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Robinhood reports 43% revenue decline

wsj.com

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Re: Robinhood reports 43% revenue decline

#61

Post by rurp »

gruez wrote: post #40
dnadler wrote: post #32

Earlier quoted context omitted.

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 w…

Maybe I'm missing something, but isn't the answer to simply have more collateral? Given that RH was able to raise emergency funds around this time it seems really likely that they could have been better capitalized before the turbulence started, and gotten the money on better terms than an emergency deal.

They probably didn't do this because they underestimated the need for it (poor risk models), or simply didn't want to pay the extra cost.

Re: Robinhood reports 43% revenue decline

#62

Post by tyrfing »

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…

Can you link to the transcript or recording of this question and response? I am unable to find it.

Re: Robinhood reports 43% revenue decline

#63

Post by paulgb »

j-bos wrote: post #59
paulgb wrote: post #50

Earlier quoted context omitted.

> normal operations But that's the thing, a bunch of their userbase aping into one stock isn't (or rather, wasn't ) normal operations. It's the financial markets equivalent of jumping in an elevator.

Can't help but say, elevator's are designed to handle jumping, even many people jumping.

There's a good chance you'd trigger the failsafe though, right?

Re: Robinhood reports 43% revenue decline

#64

Post by dangerlibrary »

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…

"Not being able to transact GME" is one thing, but they disabled the ability to buy, and kept the ability to sell. It wasn't a symmetric freeze - it was a deliberate action that could only have one outcome on the stock price.

It doesn't matter what the reason is - underfunded collateral or otherwise. The experience they provided to their customers was "you can only sell this stock, nobody can buy it." That's not their customers' fault. It just isn't.

Also, not for nothing, I don't think that many of the larger retail traders in e.g. /r/superstonk are as confused about clearing houses' role as you believe them to be.

Re: Robinhood reports 43% revenue decline

#65

Post by flywithit »

buildbuildbuild wrote: post #38

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. La…

Even supposing all that cryptocurrency integration brought on a lot of profit, I don’t think it secures their future because other platforms can just copy it.

Re: Robinhood reports 43% revenue decline

#66

Post by dragontamer »

dangerlibrary wrote: post #64
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…

"Not being able to transact GME" is one thing, but they disabled the ability to buy, and kept the ability to sell. It wasn't a symmetric freeze - it was a deliberate action that could only have one outcome on the stock price. It doesn't matter what the reason is - underfunded collateral or otherwise. The experience they provided to their customers was "you can only sell this stock, nobody can buy it." That's not thei…

> "Not being able to transact GME" is one thing, but they disabled the ability to buy, and kept the ability to sell. It wasn't a symmetric freeze - it was a deliberate action that could only have one outcome on the stock price.

Because Robinhood didn't have enough margin to keep buying GME.

But if you sold GME, that reduced the margin Robinhood had to keep.

-------

In other words: Robinhood has no more money to buy GME on behalf of its customers. It could sell however, because selling unwound Robinhood's GME position.

Robinhood (and Robinhood's partners) are "on the hook" for all GME for the 2-days in the T-2 transaction period of modern US trading law. Trades take 2 days to take place, so somebody needs to be "the risky bagholder" whenever a stock's price changes dramatically.

Robinhood only had enough money to support X amount of buys. When that money ran out, Robinhood was unable to buy, and could only sell GME.

Of course, this only happened for 2 days as the stocks / money exchanged hands. But 2 days is apparently an eternity and none of these stock buyers were buying GME for the long term, just for the hype of it all. So it was all over by the time Robinhood was able to buy again.

Re: Robinhood reports 43% revenue decline

#68

Post by dangerlibrary »

dragontamer wrote: post #66
dangerlibrary wrote: post #64

Earlier quoted context omitted.

"Not being able to transact GME" is one thing, but they disabled the ability to buy, and kept the ability to sell. It wasn't a symmetric freeze - it was a deliberate action that could only have one outcome on the stock price. It doesn't matter what the reason is - underfunded collateral or otherwise. The experience they provided to their customers was "you can only sell this stock, nobody can buy it." That's not thei…

> "Not being able to transact GME" is one thing, but they disabled the ability to buy, and kept the ability to sell. It wasn't a symmetric freeze - it was a deliberate action that could only have one outcome on the stock price. Because Robinhood didn't have enough margin to keep buying GME. But if you sold GME, that reduced the margin Robinhood had to keep. ------- In other words: Robinhood has no more money to buy G…

I'm not confused why they did what they did. I understand the situation they were in. I'm saying they shouldn't have done it, and that there is an obvious conflict of interest when there's a short squeeze on hedge funds going on, and Robin Hood's paying customers are hedge funds.

Stock freezes happen. They are, all things considered, fairly routine affairs. This was not a stock freeze - it was a company that got out over its skis, ran out of money, and screwed their users to ~unfuck the situation~ unwind their position.

Re: Robinhood reports 43% revenue decline

#69

Post by kareemsabri »

colinmhayes wrote: post #42
daniel-cussen wrote: post #27

Earlier quoted context omitted.

> 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. So why did you start out saying they didn't lock trading...to then say they did lock trading? Do some people will only read the first fifteen words of your post? Like are you aiming to fill the air with positive-sounding sounds that make Robinhood sound good? You think we do…

I don't think it's fair to say robinhood locked trading here. The brokers increased the amount of collateral needed to buy GME and robinhood didn't have the money. They were unable to buy more GME until their loan came through

That's not quite correct. The clearing house demanded more collateral from Robinhood based on market volatility, not specifically to trade GME. Robinhood negotiated less collateral by locking buying of GME, a highly volatile security. There is no other way to say it than that Robinhood locked trading of GME.

Re: Robinhood reports 43% revenue decline

#70

Post by gamblor956 »

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.

Only if you were below the minimum asset threshold, which varied between $500 and $1000 over the past decade.

I've used TD Ameritrade for over a decade and haven't paid a fee to them for trades in nearly as long.

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