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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

#281

Post by erichocean »

ianai wrote: post #258
MrPatan wrote: post #177

Earlier quoted context omitted.

Not exactly. It would be as if the bank that mortgaged your house then prevented people from buying it, then turned around to you and said "See? Nobody wants it! You need to lower the price. Oh! What's this? The price has gone down, I need to reposses it. Thanks, come again!

But for the part where the current valuation was widely viewed as much too high. It does smell bad. I agree with how you framed it. I’m really grateful you wrote it that way as it makes it very clear how this feels deeply corrupt. I suspect this is a corner case which could bankrupt a broker though.

How can it be too high when there was a know market to buy them? Short seller positions are public, and they had already agreed to buy the stock by such and such date.

The price looks just right to me.

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

#282

Post by boatsie »

r00tanon wrote: post #279

There is a regulatory framework, enforced by the SEC, that prevents firms from collaborating on trades in attempts to manipulate stock prices. When an army of retail investors openly collaborate on messaging platforms to manipulate a stock's price, essentially a crowd-sourced "pump and dump," it falls under SEC enforcement. A retail investor can still be prosecuted for violating SEC regulations, such as using insider…

How are users on wsb openly discussing GME any different than huge banks with analysts saying “we rate GME as a strong buy”? Also, look at some of these hedge funds and their leverage—-a $3B fund with 10x leverage is going to be able to “manipulate” a stock price with big orders in almost any way they choose, and they do it in secret!

Now I don’t personally think GME is worth $300/share, but the people buying it think they will be able to sell it for more, and that is their right. They aren’t being “tricked” with deliberate misinformation, there are indeed a lot of shorts still out there that will eventually need to cover.

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

#284

Post by zo1 »

anchpop wrote: post #228
dj_mc_merlin wrote: post #223

Earlier quoted context omitted.

One of the most common techniques of making a class of people seem crazy is associating conspiracy theories with them. CIA has been doing it for nearly a century by now.

Source?

Do your own research! /s

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

#285

Post by zo1 »

Goronmon wrote: post #225
Railsify wrote: post #208

Earlier quoted context omitted.

Someone not wanting to explain what is in 50 news articles to new commenters does not make them a conspiracy theorist, why should they do your google searches for you?

Someone not wanting to explain what is in 50 news articles to new commenters does not make them a conspiracy theorist, why should they do your google searches for you? Yes, this is definitely one of the cookie-cutter responses. Dubious claims of "so many sources" but they are just super busy and can't be bothered to link to a single one.

Honestly, I'd say a lot of time there aren't any "legitimate sources" to prove the claims being made. That's a good chunk of the problem, because it seems that legitimate investigation and "linking" of said facts to prove the claims is next to impossible without serious government-level powers of acquiring evidence. So inference needs to be used, unfortunately. And once you start inferring without direct evidence, you start sounding like a conspiracy theorist, which is now being used to shut-down dissent and questioning.

It's not like a journalist right now can tell Robinhood "give us all your internal emails so we can verify the reason you've stopped trading these stocks". Or "Hey Discord, let's look at your internal slack comms so we can figure out what evidence you had to conclude that the WSB chat rooms were filled with hatespeech." Or "give us a data-dump of all the users and comments you identified as hatespeech".

How about some regulation in that regard? Hey EU? Here's an idea for a possible scenario and how it could look:

1. Public company makes contentious claims.

2. Curious individual (maybe journalist) makes formal request for data to confirm.

3. By law, company above is obligated to provide access.

4. Individual gets given a secure-room, no-data-copying-allowed physical access to inspect and analyze said data.

5. Individual is allowed to report on said data.

Edit. Formatting.

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

#286

Post by rokobobo »

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.

To be clear, RH (and others) blocked their users from trading those stocks. That’s separate from trading halts, which are initiated by the listing exchange based on algorithmic rules and apply for all trades in the US. The broker is in its right to give you a margin call anytime. It cannot liquidate your position if the stock is halted by the exchange, because all trades are halted during that time.

All that said, my personal opinion is that they couldn’t check in a code change to handle the increased collateral requirements, so the only feasible and somewhat legal way to save RH was to prevent its users from buying more. Pretty shitty, but then again, ever since RH crashed on 2020-02-29 because none of their devs thought of leap years, I can’t say I expect very much from them technology-wise.

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

#287

Post by amluto »

elihu wrote: post #252
amluto wrote: post #188

Earlier quoted context omitted.

This isn't some little detail hidden in the TOS. This is what a margin account is . If you do not have your required maintenance margin (and that may be a complicated calculation), the broker can and will sell things for you to protect themselves. This is, frankly, common sense. If you deposit $100, buy $300 of stock, and that stock falls below $200, your account's equity will go below zero and your broker is in trou…

Are all of the forced GME sales in the situation you describe? (Not a rhetorical question, I'm actually wondering if it's the case.) Let's say your scenario is a little different: you deposit $100, buy $300 of stock, and the stock goes up to $600, then drops to $400. Then the broker sells your shares at $400 to "protect themselves". If that's what's going on here, that seems wrong. On the other hand, if it's as you d…

I don’t know what Robinhood is actually doing, but I think your scenario isn’t necessarily problematic.

Suppose I deposit $100 and Butt $300 of stock. Now I have -$200 of cash. (The UI doesn’t necessarily show it like that, but that’s what’s in my account.). If the stock goes up to $600, I still have -$200 of cash. If the stock drops to $400, I still have -$200 of cash. If the volatility estimates change such that a rapid crash to $199 seems likely, the broker should margin call me, as a crash to $199 would send my account value negative.

Contrast this with non-margin trading. If I deposit $400 and buy $300 of stock, I have $100 of cash, and the broker doesn’t particularly care what happens to the stock price, since they are taking no risk. Their clearer may impose requirements on them, but that’s a somewhat separate issue.

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

#288

Post by mlyle »

rokobobo wrote: post #286
AnHonestComment wrote: post #111

Earlier quoted context omitted.

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.

To be clear, RH (and others) blocked their users from trading those stocks. That’s separate from trading halts, which are initiated by the listing exchange based on algorithmic rules and apply for all trades in the US. The broker is in its right to give you a margin call anytime. It cannot liquidate your position if the stock is halted by the exchange, because all trades are halted during that time. All that said, my…

What code change would you recommend? Sure, prevent margin buys-- but that's not enough. You'd need to require that the cash from a transfer has actually shown up. Perhaps even crossed some time after that.

And that's enough to make people pretty not-happy.

It sounds like now that they have a bunch of additional cash in hand they're going to allow (with limitations) GameStop buys again.

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

#289

Post by foepys »

refurb wrote: post #247
tibbon wrote: post #211

Earlier quoted context omitted.

> 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. That's really cool to be able to do. For the average American, that's pretty much impossible to afford.

It’s not impossible to afford. You can a lawyer to review a employment contract for a few hundred dollars. Many, many Americans can afford that.

Apparently only 39% of Americans can afford a $1,000 emergency expense. I'm sure that hiring a lawyer to read over an employment contract does not even fall under "emergency expense" for the vast majority of people, thus making the number of people who can afford it even lower.

https://edition.cnn.com/2021/01/11/success/1000-emergency-ex...

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

#290

Post by bondarchuk »

imnotlost wrote: post #236
bondarchuk wrote: post #200

Earlier quoted context omitted.

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 toward…

Fair enough, thanks for the explanation.
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