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Analysis: Robinhood protected from lawsuits by user agreement, Congress

reuters.com

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Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#71

Post by alasdair_ »

hehehaha wrote: post #21
ericmay wrote: post #4

Robinhood 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.

Almost every single broker offers commission-free trading now.

And some of them (Fidelity, Vanguard etc.) didn’t pull trading when it got volatile. They also have far more stable platforms.

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#72

Post by freeone3000 »

Alex3917 wrote: post #23
gruez wrote: post #15

Earlier 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.

You'll notice on Friday, a list of stocks with high volatility had restricted trading - including non-meme stocks, like AMD. It's a reaction to higher holding percentages.

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#74

Post by codesternews »

maest wrote: post #44
vertis wrote: post #25

Earlier 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.

This time it is different. Previously they had glitches etc. This time they by choice restricted users which lead their users loose.

Whole concept they broke. If any investor still uses robinhood they are stupid. Your money and stock is not safe with Robinhood. They can restrict you any time.

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#75

Post by gruez »

Daho0n wrote: post #56
vertis wrote: post #36

Earlier quoted context omitted.

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!

>How come it works from all the way over here in Scandinavia? No problems with GME while RH was shutting it down.

Maybe because there's already a high barrier to trading US stocks (or stocks in general), so there wasn't enough people piling on to strain the brokerage's balance sheets?

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#76

Post by tengbretson »

I checked the Robinhood tos and it looks like they have a forced arbitration clause anyway. I'm not sure why the class action efforts thought they could get anywhere.

That said, I'm pretty sure you could make Robinhood fold if the users all bombed them with arbitration filings.

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#77

Post by alasdair_ »

TuringNYC wrote: post #64
koolba wrote: post #47

Earlier quoted context omitted.

Don’t Fidelity, E*TRADE, Ameritrade, and just about it everyone else have zero commission trades now?

Not on options

While technically true, I wonder if people care much about a $1 fee on an entire contract (100 shares).

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#78

Post by beezle »

gruez wrote: post #27
vertis wrote: post #25

Earlier 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…

>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.

Re IB: if you are a "Pro" account generally not. If you are a "Lite" account, yes they get paid for order flow.

As to the other point, I belive the issue was in settlement, not clearing, ie with DTCC collateral reqs.

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#79

Post by nullc »

jcranmer wrote: post #49
mdorazio wrote: post #5

"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? Very probably. The general principle of Article III jurisprudence is that you have to demonstrate concrete, particularized harm to bring a case, not generalized, theoretical harm. If your allegation is th…

Loss of an unlawful gain wouldn't be an actionable harm in any case.

"I intended to buy at a higher price in order to manipulate the price of an asset well above its value, and was harmed by being delayed until a later time where I could buy it at a lower price" -- not going to fly.

If RH is inadequately disclosing the risks of margin trading then some of their customers that had positions closed due to margin requirements might have cases.

Re: Analysis: Robinhood protected from lawsuits by user agreement, Congress

#80

Post by m463 »

notyourwork wrote: post #10
kleton wrote: post #7

Earlier quoted context omitted.

Each FINRA arbitration case would be expected to cost the company up to 10,000 in fees. If anywhere near the 100,000 users who left negative reviews on the Google Play store for the app file an arbitration and pay the filing fee, Robinhood will absolutely go bankrupt. If you are/were a Robinhood user: https://www.finra.org/arbitration-mediation/initiate-arbitra...

Submitting a negative review is a lot less effort than dealing with a court case. I think it’s unlikely a small percentage of 100,000 will pursue.

But remember the arbitration problem that doordash faced when a law firm created an easy-to-arbitrate system for workers?

just do a web search for "arbitration backfired"

you'll find this and other interesting cases :)

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