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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

#251

Post by skedaddle »

kasey_junk wrote: post #246
skedaddle wrote: post #243

Earlier quoted context omitted.

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 flo…

Aah ok my mistake, it does look like the "cash" account type is not the default. Thanks for the info.

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

#252

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.

You can clearly see that the price was going to infinity because there weren't enough sellers. This absolutely ruins anyone underwriting options because they now have to immediately cover all outstanding calls at whatever the ask is.

This is what r/wallstreetbets was after. Forcing people to buy at $1000+. Robinhood should've had collateral for people buying stock in all cash. If they don't they are basically a busted bank, and they cheated all GME holders.

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

#253

Post by kasey_junk »

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…

I think one thing people are very confused by is the “all cash” part of your sentiment. If you “deposit” money with Robinhood (or any other broker) and can trade it immediately (or any timeframe less than a few days) you are not trading cash. Cash takes days to move from 1 account to another without taking on credit risk.

Similarly if you sell shares in 1 symbol and buy shares in another in less of a time frame than a few days you aren’t using cash. You are using credit (because it takes days for sales to settle).

All of that credit risk is all currently legislated to go through a few bottlenecks who have the power to enforce their own credit rules.

Analogies are dumb but it would be like if Amex called all the casinos and said “everyone has 90% less credit than they did 2 minutes ago”. If you had a roulette ball running based on your previous credit line at Amex you can bet the Casino would grab that ball. Especially if it had 200k Amex lendees in their pits.

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

#254

Post by tw8345 »

vertis wrote: post #25
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…

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…

Im shutting down my TD ameritrade account because of this. I did not want to trade any of these wacky stocks but its clear to me that in the event of a material market movement or event they will block trades or fail to execute. Thats a real big problem

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

#255

Post by LatteLazy »

perl4ever wrote: post #229
LatteLazy wrote: post #196

Earlier quoted context omitted.

I agree broadly. I think it's just institutional momentum. We could do settlement within minutes for 99% of trades. The only reason we haven't is because 100+ years ago people though 2 days (T+2) was quick and we haven't updated it. The EU is gradually forcing its members to do T+1 and eventually (I think decades in the future) wants same day for most products. That reduces risk and it makes the market fairer (RobinH…

>The only reason we haven't is because 100+ years ago people though 2 days (T+2) was quick and we haven't updated it T+2 has been around since 2017, not for 100 years. It was T+3 before that in the US. Before computers were in use, I believe it took 2 weeks and was gradually reduced to T+3 during the 70s and 80s.

Jesus.

I think I was so lucky to fall into mostly doing front office. Everything back office is like legacy software only it's people and business processes.

Good knowledge, if never have guessed it was so recent!

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

#256

Post by ycombobreaker »

PartiallyTyped wrote: post #215
LatteLazy wrote: post #112

Earlier quoted context omitted.

Yes, because if they'd bought more they'd have lost money, and RobinHood only stopped them buying. "but we could have driven the price up by cornering the market" I hear RobinHood/WSB users say. Maybe, but that would be illegal market manipulation. So if your case is that you lost out because RobinHood wouldn't facilitate a crime, you have a poor case.

Ladder short attack caused the price to drop during the low volume. Every time artificial limits were imposed by RH, the price dropped in __all__ the restricted stocks. That is when they restricted shares to 0, or to 2, and subsequently to 1, and again to 0. On Friday, there were puts expiring and HFs stood to lose a lot, they didn't, and the answer is obvious as to why.

Everything I can find online about this "ladder short attack" points to the GME activity. Does anybody have any explanation for this that predates the last week? This is not the first short squeeze, nor the first outage for retail traders during a volatile period. The only explanation I see on reddit refers to hedge funds lowering their bids, which isn't sufficient to explain the market actually dropping (there were other buyers out there, and market makers). Anyone can put in a lowball bid but it doesn't matter if it's far off-book.

What does make sense to me is that cutting off a substantial amount of retail flow would reduce buying pressure, causing all market participants to regain at least a little confidence in a reversion to the mean. It just seems pretty tinfoil-hatty to me to view this as some sort of elite cabal, as if RH and Citadel were somehow the only participants who could effect price changes.

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

#257

Post by _trampeltier »

LatteLazy wrote: post #196
_trampeltier wrote: post #193

Earlier quoted context omitted.

I don't trade stocks at all, I just played a bit around with crypto for some years. For me it seems, as traditional stock exchanges looks like in stone age compared to the crypto world, when I really need days to make the deal in the background. Also then I don't understand how it needs one one side days to make the deal and on the other side there exist HF traders, who do many, some say as many as 1000 trades per se…

I agree broadly. I think it's just institutional momentum. We could do settlement within minutes for 99% of trades. The only reason we haven't is because 100+ years ago people though 2 days (T+2) was quick and we haven't updated it. The EU is gradually forcing its members to do T+1 and eventually (I think decades in the future) wants same day for most products. That reduces risk and it makes the market fairer (RobinH…

Don't blame Cobol for the 2 days. Cobol might have old roots, but I'm sure it's many many times faster as all the fancy JavaScript and Python stuff.

It's just because because the Exchanges are lazy and did not care until now.

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

#258

Post by LatteLazy »

ycombobreaker wrote: post #256
PartiallyTyped wrote: post #215

Earlier quoted context omitted.

Ladder short attack caused the price to drop during the low volume. Every time artificial limits were imposed by RH, the price dropped in __all__ the restricted stocks. That is when they restricted shares to 0, or to 2, and subsequently to 1, and again to 0. On Friday, there were puts expiring and HFs stood to lose a lot, they didn't, and the answer is obvious as to why.

Everything I can find online about this "ladder short attack" points to the GME activity. Does anybody have any explanation for this that predates the last week? This is not the first short squeeze, nor the first outage for retail traders during a volatile period. The only explanation I see on reddit refers to hedge funds lowering their bids, which isn't sufficient to explain the market actually dropping (there were…

Agreed.

I wondered if it was autocorrect but it's all over reddit too.

As best as I can see, they're saying the price falls if hedge funds decide to lower the bid price. That doesn't make much sense to me, but I'm not (quite) all knowing so...

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

#259

Post by dane-pgp »

andrewflnr wrote: post #19

Who is trying to sue Reddit for this? Bringing them up just sounds like building a case for repealing Section 230 of the DMCA, which would be a disaster but nevertheless seems to have bipartisan support.

Just to be clear, the DMCA is not the law you're thinking of:

"Section 230 is a piece of Internet legislation in the United States, passed into law as part of the Communications Decency Act (CDA) of 1996 (a common name for Title V of the Telecommunications Act of 1996), formally codified as Section 230 of the Communications Act of 1934 at 47 U.S.C. § 230."

https://en.wikipedia.org/wiki/Section_230

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

#260

Post by LatteLazy »

_trampeltier wrote: post #257
LatteLazy wrote: post #196

Earlier quoted context omitted.

I agree broadly. I think it's just institutional momentum. We could do settlement within minutes for 99% of trades. The only reason we haven't is because 100+ years ago people though 2 days (T+2) was quick and we haven't updated it. The EU is gradually forcing its members to do T+1 and eventually (I think decades in the future) wants same day for most products. That reduces risk and it makes the market fairer (RobinH…

Don't blame Cobol for the 2 days. Cobol might have old roots, but I'm sure it's many many times faster as all the fancy JavaScript and Python stuff. It's just because because the Exchanges are lazy and did not care until now.

Sorry, I'm not blaming cobol. I have a lot of respect for the older languages. Anything that old works, and the people who made it were engineers in the true sense of the word.
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