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Robinhood reports 43% revenue decline

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Re: Robinhood reports 43% revenue decline

#211

Post by deschutes »

SilasX wrote: post #209
deschutes wrote: post #199

Earlier quoted context omitted.

It makes perfect sense for a regulation that intends to protect the retail customer's interests. I suspect Robinhood would put customer money up for collateral if they were allowed to do so.

What is that responding to? The problem is the lack of a consistent threat model for whom you're protecting and what you're protecting them from . Half the time it's "the consumer could reneg on the purchase" and half the time it's "the shares could be stoken from the consumer". And 100% of the time, the super-confident, I-get-this-and-you-don't explainer doesn't realize the inconsistency.

I'm not sure what you're driving at. The sibling clearly outlines a scenario where the collateral is lost. But it almost doesn't matter so long as you assume the clearinghouse isn't some vestigial intermediary.

I can't answer why customers with cash in hand couldn't directly settle the trade. Maybe most of the time it doesn't matter and it's easier for brokers to have one settlement process. Maybe the industry has come to depend on the delayed settlement in some unrelated way. Maybe it's something that hasn't fully been adopted due to change taking time. Maybe the referenced regulations get in the way of an uncollateralized process.

Re: Robinhood reports 43% revenue decline

#212

Post by filoleg »

mumblemumble wrote: post #193
filoleg wrote: post #180

Earlier quoted context omitted.

> Maybe I'm missing something here, but it seems to me that freezing selling as well as buying would have screwed their retail customers even worse? You aren't missing anything. This is fairly obvious to anyone who understands how exchanges/brokers operate even on a basic level. The bottom line of it is, disabling buying was a hard necessity to avoid a complete disaster for everyone involved (including customers). Di…

OK, thanks for the validation. I think the next step, then, is to observe that I don't see how this can be characterized as a case of Robinhood getting out over their skis. Gamestonk looks for all the world to me like it was a black swan event that nobody could have anticipated. And the amount of reserve money Robinhood's clearer required is, realistically, set by the clearer. I suppose technically Robinhood could ha…

> I suppose technically Robinhood could have held more, but that seems like the kind of thing that no consortium of mere humans would ever actually do, right?

Yep. That's why RH wasn't the only major brokerage that disabled buying of GME on that day. They just got the most media coverage. Probably because most of superstonk users, I assume, used RH instead of other brokerages, or because RH was an easy target for the media.

Webull, Schwab, IB, and some other brokers restricted GME trading activity during that time as well, here is a list with details on each major brokerage someone on WSB has compiled[0]. I cannot verify all of those myself, but I can confirm that Webull definitely restricted it as well, as I used it myself during that time period. But that little fact wouldn't support the whole "shadow cabal" conspiracy theory though, so it gets conveniently omitted in almost every discussion of it by superstonk users.

0. https://www.reddit.com/r/wallstreetbets/comments/l6xlw3/robi...

Re: Robinhood reports 43% revenue decline

#213

Post by freemint »

chii wrote: post #206
Denvercoder9 wrote: post #171

Earlier quoted context omitted.

The problem with this analysis is that Robinhood didn't choose to block buy orders, they were forced to because they were no longer able to fulfill them. You can argue about whether Robinhood should've been better prepared for the volatility that arose (and that could be an interesting conversation by itself), but they weren't. GP claims "they shouldn't have done it", but continuing wasn't an option. The only other c…

it might have made robinhood look better to uninformed retail traders if they disabled both the sell button as well as the buy button.

No it wouldn't have. People who knew they could sell in theory and couldn't in practice would complain to and maybe sue for damages (justified or not) the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface.

Re: Robinhood reports 43% revenue decline

#214

Post by freemint »

eftychis wrote: post #176
f-securus wrote: post #151

Earlier quoted context omitted.

If majority of retail was blocked out of buying during this period, then who was on the other end of the transaction and why do you think they would be buying when retail has the buy button turned off and the stock is 'severely disconnected from reality'? Could Robinhood have disabled margin accounts and only allowed people to purchase with settled cash as a way to keep the margin requirements in check? It seems big…

a) "big money" -- (such as retirement accounts or other institutions) -- don't care about "retail." They have to follow certain risk regulations and plans and will follow them, and that's it. Market makers will try to drive ahead of the market in an effort to provide liquidity (and make money to live and prosper in the process). b) Robinhood was "blocked" because it decided to not do any serious risk management. And…

Yes but it could give users the option to lend money to Robinhood to perform the transaction or have no transaction.

Re: Robinhood reports 43% revenue decline

#215

Post by freemint »

drexlspivey wrote: post #149
thebean11 wrote: post #102

Earlier quoted context omitted.

Ah TIL that the requirements would be different per-stock. It still seems to me that Robinhood should be able to fulfill orders for customers who had fully settled funds in the account. If I have money in my account (fresh from my bank account) that money is enough for 100% collateral.

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

They can't take it for collateral however they could ask to have it lend to RH to serve as two day collateral.

Re: Robinhood reports 43% revenue decline

#216

Post by Denvercoder9 »

freemint wrote: post #213
chii wrote: post #206

Earlier quoted context omitted.

it might have made robinhood look better to uninformed retail traders if they disabled both the sell button as well as the buy button.

No it wouldn't have. People who knew they could sell in theory and couldn't in practice would complain to and maybe sue for damages (justified or not) the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface.

> the correct option would have been to let users "lend" robinhood the money for 2 days to process the transaction and have this be explained in the interface

As explained elsewhere in this thread, regulations don't allow this.

Re: Robinhood reports 43% revenue decline

#217

Post by SilasX »

gruez wrote: post #210
SilasX wrote: post #208

Earlier quoted context omitted.

I don't know what that has to do with a customer who put up (100% of) $10k to buy $10k of stock and is prevented by their broker from backing out.

Because there are two distinct layers to the system, the clearinghouse to its members, and its members (brokerages) to their customers. All the clearinghouse cares about is that the member can put up the collateral on the day of trade, and on the day of settlement they show up with the rest of the money. Whether the clearinghouse member's customer paid for their stock in cash or on margin doesn't concern them. There…

This is a copy of the previous thread. As before, this latest reply just prompts the question: how can a broker promise that the collateral is good, but not the initial funds for the purchase? [1] Apparently, they have a way to say “oh no these funds are good, you can trust them” … but only for the collateral, not for customer funds that have lived for years in the same account.

And for that matter, how can bankruptcy even matter? These are all funds that live in a separate bucket from the rest of operations. Even in a bankruptcy, they wouldn’t disappear (like your coat at a dry cleaner’s.

[1] Recall the comment about how you’re implicitly supposing a “credible lockup of funds” primitive, which has a strange structure, on closer examination: https://news.ycombinator.com/item?id=27694540

Re: Robinhood reports 43% revenue decline

#218

Post by SilasX »

deschutes wrote: post #211
SilasX wrote: post #209

Earlier quoted context omitted.

What is that responding to? The problem is the lack of a consistent threat model for whom you're protecting and what you're protecting them from . Half the time it's "the consumer could reneg on the purchase" and half the time it's "the shares could be stoken from the consumer". And 100% of the time, the super-confident, I-get-this-and-you-don't explainer doesn't realize the inconsistency.

I'm not sure what you're driving at. The sibling clearly outlines a scenario where the collateral is lost. But it almost doesn't matter so long as you assume the clearinghouse isn't some vestigial intermediary. I can't answer why customers with cash in hand couldn't directly settle the trade. Maybe most of the time it doesn't matter and it's easier for brokers to have one settlement process. Maybe the industry has co…

>I'm not sure what you're driving at. The sibling clearly outlines a scenario where the collateral is lost.

They outlined a (dubious) scenario where the collateral protected the clearinghouse or counterparties, not the retail consumer, which your original comment appealed to. So no, you can’t mix and match and equivocate between the two justifications, and if your comment is going to appeal the latter, you can’t equate it with the former.

>I can't answer why customers with cash in hand couldn't directly settle the trade. Maybe…

Okay, I hate to come down hard on you, since you’re far from the only (or worst) offender, but … if what you’re saying is true, you really shouldn’t be commenting on this thread.

If you’re coming in with the view that Gamestonkers are just misinformed about how things work, and you want to tell them so, it’s incumbent on you to actually understand “how things work” at a deeper level, which includes being able to answer follow up questions.

I linked an earlier thread where I, following the Hacker ethos, applied my curiosity to pin down a model that would explain the Robinhood failure and reconcile any deficiencies in my worldmodel. That exchange was an attempt to pin things down rigorously, and a rigorous answer requires that you be able to answer questions like that.

So this really isn’t the place for “fake it till you make it” or throwing around wild speculation. If you speak authoritatively while lacking the requisite understanding, then you’re adding noise, not signal.

It is not a strike against you that you lack that understanding. Heck, I’m the same way! But it is when you want to call others’ understanding deficient. And it does mean you should leave room for others who can (justifiably) offer understanding.

Re: Robinhood reports 43% revenue decline

#219

Post by deschutes »

SilasX wrote: post #218
deschutes wrote: post #211

Earlier quoted context omitted.

I'm not sure what you're driving at. The sibling clearly outlines a scenario where the collateral is lost. But it almost doesn't matter so long as you assume the clearinghouse isn't some vestigial intermediary. I can't answer why customers with cash in hand couldn't directly settle the trade. Maybe most of the time it doesn't matter and it's easier for brokers to have one settlement process. Maybe the industry has co…

>I'm not sure what you're driving at. The sibling clearly outlines a scenario where the collateral is lost. They outlined a (dubious) scenario where the collateral protected the clearinghouse or counterparties, not the retail consumer, which your original comment appealed to. So no, you can’t mix and match and equivocate between the two justifications, and if your comment is going to appeal the latter, you can’t equa…

I never claimed to know anything about the subject and I don't see how you got from what I said to "check your tone". I read the thread you linked and shared my own conclusions.

What I can say is that the explanation given is consistent with motives that make sense for the relevant parties. And I feel that was perfectly clear in the linked thread as well. And guess what, the involved parties are publicly saying things that are consistent with all this too!

I never mentioned or in any way disparaged "gamestonkers".

As to the rest of your comment: Actually understanding how this part of the financial system works is going to require a good deal more work than being the obtuse end of a discussion. And I expect you'll be disappointed with what you learn.

Re: Robinhood reports 43% revenue decline

#220

Post by gruez »

SilasX wrote: post #217
gruez wrote: post #210

Earlier quoted context omitted.

Because there are two distinct layers to the system, the clearinghouse to its members, and its members (brokerages) to their customers. All the clearinghouse cares about is that the member can put up the collateral on the day of trade, and on the day of settlement they show up with the rest of the money. Whether the clearinghouse member's customer paid for their stock in cash or on margin doesn't concern them. There…

This is a copy of the previous thread. As before, this latest reply just prompts the question: how can a broker promise that the collateral is good, but not the initial funds for the purchase? [1] Apparently, they have a way to say “oh no these funds are good, you can trust them” … but only for the collateral, not for customer funds that have lived for years in the same account. And for that matter, how can bankruptc…

>how can a broker promise that the collateral is good, but not the initial funds for the purchase? [1]

1. the collateral is good because it's transferred/wired on the day of purchase.

2. as mentioned in my previous comment, that could theoretically be done today (ie. "trust me, I can definitely come up with the money on the day of settlement"), but it's not done for various reasons.

>And for that matter, how can bankruptcy even matter? These are all funds that live in a separate bucket from the rest of operations. Even in a bankruptcy, they wouldn’t disappear (like your coat at a dry cleaner’s.

but in the scenario mentioned above, how are you going to recover the funds? specifically, from where are you going to get the money to make the seller whole?

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