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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

#131

Post by [deleted] »

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.

[deleted]

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

#132

Post by trident5000 »

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…

They are the number 1 app in app stores right now. People are morons. They're not going out of business anytime soon.

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

#133

Post by koolba »

alasdair_ wrote: post #77
TuringNYC wrote: post #64

Earlier quoted context omitted.

Not on options

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

I guess if you’re buying lottery tickets at $.01-$.02 per contract it’s be a 50-100% change in costs.

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

#134

Post by TylerE »

katbyte wrote: post #116
notyourwork wrote: post #10

Earlier quoted context omitted.

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.

If 1% do that’s 1,000,000...

That’s a whole 6 hours of profit. They’re at almost $1 bill in annual revenue for 2020.

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

#135

Post by LatteLazy »

8ytecoder wrote: post #98

This thread is full of people who have no idea how the exchanges, brokers, clearing firms and clearing houses operate. https://www.bloomberg.com/opinion/articles/2021-01-29/reddit...

It's very disappointing. I don't expect people to know these things. But on HN, I'd expect them to ask or listen or read about it. Instead people just post about how it's a big finance conspiracy and how they're going to sue everyone...

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

#136

Post by [deleted] »

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.

[deleted]

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

#137

Post by tptacek »

vertis wrote: post #36
gruez wrote: post #27

Earlier 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...

This subthread is confusing clearinghouses, clearing brokers, and execution brokers.

Citadel is an execution broker. Their job is to match buyers and sellers.

Apex (in these conversations) is a clearing broker. Robinhood is its own clearing broker. Clearing brokers are responsible for ensuring that money and stock actually changes hands (this takes 2 days, but all of these firms work together to create the illusion, using credit, that it's instant; those credit arrangements are why brokerages post collateral).

Clearing brokers are members of clearinghouses. The relevant one here is (I think) NSCC, which is owned by DTCC. Policy set at DTCC determines how much collateral needs to be posted to cover any particular set of trades.

DTCC drastically ratcheted up the amount of collateral required to cover trades in meme stocks, which had the effect of 10x'ing the amount of cash Robinhood was required to post to insure that it would not go out of business before its current set of in-flight trades cleared. It made the same requirement of Apex, which passed restrictions down to its customers. These companies are contractually required to make good on collateral requirements, so there isn't much choice involved.

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

#138

Post by 542458 »

abotsis wrote: post #51

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.

My understanding is just because something meets the layman definition of, say, “market manipulation” doesn’t mean it meets the legal definition of that. This also applies to things like recklessness - the legal definition and the layman definition are different.

Furthermore, AFAIK it’s not that something like “market manipulation” is illegal - it’s usually more complex than that, and might only be illegal under circumstances XYZ.

It’s tempting to read laws as if they’re written in plain English, but it’s really more like a specialized dialect where words and phrases have different (and often complex) meanings.

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

#139

Post by DLay »

alasdair_ wrote: post #71
hehehaha wrote: post #21

Earlier quoted context omitted.

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.

I think it’s also important to mention that Robinhood also has the most brain dead simple UI out of all the trading platforms I’ve seen.

The brokers you’ve listed have more complicated user interfaces than the casual trader would care to learn about. Fidelity and Vanguard also probably care way more about their reputations than to gamify their platform like RH does.

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