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It’s Time for Real Time Settlement

blog.robinhood.com

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Re: It’s Time for Real Time Settlement

#81

Post by dlubarov »

olejorgenb wrote: post #24
justlurkin12 wrote: post #18

Earlier quoted context omitted.

Real time securities wouldn't need brokerages to front collateral while the trades settle by the virtue of no settling period. They would only have to deal with customer capital used to buy the stock.

I still don't get why customer capital can't be used as collateral. Which scenario is this rule protecting the customer from?

I think the problematic scenario is when the customer wants to buy a security using the proceeds of a recent sale, which hasn't settled yet. Since the proceeds haven't made it to the broker's bank account yet, the broker would use their own capital in the interim.

Re: It’s Time for Real Time Settlement

#82

Post by notsureaboutpg »

imcoconut wrote: post #72

This is robinhood's fault. He's not wrong that instant (or same day) settlement would be better than T+2, but there were plenty of other brokers that did not restrict trading. This was a liquidity issue for robinhood. This is a risk you run being a "cool startup that moves fast and breaks things" in the arena of securities trading. Additionally, Some of the bugs they've experienced are absurd in the context of a brok…

Yeah, you can open a Fidelity account with no minimum and get commission free trades and their app is great.

What advantage does Robinhood have in comparison? Outages and low liquidity?

Re: It’s Time for Real Time Settlement

#83

Post by AmericanChopper »

imcoconut wrote: post #72

This is robinhood's fault. He's not wrong that instant (or same day) settlement would be better than T+2, but there were plenty of other brokers that did not restrict trading. This was a liquidity issue for robinhood. This is a risk you run being a "cool startup that moves fast and breaks things" in the arena of securities trading. Additionally, Some of the bugs they've experienced are absurd in the context of a brok…

I agree that this is robinhoods fault, and that they have been deceptive in their PR about this, and that their UX workflows are misleading about what’s actually happening...

But, plenty of other brokers had the same issue. Including Merrill for instance. I would say that the more concerning issue that this has highlighted is how this part of the system gives large institutions greater access to markets than retail investors get. Addressing a systemic flaw like this seems like the best possible thing that could come out of this controversy.

Re: It’s Time for Real Time Settlement

#84

Post by pokot0 »

imcoconut wrote: post #72

This is robinhood's fault. He's not wrong that instant (or same day) settlement would be better than T+2, but there were plenty of other brokers that did not restrict trading. This was a liquidity issue for robinhood. This is a risk you run being a "cool startup that moves fast and breaks things" in the arena of securities trading. Additionally, Some of the bugs they've experienced are absurd in the context of a brok…

They are diverting the attention from their core problem: lack of transparency. I had a RH account for years and I didn't know it was a margin account (be sure: I did not signup for their "margin" service). All RH account are margin accounts even if they feel like cash accounts (but with T+0 settlement). This is what triggered their cash problems and what drives people crazy now: a user feels they gave them 100$ to buy 100$ of stocks, while what happens is that you get a loan and they buy some form of stock in their name while committing to you for the value of one stock. Robinhood is the facebook of finance. I moved my money out of them.

Re: It’s Time for Real Time Settlement

#86

Post by jcranmer »

bobthebuilders wrote: post #66
swampthing wrote: post #59

Earlier quoted context omitted.

Does there have to be one single explanation for 3 separate events?

Occam's razor. The fact that someone said take down WSB is way simpler than any alternative.

Except you're missing the explanation as to why all of the actors have a reason to listen to that person. That's where things stop being simple.

Re: It’s Time for Real Time Settlement

#87

Post by unethical_ban »

ZephyrBlu wrote: post #49
unethical_ban wrote: post #43

Earlier quoted context omitted.

I think the point is, the effect of that sudden change was the screwing over of retail investors at the expense of funds and firms that weren't locked out. And that RH should have seen this coming if it were all "by the book". And how the hell can those fees go up so instantly? If we're going to be all "free market" about how only the strong survive, RH should be eliminated.

It _was_ by the book and they _should_ have seen it coming. "How do clearinghouses determine how much is required? It’s pretty technical, but the process basically works as follows: clearinghouses look at a firm’s customer holdings as a portfolio. They use a volatility multiplier, looking at specific stocks, to quantify their risk. The clearinghouse may assign significant additional charges based on how much of one s…

Do you agree, then, that RH should be punished, if not dismembered as an entity, for incompetence leading to billions in stock losses?

Re: It’s Time for Real Time Settlement

#88

Post by notsureaboutpg »

ForHackernews wrote: post #46

Yeah, I'm not gonna trust the company that can't write code to handle leap years[0] to do real-time anything. [0] https://www.reddit.com/r/wallstreetbets/comments/fcoaev/and_...

Not only couldn't write code to handle it but couldn't patch code which mishandled it after it failed publicly!!!

How do you have the same leap year bug 4 years later??

Re: It’s Time for Real Time Settlement

#89

Post by astrange »

pokot0 wrote: post #84
imcoconut wrote: post #72

This is robinhood's fault. He's not wrong that instant (or same day) settlement would be better than T+2, but there were plenty of other brokers that did not restrict trading. This was a liquidity issue for robinhood. This is a risk you run being a "cool startup that moves fast and breaks things" in the arena of securities trading. Additionally, Some of the bugs they've experienced are absurd in the context of a brok…

They are diverting the attention from their core problem: lack of transparency. I had a RH account for years and I didn't know it was a margin account (be sure: I did not signup for their "margin" service). All RH account are margin accounts even if they feel like cash accounts (but with T+0 settlement). This is what triggered their cash problems and what drives people crazy now: a user feels they gave them 100$ to b…

This has nothing to do with being a margin account, it's DTCC requirements related to wanting to buy the same stock everyone else at the same broker also wants to buy.
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