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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

#241

Post by 1vuio0pswjnm7 »

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...

The DoorDash plaintiffs had valid wage claims. Here, according to Reuters' analysis of the agreeement^1, RobinHood plaintiffs do not have a valid contract claim. There is no breach of contract because the agreement specifically allows for RH to silently refuse to execute orders. What can RH customers sue RH for? If there is no valid claim they can make, then there's no possibility of arbitration.

1. https://web.archive.org/web/20200217224304/https://cdn.robin...

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

#242

Post by r00fus »

tptacek wrote: post #201
jcranmer wrote: post #88

Earlier quoted context omitted.

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.

And install/use RECAP so you can make PACER use more free.

https://free.law/recap

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

#243

Post by skedaddle »

kasey_junk wrote: post #226
skedaddle wrote: post #221

Earlier quoted context omitted.

Just curious -- why not?

The search terms you want is “T+2 settlement”. TLDR all trades take 2 days to settle but brokerages abstract that via “loans” and collateral.

Thanks. I don't use Robinhood but I thought your buying fund there consisted of actually-deposited cash. In that case why can't they use a customer's money to cover the collateral? Is it a business practice or a requirement for some other reason?

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

#245

Post by kasey_junk »

tptacek wrote: post #234
kasey_junk wrote: post #226

Earlier quoted context omitted.

The search terms you want is “T+2 settlement”. TLDR all trades take 2 days to settle but brokerages abstract that via “loans” and collateral.

Tell me if I'm way off here: The clearinghouse collateral requirements in part protect the clearinghouse from things that can go wrong at the brokerage , like if Robinhood had a vulnerability that let people place huge orders without paying for them, and they were, like, put out of business overnight.

The DTCC requirements are all about protecting brokerages (and other counter parties) from each other. Basically (and I’m not an expert in this) it’s a risk sharing scheme where if Robinhood (or any other broker) goes under all the other members cover the positions.

I don’t think it has anything to do with margin vs non-margin accounts for instance. It’s just a formula where you split up the outstanding shares by the VaR as I’d get a capital requirement.

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

#246

Post by kasey_junk »

skedaddle wrote: post #243
kasey_junk wrote: post #226

Earlier quoted context omitted.

The search terms you want is “T+2 settlement”. TLDR all trades take 2 days to settle but brokerages abstract that via “loans” and collateral.

Thanks. I don't use Robinhood but I thought your buying fund there consisted of actually-deposited cash. In that case why can't they use a customer's money to cover the collateral? Is it a business practice or a requirement for some other reason?

A) no they, and most brokers will let you start trading as soon as you “deposit” money even though you have many days to reverse those deposits. But:

B) your shares trading immediately is a fiction. It takes days for those trades to settle. And any subsequent trades you make with those funds are all subject to credit risk. The central clearing house collateral rules are about risk management around that multi day float.

I think but am not an expert on this that the DTCC times explicitly require the capital to come from the brokerage not the clients. I don’t know why but can guess that it’s because it’s the brokerages taking on the risk not the individuals.

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

#247

Post by pfisch »

tptacek wrote: post #235
pfisch wrote: post #218

Earlier quoted context omitted.

No, that analogy doesn't fit. Fully half of robinhood users owned GME stock. They were in the middle of a bet. RH created a situation where the stock could only go down. "I think it's like a brokerage that has to post 100% collateral --- out of their money" How is this not the customers money? You deposited 100% of the collateral with RH. Banks can take your money and make loans with it so the bank can make profit, b…

Again, this is pretty funny. It really does sound like you're saying the casino can't kick you out if you're in the middle of playing some blackjack strategy. "I'm not done yet!" I'm pretty sure everyone retained their ability to get cash out of Robinhood, for whatever that's worth.

No, you are trying to suggest that these are all new blackjack games, not the middle of one. If you are holding 21 and they shut the game down in the middle that is illegal. HALF of robinhood users bought and were holding GME. They were holding 21 and Robin Hood shut them down in the middle, turning their winning hand into a losing hand. That is the difference.

When they bought the stock they had absolutely no reason to think the brokerages would stop selling shares.

They were selling call options that are in the money at $500, while simultaneously not actually allowing GME to go to $500. That is outrageous.

Right before robin hood shut down GME they closed people's positions out at a price of over $2000 per share. The holders literally broke through the sells and were forcing the short squeeze to happen. Robin hood then forced GME into the floor. That is absurd and should absolutely be illegal. It is a crooked casino. They should've been forced to close out everyone's position at the ask price, but they didn't want to so they cheated.

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

#248

Post by kasey_junk »

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…

And what did Citadel do with that info? Citadel is one of several internalizers Robinhood uses. Each of them got the same data. They are all competitors.

Can you explain the actual trade you are suggesting happened?

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

#249

Post by tptacek »

pfisch wrote: post #247
tptacek wrote: post #235

Earlier quoted context omitted.

Again, this is pretty funny. It really does sound like you're saying the casino can't kick you out if you're in the middle of playing some blackjack strategy. "I'm not done yet!" I'm pretty sure everyone retained their ability to get cash out of Robinhood, for whatever that's worth.

No, you are trying to suggest that these are all new blackjack games, not the middle of one. If you are holding 21 and they shut the game down in the middle that is illegal. HALF of robinhood users bought and were holding GME. They were holding 21 and Robin Hood shut them down in the middle, turning their winning hand into a losing hand. That is the difference. When they bought the stock they had absolutely no reason…

If you say so. I think I believe the reporting on the clearing collateral requirements. Sorry.

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

#250

Post by pfisch »

tptacek wrote: post #235
pfisch wrote: post #218

Earlier quoted context omitted.

No, that analogy doesn't fit. Fully half of robinhood users owned GME stock. They were in the middle of a bet. RH created a situation where the stock could only go down. "I think it's like a brokerage that has to post 100% collateral --- out of their money" How is this not the customers money? You deposited 100% of the collateral with RH. Banks can take your money and make loans with it so the bank can make profit, b…

Again, this is pretty funny. It really does sound like you're saying the casino can't kick you out if you're in the middle of playing some blackjack strategy. "I'm not done yet!" I'm pretty sure everyone retained their ability to get cash out of Robinhood, for whatever that's worth.

https://www.reddit.com/r/wallstreetbets/comments/l7em07/cowo...

https://www.reddit.com/r/wallstreetbets/comments/l7bpf5/30_s...

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