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Robinhood reports 43% revenue decline

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Re: Robinhood reports 43% revenue decline

#141

Post by WoahNoun »

vmception wrote: post #131
dragontamer wrote: post #66

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. 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…

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.

Re: Robinhood reports 43% revenue decline

#142

Post by mumblemumble »

dangerlibrary wrote: post #68
dragontamer wrote: post #66

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. 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…

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? Temporarily halting all trading is something an exchange can reasonably do, sure. But for an individual retail brokerage to do it (instead of only halting buying) seems like something that straight-up shouldn't be legal.

Basically because of the balance of upside and downside --

If I can't buy into a stock that's suddenly spiked, at best I'm experiencing FOMO and at worst I'm missing out on some potential profits.

If I can't liquidate my position on a stock that's suddenly spiked, then at best I'm missing a chance to realize my gains and at worst I'm being forced to sit there and lose money.

(I realize this is only considering long buying. TBH, I can't really think up a story for retail short sellers more compassionate than "caveat vendor." Nor am I sure why I should try to.)

Re: Robinhood reports 43% revenue decline

#143

Post by Dma54rhs »

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.

They gave safety modes as well even things get out of ordinary.

Re: Robinhood reports 43% revenue decline

#144

Post by dragontamer »

Majromax wrote: post #53
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.…

> If I sell GME to buy AMZN, does that have different collateral implications to selling GME to buy GME an hour later? Yes. Stock trades don't settle instantly, and brokers must put up collateral to ensure that parties don't walk away if the price moves against them between the order and the settlement. Thanks to the meme-stock volatility, DTCC (the clearing house) imposed special collateral requirements for Gamestop…

>Stock trades don't settle instantly

More precisely: US Law for the time (and today) is T+2 settlement. Meaning the trade doesn't _actually_ happen until 2 days later.

It is the job of all the middle-men to make it look like it appeared instantly. But the price of GME was changing dramatically, so the middle-men (DTCC) asked Robinhood for more money than Robinhood expected.

Robinhood couldn't afford the higher price, and DTCC didn't want to trade anymore unless more $$$ was offered up to "cover their ass" in case the stock price changes in 2 days.

------

Those middlemen work in most situations. But when the stock is like +500% in a few hours (or whatever happened that day...), they tend to get squeamish. After all, they're the bagholders if any of these trades go bad.

Quickly-changing stock prices makes them more-and-more squeemish.

Re: Robinhood reports 43% revenue decline

#145

Post by WoahNoun »

ar_lan wrote: post #92
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…

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 support more buying.

Re: Robinhood reports 43% revenue decline

#146

Post by chrismcb »

dragontamer wrote: post #105
BigBubbleButt wrote: post #103

Earlier quoted context omitted.

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…

Personally speaking, I blame the customers. They are paying for $0 trades to a very, very small trading firm with well-known trade-execution problems months / years before the GME instance. No serious trader actually trusted Robinhood, and nobody was surprised when Robinhood's trading ability was shown to be so weak in that timeframe. There were many respectable banks with much stronger finances who were able to supp…

Wait... What? You are blaming customers for being... customers? You have repeated multiple times that Robinhood essentially ran out of money. But then finally you mentioned why people are leaving... Because they don't trust Robinhood. It doesn't matter why they stopped trading, it simply matters that they did.

Re: Robinhood reports 43% revenue decline

#147

Post by thebean11 »

winenbug wrote: post #138
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.

Assuming that the average meme-stock chaser trades with settled funds, though.

Right, that's my point. Why stop trading with settled funds, when it was only unsettled funds causing the issue?

Re: Robinhood reports 43% revenue decline

#148

Post by WoahNoun »

thebean11 wrote: post #31
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…

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.…

The formula for reserve requirements includes volatility as a variable. Before the meme stock frenzy, GME only required <5% of cash collateral before settlement. When volatility surged, this went to close to 100% cash collateral. RH didn't have enough cash.

Re: Robinhood reports 43% revenue decline

#149

Post by drexlspivey »

thebean11 wrote: post #102
Majromax wrote: post #53

Earlier quoted context omitted.

> If I sell GME to buy AMZN, does that have different collateral implications to selling GME to buy GME an hour later? Yes. Stock trades don't settle instantly, and brokers must put up collateral to ensure that parties don't walk away if the price moves against them between the order and the settlement. Thanks to the meme-stock volatility, DTCC (the clearing house) imposed special collateral requirements for Gamestop…

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

Re: Robinhood reports 43% revenue decline

#150

Post by bastardoperator »

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…

None of this sounds game changing to me. I can get a coinbase card, but don't actually want one of those either. I think their days are numbered given the steep revenue declines.
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