And that is, trade execution. It matters, especially in times of trouble / times of risk. The stronger the bank, the better their ability to continue operations during weird times.
> The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell.
Except they do. All the time when bubbles pop and other crisis form. Good luck selling stocks during the crash of (whatever). When the stock market is crashing, there's no buyers, so the price keeps dropping and dropping.
Without any buyers, you will never be matched and you'll never be able to sell until its too late. Understanding these mechanics is very important to any market participant.
"Flash crashes" with stop-loss orders are particularly lulzy. Your stock is automatically put up for a sale on a flash-crash. There's no buyers, so you sell the stock at a grossly lower price than expected (when some savvy buyer finally decides the price is low enough). That's when you're matched up. By the time you look at the stock, the "flash crash" is over, your stock is randomly sold and at a bad price.
Etc. etc. Its annoying, but these sorts of events happen all the time, and its important to remember the mechanics of buying/selling stocks at all times when trading.
https://www.sec.gov/news/press-release/2020-321
Robinhood was all kinds of shady long before the GME events.
Market halts are completely different from what we are discussing. And one of the purposes of market makers is to provide liquidity in extreme cases as you are describing (I'm not saying it works perfectly, but it's one of their reasons for existing).
Anyway, I feel like we aren't quite getting our points across to each other. Not blaming you just saying let's agree to disagree.
I'm not talking about market halts. I'm saying when all the buy-orders vanish from the marketplace, it results in a "flash crash". Hitting the "sell" button will do really weird things at these times.
After all, a "sell" can only mechanically happen if the market pairs you up with a "buy". That's just how the stock market works. If there's no buyers, you can't sell, even if you're hitting the "sell" button.
I realize every buy needs a sell. I also said "typically" and considering there obviously were buyers since you could still sell, everything you're saying is irrelevant to the discussion we had about GME in 2021.
Anyway, we're not getting anywhere. You can respond but I'm not responding anymore.
No, RH matched the sell order with an internal buy order and netted them out to reduce their collateral requirements over the T+2 settlement period. They didn't use cash to buy stock from other brokerages.
Options are extremely different than the underlying stock.
Options is everything we discussed except with way less volume and way more margin requirements.
It doesn't seem like IB restricted GME-stock, only options-on-GME-stock, which is a very, very different instrument.
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That being said, if I were a paying customer to IB and was hoping for good options-trades during that time, I guess I would have been pissed off. Still though, its a far more understandable issue to have a derivative-trade fall through rather than the underlying stock-trade fall through.
If Robinhood is taking a net inflow of shares, then logically other brokers must have a net outflow. So of course there would be other brokers with shares to buy.
One reason you could go to some other broker and buy GME is because that broker had many other customers looking to offload an overhyped stock. You couldn't buy on Robinhood because their customer base was mostly retail traders looking only to buy.
Robinhood didn't have the money / collateral to obtain any more shares.
As far as Robinhood is concerned, GME was sold out for that time period. It really is actually that simple. No shares for Robinhood meaning no new shares for Robinhood customers.
In 2 days time, Robinhood T+2 settlements occurred and everything cleared up. Except the meme-stock buyers already lost interest because they had the attention span of gnats.
> how much I dislike your analogy.
Care to explain why its a bad analogy? The only meaningful difference I can think of is the whole T+2 settlement thing (but that's very much like "The next delivery of Furbies is in 2 days", yall can buy Furbies then). Perhaps this is stretching the analogy too far now but... the fundamental situation seems to be solid.