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It’s Time for Real Time Settlement

blog.robinhood.com

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Re: It’s Time for Real Time Settlement

#131

Post by [deleted] »

throw0101a wrote: post #107
kolbe wrote: post #36

Earlier quoted context omitted.

It blew my mind when they went from T+3 to T+2. I couldn't fathom why they would go about changing it, but not go to overnight settlement. Government, though.

> Government, though. Equities clearing and settlement is done privately: * https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_... If the members of the DTCC want to have it done faster, they'll request it. There's been talk, but it involves everyone agreeing to it and changing their internal workflows as well AFAICT.

[deleted]

Re: It’s Time for Real Time Settlement

#132

Post by dataflow »

JumpCrisscross wrote: post #105
Miner49er wrote: post #101

Earlier quoted context omitted.

I think this is jumping the gun. Robinhood takes some fault yes, but why are people ignoring the DTCC/clearinghouses role in this? It seems they raised deposit requirements potentially more than was standard. This needs to be investigated. WeBull's CEO claimed their clearinghouse told them to stop selling these securities (no mention of deposit requirements). If they really weren't even given an option to deposit mor…

> they raised deposit requirements potentially more than was standard What is your source for this? DTCC collateral requirements are calculated using, more or less, a fixed, predictable formula. And the DTCC isn't the ultimate creditor in these arrangements. They are drawing on lines of credit from banks, who are ultimately taking the credit risk of the collateral being insufficient for settlement.

> DTCC collateral requirements are calculated using, more or less, a fixed, predictable formula.

"Less" might be accurate, given there's apparently a subjective multiplier. https://www.youtube.com/watch?v=2M7X2dsW_Xw&t=5m25s

Re: It’s Time for Real Time Settlement

#133

Post by NovemberWhiskey »

robocat wrote: post #114
JumpCrisscross wrote: post #105

Earlier quoted context omitted.

> they raised deposit requirements potentially more than was standard What is your source for this? DTCC collateral requirements are calculated using, more or less, a fixed, predictable formula. And the DTCC isn't the ultimate creditor in these arrangements. They are drawing on lines of credit from banks, who are ultimately taking the credit risk of the collateral being insufficient for settlement.

“ Mr. Denier said that Apex was told by DTCC that collateral requirements had been raised on transactions for GameStop to near 100%.” - https://www.wsj.com/articles/gamestop-trading-restrictions-b...

... and now you will presumably give us an example of a case similar to GME where collateral requirements were not raised so we can see that the treatment was not standard?

Re: It’s Time for Real Time Settlement

#135

Post by justinsaccount »

wtf_is_up wrote: post #121
nprz wrote: post #112

Earlier quoted context omitted.

Zero commission trade is actually bullshit anyway. You end up losing more from inferior execution time than you would if you just paid the $5 per trade. Robin Hood also lied to users about this and ended up paying a $65 million fine[0]. [0] https://www.sec.gov/news/press-release/2020-321

How is this possible when I use limit orders? (not a robinhood user btw, but pretend I am)

from screenshots I have seen lately, I'd bet that at least 20% of RH users have no idea what a limit order is.

Re: It’s Time for Real Time Settlement

#136

Post by amluto »

I have seen on Twitter that Robinhood was unable to use customer funds to satisfy clearing deposit requirements, but I couldn’t find an actual authoritative source on this. Is this correct? It seems to me that, to secure a $300 purchase buy a customer, Robinhood ought to be able to use that customer’s $300.

Re: It’s Time for Real Time Settlement

#137

Post by rdsubhas »

Miner49er wrote: post #101
imcoconut wrote: post #72

This is robinhood's fault. He's not wrong that instant (or same day) settlement would be better than T+2, but there were plenty of other brokers that did not restrict trading. This was a liquidity issue for robinhood. This is a risk you run being a "cool startup that moves fast and breaks things" in the arena of securities trading. Additionally, Some of the bugs they've experienced are absurd in the context of a brok…

I think this is jumping the gun. Robinhood takes some fault yes, but why are people ignoring the DTCC/clearinghouses role in this? It seems they raised deposit requirements potentially more than was standard. This needs to be investigated. WeBull's CEO claimed their clearinghouse told them to stop selling these securities (no mention of deposit requirements). If they really weren't even given an option to deposit mor…

People ignore the clearing house because they don't see it, they don't interact with it, and they don't have a customer contract with it. For all their practical purposes, the clearing house doesn't exist.

It's obvious from RHs statement that they are stuck between the DTCC and customers. They are not willing to call out the DTCC because they are fully at the mercy of it. So they are trying their best to be positive and forward looking, trying to offer help to rally around something totally outside their control (real time settlements).

Re: It’s Time for Real Time Settlement

#138

Post by [deleted] »

Forge36 wrote: post #125
JumpCrisscross wrote: post #120

Real time equities settlement and clearing is a terrible idea. It sounds great. But it breaks a lot of good stuff. I'm surprised the CEO of a brokerage is advocating for it. (The article is a bit loose with the terms settlement and clearing. Again, surprising from the CEO of a company that almost got taken out by internal clearing failures.) If you only think about the American stock market from the perspective of a…

In the U.S. the Federal Reserve is already planning to support it. Thread discussing it from a few days ago.: https://news.ycombinator.com/item?id=25982987

[deleted]

Re: It’s Time for Real Time Settlement

#139

Post by im3w1l »

JumpCrisscross wrote: post #120

Real time equities settlement and clearing is a terrible idea. It sounds great. But it breaks a lot of good stuff. I'm surprised the CEO of a brokerage is advocating for it. (The article is a bit loose with the terms settlement and clearing. Again, surprising from the CEO of a company that almost got taken out by internal clearing failures.) If you only think about the American stock market from the perspective of a…

> When you expand it to institutions, real-time settlement means having to warehouse all the funds they might need to trade with in a day with their prime brokers as cash. Not Treasuries. Cash. Because their broker has to be able to wire out that $1bn instantly.

I see two solutions here, either they sell the treasures (with also instant settlement) and then buy, or they could trade on margin backed by the securities. Or am I missing something?

Re: It’s Time for Real Time Settlement

#140

Post by cortesoft »

nprz wrote: post #112
imcoconut wrote: post #72

This is robinhood's fault. He's not wrong that instant (or same day) settlement would be better than T+2, but there were plenty of other brokers that did not restrict trading. This was a liquidity issue for robinhood. This is a risk you run being a "cool startup that moves fast and breaks things" in the arena of securities trading. Additionally, Some of the bugs they've experienced are absurd in the context of a brok…

Zero commission trade is actually bullshit anyway. You end up losing more from inferior execution time than you would if you just paid the $5 per trade. Robin Hood also lied to users about this and ended up paying a $65 million fine[0]. [0] https://www.sec.gov/news/press-release/2020-321

Whether you would be better off with the $5 trade or not is dependent on how many shares you trade at a time.

It wouldn’t have been an issue if Robinhood had been upfront about their pricing. They still would have been a good deal for many retail investors, but they instead chose to lie.

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