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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

#241

Post by matwood »

gher-shyu3i wrote: post #195
kasey_junk wrote: post #189

Earlier quoted context omitted.

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 r…

> who took the view that all short positions were ursary It's more than usury. There is usury involved because "lending" the stock is done with interest. However, the problems don't stop there. Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. This isn't how a stable society should be set up. Furt…

> Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well.

Companies that have inefficiently deployed capital or have problems like a Theranos or Enron should collapse. People keep acting like shorts show up to a company like Apple and take it down. That's not at all what happens. Shorts are a lot like vultures. We may not like to see what they do, but they provide a service by cleaning up dead carcasses.

If you want to argue that shorters spread (dis)information in a company and should be more closely looked at, I might agree. My immediate counter though would be that I see way more positive information spread in general, and people rarely seem to check that until it so blatantly false things collapse.

Re: It’s Time for Real Time Settlement

#242

Post by u10 »

gher-shyu3i wrote: post #195
kasey_junk wrote: post #189

Earlier quoted context omitted.

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 r…

> who took the view that all short positions were ursary It's more than usury. There is usury involved because "lending" the stock is done with interest. However, the problems don't stop there. Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. This isn't how a stable society should be set up. Furt…

Imagine letting companies like Nikola and Valeant Pharma continue to rip off investors.

Re: It’s Time for Real Time Settlement

#243

Post by danhak »

u10 wrote: post #242
gher-shyu3i wrote: post #195

Earlier quoted context omitted.

> who took the view that all short positions were ursary It's more than usury. There is usury involved because "lending" the stock is done with interest. However, the problems don't stop there. Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. This isn't how a stable society should be set up. Furt…

Imagine letting companies like Nikola and Valeant Pharma continue to rip off investors.

If investors believe shares of these companies are a ripoff, they can sell any holdings and / or abstain from buying. Just like they can do in nearly every other type of market.

If a used car salesman is trying to rip me off, I walk away from the deal. I don't need to be able to short his inventory! And the supply / demand dynamics of the used car market will trend toward equilibrium without any such shorting.

Re: It’s Time for Real Time Settlement

#244

Post by tedunangst »

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…

We may not find out this news cycle, but my guess would be they wanted collateral for pending trades, and they eventually agreed on future trades only. The amount RH eventually raised, $3.4 billion, is in line with that.

Re: It’s Time for Real Time Settlement

#245

Post by Traster »

So this is like Facebook releasing a statement saying "It's time we were all nicer to each other" right? That genocide we were helping? You guys should figure that out. Hey guys, you know how you run a successful business clearing trades, and we just had to dilute our share in our company 50% because we fucked up our collateral calcuations?

Well, we've got an idea. You redesign your entire business so that we don't need collateral, and that way, we no longer have our problem.

Also, does anyone find this stupid "we have the best financial system in the world" bullshit a little insulting? It's just jingoistic PR chest beating. Pro-tip: Whenever you're in trouble, talk about how great America is.

I'm waiting for Elizabeth Holmes to release a statement about how the CDC should instruct all humans to encode the disease they have into their blood, because then Theranos would be a home run.

I guess what I'm saying is: If you're running a business, do your job.

Re: It’s Time for Real Time Settlement

#246

Post by NovemberWhiskey »

gher-shyu3i wrote: post #225
NovemberWhiskey wrote: post #220

Earlier quoted context omitted.

> 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…

>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).

A mortgage is a liability, not an asset. You can't take out a loan against a liability. Nothing you're writing here really makes any sense to me, despite the benefit of the doubt.

Re: It’s Time for Real Time Settlement

#247

Post by danhak »

matwood wrote: post #241
gher-shyu3i wrote: post #195

Earlier quoted context omitted.

> who took the view that all short positions were ursary It's more than usury. There is usury involved because "lending" the stock is done with interest. However, the problems don't stop there. Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. This isn't how a stable society should be set up. Furt…

> Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. Companies that have inefficiently deployed capital or have problems like a Theranos or Enron should collapse. People keep acting like shorts show up to a company like Apple and take it down. That's not at all what happens. Shorts are a lot like v…

Theranos collapsed without any shorting involved. Isn't this a counterpoint to the argument that shorting is required for "price discovery" and the unmasking of fraud?

Re: It’s Time for Real Time Settlement

#248

Post by TopInvestor »

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

Wondering if I had $10,000 to invest I would use an app.

Re: It’s Time for Real Time Settlement

#249

Post by psychlops »

satellite2 wrote: post #238
psychlops wrote: post #203

Earlier quoted context omitted.

Clearing crypto doesn't require debt because the broker is doing an internal transaction. If done on-chain, it will be an atomic transaction. Neither require clearing with another firm. Banks don't actually shuttle physical dollars back and forth as most transfer via SWIFT. The physical money banks need is only for teller withdrawals, ATMs or whatnot.

Swift is only a communication protocol it doesn't solve the clearing problem. The clearing problem is really at its core about avoiding to move cash and how to transfer debt between two entities that don't know (and trust) each other, as far fetched as it sounds. When you transfer $1 to a friend of yours that is at another bank, your bank owes you one less dollar and your friend's bank owe him one more. But aginst wh…

Swift is a communication protocol to move digital cash. Once the wire goes through, the next bank has the cash and the last bank doesn't. That solves the clearing problem (for currencies). Yes, the process is sticky as every bank likes to hold the money as long as possible, but ownership is clear and fast.

The clearing problem for OP is with stocks and deal with purchasing and selling from different owners using a regulatory intermediary (DTCC). Getting all those parts coordinated is more challenging.

Re: It’s Time for Real Time Settlement

#250

Post by u10 »

danhak wrote: post #243
u10 wrote: post #242

Earlier quoted context omitted.

Imagine letting companies like Nikola and Valeant Pharma continue to rip off investors.

If investors believe shares of these companies are a ripoff, they can sell any holdings and / or abstain from buying. Just like they can do in nearly every other type of market. If a used car salesman is trying to rip me off, I walk away from the deal. I don't need to be able to short his inventory! And the supply / demand dynamics of the used car market will trend toward equilibrium without any such shorting.

ok, but what incentives does anyone have to actually look at potentially fraudulent situations, especially if the stock is ripping, as in the case of Valeant Pharmaceuticals? In fact the incentives are so perverse that it pays _not_ to state your research on why the company is not worth what it is. Even the time value spent on research is non trivial.

Your example would make more sense if the car they were selling a what may seem as a perfectly fine Lambo, but in actuality it was a lemon. And the only way to find out if it was a lemon or not is to tear it apart piece by piece.

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