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How do they make money? And why does it matter who executes your transaction as a retail investor.
You might not get the best price when buying on broker that uses pay for order flow.
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Thanks, that's a great explanation of what I probably the most likely outcome. Humor me for a second - what happens the the (unlikely event) they ALL hold until it hits $10,000, and the "infinity squeeze" really does happen?
> Humor me for a second - what happens the the (unlikely event) they ALL hold until it hits $10,000, and the "infinity squeeze" really does happen? At some point, you can't squeeze infinite money out of short sellers. In theory, if they're still short when the price passes a threshold higher than their margin limits, they'll get margin called and forced to sell. If the brokers and clearing houses didn't get the risk…
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What happens if they ALL hold until it's at an astronomical price like $10,000 ?
None of them have any gains until they press the sell button. The early buyers will probably sell a little bit to lock in profits. This drives the price down. They’ll then go on to social media and pump GameStop everywhere with memes and stories about taking down Wall Street. This brings in new money to pump the price back up. This is what they’re already doing: Pumping the stock to bring in new money, which they col…
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They will likely lose a lot of their users. The users were never the customers - not even the gold ones.
Which broker do they go to instead? The big competitors at least temporarily halted GME buying today also.
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Robinhood Instant is not the same thing as a margin account. You're thinking of Robinhood Gold. FINRA rules say you can't open a margin account with less than $2k. Margin investing is offered to eligible customers through Robinhood Gold, a suite of premium investing products including Nasdaq Level 2 market data and Morningstar Research Reports, for only $5 a month. The first $1,000 of margin is included in the $5 mon…
I don't use Robinhood myself, so I could be mistaken or confused about something, but their documentation specifically describes Instant as a margin account. ( https://robinhood.com/us/en/support/articles/robinhood-accou... )
"(4) equity of at least $2,000 except that cash need not be deposited in excess of the cost of any security purchased (this equity and cost of purchase provision shall not apply to "when distributed" securities in a cash account). The minimum equity requirement for a "pattern day trader" is $25,000 pursuant to paragraph (f)(8)(B)(iv)a. of this Rule.
Withdrawals of cash or securities may be made from any account which has a debit balance, "short" position or commitments, provided it is in compliance with Regulation T and Rules 400 through 406 of SEC Customer Margin Requirements for Security Futures and Rules 41.42 through 41.49 under the CEA, and after such withdrawal the equity in the account is at least the greater of $2,000 ($25,000 in the case of a "pattern day trader") or an amount sufficient to meet the maintenance margin requirements of this Rule."
https://www.finra.org/rules-guidance/rulebooks/finra-rules/4...
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I don't even really get all the anger directed just at Robinhood. Apex clearing, which clears for virtually every other new age trading platform (and back in the day RH) also halted these stocks. I'm not sure of the biz aspect of this, but given the criticism RH historically got for pay-for-flow schemes (even while they were using Apex) I would assume it was RH which got the market-flow kickbacks - not Apex. So it's…
Robinhood screwed themselves thrice over. If their clearing outfit wouldn't handle these transactions anymore at reasonable prices, that's out of their control. Fine. RH didn't have to send out a patronizing "we're doing this for your own good" email. RH didn't have to continue failing at anything resembling forthright communication. (Including their tweets, blog posts, and outright false in-app messages that implied…
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Where does one get this army of straw men?
I’m trying to figure out what risk mitigation techniques and what trading pricing regimes are going to land people in prison after the fact in the Reddit future.
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Which broker do they go to instead? The big competitors at least temporarily halted GME buying today also.
Off the top of my head I recall etrade, fidelity, schwab, and TD ameritrade allowed people to buy GME. I understand being able to buy on margin has been restricted almost everywhere, though.
https://www.theverge.com/2021/1/28/22254863/etrade-gamestop-...
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I've been watching the market for years. Pump & dumps happen. They are usually over in a few hours max. Sometimes much quicker. This has been going on for days (the majority of the week) and shows no signs of stopping. In fact tomorrow could be the most volatile day yet. I'm not sure what is making you think all of the RH users were suckers, many of them have made quite a bit off of this. I don't personally use RH cu…
Stock market is a 0 sum game. Someone is going to pay in the end. It’s not the hedge fund, they already covered to the tune of $2 billion and someone has pocketed that money and it’s not retail investors.
The RH apologists are going on long winded explanations about clearing houses (and to some extent there’s elements of “it’s too complex for your little brain”). But even to the extent it’s true, if I put in 5k from my checkings into RH and buy stock, why does Rh need all this liquidity to get orders filled? I understand turning margin accounts off, but that’s it . Past that, at best robinhoods business model is highl…
One of Robinhood’s innovations was that they gave everyone a margin account, but hid the details. When you transfer money in, Robinhood doesn’t actually get that money until a couple days later. They allow you to buy stock immediately, but that happens (transparently) on margin. Robinhood is loaning you the money to make it happen. Likewise, when you buy or sell a stock, the trade doesn’t settle for t+2 days. Robinho…
They didn't announce anything to anyone until it went into effect, despite programming their systems in advance for the changes.
Every explanation they've provided has a million holes in it.