Robinhood is automatically initiating GME sell orders on users' behalf • Hacker News Board

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#121

Post by stronglikedan » Thu, Jan 28, 2021, 9:17 PM UTC

mbreese wrote: post #116

tibbon wrote: post #112

Earlier quoted context omitted.

I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…

> When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage Really? Because that would make closing take forever. I mean, even after the purchase agreement and mortgage terms, there are a ton more documents to go through.

They attorneys have done the same with me through all three of my closings, and yes, they do take forever, precisely for that reason.

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#122

Post by Animats » Thu, Jan 28, 2021, 9:18 PM UTC

mikestew wrote: post #103

firebaze wrote: post #100

Smelled like scam, is a scam. So glad I didn't fall into the robinhood trap, I was really close to. Edit: yes this comment isn't related to the linked article.

Fidelity and every other brokerage of which I have knowledge would let you do the same thing (get into a bad trade, and then liquidate your position when you exceed margin limits). This isn't a "Robinhood" thing, this is an "ignorant gamblers who shouldn't be allowed anywhere near a margin account" thing.

Yes. Understand that if you buy on margin, and the stock goes down too much, you owe the broker money. The broker can ask you to deposit more money to cover a margin call, or sell out your position.

What's unusual about RobinHood is that they make buying on margin very easy. It's a feature of a "Robinhood Gold" account.[1] "You can try Gold for free for the first 30 days. Sign up anytime from your account settings." This gets people trading on margin who probably shouldn't be trading on margin. Many of them are going to be busted down to zero. Those prices aren't going to stay up once the fad is over.

Here's RobinHood's margin agreement.[2]

[1] https://robinhood.com/us/en/support/articles/gold-overview/

[2] https://cdn.robinhood.com/assets/robinhood/legal/RHS%20Custo...

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#123

Post by joering2 » Thu, Jan 28, 2021, 9:18 PM UTC

From [1]: On September 2, 2020, the Wall Street Journal reported that Robinhood was under SEC investigation for failing to fully disclose selling clients' orders to high-speed trading firms, with a potential $10M+ fine.[6] Robinhood paid $65M to settle the SEC investigation on December 17, 2020.

Gee.. I guess a slap on their wrist will make them behave NEXT time. How come people are not in jail for this?? I hope this time around politicans will make enough stink that SEC will actually forward indictments to DOJ.

[1] https://en.wikipedia.org/wiki/Robinhood_(company)#SEC_Probe_...

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#124

Post by xzel » Thu, Jan 28, 2021, 9:18 PM UTC

tibbon wrote: post #112

mikestew wrote: post #98

Yeah, brokerages will do that if the stock takes a big drop like it did today. Oh, did you not read that part of your margin agreement? According to thread, some are just now getting to that part. Those same folks shouldn't have been trading GME on margin. If it's any consolation, I've had Fidelity, IB, et. al., do the exact same thing when a trade turned sour. Difference is, I didn't run to Reddit to display my igno…

I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…

TOS on websites aren't the same the agreement to a margin account. Not reading that would be like not reading your mortgage agreement or your auto loan agreement. I agree they're long and confusing but financial agreements are super important to read and if you can't understand it hire a younger/cheaper lawyer for an hour. Every contract I've signed for employment I've hired someone to confirm the law in that state and it really makes a difference knowing what is in there.

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#125

Post by thebean11 » Thu, Jan 28, 2021, 9:18 PM UTC

AnHonestComment wrote: post #111

thebean11 wrote: post #101

This is probably legit, unlike delisting it. You are taking a loan from them with the understanding that they can (in some circumstances) liquidate your investment to lower their own risk. This absolutely seems like one of those circumstances.

A margin call on a stock you halted trading in smells like fraud. It’s like the bank banning selling your home then repossessing it when the value falls. Crooked entirely.

> It’s like the bank banning selling your home then repossessing it when the value falls.

Apples and oranges. If you bought a house on margin, the way a brokerage defines margin, they would absolutely be allowed to do that. Margin and mortgage are fundamentally different types of loans.

I agree that halting buys was absolutely wrong. Definitely see where you're coming from, if you look at the two actions together..it doesn't paint a very pretty picture.

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#126

Post by [deleted] » Thu, Jan 28, 2021, 9:18 PM UTC

tibbon wrote: post #112

mikestew wrote: post #98

Yeah, brokerages will do that if the stock takes a big drop like it did today. Oh, did you not read that part of your margin agreement? According to thread, some are just now getting to that part. Those same folks shouldn't have been trading GME on margin. If it's any consolation, I've had Fidelity, IB, et. al., do the exact same thing when a trade turned sour. Difference is, I didn't run to Reddit to display my igno…

I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…

[deleted]

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#127

Post by coding123 » Thu, Jan 28, 2021, 9:19 PM UTC

mbreese wrote: post #116

tibbon wrote: post #112

Earlier quoted context omitted.

I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them. The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line: > A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tec…

> When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage Really? Because that would make closing take forever. I mean, even after the purchase agreement and mortgage terms, there are a ton more documents to go through.

I'm guessing it was the mobile notary he might have thought was an attorney.

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#128

Post by llampx » Thu, Jan 28, 2021, 9:19 PM UTC

mikestew wrote: post #103

firebaze wrote: post #100

Smelled like scam, is a scam. So glad I didn't fall into the robinhood trap, I was really close to. Edit: yes this comment isn't related to the linked article.

Fidelity and every other brokerage of which I have knowledge would let you do the same thing (get into a bad trade, and then liquidate your position when you exceed margin limits). This isn't a "Robinhood" thing, this is an "ignorant gamblers who shouldn't be allowed anywhere near a margin account" thing.

They changed margin requirements intra-day, started liquidating positions no questions asked, and stopped buying of the stock. How many coincidences do you need to say that this was the planned outcome?

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#129

Post by gruez » Thu, Jan 28, 2021, 9:19 PM UTC

stickfigure wrote: post #113

simonsaidit wrote: post #108

Earlier quoted context omitted.

The difference here is they prevented people from starting new positions while still allowing closing them .. effectivly being the cause of the drop.

> cause of the drop Not sure I understand this perspective. GME was a balloon floating around in a needle shop.

Yeah, but the wishful thinking in the other threads I've seen was that by the time it popped, all (or most) of the holders would be the short sellers, not the wsb people who pumped it up. In that sense it would be "fine".

Re: Robinhood is automatically initiating GME sell orders on users' behalf

#130

Post by rich_sasha » Thu, Jan 28, 2021, 9:19 PM UTC

It is really interesting reading all this.

Someone reuses passwords all over the internet, gets hacked and loses savings of a lifetime, HN says “OMG sooo stupid, you have to have minimal computer literacy in life” etc.

People get burnt on literally run-of-the-mill situations with trading and get angry with the world, and vent in a rigged system.

Of course there is space for outsiders to challenge the establishment, but assuming you grok finance because you installed Robinhood app is... naive!!!