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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

#221

Post by astrange »

IgorPartola wrote: post #198
astrange wrote: post #80

Earlier quoted context omitted.

They didn't do anything wrong, they are not allowed to restrict sales, and they were forced to restrict buys because you can't get $3 billion collateral overnight.

Then why are they in this business if they don’t have the collateral? If I have the money in my RH account to buy the stock, why can’t I buy it? I understand restricting buying on margin because obviously that’s affected by volatility, but if I am bringing cash to a transaction, why is it suddenly restricted? I don’t really have a horse in this race, I am just trying to understand how it’s ok for them to put their th…

> Then why are they in this business if they don’t have the collateral?

The grocery store doesn't deserve to go out of business if they run out of paper towels sometimes.

> but if I am bringing cash to a transaction, why is it suddenly restricted?

They can't use your cash as collateral due to preexisting rules (part of new regulations after 2008). They have to use their own, and in this case it wasn't infinite.

Re: It’s Time for Real Time Settlement

#222

Post by Traster »

swampthing wrote: post #202
u678u wrote: post #185

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.

"nearly goes under because it over extended itself" is not really accurate. They took the steps necessary to prevent that from happening, by blocking the behavior that would have led to that. Unfortunately, those steps, in combination with poor communication on Robinhood's part, and emotion, ignorance, and paranoia on the part of the general public, has led to a PR crisis for them.

They didn't block behaviour that would lead to that. They disabled their core product and raised $3.4 billion in a week to cover their fuck up. Most likely, the founders of RH found themselve significantly diluted by this event and if they hadn't been able to raise more capital they likely would've gone bankrupt even if they disabled everything. That's pretty much the definition of over-extending yourself.

Re: It’s Time for Real Time Settlement

#223

Post by kasey_junk »

atombender wrote: post #217
kasey_junk wrote: post #171

Earlier quoted context omitted.

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.

The SEC judgement was on Dec 17, 2020. Schwab announced commission-free trading on Oct 7, 2020. IBKR dropped their fees (for IBKR Lite) in September that year.

The judgement was for behaviors between 2015 and 2018.

https://www.sec.gov/news/press-release/2020-321

Re: It’s Time for Real Time Settlement

#224

Post by totalZero »

astrange wrote: post #80
IgorPartola wrote: post #69

Earlier quoted context omitted.

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…

They didn't do anything wrong, they are not allowed to restrict sales, and they were forced to restrict buys because you can't get $3 billion collateral overnight.

> you can't get $3 billion collateral overnight.

Tell that to Melvin Capital.

https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...

Re: It’s Time for Real Time Settlement

#225

Post by gher-shyu3i »

NovemberWhiskey wrote: post #220
gher-shyu3i wrote: post #213

Earlier quoted context omitted.

> Capitalism is predicated on the ability to loan out money. If that's true, then it's fundamentally broken (assuming interest bearing loans of course). You will never have a sustainable economic system that is based on interest bearing loans, we see it all the time with people waiting for the next crash to happen. > No debt means no credit for new businesses Not true. There are moral alternatives. If you want to sta…

> Mortgages artificially increase property prices, continuing the cycle. There are alternatives that don't involve interest. You see it all the time in the auto industry where they have 0% loans. Do the same with houses. If your perspective is that artificial bubbles in asset prices will be reduced by lowering the cost of borrowing (i.e. no interest) then you're going to have to explain that, because it's the opposit…

When did we have 0% interest on houses in modern times? I said that mortgage interest contributes to bubbles, not that it's the only cause. Interest is more insidious, because it allows people who have wealth to gather even more wealth without putting in the appropriate risk to balance it, giving them the luxury to purchase assets easily, contributing to those bubbles somewhat indirectly.

However, because of interest, those same wealthy people have an even bigger advantage. They take out mortgages, and after a while they can take out loans on said mortgages to acquire even more assets. It's genius really (in a very evil way).

These things are very interconnected. Just banishing mortgages won't solve the issue. The economic system has to be fundamentally turned over.

Re: It’s Time for Real Time Settlement

#226

Post by totalZero »

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…

The reason that I agree with you is that Robinhood's actions spooked buyers, and long-holders who are Robinhood customers lost money as a result...not to mention allowing covering shorts to front-run the retail demand.

Re: It’s Time for Real Time Settlement

#228

Post by cameldrv »

justapassenger wrote: post #210
Forge36 wrote: post #125

Earlier quoted context omitted.

In the U.S. the Federal Reserve is already planning to support it. Thread discussing it from a few days ago.: https://news.ycombinator.com/item?id=25982987

It’s only for small money transfers, up to $25k last time I’ve looked at it.

For bigger transfers, the $10-20 fee for a fedwire is no longer much of a factor, so people will just use that.

Re: It’s Time for Real Time Settlement

#229

Post by totalZero »

barnabee wrote: post #219
totalZero wrote: post #211

Earlier quoted context omitted.

Slower settlement gives the exchange and clearinghouse time to process the trade, it gives firms time to borrow cash overnight in the repo market to pay for trades made by the front office, it gives short-sellers time to borrow and deliver shares, and so forth. T+1 means overnight (options settle this way), so T+2 gives everyone in the world (sometimes you trade from one region for a legal entity in another) a little…

These are terrible reasons. Time to process the trade should be zero if systems are designed properly. If you need to borrow cash to trade you should do it first, etc. If some participants want to stay slow, bear more risk, require more capital, etc... let them. But the rest of the financial system shouldn't be held back because of them. Time for instantaneous settlement, across the board. This will never happen if w…

A San Francisco approach to a New York problem.

Re: It’s Time for Real Time Settlement

#230

Post by totalZero »

atombender wrote: post #215
totalZero wrote: post #212

Earlier quoted context omitted.

...And then we would need arbitrageurs to keep the fast NBBO in line with the slow NBBO, so that people in the two pools can trade with each another.

Why? This only affects settlement, not execution. Execution is already "real time".

Because the trade has two sides that have to agree on settlement terms.
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