Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

It’s Time for Real Time Settlement

blog.robinhood.com

Post reply on HN
Print view View original

341–350 of 445 posts

Re: It’s Time for Real Time Settlement

#341

Post by tylerhou »

totalZero wrote: post #286
tylerhou wrote: post #251

Earlier quoted context omitted.

Short squeezes are not good for the market, period, but they only happen in extraordinary circumstances. And actively encouraging people to cause short squeezes in order to reduce the potential for future short squeezes seems... counterproductive. If you want to reduce the number of people shorting a stock, creating artificial short squeezes would work, yes, but then I again ask: why do we want to prevent people (or…

> Short squeezes are not good for the market, period This is an opinion. To briefly articulate some arguments that take the other side: Short squeezes are a disincentive for hedge funds to take undisclosed bearish positions in otherwise healthy companies, and for options dealers to sell cheap call options on those companies. They also increase equity value for shareholders. A squeeze can reduce the debt load for a co…

During a short squeeze, assets are "mispriced," and their prices have high volatility. Having a "correct" and "stable" price for assets is fundamentally important to any market as the market's intended purposes are to allow society to "efficiently" allocate capital and let participants hedge risk. "Wrong" and highly variable prices inhibit both goals.

Of course short squeezes (like any asset mispricing) can be good for individual market participants: but on net for all participants, they are not. That's why regulators step in when assets are mispriced, and they have attempted to/successfully prosecuted those who have intentionally created short squeezes.

Re: It’s Time for Real Time Settlement

#342

Post by tptacek »

jpambrun wrote: post #340
tptacek wrote: post #322

Earlier quoted context omitted.

When humans did all the trading, it cost drastically more to trade, all that money went directly into the pockets of market insiders, and the whole market was crooked as a barrel of fishhooks. Google "odd eighths scandal".

You can't access this high speed trading. This is the toy of billionaires that can afford microwave link between New York and Chicago and have dedicated teams of FPGA developers to write high speed network stacks with trading logic embedded in them. This is what the parent comment was talking about.

I don't need to be able to access high speed trading to access the benefits!

Re: It’s Time for Real Time Settlement

#343

Post by whitepoplar »

JumpCrisscross wrote: post #260
cameldrv wrote: post #228

Earlier quoted context omitted.

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

> the $10-20 fee for a fedwire is no longer much of a factor That is almost entirely your bank charging a mark-up. The Fed charges its members between 3.3¢ and 84¢ per wire, depending on things [1]. (It can go as high as $1.20 for a $100+ million wire from a bank that handles fewer than 14,000 wires a month.) My bank, for instance, doesn’t charge anything for wires. [1] https://www.federalreserve.gov/newsevents/press…

Which bank do you use that doesn't charge for wires?

Re: It’s Time for Real Time Settlement

#344

Post by toomuchtodo »

whitepoplar wrote: post #343
JumpCrisscross wrote: post #260

Earlier quoted context omitted.

> the $10-20 fee for a fedwire is no longer much of a factor That is almost entirely your bank charging a mark-up. The Fed charges its members between 3.3¢ and 84¢ per wire, depending on things [1]. (It can go as high as $1.20 for a $100+ million wire from a bank that handles fewer than 14,000 wires a month.) My bank, for instance, doesn’t charge anything for wires. [1] https://www.federalreserve.gov/newsevents/press…

Which bank do you use that doesn't charge for wires?

Not OP, but Fidelity is the only financial services firm I'm aware of that doesn't charge inbound or outbound wire fees (exceptions apply if you're a high net worth individual at other firms).

Re: It’s Time for Real Time Settlement

#345

Post by swampthing »

ashtonkem wrote: post #334
swampthing wrote: post #298

Earlier quoted context omitted.

Do you consider them having their collateral requirements changed on them at 3am to be them messing up? If your bank tells you your mortgage payment is going to be 10x this month, and you have to scramble to cover that, did you mess up your personal finances?

If you run a brokerage, you should know that collateral requirements can change based on market conditions.

If you own a car, you should know that you could be in a catastrophic accident at any time based on the behavior of others. If you are driving lawfully and someone t-bones you out of nowhere and you die, did you make a mistake in your driving?

Re: It’s Time for Real Time Settlement

#346

Post by ashtonkem »

swampthing wrote: post #345
ashtonkem wrote: post #334

Earlier quoted context omitted.

If you run a brokerage, you should know that collateral requirements can change based on market conditions.

If you own a car, you should know that you could be in a catastrophic accident at any time based on the behavior of others. If you are driving lawfully and someone t-bones you out of nowhere and you die, did you make a mistake in your driving?

A better analogy is that you should know that driving is dangerous and therefore keep insurance.

But again, dealing with changing margin requirements is a core part of the job when you run a brokerage, especially for margin accounts. They didn’t do their jobs right, and they want to blame someone else.

Re: It’s Time for Real Time Settlement

#347

Post by [deleted] »

tptacek wrote: post #342
jpambrun wrote: post #340

Earlier quoted context omitted.

You can't access this high speed trading. This is the toy of billionaires that can afford microwave link between New York and Chicago and have dedicated teams of FPGA developers to write high speed network stacks with trading logic embedded in them. This is what the parent comment was talking about.

I don't need to be able to access high speed trading to access the benefits!

[deleted]

Re: It’s Time for Real Time Settlement

#348

Post by princeb »

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'm surprised the CEO of a brokerage is advocating for it.

settlement is a necessary but undesirable part of the business of a brokerage, because it locks up capital, which is costly, for a business model whose margins are shrinking rapidly. it used to be that brokerages could earn something from the overnight repo on the balance sheet in order to compete aggressively on fees but nowadays overnight rates are so low and zero-cost execution is the cat let out of the bag. maybe prime brokerages can comfortably rely on the bank's overall B/S to manage this risk but specialist and retail brokerages are all aggressively shrinking capital to stay competitive at the cost of not doing business on days like these. how much is robinhood paying for drawing down those credit lines over the last week just to tide over the 2-day mismatch in trading and settlement? how close was it to getting stopped on doing business in all the other tickers that aren't GME and AMC? I honestly think robinhood would rather not have done that wsb business at all.

Re: It’s Time for Real Time Settlement

#349

Post by swampthing »

JumpCrisscross wrote: post #325
swampthing wrote: post #281

Earlier quoted context omitted.

That sounds plausible, but even then, if Robinhood couldn't meet the new deposit requirements, I think the existing trades just wouldn't settle (and obviously they wouldn't be accepting new ones)? I'm not seeing how Robinhood would have gone bankrupt in such a situation.

> if Robinhood couldn't meet the new deposit requirements, I think the existing trades just wouldn't settle (and obviously they wouldn't be accepting new ones)? Defaulting on clearing obligations is the old school way for a brokerage to go under. The moment that happens, customers’ funds and assets are segregated and what is left goes into receivership. The parent company would then file for bankruptcy protection to…

I don't think this is the same as what you're referring to. Under the DTC rules, this would likely have been an "Additional Participants Fund Deposit". The rules seem intentionally vague about what happens if you don't make this payment. As far as I can tell, the rules allow the DTC to unilaterally demand an uncapped deposit from a participant at any time.

Fidelity has $3.3 trillion AUM. Imagine if all its customers decided to take some actions that led the DTC to demand an "Additional Participants Fund Deposit" equivalent to 100% of what's at risk, like in Robinhood's case. Would Fidelity's inability to pay that be viewed as due to a failing on Fidelity's part?

Re: It’s Time for Real Time Settlement

#350

Post by technobum »

jpambrun wrote: post #340
tptacek wrote: post #322

Earlier quoted context omitted.

When humans did all the trading, it cost drastically more to trade, all that money went directly into the pockets of market insiders, and the whole market was crooked as a barrel of fishhooks. Google "odd eighths scandal".

You can't access this high speed trading. This is the toy of billionaires that can afford microwave link between New York and Chicago and have dedicated teams of FPGA developers to write high speed network stacks with trading logic embedded in them. This is what the parent comment was talking about.

In case anyone else got very confused, FPGA has nothing to do with female golf.
Post reply on HN