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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

#301

Post by myWindoonn »

unethical_ban wrote: post #87
ZephyrBlu wrote: post #49

Earlier quoted context omitted.

It _was_ by the book and they _should_ have seen it coming. "How do clearinghouses determine how much is required? It’s pretty technical, but the process basically works as follows: clearinghouses look at a firm’s customer holdings as a portfolio. They use a volatility multiplier, looking at specific stocks, to quantify their risk. The clearinghouse may assign significant additional charges based on how much of one s…

Do you agree, then, that RH should be punished, if not dismembered as an entity, for incompetence leading to billions in stock losses?

This is the same fallacious argument that media cartels use to claim that copyright infringement "costs" them and incurs "losses". No, this is unrealized revenue, and that's generally not punishable by law; there have to be specific circumstances which would indicate fraudulent behavior.

RH is trying their best to stay afloat and carry out their fiduciary duty, and it seems that the incompetence is not with RH but with the many users who misunderstood how RH works.

(To be clear, we should dismember the entire system of short-selling shares of corporations, for the billions of dollars worth of damages and injuries which are done to the employees of those corporations and the social fabric. But that is not the same as revoking RH's charter.)

Re: It’s Time for Real Time Settlement

#302

Post by adjkant »

paxys wrote: post #193
adjkant wrote: post #127

Earlier quoted context omitted.

Merrill Edge is ugly but quite functional and featured on iOS. Same with Schwab. I don't need the "millennial" UI experience when moving thousands of dollars. And that's not to say it doesn't have value - I love it for many things. I'm a happy customer of Warby Parker, Brooklinen, Joybird, and Lemonade to note a few, all of which offer slick UI's and a bit of markup for a "just works, simply" experience. I much prefe…

You don't need a good UI experience the same way my dad doesn't need a "fancy website thing" because he can easily call his stock broker to make the trade. But if these companies don't evolve they are going to keep losing younger millennials and beyond to Robinhood as time goes on.

That's a huge mischaracterization of what I said.

As I made clear, I clearly do value UI/UX and I'm not some old person making trades over the phone (I'm 24, directly in the Robinhood demo). What I'm saying is that in this specific use case, it's not nearly as important as correctness/reliability, which Robinhood has a terrible history with. An improved UI could be a factor that would draw me away, but there are simply more important things when it comes to where to bank my savings.

Again, the point here is that there's not a huge gap that people seem to try to say there is. They have a fully working website, apps, etc. They're regularly updated and all, see UI refreshes, the usual. Trading may take 4 clicks instead of two, but it's just so much more minor than people claim.

> if these companies don't evolve they are going to keep losing younger millennials and beyond to Robinhood as time goes on

Maybe to other companies, but I think Robinhood may never recover from this. Whoever does draw these away will have to offer bank-level correctness standards in addition to the nice UX. I'd be willing to bet Robinhood had a steady stream of bigger players leaving the platform as they got older because the product is optimized for new investors, not long term financial management. Maybe that niche of new investors is all they need, but their UX won't keep those who age/grow out of that type of user IMO.

Re: It’s Time for Real Time Settlement

#303

Post by iabacu »

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…

I think you’re making cash a bigger deal than it is.

If you have collateral that can also be transferred in real-time, can’t that back a cash loan immediately with extremely low interest costs?

Re: It’s Time for Real Time Settlement

#304

Post by gonehome »

biswaroop wrote: post #296
gonehome wrote: post #178

Earlier quoted context omitted.

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…

Well that's a long reply, and I agree with you by and large. RH has a bright future if they communicate better with their users. 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 bl…

It sounds like we probably agree on most things and use fidelity in roughly the same way.

I’d argue Craigslist’s design is ugly, but quite good - it’s dense/high bandwidth, does exactly what people want without fluff. It’s fast. They also benefit a lot from network effects, but even ignoring that I think the website does a pretty good job doing what it's supposed to and is easy to use.

Fidelity is ugly and bad. Hundreds of hidden menus. Many things can’t be done via the app. Some actions require a phone call. Options trading sucks.

For an example, I wanted to wire my rent. The place to do this is via transfers.

Specifically: Transfer -> to bank account -> that I do not own.

That’s the flow to wire money to an external person. It’s not obvious and buried and it can only be done on a desktop.

Automated deposits are similarly cumbersome.

The app is also quite slow and the login flow is painful.

Re: It’s Time for Real Time Settlement

#305

Post by totalZero »

kasey_junk wrote: post #197
totalZero wrote: post #187

Earlier quoted context omitted.

> 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…

You can make a lot of money proving that. Nanex made a bit of a cottage industry whistleblowing on that sort complaint.

There's no money in proving that different brokers have varying execution quality, and it's not a regulatory requirement to execute instantaneously. I'm not sure how Nanex figures into it; there's nothing nefarious involved.

If I am in New York and I send a limit buy order to Schwab that is two cents through the offer, Schwab may route my order to a market-maker in Chicago who uses a decision model to either take the other side of my order on the offer, or post my limit order to the exchange with the best offer. Let's say the market-maker doesn't want to sell me the security and routes it to an exchange in Miami. By the time he posts the bid, the offer may have moved and my limit order may no longer be marketable. That doesn't mean Schwab broke the law. Routing orders between computer systems and making risk decisions takes nonzero time, and factors like latency and exchange fees can affect where the order goes and when it arrives.

Re: It’s Time for Real Time Settlement

#306

Post by vl »

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.

If you sell Bitcoin on Gemini for dollars, you can instantly wire dollars to your checking account at your bank. (Haven’t tried Coinbase, so can’t say).

Re: It’s Time for Real Time Settlement

#307

Post by vageli »

gher-shyu3i wrote: post #279
NovemberWhiskey wrote: post #246

Earlier quoted context omitted.

> 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 dou…

You can take out a loan on an existing mortgaged asset after you built some equity into it, especially if the asset increased in price during that period. You don't have to have paid it off. It goes to show how evil the entire setup is. It's basically laying domino blocks, the moment something happens, the entire thing collapses.

> You can take out a loan on an existing mortgaged asset after you built some equity into it, especially if the asset increased in price during that period.

Is not a mortgage very similar to owning X% of a thing? Like, if I had a mortgage for $100,000 and I've paid $10,000 towards it, it's almost akin to owning 1/10 of the house (which would play out in the event of liquidation, all other things equal). That real estate tends to rise in value as an asset class is tangential to the topic of usary. It seems plain to me that there is a concept of the current value of something versus the future value of something, with the difference being expressed as interest (to some degree)?

Re: It’s Time for Real Time Settlement

#308

Post by lazide »

iabacu wrote: post #303
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…

I think you’re making cash a bigger deal than it is. If you have collateral that can also be transferred in real-time, can’t that back a cash loan immediately with extremely low interest costs?

What collateral can be transferred in real time that would not also get caught up in market issues that would likely cause counterparty risk of some sort? Even US treasuries vary in price on a day to day basis, based on market conditions.

Cash is the only thing with an agreed upon fixed value

Re: It’s Time for Real Time Settlement

#309

Post by amluto »

swampthing wrote: post #173
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.

Do you have a citation for this? I found an relatively old FINRA document that sort of seemed to say the opposite, but it wasn’t obviously in reference to stocks and I think it also predated Dodd-Frank.

Re: It’s Time for Real Time Settlement

#310

Post by krick »

totalZero wrote: post #234
krick wrote: post #162

I'm really ignorant about all this securities trading stuff. Can somebody enlighten me to what this change actually means? Or maybe point to some "beginners guide", after which I'd understand what he is talking about?

T+0 means securities and funds change hands instantaneously (or maybe EOD) rather than on the present two-day lag. That two-day process is managed by a clearinghouse that requires members like Robinhood to put up large amounts of money, which Robinhood doesn't have in spades, for clearing and collateral. He's trying to blame that requirement for Robinhood's most recent miserable failure.

That far I could vaguely guess, but I don't see any connection between these fact.

First off, what do you mean by "Robinhood's most recent miserable failure"? The story as I know it: WSB pumped up GME, somebody (Melvin's Capital) majorly fucked up and lost money, somebody (Blackrock, Citadel, some lucky traders) gained something from the situation, basically, business as usual. Then Robinhood screwed over it's customers, by forbidding them to perform some operations, motives for which remain questionable and may result in a prosecution (because of affiliation with Citadel), but AFAIK that's very theoretical and right now Robinhood didn't really suffer any loss.

None of this really fits the description of "miserable failure" on Robinhood's part, as far as I can tell. So what do you mean? Am I missing some details?

Is he blaming T+2 for forcing him/Robinhood to prevent users to buy stock? How so?

Second, I still don't quite understand what T+2 means. All trades look instantaneous to every particular seller (including all Robinhood clients), right? Also, all trades are recorded by a centralized entity (NYSE), so there also cannot be any disagreement between brokers about how much who owes whom. Actual money/securities movement between brokers is T+2, but in the essence that is just some bureaucratic bullshit, and shouldn't affect broker's clients' (including all Robinhood users) ability to buy stock, right? Also, whatever the current regulations are, Robinhood somehow performed under them until now, so it somehow managed to meet whatever clearinghouse requires of them, right?

So, in the essence, I still don't understand what the fuss is about, and how Tenev could possibly blame T+2 for anything (which, btw, I don't see him explicitly do: he doesn't say that it was because of some clearinghouse requirements he was forced suddenly to shut down free trade of stock on his platform, does he?)

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