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Robinhood is automatically initiating GME sell orders on users' behalf

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

#231

Post by acover »

ummonk wrote: post #181
xibalba wrote: post #119

Interesting counter point to the "elites-pulling-levers-to-protect-hedgies" conspiracy theory: https://twitter.com/arampell/status/1354859474658312196?ref_...

That's not a counter point. The IB Chairman explicitly said they put in the restrictions to protect market makers rather than their customers: https://www.youtube.com/watch?v=7RH4XKP55fM

Forgive me I don't know a lot about this. I think he is talking about protecting intermediaries like the clearing houses and the exchanges themselves. The exchanges only work if counter party risk doesn't exist. To solve this, the exchanges back stop every trade and act as one common counter party [0].

He is concerned that there is a $15 billion loss out there due to options on GME. This could wipe out the intermediates guaranteeing the trades. Further that $15 billion can grow arbitrarily as GME is in a short squeeze and disconnected from reality.

[0] - https://www.cmegroup.com/clearing/risk-management.html

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

#232

Post by paxys »

eterm wrote: post #7

Browing the top of reddit right now is really reminiscent of /r/The_Donald, particularly the shift from a bunch of 'ironic' jokers to conspiracy theories and shouty chest beating and calls for upvotes. I'd treat anything like this with a huge pinch of salt.

One of the top posts on WSB this morning was a supposed Robinhood engineer who overheard a call between their CEO and the White House instructing them to stop trading $GME. The /r/The_Donald comparisons seem apt at this point.

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

#233

Post by Spooky23 »

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.

More like “you didn’t read your contract”.

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

#234

Post by FabHK »

captainarab wrote: post #60
markdown wrote: post #56

Earlier quoted context omitted.

> And what repercussions would they face Nothing worth worrying about. Every single case in the financial sector over the past two decades has resulted in fines that are a fraction of the profits. I mean, you had banks laundering money for cartels, Malasians were looted, etc etc... every single time they fine the culprits a tiny fraction of their profits. The US has made criminal activity profitable, even if you get…

100% agree. Pretty sad to see most of HN willfully ignoring this fact and jumping to the defense of Hedge Funds and the billionaire class.

FWIW, I think there are no conspiracies here on the side of Robinhood, and the attacks by the revolutionary mob are misguided.

Having said that, there is no question that banks ruined the economy during the GFC, and didn't pay enough of a price, and hedge fund managers often make a killing, while paying very little in taxes, and HFT make a killing without providing any social value.

But the answer to that is not, I'm afraid, hyping some gaming stock and trying to squeeze a few shorts.

The answer is political action - voting, pushing for proper regulation. There are lots of proposals out there: stringent capital requirements for banks; closing the "carried interest" loophole; changing the structure of markets (eg auctions every minute instead of continuous markets).

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

#235

Post by Spooky23 »

cwkoss wrote: post #197
thebean11 wrote: post #125

Earlier quoted context omitted.

> 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…

Isn't buying a house on margin... basically just a normal mortgage?

No. A mortgage is a collateralized loan.

Margin loans more like a performance bond. Unlike a mortgage, it gets called in when you cannot cover the loan. Speculation with margin is dumb for most people.

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

#236

Post by imnotlost »

bondarchuk wrote: post #200
imnotlost wrote: post #189

Earlier quoted context omitted.

Of course, you're literally borrowing money from them to buy securities.

Alright, I didn't know that. It does sound like a bad deal. Imagine if a bank suddenly changed the terms of your mortgage and repossessed the house. You're literally borrowing money from them after all.

Apples to oranges.

The bank's collateral is its lien on the house. A bank is not interested in foreclosing as long as you keep paying interest + principal every month. In fact, if the value of your house drops 90% it is in your interest to drop the keys off at the bank and say: "You guys can have it".

A broker's collateral, when you buy on margin, is the security you bought. As the value drops, collateral goes towards 0. Of course they're going to cover their own a*. It's in the agreement you signed when you opened a margin account.

Nobody changed any terms.

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

#237

Post by ptd »

paxys wrote: post #232
eterm wrote: post #7

Browing the top of reddit right now is really reminiscent of /r/The_Donald, particularly the shift from a bunch of 'ironic' jokers to conspiracy theories and shouty chest beating and calls for upvotes. I'd treat anything like this with a huge pinch of salt.

One of the top posts on WSB this morning was a supposed Robinhood engineer who overheard a call between their CEO and the White House instructing them to stop trading $GME. The /r/The_Donald comparisons seem apt at this point.

You don't think any of the high finance billionaires who were losing billions of dollars reached out to the people in the government whose campaigns they funded for support?

Calling this a conspiracy theory is...inaccurate in my opinion.

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

#238

Post by thebean11 »

cwkoss wrote: post #197
thebean11 wrote: post #125

Earlier quoted context omitted.

> 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…

Isn't buying a house on margin... basically just a normal mortgage?

No like I said they are fundamentally different. In a normal mortgage the bank cannot take your house if you make payments. With margin they can force you to sell if your account becomes too risky (usually happens because your positions lost value, but could also happen in cases like these where an investment is deemed to have a high probability of losing value). They can do this even if you are paying the interest on your margin on time.

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

#239

Post by elihu »

dingaling wrote: post #166
short_sells_poo wrote: post #75

Earlier quoted context omitted.

If you have a margin account, the broker calculates a risk based margin and can close any position they wish if they deem it a risk. They don't have to give you any justification. With increased buying power comes increased risk. In some sense this was basically inevitable. Robinhood allowed (perhaps even encouraged) a huge mass of clueless investors to flood into the market. As long as the going was good, nobody com…

Maybe it's a good time to stop calling them investors and instead call them speculators. They're not investing in anything, their money doesn't contribute to any form of progress.

I assume Gamestop the company (and all the people they employ) are better off than they were a week ago. Maybe there won't be many lasting positive effects from having their stock briefly worth a lot more than it rationally should, but on the other hand you could make a reasonable case that they have been significantly harmed by short sellers, and that if a bunch of hedge funds lost their shirts because of their short positions they'll be more careful about shorting Gamestop or any other company in the future. Maybe that's a good thing.

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

#240

Post by DennisAleynikov »

ptd wrote: post #237
paxys wrote: post #232

Earlier quoted context omitted.

One of the top posts on WSB this morning was a supposed Robinhood engineer who overheard a call between their CEO and the White House instructing them to stop trading $GME. The /r/The_Donald comparisons seem apt at this point.

You don't think any of the high finance billionaires who were losing billions of dollars reached out to the people in the government whose campaigns they funded for support? Calling this a conspiracy theory is...inaccurate in my opinion.

I think the specific nature of the baseless accusation is what makes it a conspiracy theory.

Market manipulation is happening but mostly cuz Robinhood doesn't do anything on their own they rely on other companies

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