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Robinhood reports 43% revenue decline

wsj.com

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Re: Robinhood reports 43% revenue decline

#31

Post by thebean11 »

jasode wrote: post #24
ryanmcbride wrote: post #2

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

They had enough money to cover users' trades in securities other than GME, though, right? If I sell GME to buy AMZN, does that have different collateral implications to selling GME to buy GME an hour later? If I send them a bank transfer for $10k, they should have that money as soon as it clears right?

There are many other ways they could have handled it beyond halting buying (and buying only) in an individual stock. The most obvious being just stop letting customers trade with unsettled funds.

Re: Robinhood reports 43% revenue decline

#32

Post by dnadler »

jasode wrote: post #24
ryanmcbride wrote: post #2

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place.

Re: Robinhood reports 43% revenue decline

#33

Post by thehoff »

jasode wrote: post #24
ryanmcbride wrote: post #2

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

I forget, weren't there others that did the same? Were they also in that same boat (not enough funds on hand to cover trades)?

Re: Robinhood reports 43% revenue decline

#34

Post by rchaud »

asdff wrote: post #18
Justin_K wrote: post #8

This is what happens when your clients come to realize they're getting screwed in exchange for "free" trades. Search "robin hood order flow".

The vast majority of investors are not trading enough money for these minute scrapings to add up to anything at all. OTOH TD ameritrade et all were charging you $7.99 a trade or whatever hustle they had people forced into previously.

That isn't much money at all for retail customers that any sane financial planner would advise to buy and hold. Or put some into an ETF or mutual find each month.

It's mostly an issue with people making multiple trades each day who won't spring for the premium plans.

Re: Robinhood reports 43% revenue decline

#35

Post by blahblah123456 »

autosharp wrote: post #14
kyriefh wrote: post #4

Earlier quoted context omitted.

this is a good example of the importance of comms and user education. robinhood didn't lock trading - or at the very least, they were far from the only brokerage to do so and had very little choice in the matter. however, they were the front end that uninformed users experienced it through and thus took a huge PR hit

At first I assumed it was because of liquidity problems and not because they wanted to screw customers. But in the hearings later he refused to answer a bunch of easy questions. E.g. the following meme is literally what he said: https://www.reddit.com/r/wallstreetbets/comments/lngem6/do_y... Q: "Do you realize that you literally manipulated the market. Yes or No?" Vlad: "Thank you for the great question. When I was a…

Nah, not true. In a legal proceeding, always say the minimum. It's never to your benefit to talk to law enforcement (or congress in this case).

Re: Robinhood reports 43% revenue decline

#36

Post by thawaya3113 »

ryanmcbride wrote: post #2

I feel like regardless of the reasons they did it, whether or not it was necessary, they lost a lot of good faith with the users when they locked the GME and crypto trading during that whole thing. I have no idea how necessary their actions were but regardless of its necessity it still cost a lot of user good will.

They did it so they wouldn’t collapse financially. And probably lose all licenses and privileges to make trades for the foreseeable future, ending them as a company.

Re: Robinhood reports 43% revenue decline

#37

Post by gruez »

thebean11 wrote: post #31
jasode wrote: post #24

Earlier quoted context omitted.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

They had enough money to cover users' trades in securities other than GME, though, right? If I sell GME to buy AMZN, does that have different collateral implications to selling GME to buy GME an hour later? If I send them a bank transfer for $10k, they should have that money as soon as it clears right? There are many other ways they could have handled it beyond halting buying (and buying only) in an individual stock.…

>they should have that money as soon as it clears right?

You'd think so, but no. The brokerages can't use customer funds to do that. They have to front the cost themselves.

>We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it.

https://finance.yahoo.com/video/heres-why-robinhood-restrict...

Re: Robinhood reports 43% revenue decline

#38

Post by buildbuildbuild »

I’m a big believer in their future. As soon as they release their native crypto deposit/withdraw functionality beyond beta (it’s amazing), Robinhood will be the first true crypto exchange with an attached U.S. bank account. [1]

That means no transfer times between banks and an exchange. Deposit and sell crypto, instantly spend fiat on their debit card. Deposit your paycheck ACH, withdraw crypto to your own wallet. Lack of a stablecoin is its only current blind spot.

It’s a game changer and very few people are understanding this, including in the marketing department at Robinhood. They need to plaster “Now an exchange, with a bank account.” ads on crypto news sites.

[1] Square Cash almost counts but I discount them due to only supporting BTC - a fault of their founder’s BTC maximalism belief.

Re: Robinhood reports 43% revenue decline

#39

Post by ketzo »

thebean11 wrote: post #31
jasode wrote: post #24

Earlier quoted context omitted.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

They had enough money to cover users' trades in securities other than GME, though, right? If I sell GME to buy AMZN, does that have different collateral implications to selling GME to buy GME an hour later? If I send them a bank transfer for $10k, they should have that money as soon as it clears right? There are many other ways they could have handled it beyond halting buying (and buying only) in an individual stock.…

> does that have different collateral implications to selling GME to buy GME an hour later?

Yes, it does.

Robinhood is buying GME for you. They’re buying it on credit (for two days) from a clearinghouse. GME became an extremely volatile asset. That meant that it was much more expensive to buy on credit. Robinhood did not have enough collateral to back up these extremely expensive purchases.

Re: Robinhood reports 43% revenue decline

#40

Post by gruez »

dnadler wrote: post #32
jasode wrote: post #24

Earlier quoted context omitted.

>I have no idea how necessary their actions were It was financially unavoidable for Robinhood because they didn't have the _extra_ billions$ in collateral deposited at the clearinghouse to back up their customers' trades (e.g. GME). Various stories about it having to raise extra billions in an emergency: https://www.google.com/search?q=robinhood+emergency+raise+bi... But retail traders (not the professional traders l…

I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this. I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place.

>I don't know that I'd lay the blame at retail traders not being sophisticated enough to understand this.

I'm not sure how you got the impression that the parent comment was laying the blame on the user. I interpreted it as excusing the behavior of robinhood. Blame isn't a zero sum game, it's possible to argue that robinhood is less blameworthy without saying that the retail traders are to blame.

>I'd lay the blame with the company that had such poor risk controls that they allowed this to happen in the first place.

What risk controls? As per the parent comment, it's an issue with settlement/collateral requirements, and robinhood not being prepared to satisfy them in light of a stock going 10x in a short period of time. I'm not sure how "risk controls" would have helped.

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