291–300 of 445 posts
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From what I understood from his comment, he was worried about how shorting would cause the collapse of the agricultural sector, so agreeing with you that it's a bad and dangerous practice.
No the opposite. I believe that modern agriculture would collapse without short positions. I concede this is largely an act of faith on my part.
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Using brokerages that are sufficiently capitalized to clear the trades you want to make. You might have to pay fees to do that. Having other people assume credit risks on your behalf usually costs some money.
That’s fair, but again if I am not trading on a margin and using my own money, where exactly does their capital come into play?
DTCC protects brokerages from each other. Brokerages post collateral to insure each other in case a brokerage fails, and the customers, at other brokerages, on the other sides of the trades from the failed broker, need to be made whole. The clearinghouse isn't insuring against you the customer not being there with the $15 to buy your GME share tomorrow. It's insuring against something horrible happening at Robinhood that zeroes out all its accounts, drives it out of business, traps all its staff in a deep sea diving bell, that kind of thing.
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 n…
Where are you reading that they messed up their collateral calculations?
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> 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.
They aren’t a grocery store. If they were out of GME stock to buy nobody would hold it against them. That wasn’t the case. I clearly don’t understand the regulations around this. It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no? And it’s also a problem that their inability to trade that stock affects the price. So what…
> It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no?
If a stock is volatile you should not be buying it, that's how you lose money. The people who profit are market makers like RH's Citadel, who get paid on every trade.
> And it’s also a problem that their inability to trade that stock affects the price. So what is the correct solution here?
Technological improvements like the one RH's CEO wrote this article about. Btw, for reasons I've forgotten RH's collateral issues got even worse as the price went down again - if it kept going up it'd actually be more possible for them to continue providing buys.
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In your hypothetical example, a stock is going up and up, and I suspect it might be fraudulent, and you believe I have no incentive to pull my money out before the house of cards collapses? Getting my money out is all the incentive I need! I bet plenty of Theranos investors would've loved to do exactly that. And there was no shorting involved in that company.
The question they are asking is if it’s going up & up what will ever cause it to go down? The standard answer is the government. Which is fine but reduces a moral position to an operational one.
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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 c…
Re: Fidelity, by excellent I mean: it does what I want it to do, and the UI is clear enough. To be fair, I'm an infrequent trader who mainly uses Fidelity for banking, so I don't spend much time on the app. I'm also willing to sacrifice UI flashiness for a functional service that doesn't block me from trading when I do.
[ETA: I believe there's a lot to be said, and has been said, for ugly functional UIs that outlast fancier competition. The archetype is craigslist]
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No the opposite. I believe that modern agriculture would collapse without short positions. I concede this is largely an act of faith on my part.
How so? Shorters push stock down, so how does it benefit the agriculture industry?
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Where are you reading that they messed up their collateral calculations?
They ended up in a situation where they had to prevent trading, draw down their entire credit lines and then do another funding round to shore up $3.4Bn - it's pretty clear they fucked up their collateral.
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That’s fair, but again if I am not trading on a margin and using my own money, where exactly does their capital come into play?
The money you put up to buy a stock is your money. SEC rules require that it be kept segregated. It is at no point available for your brokerage to post as collateral for its own risks. DTCC protects brokerages from each other . Brokerages post collateral to insure each other in case a brokerage fails, and the customers, at other brokerages, on the other sides of the trades from the failed broker, need to be made whol…
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They aren’t a grocery store. If they were out of GME stock to buy nobody would hold it against them. That wasn’t the case. I clearly don’t understand the regulations around this. It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no? And it’s also a problem that their inability to trade that stock affects the price. So what…
They effectively were "out of GME stock". They usually have to put up 10% (or something) per share collateral with DTCC to send out more buys, but the volatility meant that it went up to 100% collateral, so they couldn't afford to allow purchases. This happens based on a formula where one of the factors is GME being the #1 stock being purchased that day on RH. > It seems to me that when stock is volatile is exactly w…