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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

#91

Post by paxys »

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…

> Why choose robinhood when the alternatives include some of the most well capitalized institutions in the world

The biggest reason is that none of those world class institutions can actually build a functioning smartphone app

Re: It’s Time for Real Time Settlement

#92

Post by NovemberWhiskey »

justlurkin12 wrote: post #28
olejorgenb wrote: post #24

Earlier quoted context omitted.

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

That's my question as well. I think it's because the customer capital has to be transferred to the counterparty that issued the sell. I imagine that it makes things complicated if the DTCC has to send over 1-10% of this amount and then the brokerage that executed the buy has to send over the rest so, if I had to guess, they did this for simplicity's sake. Btw the requirement to not use customer collateral is enforced…

>Btw the requirement to not use customer collateral is enforced by the DTCC and not at a brokerage level discretion.

No, it's an SEC rule.

Broker dealers can fail, sometimes due to malfeasance but sometimes simply due to bad management or even bad luck.

In a system with a central clearing counterparty (in this case, the NSCC/DTCC), that organization mutualizes those risks by acting as "the seller for every buyer and the buyer for every seller": the process of novation splits each trade between buyer and seller into two. i.e. the seller sells to the NSCC and the buyer buys from the NSCC. Effectively the NSCC is guaranteeing the trades.

The collateral is effectively a security deposit that varies in size depending on how much risk a particular broker dealer is bringing into the system as a whole.

Does it make sense yet why this can't be done with client money?

Re: It’s Time for Real Time Settlement

#93

Post by SpicyLemonZest »

epa wrote: post #45

This post is equivalent to an Op Ed saying World Peace is what society needs. Vlad, we understand you are trying to salvage some of the PR mess that was made by placing the blame on others. This post is lacking substance on next steps and how Robin Hood would like to implement this. While it is not what your Company does, what is your suggestion?

The implicit call is that the SEC should push for it and financial institutions should accept the push. I'm not sure there's much to say beyond that; the basic technological principles behind getting real-time information from the NYSE to DTCC are simple and well-understood. The industry just has to invest the time and money required to make it happen.

Re: It’s Time for Real Time Settlement

#94

Post by [deleted] »

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…

[deleted]

Re: It’s Time for Real Time Settlement

#95

Post by dharmab »

paxys wrote: post #91
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…

> Why choose robinhood when the alternatives include some of the most well capitalized institutions in the world The biggest reason is that none of those world class institutions can actually build a functioning smartphone app

I've been mostly happy with the Charles Schwab app. They also don't charge any fees.

Re: It’s Time for Real Time Settlement

#96

Post by duxup »

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.

I'm not sure that's more simple than different groups taking different actions for their own reasons.

Re: It’s Time for Real Time Settlement

#97

Post by Negitivefrags »

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…

> This was a liquidity issue for robinhood.

The only reason robinhood has liquidity issues is because of T+2 settlement.

I mean why should a broker app need to have liquidity at all. Why restrict the ability to make this type of business to companies with a lot of capital.

Re: It’s Time for Real Time Settlement

#98

Post by tptacek »

IgorPartola wrote: post #69
kzrdude wrote: post #32

Robin hood has been called so many strange names and then gets no recognition when they want to strike at the root of the problem.

The simple issue that I saw with RH is that they restricted the ability to buy stocks like GME but not the ability to sell. It’s one thing to freeze the stock in place. It’s an entirely different thing to basically create a situation where your actions drive the price down while only letting investors sell. I will be honest I don’t entirely grasp the situation, but this seems to me like it was not just a bad PR situa…

Legality aside, imagine being an RH customer with a $300/shr position in GME locked in. Look where the stock is now, and where it's heading.

Re: It’s Time for Real Time Settlement

#100

Post by rodgerd »

PeterisP wrote: post #77
hehehaha wrote: post #15

Earlier quoted context omitted.

There are many reasons but most importantly, delayed settlement serves as fraud deterrent and error/exception handling. Should be T+1 same as options. Think of it as a database, do you want instantaneous non-reversible commits by default when transactions number in the billions with known error rate? Or perhaps have a reasonable buffer for safety?

For cash, pretty much every country has a functioning real time gross settlement system that manages to do essentially instantaneous non-reversible commits by default and carries all the large payments and the netting settlements for all kinds of smaller bundled payments. Yes, there are risks, errors and fraud - but if that's manageable for very, very large amounts of cash, why wouldn't it be for stock?

Most countries do not settle in real-time, or even close to it.

Even ones moving towards it are still allowing 5 - 15 minute windows on settlement.

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