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Robinhood reports 43% revenue decline

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Re: Robinhood reports 43% revenue decline

#161

Post by dragontamer »

mazlix wrote: post #156
dragontamer wrote: post #88

Earlier quoted context omitted.

> I'm saying they shouldn't have done it They had no choice. They literally couldn't obtain any more GME stock. You cannot squeeze blood out of a stone. What do you want Robinhood to do? The GME situation got into a "sold out" situation. Much like how a toy-store runs out of Furbies back in the 90s, Robinhood ran out of GME-stock to sell to its customers. They would allow "selling", because Robinhood can then obtain…

You're saying they'd sell it to the next customer, but Robhinhood wouldn't sell it to the next customer - so that's where this seems to break down. When a RH user placed a sell order why couldn't the buy side of their order book add that?

Because there were more buyers than sellers within Robinhood.

So when a RH user hit the buy button, RH couldn't find a seller within Robinhood and had to go to the clearinghouse to find other sellers. Robinhood maximized its buy orders to the clearinghouse (ran out of money), and that was it. RH couldn't afford finding sell-orders anymore. Game over.

------

Furthermore, the amount of money needed at the clearinghouse was clearly a burden to Robinhood. When they saw the bill, I'm sure they would have preferred for sell-orders to go to the clearinghouse (rather than internally), to unwind from DTCC.

All stock brokers prefer trading "within" the system rather than seeking out 3rd party partners to find stocks / stock-buyers. Its cheaper and easier.

Re: Robinhood reports 43% revenue decline

#162

Post by turtledove »

werber wrote: post #116

I used the app briefly during the Gamestop hype, and am not a savvy investor by any means. But the press circus surrounding it in the aftermath made me feel like I had used an online slot machine not an investing application.

> online slot machine not an investing application.

These things are the same. Different front end UX, maybe, but if you are taking WSB advice then these two things are the same.

Re: Robinhood reports 43% revenue decline

#163

Post by f-securus »

WoahNoun wrote: post #141
vmception wrote: post #131

Earlier quoted context omitted.

You're missing the point on behalf of some other people that are missing the point. If they didn't have the conflict of interest it would have been obvious to them that they needed to disable sells as well as the buys. Just freeze the stock, instead of only considering the freezing of the buys as a mere technicality while being pushed towards the convenience of keeping sells open. The point is for them to think of th…

Disabling sells and not letting someone exit a position is infinitely worse then not letting someone buy to enter a position. The latter is only theoretically harmed and has no case to sue; the former is provably harmed and can sue.

It is hard to say the latter is only theoretically harmed when the rising price was caused by retail FOMO (according to SEC report) and Robinhood managed the majority of retail orders....

Re: Robinhood reports 43% revenue decline

#164

Post by gretch »

gruez wrote: post #49
gretch wrote: post #26

Earlier quoted context omitted.

Except robinhood suffers major security breaches (eg Nov 21) and then that information stolen on you can be used to hack your account. Sure the investment game is the same, but step 1 is to not get hacked.

>Except robinhood suffers major security breaches (eg Nov 21) I went to search that up and got >the unauthorized party obtained a list of email addresses for approximately five million people, as well as full names for a different group of approximately two million people. We’ve determined that several thousand entries in the list contain phone numbers https://blog.robinhood.com/news/2021/11/8/data-security-inci... I…

You can call it whatever you want.

What I know is this would not happen to me at Vanguard. And if it did I would switch.

Re: Robinhood reports 43% revenue decline

#165

Post by mazlix »

WoahNoun wrote: post #145
ar_lan wrote: post #92

Earlier quoted context omitted.

It's bizarre to me how many people really seem to have sided with Robinhood on this and blame the consumer's for being "too dumb to understand the reality of what happened." Situations occur, and usually customers are receptive if they are given heads up and a reason why. But Robinhood just completely subverted their customer's expectations rapidly and unexpectedly. The entire purpose of their app is TO abstract away…

They've been pretty open actually. They did not have enough cash on hand to support the buy volume. They have said this repeatedly. They have also said if incoming bank transfers from retail investors had settled faster they would have had enough cash. The "instant deposit" feature of letting people buy stocks with cash deposits they had only initiated but had not settled meant they didn't have the cash on hand to su…

January 27th, 2021 Robinhood sent me an email warning that "In an effort to help reduce risk, we've begun implmenting certain restrictions for GME and AMC options trading". They explain some restrictions being made to options. They don't provide any sort of warning that completely removing the ability to buy the underlying stock for all of their users was even a possibility.

I think it sshould be part of their fiduciary duty to inform people of the risks of purchasing stocks that they are running out of collateral for.

Re: Robinhood reports 43% revenue decline

#166

Post by vincentmarle »

klipklop wrote: post #113

You guys forget they also did the same thing blocking Nokia stock buys. Don’t tell me they didn’t have enough to cover that. It had a fraction of the GME madness. I am not wealthy, but I have more stock than the average person. I moved all of it out of RH. Will never trust them again. I am sure there was thousands of little guys like myself that bailed. The idea that they blocked sales just long enough for the r/wsb…

Yep once you lose the trust, it’s over. There’s plenty of players out there that can offer the same.

Re: Robinhood reports 43% revenue decline

#167

Post by f-securus »

timdev2 wrote: post #115
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…

I sold GME for a tidy profit on RH while buying was disallowed. Not hypothetically; I really did. Are you saying RH should have forced me to hodl? How would that have been a better customer experience?

In another reality Robinhood did not turn off the buy button and short hedge funds get margin called and the squeeze occurs... allowing you to hit a grand slam as opposed to being happy with your home run.

Re: Robinhood reports 43% revenue decline

#168

Post by kasey_junk »

thebean11 wrote: post #154
drexlspivey wrote: post #149

Earlier quoted context omitted.

They can't use customer funds for collateral to the clearing house, they must use their own funds

Might be missing something, if I deposit $100 and use it to purchase stock, they cannot use my $100? What does that even mean given that money is fungible?

Money is fungible but how its accounted for isn’t. I’m not an expert in the regs around margin accounts but have worked in other spaces where my company was holding money for others.

It is usually strictly regulated. In some jurisdictions you must hold it in specific accounts that have particular attributes and you must have dollar for dollar parity between the account and the money you collect. In almost every situation where you are holding money for someone else you aren’t allowed to use it to pay your own debts. And in this case the collateral obligation is on Robinhood not on their account holders.

Re: Robinhood reports 43% revenue decline

#169

Post by at-fates-hands »

PragmaticPulp wrote: post #41
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 would be shocked if the GME / Reddit crowd made up more than a few percent of that decline. Robinhood has a lot of users across a lot of demographics. Reddit, however large, is more of a small microcosm of internet culture. I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom and a wonky stock market where it felt like everyone was getting rich from stocks and options. Now that the marke…

>> I think it's more likely that Robinhood's rapid rise was fueled by COVID boredom.

Agreed. The half dozen people I know who were kind of on the back end of this before they locked up trading made some money off it. Not a lot, but nothing to sneeze at either. Once the whole saga went nuclear, they decided to close out their accounts. Most waited for everything to settle out, sold off all their positions and cashed out.

They haven't been back. It feels a lot like a normal trading cycle. I'm sure the same thing would've eventually happened where people found something else that caught their attention, but the whole GME saga I think speed up a lot of people into other things.

COVID had a weird effect where people found a lot of things to do they normally would not have been doing. Now that things have subsided somewhat, people are moving on from those things and going back to the activities and hobbies they were doing pre-COVID.

Re: Robinhood reports 43% revenue decline

#170

Post by drexlspivey »

thebean11 wrote: post #154
drexlspivey wrote: post #149

Earlier quoted context omitted.

They can't use customer funds for collateral to the clearing house, they must use their own funds

Might be missing something, if I deposit $100 and use it to purchase stock, they cannot use my $100? What does that even mean given that money is fungible?

When you deposit $100 dollars in Robin Hood they must keep that $100 in a bank account. If you later use those dollars to buy a stock they must post collateral to the clearing house but not the $100 dollars you deposited (those must sit in the bank account still). Your account however is being credited with the stock instantly. In two days when the trade settles they transfer the $100 dollars to the clearing house and get their colatteral back.

The problem as you can see is that you deposited $100 and they have to use $15 (for example) more of their own cash. If overnight the 15% margin requirement changes to 30% and RH doesn't have a huge amount of cash sitting around they are going to get squeezed.

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