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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

#171

Post by kasey_junk »

atombender wrote: post #149
nprz wrote: post #112

Earlier quoted context omitted.

Zero commission trade is actually bullshit anyway. You end up losing more from inferior execution time than you would if you just paid the $5 per trade. Robin Hood also lied to users about this and ended up paying a $65 million fine[0]. [0] https://www.sec.gov/news/press-release/2020-321

"Not charging $5 per trade" implies that other brokerages such as Schwab, Fidelity, and TD Ameritrade — which haven't been penalized by the SEC — suddenly offered poorer order execution when they dropped their commissions, which by all accounts they did not. They all experienced declines in revenue. What Robinhood did was to lie about their execution. They claimed their trade prices were as low as other brokerages, w…

Lol. You cannot judge your order execution quality as a retail customer. It takes the SEC years of investigation to do that. Its certainly not something retail brokers compete on.

Robinhood lied and should be punished but they were penalized for doing so before other brokers had gone to $0. It remains to be seen what happens at the other brokers now that they are free.

Re: It’s Time for Real Time Settlement

#172

Post by unethical_ban »

biswaroop wrote: post #124
paxys wrote: post #91

Earlier quoted context omitted.

> 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 used Fidelity for many years: the app is excellent.

My first thought logging into their mobile app and desktop was "Jesus Christ this is terrible". Maybe it is functional, but RH knocks UI out of the park.

Re: It’s Time for Real Time Settlement

#173

Post by swampthing »

amluto wrote: post #136

I have seen on Twitter that Robinhood was unable to use customer funds to satisfy clearing deposit requirements, but I couldn’t find an actual authoritative source on this. Is this correct? It seems to me that, to secure a $300 purchase buy a customer, Robinhood ought to be able to use that customer’s $300.

They are legally prohibited from using the customer's funds for the deposit requirements.

Re: It’s Time for Real Time Settlement

#174

Post by swampthing »

TopInvestor wrote: post #147
amluto wrote: post #136

I have seen on Twitter that Robinhood was unable to use customer funds to satisfy clearing deposit requirements, but I couldn’t find an actual authoritative source on this. Is this correct? It seems to me that, to secure a $300 purchase buy a customer, Robinhood ought to be able to use that customer’s $300.

RH is giving a loan - these are margin accounts. That is why it had to raise $ billions.

They do have margin accounts, but as I understand it, that was not what caused these deposit requirements to shoot up. I.e. the margin accounts were not what caused the problem.

Re: It’s Time for Real Time Settlement

#175

Post by bob1029 »

bionhoward wrote: post #152

I find it surprising to see Robinhood leadership call for increased speed, when they haven't launched a public API...

I am not surprised they haven't made an API public yet. Looking at how razor-thin their operational margins have been on IT and financial fronts, any hypothetical added load from traders trying to algorithmically hammer some API is probably going to wind up in disaster.

I cannot speak for all of the engineering that goes down at Robinhood, but the way their web-based trading interface performed for me was regrettable at best. Never was able to load my history in that interface without my browser getting javascript timeout warnings. Always had to go back to my phone to see what dividends I got paid out. This sort of problem, which strongly-encouraged me to switch to a different broker, does not give me much confidence that other areas of engineering at Robinhood are handled much better.

Re: It’s Time for Real Time Settlement

#176

Post by amznthrwaway »

Miner49er wrote: post #101
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 think this is jumping the gun. Robinhood takes some fault yes, but why are people ignoring the DTCC/clearinghouses role in this? It seems they raised deposit requirements potentially more than was standard. This needs to be investigated. WeBull's CEO claimed their clearinghouse told them to stop selling these securities (no mention of deposit requirements). If they really weren't even given an option to deposit mor…

The deposit requirements were set exactly the way they’re always set.

RH’s main issue was that they had tons of customers with margin accounts, but they didn’t have enough cash to serve as collateral on that margin, when it was used to buy something risky.

It’s just a poorly capitalized, poorly run brokerage with shitty risk controls, but a very shiny and easy to use UI.

Re: It’s Time for Real Time Settlement

#177

Post by dragonwriter »

TopInvestor wrote: post #143
wtf_is_up wrote: post #121

Earlier quoted context omitted.

How is this possible when I use limit orders? (not a robinhood user btw, but pretend I am)

The general recommendation is never use limit orders - do not reveal your intention to the other side.

I've seen recommendations to never use market orders; I've never seen one against limit orders.

Re: It’s Time for Real Time Settlement

#178

Post by gonehome »

biswaroop wrote: post #124
paxys wrote: post #91

Earlier quoted context omitted.

> 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 used Fidelity for many years: the app is excellent.

I use Fidelity - the app sucks.

It may be 'excellent' relative to competitors in "shitty old financial company app" space, but it is in no way excellent compared to a high quality phone app.

Robinhood is successful because their software is actually good. My bullish case for them would be them leveraging this capability as a way in to becoming a Fidelity sized financial competitor.

Their CEO's inability to honestly communicate with the public is hurting them though. He should have lead with their liquidity clearing house issues and directly addressed the apparent conflict of interest. He appears to either be unwilling or incapable of doing this.

They've now after the fact explained some of the clearing house issues, but they still act as if they don't understand the conflict of interest question. Just address it directly.

When Elon asked him about it he should have said something like, "I can see why people would think we'd be under pressure from the funds that buy our order flow, but we live and die by our retail reputation and would not risk that to illegally coordinate with these funds. We'd go direct to our retail customers first. That said, we were not asked to do what we did or pressured by them, we had to make choices on the fly to stay liquid and in that craziness I failed to communicate what we were doing in real time to our users - that was my failure".

Instead he mostly dodged the substantive question and came across as full of shit (only addressing the narrow aspects not really in dispute). I think this could be the truth, but when paired with him lying on TV about their liquidity issues it leads me to distrust him, and by extension the company.

I suspect the reality is something in the middle, considering what RH's customers (the funds) would want, fear of mentioning their liquidity issue causing a run, and the clearing house concern. He handled this poorly.

Re: It’s Time for Real Time Settlement

#179

Post by satellite2 »

wtf_is_up wrote: post #121
nprz wrote: post #112

Earlier quoted context omitted.

Zero commission trade is actually bullshit anyway. You end up losing more from inferior execution time than you would if you just paid the $5 per trade. Robin Hood also lied to users about this and ended up paying a $65 million fine[0]. [0] https://www.sec.gov/news/press-release/2020-321

How is this possible when I use limit orders? (not a robinhood user btw, but pretend I am)

If, by the time your order reaches the book, there is a better price than your limit, you are entitled to it.

That is the best execution obligations of your broker.

In RH case, their intermediary bought at the better price and resold it to you at your ask, keeping the difference.

Re: It’s Time for Real Time Settlement

#180

Post by totalZero »

humanlion87 wrote: post #128
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…

If companies like Robinhood don't come along, how do you think disruption in the financial market will happen? If we always go back to the existing players, rate of innovation will be so slow (especially in the financial market). And it's obvious that startups will not have the same amount of assets that century old companies have. But JPMorgan or BofA did not earn their trillions overnight. In fact, we can even say…

Is an obsession with "disruption" over "improvement" wise for a system that moves hundreds of billions of dollars every day?

We were on T+3 a few years ago. Now we're on T+2. That wasn't the result of some whiny blog post, it was the result of gradual and careful operational improvements. There's a lot of work that goes on in the back and middle offices of those century-old companies.

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