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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

#151

Post by o-__-o »

JMTQp8lwXL wrote: post #129
ditonal wrote: post #104

Earlier quoted context omitted.

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 gene…

The solvency issue is the root cause leading me to leave Robinhood personally. The limitation on market orders was the symptom; the cause was a rotten core. This is the true reason why everyone should leave Robinhood. I do not want to deal with realizing FDIC/SIPC insurance preferably ever in my lifetime.

You dealt with it when you eg had a Wachovia bank account before they became Wells Fargo. You saw it happen en masse in 2008.

FDIC guarantees funds to the bank. If the bank fails FDIC ensures YOU continue to access your account. If this means taking the bank into receivership and changing owners so be it. You can go to the FDIC website to see what banks have failed. Many do over the course of a year but the account owners are never at risk outside of the insurance amount on a single deposit account.

I hope you don’t keep more than 250,000 in an fdic insured account without additional insurance (which is silly because you could just open another account at the institution for additional coverage)

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

#152

Post by btown »

kleton wrote: post #7
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…

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...

For what it's worth, arbitration filing fees can be calculated at https://tools.finra.org/arbitration_calculator/ - they seem to start at $50 for specified damages, and $1575 for unspecified damages. (Obligatory: not a lawyer, not at all recommending that anyone do this without consulting one.)

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

#153

Post by chrischen »

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 did shoot up in the app store during this negative publicity. It could be that a vocal minority just don’t matter.

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

#154

Post by throwaheyy »

headmelted wrote: post #118
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…

Even without the user exodus I’d think there’s cause for concern regardless. They’ve said their financial position is stable, yet they’re stopping trades because of the volume moving through their clearance system (if I’ve understood what Vlad was saying to Bloomberg correctly, they no longer use an external clearing house). If it walks like a duck, and it quacks like a duck, then it’s probably a duck. And it’s proba…

I don’t think so. Their settlement collateral deposited with the clearing house is unrelated to their own profit, loss or debt. It’s to cover customer trades in the event of a customer defaulting on settlement.

The collateral can be thought of as more like “server capacity”. Their customers’ demand for usage of the collateral exceeded what was available and they had to reject new trades with, continuing the analogy, an HTTP 429. That doesn’t mean that they’re suddenly insolvent.

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

#155

Post by jonp888 »

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!

Just luck. Trade Republic, a Robin-hood-alike in Germany, also had to shut down GME purchases.

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

#156

Post by doanerock »

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...

The problem is not the cleaning houses, this article explains it really good https://www.bloombergquint.com/markets/clearing-firms-preven... So there are couple of issues, one is the two day settlement, the other is increased capital requirements put in by DTCC.

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

#157

Post by o-__-o »

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.

>court case

I thought it is arbitration (which is less effort than a court case)

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

#158

Post by headmelted »

throwaheyy wrote: post #154
headmelted wrote: post #118

Earlier quoted context omitted.

Even without the user exodus I’d think there’s cause for concern regardless. They’ve said their financial position is stable, yet they’re stopping trades because of the volume moving through their clearance system (if I’ve understood what Vlad was saying to Bloomberg correctly, they no longer use an external clearing house). If it walks like a duck, and it quacks like a duck, then it’s probably a duck. And it’s proba…

I don’t think so. Their settlement collateral deposited with the clearing house is unrelated to their own profit, loss or debt. It’s to cover customer trades in the event of a customer defaulting on settlement. The collateral can be thought of as more like “server capacity”. Their customers’ demand for usage of the collateral exceeded what was available and they had to reject new trades with, continuing the analogy,…

I agree this isn’t about Robinhood’s solvency, but it also means they’re essentially unable to execute trades in a way that’s consistent with a free market.

Their business requires them to perform this function, and if they can’t do that because they’ve run out of their own money with which to underwrite these trades until settlement, then that’s very much a crisis of liquidity however you slice it (which you can’t because, you know, liquid. Badum-tisch).

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

#159

Post by sroussey »

pfisch wrote: post #146
tptacek wrote: post #120

Earlier quoted context omitted.

Your claim that RH restricted users by choice seems false. RH is required by NSCC/DTCC rules to post collateral for trades in the process of settlement. As a result of volatility, the collateral requirements for meme stocks shot up from something like single digits to something perhaps approaching 100%. Robinhood was apparently forced to draw down a $600MM line of credit just to cover the trades it had already allowe…

Yeah....except all the more legitimate brokerages didn't limit anything. TD Ameritrade made me place limit orders, but that is not even close to the same thing. Fidelity was unaffected.

Public was limited by their clearinghouse. Several brokerages did this.

Some did not, mostly since their clientele wasn’t buying these anyhow.

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

#160

Post by codesternews »

tptacek wrote: post #120
codesternews wrote: post #74

Earlier quoted context omitted.

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.

Your claim that RH restricted users by choice seems false. RH is required by NSCC/DTCC rules to post collateral for trades in the process of settlement. As a result of volatility, the collateral requirements for meme stocks shot up from something like single digits to something perhaps approaching 100%. Robinhood was apparently forced to draw down a $600MM line of credit just to cover the trades it had already allowe…

Does not matter. You are dealing with brokage. Its on the brokrage to maintain the service and whenever I want to buy/sell my share I could. Not get restricted.

There is no restriction from SEC. Its money in app not privacy issue me/people would compromise.

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