Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop • Hacker News Board

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#321

Post by nico_h » Thu, Jan 28, 2021, 2:55 PM UTC

vincentmarle wrote: post #99

snowwrestler wrote: post #36

Brokers are worried about their legal exposure at this point. They could face lawsuits from investors in Melvin and other hedge funds, who will allege that the brokers knew they were facilitating intentional financial harm. It doesn’t matter if these are likely to fail; they are expensive lawsuits to defend against and therefore may result in settlements. And they could face class action litigation from trial lawyers…

> They could face lawsuits from investors in Melvin and other hedge funds Wait until Robinhood sees the class action lawsuit

Shouldn't they have an arbitration clause in there somewhere? Maybe that would open them to a Thousand Papercut bleeding when everyone activate the arbitration clause at once.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#322

Post by sharker8 » Thu, Jan 28, 2021, 2:55 PM UTC

Switch to WeBull, works great.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#323

Post by krelian » Thu, Jan 28, 2021, 2:56 PM UTC

pdevr wrote: post #244

FWIW, Robinhood posted a statement on their blog[1]. Two snippets: >In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. Also: >We fundamentally believe that everyone should have access to financial markets. Cognitive dissonance to the hilt :) [1] https://blog.robinhood.com/news/2021/1/28/keeping…

At least for GME the stock is still rising uncontrollably. If the WSB crowd who mainly uses Robinhood can't buy then who is pushing the price up?

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#324

Post by diveanon » Thu, Jan 28, 2021, 2:56 PM UTC

wyldfire wrote: post #26

Can someone help me understand Robinhood's POV? This just seems so outrageous that there must be some sane rationale that I'm not seeing. Why do Robinhood, Reddit, Discord, etc feel like they have to respond to this? Whether the investments being made are responsible or not, it doesn't seem like it should be their place to intervene. If the hedge funds over-shorted GME and WSB recognized that and traded against that…

Because RH's real customers are the hedge funds that buy their trading data.

It's users are the product.

I'm sure this started with a call from a "concerned" board member.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#325

Post by volta83 » Thu, Jan 28, 2021, 2:56 PM UTC

alistproducer2 wrote: post #122

wyldfire wrote: post #26

Can someone help me understand Robinhood's POV? This just seems so outrageous that there must be some sane rationale that I'm not seeing. Why do Robinhood, Reddit, Discord, etc feel like they have to respond to this? Whether the investments being made are responsible or not, it doesn't seem like it should be their place to intervene. If the hedge funds over-shorted GME and WSB recognized that and traded against that…

Reddit and discord are afraid they'll be implicated in what is a classic pump and dump. Robinhood only exists because the SEC has chosen to look the other way concerning the pattern day trading rule which clearly is in jeopardy if big money starts complaining.

How is this a classic pump and dump ?

This is a short squeeze: the stock is shorted to the limit, and from the stock price, the shorters entered their positions "uncovered", so their risk is extremely high, and their losses are potentially infinite.

The WSB crowd and probably others noticed this, and bought the stock, knowing that it was going to become more valuable over time once the shorters had to close their positions.

They were right, and the shorters are loosing so much money that they are willing to buy back the stock at astronomical prices to limit their losses, which drives the price up even more.

The WSB crowd just need to hold until the stock is at the maximum price that the short sellers can pay, right before the short sellers default. That's the actual value of the stock right now.

If the stock climbs too much, and the short sellers default, the stock is worthless.

TBH, this is the short sellers own fault. They made the assumption that the market was "fair", and that they were going to buy back the shares for cheap when they needed them as a consequence.

That assumption was wrong.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#326

Post by im3w1l » Thu, Jan 28, 2021, 2:57 PM UTC

batmenace wrote: post #110

baybal2 wrote: post #78

Earlier quoted context omitted.

I've heard the talk that Robinhood website is an op by a financial fund called Citadel LLC. It may be considered market manipulation on their side well more solidly than some speculation on the internet, not to say a breach of brokerage contractual obligations.

Not quite. Citadel is a very well known quant hedge fund. The main way Robinhood makes money (and can let people trade without commission) is by selling their customers order flow (legally) to Citadel. Citadel (legally) uses this customer information to, in the milliseconds before the customer, front-run the trade, buy the shares and sell them to the Robinhood users at a marginal profit.

This is incorrect. To understand the business model you first have to understand the order book and how trades normally work. The order book consists of two sides. The bids (people who want to buy, how much and at what price), and the asks(people who want to sell, how much and at what price).

For instance the bid side may say

Alice wants to buy 50 shares at $20 (order added at 10:37)

Bob wants to buy 30 shares at $20.1 (order added at 11:18)

Citadel wants to buy 35 shares at $20.1 (order added at 11:17)

David buy 10 shares at $20.1 (order added at 11:01)

The bids are ordered by price, and ties are broken by who placed the order first.

If Evelyn (Robinhood customer) shows up and wants to sell 5 shares at $20, then the exchange will say, oh nice 20 is less than $20.1, lets get some trades going! $20.1 is the highest prices, and of those orders David's were entered first. So Evelyn's sell order is matched with Davids buy order. The price is determined by the order which was in the book. So Evelyn will get a better price than she hoped for!

If Evelyn had requested to sell 100 shares, then she will first sell to David for $20.1, then Citadel's for $20.1, then Bob's for $20.1 and finally some of Alice's shares for $20.

Ok but what happens if Citadel is paying for order flow?? Now the order book (from Evelyn's perspective) looks like

Alice wants to buy 50 shares at $20 (order added at 10:37)

Bob wants to buy 30 shares at $20.1 (order added at 11:18)

David buy 10 shares at $20.1 (order added at 11:01)

Citadel wants to buy 35 shares at $20.1 (order added at 11:17)

So if Evelyn (Robinhood customer) shows up, and again wants to sell 5 shares at $20, then she will sell to Citadel, even though their order is later than David's.

So to sum it up

Evelyn (Robinhood customer) is unaffected

Citadel wins

David loses.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#327

Post by ryanmarsh » Thu, Jan 28, 2021, 2:58 PM UTC

speeder wrote: post #9

This sort of stuff will put people more and more on edge, there is the deplatforming going on, people asserted their power financially, and now getting that removed too, the powers that rule USA don't realize that soon the only tool left to common people is violence? Even more with some irresponsible newspapers blaming the whole thing on GamerGate and Alt-Right, effectively pushing away people that previously could b…

Remember how quaint Occupy Wall St. seemed back in 2011? They were maligned as a bunch of privileged wannabe hippie kids. The economy was "hopelessly complex" and "how were we to know" etc. Seems we're way past that, to blatant protection of the wealthy over a fluctuation in .025% of the stock market.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#328

Post by chronolitus » Thu, Jan 28, 2021, 2:58 PM UTC

coredog64 wrote: post #108

Dem_Boys wrote: post #38

This whole Game Stop situation has made the power of the rich so obvious and disgusting. They temporarily shut down the market, banned the discord server, and are now preventing people from buying stocks on the most popular app used by small time investors. All of these moves hurt the small time investor trying to cash in on the next bitcoin-like bubble. This just creates more division, more disgust, and more of a cl…

Read up on the story of the Piggly Wiggly short/corner.

a link for the lazy (twitter thread): https://twitter.com/dollarsanddata/status/135456107992655053...

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#329

Post by NeutralCrane » Thu, Jan 28, 2021, 2:59 PM UTC

bko wrote: post #136

speeder wrote: post #9

This sort of stuff will put people more and more on edge, there is the deplatforming going on, people asserted their power financially, and now getting that removed too, the powers that rule USA don't realize that soon the only tool left to common people is violence? Even more with some irresponsible newspapers blaming the whole thing on GamerGate and Alt-Right, effectively pushing away people that previously could b…

> the powers that rule USA don't realize that soon the only tool left to common people is violence? Do you honestly believe this? Somehow we'll go from not being able to buy certain stocks to violence? Banning collecting rain water on your own property didn't do it. Abject failure of politicians keeping drinking water clean didn't do it? Not being able to buy cheese from unpasteurized milk didn't do it. Can't grow a…

> Do you honestly believe this? Somehow we'll go from not being able to buy certain stocks to violence?

It isn't simply that people can't buy certain stocks. Its an accumulation of events that increasingly lead people to believe that the system is rigged against them. This extends back decades. You have to have been living under a rock to have missed the rising tide of populist sentiment over the last decade, as seen in the pro-Trump anti-establishment contingent on the right, and the explosion of pro-socialist sentiment on the far left.

This Gamestop business probably amounts to a large bucketful of water, but at a certain point, a single drop causes the dam to burst. Kicking the can down the road by saying "surely people won't resort to violence over this" all but ensures that eventually, people will.

Re: Robinhood is limiting purchases of stocks: AMC, Blackberry, Nokia, and GameStop

#330

Post by sltkr » Thu, Jan 28, 2021, 2:59 PM UTC

rswail wrote: post #159

As I understand it, the hedge funds had naked shorts. That's illegal. If they did, what is happening to them serves them right. Even if they didn't, a "short squeeze" is perfectly legal. If the short sellers think the stock is overpriced, and there's others that think its underpriced, then both sides are placing their bets and will deal with the result, either by making or losing a lot of money. This is not a "pump a…

> If the short sellers think the stock is overpriced, and there's others that think its underpriced, then both sides are placing their bets and will deal with the result, either by making or losing a lot of money.

I don't think it's really a case of people disagreeing on the real value of GameStop stock. Framing it like this ignores important facts.

This stock was trading around $4 in August, around $20 in the beginning of January, and is almost at $400 right now. People can have legitimate disagreements about what the true value is: $5 per share? $10? $20? $40?

But no way anyone sincerely believes GameStop is worth $400/share. People who are buying right now at (or near) that price point are either doing so because they believe the short squeeze will drive the price up even further (Redditors), or because they have to deliver stock they sold short (investment funds). So all parties agree that the stock is overpriced, and people have been buying knowing this fully well.