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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

#181

Post by Tenoke »

didibus wrote: post #61
endisneigh wrote: post #29

Earlier quoted context omitted.

I don’t use Robinhood so forgive my ignorance, but what savings are you referring to?

That trading stocks on it and all of its features are free, no fees and no commission.

You are still getting a hidden fee on most transactions due to the sold order flow. Rh itself earns 17 cents per 100 shares and 58 cents for options. The loss for the user is certainly much higher though and as the cost is hidden they likely make more trades.

https://www.google.com/amp/s/www.cnbc.com/amp/2020/08/13/how...

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

#182

Post by FemmeAndroid »

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…

You’re assuming this, right? Like, they haven’t said it, and have said on TV twice that this decision wasn’t related to liquidity.

To be clear, I agree with this assessment, but they’re being anything but clear about it, which as a user, has me even more worried.

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

#183

Post by austhrow743 »

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.

Market manipulation requires intent to artificially change the stock price. It isn't everything that changes the stock price otherwise any large organisation or person with clout would be constantly market manipulating all day long.

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

#184

Post by tptacek »

dyslexit wrote: post #179
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…

I believe this explanation but I do still have questions. Why didn't they just restrict buying like they did in Friday instead of halting it completely? By halting it completely they caused a panic which caused lots of people to sell. Why didn't they halt or restrict buying of any other stocks? Why only the meme stocks? It should have affected their financial responsibilities to the clearinghouse the same ways, no? W…

No, clearinghouse requirements can apparently be per-symbol, and it's been reported that that's exactly what happened this week. It's a function of the volatility of the stock and also the proportion of the stock to all stocks being traded at a particular brokerage. There's an actual published formula somewhere on NSCC's site.

Why did they give no warning? I don't know, I think they're a clownfire.

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

#185

Post by tptacek »

FemmeAndroid wrote: post #182
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…

You’re assuming this, right? Like, they haven’t said it, and have said on TV twice that this decision wasn’t related to liquidity. To be clear, I agree with this assessment, but they’re being anything but clear about it, which as a user, has me even more worried.

They reported this morning that their clearing costs 10x'd, and it was reported in the NYT and (I think?) WSJ yesterday. Further, other retail brokerages and clearing brokerages unrelated to Robinhood reported the same thing.

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

#186

Post by birdsbirdsbirds »

sgregnt wrote: post #175
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…

This is tangential to RH, but never the less related issue: For many years now I was wondering how exectly the ETF work and whether when I buy an ETF I can be 100% sure the issuer can follow through on their obligations? What mechanism are there in place to insure that ETF will not deviate from the underlying stocks it should represent? I found it difficult to understand the intricacies related to this question. Here…

They are liquidated once the deviation is too big.

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

#188

Post by Natsu »

jcranmer wrote: post #53
kleton wrote: post #3

Robinhood'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.

Who is "you" here? The lead plaintiff is the only one taking it to court and everyone else has the option to opt out if they so desire.

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

#189

Post by tommoor »

azinman2 wrote: post #187

They may be protected from lawsuits, but they won’t be protected from the loss of users. I predict a sizable exodus of the platform.

They were gaining _millions_ of new users a day this week. I'd highly doubt the number of people closing accounts will be greater than this.

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

#190

Post by protomyth »

jcranmer wrote: post #53
kleton wrote: post #3

Robinhood'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.

That's actually the problem. Each separate arbitration costs them a bunch of cash. If you run a startup in CA, you might want to look at this language because it could get you in trouble. A class action would probably be cheaper.
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