It’s Time for Real Time Settlement • Hacker News Board

Re: It’s Time for Real Time Settlement

#181

Post by kasey_junk » Tue, Feb 02, 2021, 10:46 PM UTC

pokot0 wrote: post #142

astrange wrote: post #89

Earlier quoted context omitted.

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.

My understanding is that it does. One example (there's more like the instant deposit): when you buy a stock with money from another sale not yet settled, you are basically using margin (a loan) and thus RH have cash requirements which are a % of the cost of the trade to be settled. If you don't allow that, and only let people trade on a cash basis after the trades have been settled, you effectively have 100% of the m…

Thats true but do any brokers do that in their apps? Neither my Vanguard nor my Fidelity UI make it obvious when i’m using settled vs non-settled funds.

Re: It’s Time for Real Time Settlement

#182

Post by [deleted] » Tue, Feb 02, 2021, 10:46 PM UTC

Miner49er wrote: post #111

JumpCrisscross wrote: post #105

Earlier quoted context omitted.

> they raised deposit requirements potentially more than was standard What is your source for this? DTCC collateral requirements are calculated using, more or less, a fixed, predictable formula. And the DTCC isn't the ultimate creditor in these arrangements. They are drawing on lines of credit from banks, who are ultimately taking the credit risk of the collateral being insufficient for settlement.

Not completely, they have the right to add charges. Take a look at this tweet: https://mobile.twitter.com/KralcTrebor/status/13551753956420... It seems that they used this right by the fact that Robinhood was able to negotiate their deposit [0]. The DTCC demanded $3 billion. Robinhood negotiated down to $1.4 billion. If done by the formula, how is this possible? [0]: https://www.cnbc.com/2021/02/01/elon-musk-on-clubh…

[deleted]

Re: It’s Time for Real Time Settlement

#183

Post by JumpCrisscross » Tue, Feb 02, 2021, 10:46 PM UTC

clarkmoody wrote: post #163

Side note: cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time.

> cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time

If I sell my Bitcoin on Coinbase, I instantly get the funds in my checking account? Because that's what real-time settlement means.

Blockchains dramatically simplify the clearing part of the equation. That simplification comes with costs, however.

Re: It’s Time for Real Time Settlement

#184

Post by alwayseasy » Tue, Feb 02, 2021, 10:46 PM UTC

NovemberWhiskey wrote: post #133

robocat wrote: post #114

Earlier quoted context omitted.

“ Mr. Denier said that Apex was told by DTCC that collateral requirements had been raised on transactions for GameStop to near 100%.” - https://www.wsj.com/articles/gamestop-trading-restrictions-b...

... and now you will presumably give us an example of a case similar to GME where collateral requirements were not raised so we can see that the treatment was not standard?

Look to similar trades where concentration was as high as for GME.

Re: It’s Time for Real Time Settlement

#185

Post by u678u » Tue, Feb 02, 2021, 10:49 PM UTC

So new entrant joins industry, ruins pricing by giving product away for free, nearly goes under because it over extended itself, and then blames the rules. Yeah I'm sure everyone else wants to do what RH says.

Re: It’s Time for Real Time Settlement

#186

Post by ralph84 » Tue, Feb 02, 2021, 10:50 PM UTC

kasey_junk wrote: post #167

ralph84 wrote: post #161

Earlier quoted context omitted.

Say the national best bid and offer (NBBO) is: Bid: $10.45 Ask: $10.55 You place a limit buy order at $10.55 for 100 shares. $0 commission broker that sells order flow: Your order is routed to the market maker buying your broker's order flow. They sell you the 100 shares for $10.55 since it's within your limit and within the NBBO spread. $5 commission broker: Your broker attempts to price improve by searching multipl…

This is not at all how NBBO works. Effectively all retail brokers sell order flow and if they dont they still dont have any obligation to improve your price beyond NBBO.

> This is not at all how NBBO works

Open to corrections

> they still dont have any obligation to improve your price beyond NBBO

But those that do price improvement use it as a marketing differentiator:

https://www.fidelity.com/learning-center/tools-demos/trading...

https://investor.vanguard.com/investing/online-trading/order...

https://www.schwab.com/execution-quality

https://www.tdameritrade.com/tools-and-platforms/order-execu...

https://www1.interactivebrokers.com/en/index.php?f=47202#bes...

Re: It’s Time for Real Time Settlement

#187

Post by totalZero » Tue, Feb 02, 2021, 10:50 PM UTC

kasey_junk wrote: post #171

atombender wrote: post #149

Earlier quoted context omitted.

"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.

> Lol. You cannot judge your order execution quality as a retail customer.

If you've traded the same listed securities frequently on various platforms, you certainly can. In terms of speed, PFOF systems can hang on to limit orders that are marketable (ie they cross NBBO), technically not printing them outside the confines but taking their sweet time to make a decision about whether to cross the order or post it to an exchange. And once it goes to an exchange, you can also get a feel for how much of the displayed bid or offer you get on one platform versus another.

Re: It’s Time for Real Time Settlement

#188

Post by amznthrwaway » Tue, Feb 02, 2021, 10:52 PM UTC

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.

This is not the root of the problem. This is a distraction. Nothing more.

It sucks that some people (you) are so easily deceived.

The root of the issue was that they issued margin accounts by default, and did not have adequate capital to meet the collateral required when those accounts were used to buy a single volatile name.

There would have been no problem if they issued cash accounts by default; if they raised margin capital as they opened new accounts; or if the users had bought a bunch of VT.

Re: It’s Time for Real Time Settlement

#189

Post by kasey_junk » Tue, Feb 02, 2021, 10:52 PM UTC

gher-shyu3i wrote: post #165

JumpCrisscross wrote: post #120

Real time equities settlement and clearing is a terrible idea. It sounds great. But it breaks a lot of good stuff. I'm surprised the CEO of a brokerage is advocating for it. (The article is a bit loose with the terms settlement and clearing. Again, surprising from the CEO of a company that almost got taken out by internal clearing failures.) If you only think about the American stock market from the perspective of a…

> Not Treasuries. Cash The way it should be. The quicker we do away with interest bearing and yielding assets, the better. It's the cause of the vast majority of the economic mess we're in today. We've literally known about this issue for thousands of years, interest and usury have been prohibited in Islam, Christianity, and Judaism. We still think we're smart and not going to be bitten by the dangers of interest, ye…

I had an interesting conversation with someone who took the view that all short positions were ursary. They had well thought out & logically reasoned from their premises arguments to back that up. I was really glad to hear their position.

It filled me with dread because it would destroy our current agricultural industry. And as much as I recognize the problems with it, “a large percentage of the population starving rapidly” was not an outcome Id endorse because of injunctions from pre-industrial wisrmen.

Re: It’s Time for Real Time Settlement

#190

Post by psychlops » Tue, Feb 02, 2021, 10:52 PM UTC

JumpCrisscross wrote: post #183

clarkmoody wrote: post #163

Side note: cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time.

> cryptocurrency exchanges perform brokerage, settlement, and clearing continuously and in real-time If I sell my Bitcoin on Coinbase, I instantly get the funds in my checking account? Because that's what real-time settlement means. Blockchains dramatically simplify the clearing part of the equation. That simplification comes with costs, however.

Real-time settlement means that if you sell your bitcoin on coinbase, then the currency you bought (say Dollars) is yours to invest fully or withdraw into another account (say your checking account).