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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

#201

Post by tptacek »

jcranmer wrote: post #88
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.

There are definitely same claims for harm that are stronger than others. Whether any of the 6 (!) class action suits currently pending actually claim that harm is a different matter. Of the stuff I see on court listener: * 3 don't have documents available (and I'm not going to bother signing up for PACER just to find out) * 1 has a claim predicated on "I could have bought or shorted GME" (yeah, not gonna fly) * 1 has…

You should sign up for PACER. It's easy (although the web interface is horrible) and costs basically nothing at the scale you'd be using it at. It's one of those things you won't use often but you'll be happy you set it up, like, a couple times a year.

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

#203

Post by tptacek »

alasdair_ wrote: post #105
triceratops wrote: post #50

Earlier quoted context omitted.

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 custome…

This doesn't make much sense. One way Citadel could have known there was a massive number of buy orders would be to simply read WSB.

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

#204

Post by pfisch »

tptacek wrote: post #178
pfisch wrote: post #165

Earlier quoted context omitted.

Name a big, reputable brokerage that did this.

A nice thing about being a big, reputable brokerage is that you have access to big, reputable piles of cash to cover clearing collateral.

If you are operating a brokerage that can't cover when people are buying stock with all cash then you should be in breach and be forced to shut down and/or forced into bankruptcy by owing all the stockholders of the stocks in question the actual damages you caused them.

Your only real job is to operate fair and unbiased bid/ask spreads and execute trades fairly. If you aren't going to do that then you are running a scam on your customers.

How is this fundamentally different then you placing a bet at a roulette table and the casino changing the rules mid-spin to make sure you will lose?

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

#205

Post by maest »

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…

Each ETF share is backed by a unit of the underlying, so there's no price risk for the ETF issuer.

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

#206

Post by toast0 »

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…

An investment in an ETF or other mutual fund is putting your money in the hands of the managers of the fund. They set out objectives for the fund, but they don't necessarily have an obligation to meet those objectives or to keep the same objectives. They can change the objectives within the processes required by the bylaws of the fund. Most of the objectives will have weasel words for management discretion in case of volatile markets.

They have quarterly reporting obligations, and you can review those reports to see how they're doing. If you don't like what you see, you can sell the funds and/or file a shareholders' lawsuit and/or file a SEC complaint.

If you don't like that, the good news is with zero comissions as the norm, and fractional shares at many brokerages, you could build up your portfolio to match an index of your choice, without significant monetary transaction costs. It would take a lot of time to setup and when you made contributions, and dividend processing effort could be significant.

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

#207

Post by tptacek »

pfisch wrote: post #204
tptacek wrote: post #178

Earlier quoted context omitted.

A nice thing about being a big, reputable brokerage is that you have access to big, reputable piles of cash to cover clearing collateral.

If you are operating a brokerage that can't cover when people are buying stock with all cash then you should be in breach and be forced to shut down and/or forced into bankruptcy by owing all the stockholders of the stocks in question the actual damages you caused them. Your only real job is to operate fair and unbiased bid/ask spreads and execute trades fairly. If you aren't going to do that then you are running a s…

A casino will absolutely shut a machine or a table down whenever the hell they want.

I don't understand your argument. RH either has the money to put up collateral or they don't. They didn't this week. That seems like the end of the story. They can't just "choose" to have more cash on hand than they actually have.

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

#208

Post by dmurray »

nullc wrote: post #79
jcranmer wrote: post #49

Earlier quoted context omitted.

> 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 requir…

The vast majority of GME buyers could never be considered guilty of unlawful market manipulation. "I intended to buy the stock because I thought it would go up" is a pretty good reason. (OTOH I don't really believe such investors have a strong case against RH).

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

#209

Post by austhrow743 »

peterthehacker wrote: post #200
austhrow743 wrote: post #183

Earlier quoted context omitted.

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.

The argument that Reddit/WSB users manipulated the market is a more difficult one to make vs. the argument that RH manipulated the market when they restricted their users to only sell GME. If they stopped both buying and selling then GME would not have dropped the way it did. RH CEO’s denial said they made the move to protect the firm and their customers, but blocking buying and selling would’ve given them the protec…

That reddit/wsb didn't market manipulate is in no way an argument for robin hood having market manipulated.

Again, it's fine to do things that cause stock prices to move. That robin hood could have reduced their functionality further in order to affect the stock price less is not relevant. If they have some duty to go out of their way to minimise their impact on stock prices, its above and beyond regular market manipulation.

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

#210

Post by pfisch »

tptacek wrote: post #178
pfisch wrote: post #165

Earlier quoted context omitted.

Name a big, reputable brokerage that did this.

A nice thing about being a big, reputable brokerage is that you have access to big, reputable piles of cash to cover clearing collateral.

A casino definitely can't shut down a blackjack game in the middle. That is not true.

What are you even arguing here? That the purpose of a brokerage is to take customers money and play weird games with it to maximize profits and is allowed to just not have enough money to cover all cash purchases?

That is like if a bank just didn't let customers withdraw their money, and kept operating like nothing was wrong. Clearly illegal.

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