Why? Surely them blocking buys for any individual (or even small group of them) is within their rights per their customer agreement. But blocking them en masse is market manipulation, and their tos isn’t going to protect them from that.
Analysis: Robinhood protected from lawsuits by user agreement, Congress
51–60 of 293 posts
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#52SEC regulations will override any user agreement where Robinhood is required to provide fair trade execution services
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#53Robinhood's vulnerability is their forced arbitration clause in the ToS. Similar to Doordash: https://www.vox.com/2020/2/12/21133486/doordash-workers-10-m...
If I read Robinhood's ToS correctly, you agree to not arbitrate any claim you bring up in a class action lawsuit.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#54"It will be hard to prove users suffered as a result of Robinhood’s measures because GameStop and other stocks covered by the curbs fell sharply on Thursday after the restrictions were announced, said James Cox, a professor at Duke Law School." Wait, what? Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their…
> Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users?
Yes, because you'd have to prove that Robinhood volume alone caused that drop in price. Robinhood isn't that big, and GME volume was crazy on Thursday.
It's equally likely (and equally impossible to prove) that Robinhood saved their users money by preventing them from investing in a stock that was already up 500% and clearly overvalued relative to its fundamentals.
This is the part that gets me about this: even now, after the mania has passed, everyone still thinks that GME was somehow a "sure thing" investment driven by a clearly incorrect understanding of how short trading works. And even now, after the magical short call rapture that was supposed to have come on Friday never materialized, people still want to believe that it would have kept going up and up and up.
Guys, it wouldn't. It's a bubble. They pop. Everyone trying to buy at the peak was making a terrible investment decision.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#55Earlier quoted context omitted.
Probably because those are theoretical losses. The previous paragraph is also relevant: >However, Robinhood is not legally bound to carry out every trade and the lawsuits will not succeed without evidence the company restricted trading for an improper reason, such as to favor certain investors, according to several legal experts. As mentioned in other threads, robinhood wasn't able to come up with the deposit needed…
> As mentioned in other threads, robinhood wasn't able to come up with the deposit needed for their customers trades. That's not true, they only blocked trades on those specific stocks. If it was really a liquidity issue then they could have rate limited all trades equally regardless of the stock in question.
The collateral required by Robinhood’s clearing house to trade these stocks was raised to 100%, and it takes 2 days for trades to clear. Required collateral for other equities was not raised so there was no reason any other equities needed to be limited.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#56Earlier quoted context omitted.
>Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct. Wait what? Is there a list somewhere? AFAIK interactive brokers (which doesn't engage in PFOF) also shut down trading.
Yes, this[1] was the one that I found when searching. It shows that Robinhood is it's own, but as we know they route to Citadel. A bunch of others had a problem when Apex Holdings told them to restrict trading (or something along those lines). [1]: https://investorjunkie.com/stock-brokers/broker-clearing-fir...
How come it works from all the way over here in Scandinavia? No problems with GME while RH was shutting it down.
Also, Robin Hood - the irony. They are clearly for the rich against the poor. More like the sheriff of nottingham!
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#57Why can't non-Robinhood holders of GME sue Robinhood, though? If you can prove that RH's actions drove the stock down, then aren't they the victims (and also not bound by the user agreement)?
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#58Earlier quoted context omitted.
I seriously doubt it will be even a blip on their radar. In fact, I think this will be their “no such thing as bad publicity” moment and they will have massive growth. People have short memories (no pun intended) and the switching costs are also nontrivial.
What are the switching costs? Seems fairly trivial to move assets between brokerages.
RH charges $75 to transfer holdings to a different broker. If you have a big account that's probably worthwhile but I get the impression a lot of RH customers are small-time people who are just dabbling in the stock market for fun. If your account only holds $500-1000 of securities a $75 fee is pretty steep.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#59Robinhood won’t go out of business because of lawsuits, it’ll be an exodus of users. Even if they just weren’t prepared and everything they did was legitimately the right thing to do, that ship has sailed. I know people I didn’t even know had a Robinhood account ask me if I was shutting my account down too. This will be fascinating to watch. Can the repair the brand damage? I’m skeptical. Is there any similar scenari…
To be honest, people will eventually return. RH is the cost leader by a wide margin and its very unique to its business model via data arrangement with Citadel. In aggregate, total savings they pass down to retail traders is in the billions. With options trading at all time high, savings for 2020 was likely in tens of billions. Edit: upon looking at some aggregate data via OCC, appears I overestimated savings.
RH is the cost leader by a wide margin and its very unique to its business model via data arrangement with Citadel
It’s free right up until the point they decide to charge you 100% of your money.
Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress
#60Earlier quoted context omitted.
I don't have a Robinhood account, and I'm not involved in the GME/WSB stuff, but I would think twice about opening a Robinhood account now. Indeed, it's been educational about which brokers are using other clearing houses (sorry if I get the terminology wrong), and which are direct. But then badly behaved businesses like Godaddy don't seem to suffer or go out of business, so I suspect Robinhood won't have too many lo…
This is not the first time RH has gone down during critical moments in the market. Yet their userbase grows and their users come back. They'll be fine.
Maybe it's stupid, but I could forgive the outages, maybe because I wasn't doing any time critical trades when they happened. But deliberately limiting trades on dozens of stocks is so far past the line for me that I'm leaving Robinhood as soon as I find another brokerage I like.