Robinhood is facing nearly 50 lawsuits over GameStop frenzy • Hacker News Board

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#161

Post by pests » Thu, Mar 04, 2021, 8:43 PM UTC

rcxdude wrote: post #117

mlrtime wrote: post #107

Earlier quoted context omitted.

When RH sells to a internalizer for payment (PFOF) it is always inside the NBBO (National Best Bid and Offer) which is always going to be a better price than what you would receive on a public exchange AND there are 0 commissions.

Exactly. It's not the user paying for it, it's whoever would have been on the other side of the trade without the pay-for-flow.

Right, because that other side of the trade is purposefully trading against this bought flow thinking they can earn more opposed to competing with institutionalized investors.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#162

Post by nrmitchi » Thu, Mar 04, 2021, 9:07 PM UTC

chii wrote: post #156

nrmitchi wrote: post #129

Earlier quoted context omitted.

No, they can't. They can't use customer funds for DTCC deposit requirements. It's just not allowed. IIRC the deposit requirement was raised to 100%. Even if the customer funds were settled, and the customer wanted to buy 1 share of GME for $300, Robinhood would have to post $300 of it's own money , just in case. Now would Robinhood get that money back? Most likely, but that doesn't mean they don't have to have it to…

> the deposit requirement was raised to 100%. the question becomes - who/what had the power to raise this deposit ratio, and did parties that would stand to lose a lot if GME continued to rise had influence in making this deposit requirement higher?

The DTCC raised the requirement, and my understanding is that these requirements are generated formulaically; not publicly available, but is based on volume, volatility, etc of the individual underlying assets, and how exposed specific institutions are to that volatility.

The DTCC wouldn't care one way or another if GME went up or down. They're goal is to make sure that different parties are able to settle their obligations with a very high degree of certainty, and ensure that investors won't lose their money with solvent brokerage firms or other intermediaries.

If you're arguing that the DTCC is beholden to the whims of a (relatively) miniscule hedge fund, you're crossing into conspiracy theory territory.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#163

Post by lenkite » Sat, Mar 06, 2021, 12:19 PM UTC

jcranmer wrote: post #67

I've read a couple of the lawsuits on courtlistener. From what I've read, these lawsuits are going to go absolutely nowhere. The biggest problem most of the lawsuits face is that there is a provision in the Terms of Service that basically says that Robinhood can prevent you from trading in any stock it wishes. Any complaint that amounts to "Robinhood violated its contract" is going to go down in flames as a result--i…

You mean that somewhere in the huge Wall Of Text..err Terms of Service, they can say that they want my firstborn child for human sacrifice and once I click Accept, I am a goner ?

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#164

Post by WoahNoun » Sat, Mar 06, 2021, 2:27 PM UTC

sokoloff wrote: post #39

xadhominemx wrote: post #29

Earlier quoted context omitted.

Actually it is the reason they stated

There was a several hour period one evening where some “it’s for your own good because of the volatility” message was the first comms from the company on the topic.

That's not what the message said. It said "to protect our customers." Which is consistent with the capital requirements reason. If RH didn't meet the requirements, the entire company (all of their customers; even those who knew nothing about game) would go into receivership and the company unwound. Meanwhile, no one can sell their shares while this happens. Not meeting their capital requirements would have been very, very bad for all of RH's customers.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#165

Post by cwhiz » Sat, Mar 06, 2021, 2:41 PM UTC

cortesoft wrote: post #74

cwhiz wrote: post #32

I don’t really care what the rules are. Arbitrarily preventing people from buying, but not selling, is market manipulation. Any company that took part in this should be dismantled. If you need to halt trading because of liquidity requirements, halt all trading.

It wasn't arbitrary. There is huge risk for brokers when very volatile stocks are bought at heavy volume. The risk is not there when selling stock. The companies backing the risk RH was taking rightfully asked for more collateral, and RH wasn't able to come up with it. It was in no way arbitrary.

Those rules are arbitrary, and arbitrarily enforced.

Re: Robinhood is facing nearly 50 lawsuits over GameStop frenzy

#166

Post by cwhiz » Sat, Mar 06, 2021, 2:41 PM UTC

OJFord wrote: post #100

cwhiz wrote: post #32

I don’t really care what the rules are. Arbitrarily preventing people from buying, but not selling, is market manipulation. Any company that took part in this should be dismantled. If you need to halt trading because of liquidity requirements, halt all trading.

No, not allowing people to close open positions would be way more of a shit show, and way more likely to look bad (on the broker) in court.

Halting all trading is the only way to prevent market manipulation.