Because there are two distinct layers to the system, the clearinghouse to its members, and its members (brokerages) to their customers. All the clearinghouse cares about is that the member can put up the collateral on the day of trade, and on the day of settlement they show up with the rest of the money. Whether the clearinghouse member's customer paid for their stock in cash or on margin doesn't concern them. There isn't a mechanism for robinhood (or any other brokerage) to tell the clearinghouse "hey this trade is 100% good because the customer is buying it with settled cash in his account, so waive the collateral requirement".

I think what you're trying to ask is that if clearinghouse somehow knew that a given buy order would be good (ie. was paid with settled cash), then this whole fiasco wouldn't have occurred. That's true, and that's essentially what T+0 settlement is (ie. you have to come up with all the money on the day of trade).

This is a copy of the previous thread. As before, this latest reply just prompts the question: how can a broker promise that the collateral is good, but not the initial funds for the purchase? [1] Apparently, they have a way to say “oh no these funds are good, you can trust them” … but only for the collateral, not for customer funds that have lived for years in the same account.

And for that matter, how can bankruptcy even matter? These are all funds that live in a separate bucket from the rest of operations. Even in a bankruptcy, they wouldn’t disappear (like your coat at a dry cleaner’s.

[1] Recall the comment about how you’re implicitly supposing a “credible lockup of funds” primitive, which has a strange structure, on closer examination: https://news.ycombinator.com/item?id=27694540

>how can a broker promise that the collateral is good, but not the initial funds for the purchase? [1]

1. the collateral is good because it's transferred/wired on the day of purchase.

2. as mentioned in my previous comment, that could theoretically be done today (ie. "trust me, I can definitely come up with the money on the day of settlement"), but it's not done for various reasons.

>And for that matter, how can bankruptcy even matter? These are all funds that live in a separate bucket from the rest of operations. Even in a bankruptcy, they wouldn’t disappear (like your coat at a dry cleaner’s.

but in the scenario mentioned above, how are you going to recover the funds? specifically, from where are you going to get the money to make the seller whole?