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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

#261

Post by pfisch »

kasey_junk wrote: post #253
pfisch wrote: post #204

Earlier quoted context omitted.

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…

In which case I can understand you not being able to buy, because you are buying on margin.

That is not what I'm talking about though. I'm talking about 100% cash.

If you are trading on margin you can get margin called. If you aren't though your broker has no right to do this kind of stuff.

You are suggesting the casino would grab the ball for people who were not using amex. Deeply illegal.

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

#262

Post by kasey_junk »

pfisch wrote: post #261
kasey_junk wrote: post #253

Earlier quoted context omitted.

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…

In which case I can understand you not being able to buy, because you are buying on margin. That is not what I'm talking about though. I'm talking about 100% cash. If you are trading on margin you can get margin called. If you aren't though your broker has no right to do this kind of stuff. You are suggesting the casino would grab the ball for people who were not using amex. Deeply illegal.

Are you suggesting RH should have only restricted new positions to people that A) hadn’t added new money to their accounts and also B) hadn’t liquidated any other positions in the last 2 days?

I suppose you could make that argument and if you wanted to encode that as law I wouldn’t vote against it, but recognize it’s going to manifest in brokerage behavior where you can’t trade as fast or you have to keep more cash in your brokerage account.

[edit] I’d also love for you to cite what law a casino would be breaking by shutting down a game mid roll because I have no direct experience there but my mental model is that Casinos have wide latitude on allowing the games to run or not.

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

#263

Post by pixl97 »

andrewflnr wrote: post #14
caseysoftware wrote: post #9

Earlier quoted context omitted.

On the arbitration front, check out the situation with IndieGoGo and now Patreon. A large number of people acting in concert can fight back against them without going to a class action lawsuit (which are banned anyway). A few years back, the MO for companies was to require arbitration, not participate, and then let it linger forever. California changed the law recently (2019?) where if the company doesn't respond, th…

> where if the company doesn't respond, they "lose" Ah, that sounds like something that should go nation-wide.

Ha, I was wondering why there was so much California hate from businesses. This explains some of it.

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

#264

Post by nrmitchi »

abotsis wrote: post #236
austhrow743 wrote: post #209

Earlier quoted context omitted.

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 manip…

So when they reopened limited trading and prevented people who already had positions from acquiring more, how did that help their case that it was done because of their obligations to their clearing house? If they said “ok, everyone can purchase 5 additional shares” it’d be one thing. But they said “nobody can acquire to own more than 5 shares”. Some of those shares people owned were already settled....

Honestly, as someone who writes software, my first guess is that "per user rate limiting of new, unsettled individual security positions" is most likely not something that was built in to their product. It's also not something to YOLO out into production during an extreme volatility event when people are already mad at you.

Adding a static check of holding was likely much more straight forward.

In traditional Robinhood-style, this decision prioritized growth (allowing new users to still sign up and buy)

I guess a different alternative would have been just selling as much GME until they reach the maximum they could make the obligations for, but then it probably would have been considered less "fair" (if one person could buy 1000 shares, and then no one else can buy any).

You may not agree with Robinhood leadership, or Robinhood as a company (I know that I don't), but this can really be thought of as a #hugops moment where they had to figure out how to track down and address the root of these (multiple) issues in real-time. They most definitely did not come out with the "best" solution.

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

#265

Post by chii »

tgsovlerkhgsel wrote: post #219
protomyth wrote: post #190

Earlier quoted context omitted.

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.

And if there is something their current user base is good at, it's coordinated mass action. So if this is possible, I expect tens of thousands of arbitration cases to be filed by Monday.

I hope that happens. Corporations cannot, and should not be able to TOS their liabilities away.

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

#266

Post by OldHand2018 »

LatteLazy wrote: post #255
perl4ever wrote: post #229

Earlier quoted context omitted.

>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!

Stock trading kind of skyrocketed in the late 1960s. It got to the point where the NYSE had to close on Wednesdays just to catch up with the all the trading paperwork from Monday and Tuesday (Thursday and Friday was handled over the weekend). This led to brokerages buying computers to start to manage everything, just in time for trading volume to crash around 1970 and brokerages going bankrupt left and right because of all the computer investments they made.

Would you be surprised to learn that the exchanges switched to using dollars and cents for quotes and trades only in the 1990s? Prior to that it was dollars and fractions of a dollar (like 1/8, 1/32, etc). Strangely enough, all the fractions used were powers of two and thus could be represented exactly in binary. Now that we use dollars and cents, you don’t get IEEE754 floating point representations for all trades. Progress!

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

#267

Post by MisterSandman »

jerry80 wrote: post #223
gutino wrote: post #216

You can not overwrite a law by making anybody signup user agreement. This was clearly a stock manipulation played in our faces, no need o prove anything. Only left is to see if the justice exist in EEUU.

Yes, and the manipulation doesn't only affect Robinhood customers.

This. It didn't just impact RH users, it impacted the stock price as a whole. Anybody who was holding the stock should be able to join the class action.

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

#268

Post by zenexer »

1vuio0pswjnm7 wrote: post #241
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.archi…

It’s currently being widely reported that RH actively closed users’ positions without their permission and refused to let them cancel the trades. While I can’t personally vouch for this being true, if it is, I would expect that’s a little different from “refusal to execute orders.” (As always, take these anecdotes with a grain of salt: even if widely reported, it could very well be untrue.)

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

#269

Post by pfisch »

kasey_junk wrote: post #262
pfisch wrote: post #261

Earlier quoted context omitted.

In which case I can understand you not being able to buy, because you are buying on margin. That is not what I'm talking about though. I'm talking about 100% cash. If you are trading on margin you can get margin called. If you aren't though your broker has no right to do this kind of stuff. You are suggesting the casino would grab the ball for people who were not using amex. Deeply illegal.

Are you suggesting RH should have only restricted new positions to people that A) hadn’t added new money to their accounts and also B) hadn’t liquidated any other positions in the last 2 days? I suppose you could make that argument and if you wanted to encode that as law I wouldn’t vote against it, but recognize it’s going to manifest in brokerage behavior where you can’t trade as fast or you have to keep more cash i…

I mean most normal brokerage accounts clearly show you when you are buying on margin and exactly how much settled cash you have to trade with. This is not unreasonable, and as far as I am aware is the status quo.

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

#270

Post by woah »

zenexer wrote: post #268
1vuio0pswjnm7 wrote: post #241

Earlier quoted context omitted.

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.archi…

It’s currently being widely reported that RH actively closed users’ positions without their permission and refused to let them cancel the trades. While I can’t personally vouch for this being true, if it is, I would expect that’s a little different from “refusal to execute orders.” (As always, take these anecdotes with a grain of salt: even if widely reported, it could very well be untrue.)

Those were instances of margin trading. That’s how margin works. If your position is too risky, the people you are borrowing money from can close it out.
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