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Robinhood reports 43% revenue decline

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Re: Robinhood reports 43% revenue decline

#181

Post by vmception »

dragontamer wrote: post #135
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…

> 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. Why? Robinhood wanted more GME for themselves so that they can sell it to other customers, who were furiously buying up GME to the point that Robinhood ran out of GME to sell. ------- That's like a Gamestop banning used PS5 during Christmas. Erm... wait, you want to sell me your use…

Broker level stock halts happen all the time too, it was an option.

Robinhood has conflicts of interest that don't require meme stock myths. The collateral requirements was from DTCC which affected many brokers and Robinhood simply got all the attention and is unrelated to Robinhood's conflict of interest, doesnt that prove I'm not subscribing to the conspiracies?

The conflict of interest is that Citadel is their primary customer who gets all the trade data from robinhood's user. Citadel infused capital into Melvin which was the main fund Robinhood's users were trying to target because of Melvin's short position in Gamestop. The shadowy cabal conversation never needs to occur. Robinhood reacted to the DTCC collateral requirements, they should have reacted to their users as well, having a little drop of emotional intelligence to say "oh yeah this is reason to do a stock halt" instead of an asymmetric one.

Re: Robinhood reports 43% revenue decline

#182

Post by jallen_dot_dev »

BigBubbleButt wrote: post #103
dragontamer wrote: post #99

Earlier quoted context omitted.

> This is a poor analogy. So long as there is a large enough float, which is a requirement to be listed on some exchanges, there should always be stock to buy and sell. Robinhood didn't have the money / collateral to obtain any more shares. As far as Robinhood is concerned, GME was sold out for that time period. It really is actually that simple. No shares for Robinhood meaning no new shares for Robinhood customers.…

I am aware of that, and that is Robinhood being unable to manage their collateral requirements in order to continue trading GME. There were other brokers that managed to do it just fine. Robinhood messed up here. Really I think the DTCC is who messed up, but that's a much larger discussion. The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell. Retail tra…

> There were other brokers that managed to do it just fine.

If Robinhood is taking a net inflow of shares, then logically other brokers must have a net outflow. So of course there would be other brokers with shares to buy.

One reason you could go to some other broker and buy GME is because that broker had many other customers looking to offload an overhyped stock. You couldn't buy on Robinhood because their customer base was mostly retail traders looking only to buy.

Re: Robinhood reports 43% revenue decline

#183

Post by SilasX »

gruez wrote: post #37
thebean11 wrote: post #31

Earlier quoted context omitted.

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...

FYI to anyone reading: gruez and I had an exchange a while back where I tried to pin down what the collateral is accomplishing and why the customers couldn’t buy even with settled funds.

I don’t think it resulted in a satisfactory explanation but it goes over a bunch of the same questions being asked on this story, and I still think it’s useful to help isolate what part doesn’t make sense.

https://news.ycombinator.com/item?id=27693578

Re: Robinhood reports 43% revenue decline

#184

Post by quickthrowman »

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.

It was 100% necessary, they didn’t have the necessary cash to post margin with the clearinghouse.

They would’ve been a failed brokerage if they kept allowing GME trades without being able to post the required margin, the SEC would’ve taken it over and people would’ve had to wait weeks/months to ACATS their shares and cash to another brokerage.

Does that sound like a better outcome for Robinhood users? I didn’t think so.

Re: Robinhood reports 43% revenue decline

#185

Post by quickthrowman »

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.

That’s because the clearinghouse margin requirement would be lowered if people sold GME, it wasn’t a nefarious plot to destroy the share price.

There was a massive buy side imbalance on GME which required enormous amounts of cash margin at the clearinghouse. Sales of GME would lower the margin required. Do I need to restate that a third time so you understand?

Melvin Capital shuttered their fund recently anyways, the apes won.

Re: Robinhood reports 43% revenue decline

#186

Post by quickthrowman »

geph2021 wrote: post #83
dangerlibrary wrote: post #68

Earlier quoted context omitted.

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…

I wonder if Robinhood could have changed their GME margin requirements? Not sure if that's allowed, but surely that would have allowed them to unwind some (margin call everyone who is leveraged long), and some customers who were willing to put up 100% to cover their GME buys could keep buying.

No, the clearinghouse wasn’t going to change margin requirements, because those exist so transactions are completed………it’s the entire purpose of a clearinghouse.

This subject is infuriating to discuss, nobody understands the basics of why it happened!!

Re: Robinhood reports 43% revenue decline

#187

Post by jjav »

Miner49er wrote: post #30
avgDev wrote: post #10

Earlier quoted context omitted.

Robinhood thrived initially because they targeted uneducated investors. I downloaded the app, and the confetti explosion after stock purchase really turned me off. They wanted to make it fun. They wanted to target the dopamine receptors targeted by gambling. All people who I interact with who are investing with robinhood have very little knowledge of the financial system. I hate making a generalization, but after the…

Yeah, but how are those uneducated investors supposed to learn? Robinhood lowered the barrier to entry to actually allow the normal person to invest/trade. Without it, I would know far less about the financial system then I do now. For me, Robinhood really did live up what it aims to do (democratize finance for all).

> Yeah, but how are those uneducated investors supposed to learn?

By being presented with learning material on how trading works, instead of trying to hide reality behind a pretty GUI? That'd be my choice.

For example on TDAmeritrade you only get a cash account by default, no margin or option trading. You can upgrade and there are multiple levels of margin upgrades in increasing steps of risk. To do an upgrade you have to at least read some material and answer some questions and check boxes. Sure you could lie through it, but at least they make it clear you're signing up for ever increasing risk at every level.

When I first read that RobinHood was allowing people margin and option trading without even telling customers that those are enabled and what it means, I always felt it can only end badly.

Re: Robinhood reports 43% revenue decline

#188

Post by jmyeet »

kasey_junk wrote: post #175
jmyeet wrote: post #90

The one thing I have to give Robinhood credit for is the good marketing that appealed to Zoomers and the WSB crowd. But, much like Crytpo Andys, a lot of these people just don't understand how anything works. Take the GME short squeeze, which a lot of people still fundamentally misunderstand. RH allowed (allows?) you to sign up, promise to deposit funds and trade on credit, essentially, until those funds arrive (typi…

Until recently every US broker accepted payment for order flow (even Vanguard did for options). Only Robinhood gave you back the money in the form of free trades. Thats to be commended. Payment for order flow is a complex topic, mostly because the incentives are tricky, but at the end of the day, unless you are doing gigantic block trades (which you’d hire a specialist to do) you are almost certainly paying less in s…

You are mistaken. Other brokers also sold order flow [1] but not all.

[1]: https://www.investopedia.com/terms/p/paymentoforderflow.asp

Re: Robinhood reports 43% revenue decline

#189

Post by xiphias2 »

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…

It had nothing to do with retail traders being dumb: the CEO was interviewed and he didn't explain that the clearing houses needed more deposit. He could have published all the inner working details so that retail investors can review them, but he didn't do it.

Robinhood should either fullfill the abstraction, or be clear about when and how the abstraction breaks down.

Re: Robinhood reports 43% revenue decline

#190

Post by dragontamer »

vmception wrote: post #181
dragontamer wrote: post #135

Earlier quoted context omitted.

> 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. Why? Robinhood wanted more GME for themselves so that they can sell it to other customers, who were furiously buying up GME to the point that Robinhood ran out of GME to sell. ------- That's like a Gamestop banning used PS5 during Christmas. Erm... wait, you want to sell me your use…

Broker level stock halts happen all the time too, it was an option. Robinhood has conflicts of interest that don't require meme stock myths. The collateral requirements was from DTCC which affected many brokers and Robinhood simply got all the attention and is unrelated to Robinhood's conflict of interest, doesnt that prove I'm not subscribing to the conspiracies? The conflict of interest is that Citadel is their pri…

You'll have to forgive me, but my opinion of the cabal of GME-pumpers hyping the hell out of the stock on Reddit/WallStreetBets is not a group of conspirators I have much faith in.

They create a boogieman who doesn't exist ("The big banks") without actually defining who the hell they are. All the while, they're literally conspiring to Gamma Squeeze the stock up to $1000.

Then they get mad at their crappy brokerage for being crap. (I mean... maybe Robinhood shouldn't have been crap. But everyone knew it was a subpar brokerage built on hype and plenty of SEC complaints before the GME-event of January 2021).

Then one of them named Roaring Kitty gets incredibly rich from the whole situation, sells off a huge chunk of their stocks, goes quiet for a while and apparently is the good guy. A few days in Congressional hearings later, it becomes blatantly obvious that no one knows what they're talking about and here we are now today.

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I absolutely see a group of conspirators here. And its not "the big banks". I'm not sure what the legality of the whole exercise was (apparently it was legal?), but I'm not exactly seeing much altruism on the "buy buy buy" crowd.

And no. Buying a terribly priced stock when everyone else is buying it isn't "saving the stock market". Its just rocking the boat and pumping the stock price higher. If that's what people want to do with their money that's their business, but don't pretend its some kind of noble effort.

I'm not necessarily going to call the /r/WSB group "evil". But they're certainly not "good" either. And their obsession with finding boogiemen to yell at is dangerous mob-like rhetoric.

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I get that it was a big social event, that large crowds moved and coordinated together, and they all felt very fun to the participants. But guess what? So was the Anti-COVID19 Trucker Convoy as well as Occupy Wall Street.

It was a spontaneous mob, coordinated thanks to modern social media. That's all I see the event as honestly. It did some weird and interesting things to some smaller scale brokerages who couldn't handle the buy/sell orders, and it taught me a few things about the nature of exchanges and brokerages. But it wasn't some kind of altruistic event or heroic effort.

Thanks to modern social media, I expect these spontaneous crowds to erupt into other forms and other locations... be it online or in meatspace (as per "Twitter Flash Mobs", which were probably their prototype when Social Media was younger).

Maybe it was your first spontaneous internet mob, but it wasn't mine. I've seen them before and I know they'll come again.

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