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Robinhood, in Need of Cash, Raises $1B from Its Investors

nytimes.com

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Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#281

Post by itronitron »

michaelt wrote: post #266
ajsharp wrote: post #24

"To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation." Non-zero chance had they not haulted trading on those symbols they would've been insolvent by close of trading today, depending on the size of the…

> Non-zero chance had they not haulted trading on those symbols they would've been insolvent by close of trading today, depending on the size of their credit line. Perhaps you can help me understand something. In the absence of margin trading, if I deposit $100 of cash at my brokerage, then I order my broker to buy $100 worth of Stock A, how does credit and the possibility of bankruptcy enter into the transaction at…

Based on my very limited knowledge, it is my understanding that banks/brokers don't actually consider the deposit to be valid until several days after the transaction. Even if you deposited cash they would probably find some way to delay letting you use the funds pending some 'internal checking'.

So in Robinhood's case if there are many people depositing dollars to buy stock then that could be their reason or excuse to not have funds available for trading. Just a guess.

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#282

Post by iNic »

michaelt wrote: post #266
ajsharp wrote: post #24

"To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation." Non-zero chance had they not haulted trading on those symbols they would've been insolvent by close of trading today, depending on the size of the…

> Non-zero chance had they not haulted trading on those symbols they would've been insolvent by close of trading today, depending on the size of their credit line. Perhaps you can help me understand something. In the absence of margin trading, if I deposit $100 of cash at my brokerage, then I order my broker to buy $100 worth of Stock A, how does credit and the possibility of bankruptcy enter into the transaction at…

The people using Robinhood are to some degree trading on margin, that means that they are trading with money they don't have in their account, which means that Robinhood also does not have it, at least not from you. They need to have a buffer of money to deal with the borrowing, which in this case they almost ran out of.

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#283

Post by MrMan »

pishpash wrote: post #188
loycombinate wrote: post #138

So, every broker is on margin with DDTC, they don’t have to have 100pct cash for the dollar amount of the buy orders they send to DDTC, as long as they will have the cash in 2 day. Some brokers like fidelity have hoards of 401k money and more likely to have 100pct cash for their orders. Trading brokers like IBKR RH keeps the minimum possible amount of cash with DDTC, and their automated systems adjusted up the minimu…

Doesn't regular Robinhood require settled cash to trade? Edit: Nope, looks like Robinhood "Instant" is now the default, margin account, but still limited to $1000 per account: https://robinhood.com/us/en/support/articles/robinhood-accou...

This is about settlement on the back end.

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#284

Post by MrMan »

bombcar wrote: post #234
habosa wrote: post #213

Is it just me or is the involvement of VCs here really strange? If Robinhood was anything like a traditional broker (or bank/broker combination) Venture Capital firms would not have been anywhere on the list of places to get emergency money. Although I'm glad that RH has driven the price of trading down for everyone, this is one more reason why most people should keep their money with a more boring financial institut…

Most "real" brokerages can get access to billions if not trillions of cash for overnight/three days for settlement purposes. They say WallStreetBets is "4chan found a bloomberg terminal" - Robinhood is Silicon Valley masquerading as a real broker; perhaps even the Juicero thereof. I only have a small amount of play money there, and I continue to draw it down. TD Ameritrade and Vanguard serve as my real brokers. Side…

I would never use a brokerage started by SV hucksters

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#285

Post by peytn »

throwawaysea wrote: post #89
aardvarkr wrote: post #52

Earlier quoted context omitted.

So you’re putting a theory about pedophiles that run the world so they can drink the blood of children is somehow on par with the theory that billionaire hedge funds would try to exert undue pressure to preserve their wealth... Get the fuck out of here with your false equivocation

It’s not on par in that one is more absurd and unrealistic than the other. So I acknowledge your critique. But my point was more that the psychological root causes of both are similar. It comes from a tendency to latch onto a self-serving or pleasing or favorable explanation. An unproven or unrealistic or outright false narrative will do if it makes us comfortable. Ultimately, I see this example with broker collusion…

I think it’s fine to speculate, even wildly, while also seeking the truth. Especially if the truth isn’t out. It sounds like you are describing rejecting the truth, which isn’t what I think most people are doing here. Of course facts are always emerging and there will be lag time, so you and I may just be perceiving reactions differently

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#286

Post by andromeduck »

dkirill wrote: post #275
throwaway23819 wrote: post #158

Earlier quoted context omitted.

Just saw the interview, looks about what I'd expect from IBKR and why I use them.

So you are ok with your broker restricting your investment options, because one of hedge funds they sell your order flow to made a bunch of dumb decisions which put the whole market into very fragile position?

FYI: IBKR Pro doesn't do PFOF, only IBKR Lite

https://gdcdyn.interactivebrokers.com/Universal/servlet/Regi...

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#287

Post by MrMan »

etchalon wrote: post #7
stretchcat wrote: post #6

Earlier quoted context omitted.

Or they could just come clean and tell the truth..

They sent an email yesterday: "As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including throug…

If the commenters here mostly can’t understand that explanation how are even more regular people going to ? Instead they will just “not buy” the explanation and look for conspiracies

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#288

Post by briefcomment »

ajhurliman wrote: post #100
ajsharp wrote: post #24

"To continue operating, it drew on a line of credit from six banks amounting to between $500 million and $600 million to meet higher margin, or lending, requirements from its central clearing facility for stock trades, known as the Depository Trust & Clearing Corporation." Non-zero chance had they not haulted trading on those symbols they would've been insolvent by close of trading today, depending on the size of the…

A brokerage run? Unlikely for an SIPC insured institution.

It would be more of a run based on principle and fear rather than practicality. I can see why an investor would move to a competitor after seeing that RH can just stop anyone from trading, anytime.

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#289

Post by briefcomment »

feelix wrote: post #263
comboy wrote: post #251

Earlier quoted context omitted.

Imagine buying a lottery ticket from me. I run the lottery. I print it out, look at it, oooh, you know what, I can't sell you this one. Of course you don't need to pay. Goodbye. Did you lose money?

you completely missed the point. the fact that the squeeze fails means that it fails to squeeze the shorts of the hedge fund, which is the one that will be coughing up billions to pay all the retailers. So yes, the retailers that are buying shares at higher prices will indeed lose actual real money if the short squeeze fails. And it will be due to what is likely to be market manipulation (ie screwing over its clients…

I think that’s GPs point.

Re: Robinhood, in Need of Cash, Raises $1B from Its Investors

#290

Post by colordrops »

onion2k wrote: post #96
peytn wrote: post #37

Earlier quoted context omitted.

I’m not keeping my money with a financial institution that lies to me. End of story. Transfer initiated on my cash, and I’ll deal with moving stocks in the morning.

I’m not keeping my money with a financial institution that lies to me. I know for a fact my bank lies. They've been fined hundreds of millions of dollars for money laundering (it's HSBC). A few years ago I looked in to moving to a more honest bank, but I couldn't find one that also met basic criteria like having access to cash points in the UK and having a half decent mobile banking app. Literally every major bank th…

I guess they don't have credit unions in the UK?
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