Analysis: Robinhood protected from lawsuits by user agreement, Congress • Hacker News Board

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

#101

Post by franklampard » Sat, Jan 30, 2021, 7:09 PM UTC

csmiller wrote: post #43

boatsie wrote: post #8

Earlier 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.

Effectively $0. Outbound costs $75 at Robinhood. If you are moving more than a few hundred dollars, the new broker will reimburse the it.

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

#102

Post by egwor » Sat, Jan 30, 2021, 7:10 PM UTC

gruez wrote: post #75

Daho0n wrote: post #56

Earlier quoted context omitted.

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?

Agreed. Probably highly likely that few others using that broker were involved.

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

#103

Post by nrmitchi » Sat, Jan 30, 2021, 7:10 PM UTC

gruez wrote: post #83

ummonk wrote: post #70

Earlier quoted context omitted.

The harm is more particularized for those whose stock was auto-sold at the dip for a margin call because they had bought the stock in an instant account.

Is there proof of this? This gets repeated a lot and the best "proof" I've seen was a wsb post claiming they got sold "without [their] permission", but stopped short of saying whether they were using margin or not.

One piece of the "Robinhood Abstraction" that is popping up a lot right now is that the fact that a large majority would have been using margin, but not known it.

Much of the nice and fast experience that Robinhood offers ("Just signed up? You can start trading!", "Initiated a transfer? Start trading now!", "Just sold something? Rebuy something else immediately!") are all powered by the fact that these are all technical using margin.

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

#104

Post by ditonal » Sat, Jan 30, 2021, 7:11 PM UTC

codesternews wrote: post #74

maest wrote: post #44

Earlier quoted context omitted.

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.

Totally right, and furthermore, Robinhood is facing some serious solvency issues. Their PR releases claiming this was clearing house related was already highly dubious, and is self-contradicting because they are blaming it on a liquidity issue while saying it's not a liquidity issue.

But this is happening at the same time was mass account withdrawals/closures, and we're now learning this not only threatens their general solvency but ability to execute trades. This could easily cause a feedback loop that empties their accounts, at which point people are going to be unable to withdraw their cash which is goign to cause a bank run and drill the nails into their coffin even further. Healthy companies don't need to emergency borrow a billion dollars. If you have less than $250,000 on Robinhood, your account is FDIC insured so you'll eventually get your money back...but I think most people would prefer not to go through that process.

Robinhood is on a death spiral and prudent financial advice is to move any assets you have off of it as soon as possible.

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

#105

Post by alasdair_ » Sat, Jan 30, 2021, 7:11 PM UTC

triceratops wrote: post #50

bmitc wrote: post #32

Earlier quoted context omitted.

But there is the possibility that Robinhood was also cutting trading to appease Citadel, who to my understanding, just happened to re-engage their short positions right before Robinhood cut buying to Gamestop stock. If the story about Robinhood running out of money is true, why wouldn't they just ban buying on margin and not all buying? I don't understand that.

Maybe Citadel knew about RH's difficulties and timed their moves accordingly. For smart person who knows how RH's model works (I am neither, btw), which I'm sure Citadel employs many of, it wouldn't have been hard to predict.

Robinhood sends their order flow to Citadel.

Citadel would know before anybody else in the market that the massive number of buy orders from RH had just gone to zero. They would also know that sell orders were still coming in.

This would allow Citadel to profit massively on the backs of the RH customers even if there was no direct collusion.

The thing is, RH isn’t stupid. They knew that Citadel (their biggest customer) would see that orders went to zero before anyone else and could move accordingly. RH didn’t need to explicitly warn Citadel in advance - the very nature of their relationship meant that they would be told in advance.

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

#106

Post by lettergram » Sat, Jan 30, 2021, 7:12 PM UTC

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…

Within 2 hours of this happening I personally know of at least $2m leaving robinhood accounts. Everyone (and I mean literally everyone) I know that used robinhood are closing their accounts.

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

#107

Post by Gwypaas » Sat, Jan 30, 2021, 7:13 PM UTC

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!

Because we buy stocks on the open market paying courtage for someone to execute the trade.

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

#108

Post by gruez » Sat, Jan 30, 2021, 7:14 PM UTC

bmitc wrote: post #95

elliekelly wrote: post #46

Earlier quoted context omitted.

> If the story about Robinhood running out of money is true, why wouldn't they just ban buying on margin and not all buying? I don't understand that. Because DTCC requires cash collateral while the transaction is settled whether the transaction happens in a margin account or a cash account. There's no distinction from DTCC's perspective. DTCC (reportedly) increased the collateral on $GME transactions to 100% of the t…

Thanks for that information. I didn’t know that or about DTCC. Is raising the collateral on transactions like that typical?

Yes https://twitter.com/kralctrebor/status/1354952686165225478

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

#109

Post by loceng » Sat, Jan 30, 2021, 7:15 PM UTC

gruez wrote: post #62

loceng wrote: post #31

Earlier quoted context omitted.

Favor certain investors - like the ones shorting? This isn't going to be an obvious clear cut case, and there will be plenty of gaslighting as part of the TENS of billions of $ on the line.

Just because their decision favored another party doesn't mean it was malicious and they would be liable. If at&t had to shut down their network for 2 hours because of a botched firmware update, that would heavily favor the hedge funds (who probably have redundant connections), but that doesn't mean you can go after them for not being able to sell your GME stocks.

The communications records of everyone involved will paint that picture for us, as to whether favours were played or not.

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

#110

Post by drexlspivey » Sat, Jan 30, 2021, 7:15 PM UTC

lettergram wrote: post #106

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…

Within 2 hours of this happening I personally know of at least $2m leaving robinhood accounts. Everyone (and I mean literally everyone) I know that used robinhood are closing their accounts.

Where are they moving to?