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

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

#901

Post by [deleted] »

JumpCrisscross wrote: post #859
belltaco wrote: post #840

Earlier quoted context omitted.

Not really, the outrage is over a short of GME being a customer. If the headline was about Firm XYZ without a short in GME paying $100M it wouldn't be as newsworthy.

> the outrage is over a short of GME being a customer Do we have any evidence Citadel is materially net short GME? They bailed out Melvin Capital. But Melvin Capital announced that they closed out their short position. And bailing out Melvin Capital isn't the same thing as assuming their positions.

[deleted]

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

#902

Post by timack »

beachwood23 wrote: post #673
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…

I don't think this was Robinhood's choice. Robinhood doesn't actually execute any trades. They sell user's trade orders to Citadel, a trade executor. Citadel then buys the shares on the market, and sells them to Robinhood for a slight markup. It's how Robinhood offers trades for $0 fees. You pay pennies more per share, but don't have to spend $5 per trade. Citadel, and other trade executors, are refusing to buy share…

"Coincidentally"

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

#903

Post by jb775 »

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…

Serious question: Since RobinHood is a private company, does the "if you don't like it, you can build your own platform" argument apply here? Or does that only apply selectively when it benefits partisan politics?

This is the natural evolution when censorship as we've recently seen is given a pass.

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

#904

Post by anonymouse008 »

JumpCrisscross wrote: post #859
belltaco wrote: post #840

Earlier quoted context omitted.

Not really, the outrage is over a short of GME being a customer. If the headline was about Firm XYZ without a short in GME paying $100M it wouldn't be as newsworthy.

> the outrage is over a short of GME being a customer Do we have any evidence Citadel is materially net short GME? They bailed out Melvin Capital. But Melvin Capital announced that they closed out their short position. And bailing out Melvin Capital isn't the same thing as assuming their positions.

> But Melvin Capital announced that they closed out their short position. And bailing out Melvin Capital isn't the same thing as assuming their positions.

Yeah, arm's length transactions are a means of providing truth to falsity, and perfectly crafted statements are in the same category.

The only thing missing from these press releases is "to the best of my knowledge"

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

#906

Post by randomopining »

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…

Wonder if I should cash in my BTC on Robinhood. If they go under then I lose everything right?

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

#907

Post by munk-a »

mgolawala wrote: post #605
vergessenmir wrote: post #365

Earlier quoted context omitted.

This is so true. It's all connected. It's probable that Reddit, Discord, RobinHood have all received calls to disrupt retail traders from political players or financial backers. There's no evidence of this, the truth is we'll never know, but how its most obvious reason. If only RobinHood would live up to its namesake. It is alarming that "soft" circuit breakers are being used to target retail traders on exchanges. I…

When Wall Street is making billions off of selling balloon interest mortgages with no income verification the position is "The consumer is an adult and can make decisions for themselves and read the fine print.... blah blah blah .. personal responsibility." When the people are causing Wall Street to lose billions on their absurdly large short position, suddenly they are concerned for the "amateur" investors. The "uns…

Just as a note - Elizabeth Warren is pretty much on the same page:

> “For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price.”

I find it interesting that folks feel empowered to call out the BS even when they've got a pretty big spotlight on them - instead of being shushed to quiet by monied interests.

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

#908

Post by yaur »

riffraff wrote: post #724
beachwood23 wrote: post #673

Earlier quoted context omitted.

I don't think this was Robinhood's choice. Robinhood doesn't actually execute any trades. They sell user's trade orders to Citadel, a trade executor. Citadel then buys the shares on the market, and sells them to Robinhood for a slight markup. It's how Robinhood offers trades for $0 fees. You pay pennies more per share, but don't have to spend $5 per trade. Citadel, and other trade executors, are refusing to buy share…

Who wins from a more limited market? It seems to me suspending trades locks people from selling as much as it locks them from buying, and short sellers should be happy to have a more liquid market,not less.

According to the RH blog post they are allowing people to close their position, just not open or expand one.

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

#909

Post by piva00 »

cwkoss wrote: post #833
bradleyjg wrote: post #3

If they were just blocking margin trading or trades with unlimited risk that would be one thing. But this smacks of either paternalism or trying to manipulate the market. I hope they lose a lot of customers (or product depending on your POV).

It's absolutely market manipulation. RH gets sells order flow to Citadel, who bailed out Melvin Capital. Someone high up at RH got their arm twisted to help their buddies close their shorts.

Maybe someone higher up could be losing lots, much more than what Robinhood could be valued during the IPO but that would be USD 12 bi...

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

#910

Post by backzerman »

cactus2093 wrote: post #489
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…

One possible legitimate reason is the risk to Robinhood themselves. They allow margin trading and I think anybody would agree that buying GME at these crazy prices on margin is incredibly risky. If the traders can't pay, Robinhood or their bank/insurers are on the hook. Also even though the narrative here is Robinhood traders vs hedge funds, surely there are also a lot of shorts on Robinhood too, so there's more marg…

> The customers are the businesses on the other end, in Robinhood's case the market makers who are paying for the right to front-run trades.

Front-running is super illegal. You're referring to payment for order flow (PFOF), in which a sell-side party like Citadel pays Robinhood for the right to route your order to the exchange. But there's a catch: Citadel is allowed to take the other side of your trade without routing it to an exchange, but it legally has to match the exchange price or cut you a discount. If Citadel can't do either, your order MUST be routed to an exchange.

PFOF makes up a somewhat negligible source of revenue for no-fee/discount brokerages. The bulk of revenue comes from a much more mundane source: interest rate spreads. Earn X% interest on customer cash deposits while providing customers less than X% interest on their deposits.

If your order isn't making its way to an exchange, PFOF isn't your problem, and you shouldn't be day trading. Your real problem is that the professionals think you over-bid/under-asked to such an extent that they're willing to cut you a deal just to take the other side of your trade. Unless you're a professional options trader, betting against professional market makers will cost you a lot more money than the imaginary transaction costs would have.

(This is just a summary of an old HN favorite: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...)

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