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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

#301

Post by lovehashbrowns »

abluecloud wrote: post #257

Can anyone answer me this question: if they needed to cover themselves from the margins that people were using, why didn't they keep enabled the ability to buy shares with cash?

So apparently, a buy trade takes two days to clear. It just looks instant on the app. During the time it takes for your cash to go to rh to dtc to the other end, robinhood has to put up a collateral for some guarantee that the cash for the transaction will exist.

Usually this collateral is between 1-3%. Because of how volatile gme is at the moment, dtc upped the percentage to 100%. So for every buy, rh has to put up cash collateral equal to the price of the purchase of gme.

Obviously this isn't a big deal if gme is at $50. This is a big deal if gme is at $350. This is an even bigger deal if robinhood is doing this for millions of trades a day.

The reason these mechanics exist is if you sell your stock, you should be guaranteed to get your money for the stock. Whether that money comes from a user of RH, or RH, or dtc, does not matter. Someone will give you the money for your stock. Therefore, sell trades are not restricted. Buy trades are because they require collateral.

Some firms have cash on hand to cover the collateral. That's why some firms are letting you buy while others like RH aren't. RH paused buying of gme, took out a billion dollar loan and got hundreds of millions from investors, and will now enable buying again now that they have more cash on hand for collateral.

Anyone please feel free to correct me on anything. This is my understanding from WeBull's CEO.

Full video: https://youtu.be/4RS4JIEVyXM

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

#302

Post by gjm11 »

Jake232 wrote: post #179
dustinmoris wrote: post #153

Earlier quoted context omitted.

Auto correct what can I do. Of course I meant Starling, they were the first challenger bank to offer business accounts as well and I’m very happy so far.

Starling is neat except you need to request a special exemption from them for EVERY payment you send over £25,000. Only takes them an hour or so to approve it for you, but it gets pretty old having to do it 3-5x per week.

It's actually quite unusual to be making 3-5 payments over £25k in a typical week. Not saying it isn't a real problem for you, but I suspect only a very small fraction of potential users will be bothered by that particular point of friction.

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

#303

Post by jonathanstrange »

amscanne wrote: post #54
sdan wrote: post #17

Earlier quoted context omitted.

And right after saying they don't have any liquidity problems said, "We're #1 on the app" while retail investors were losing millions because of expiring options/stocks. Absolutely tone-deaf. Not denying that all securities have risks, but that was a bad response imo.

Retail investors lost millions because of an inability to buy?

It looks like deliberate market manipulation by the broker, to their own advantage and apparently also to the advantage of some Hedge Funds with close connections to them.

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

#305

Post by nojito »

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…

Trades aren't immediate they take T+2 to clear. During that time frame, Robinhood has to put up collateral.

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

#306

Post by alchemism »

maeln wrote: post #217
onion2k wrote: post #96

Earlier quoted context omitted.

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…

In France, a lot of banks are cooperative banks. While not everything is perfect, their attitude is way different than banks under different status. My bank was never involved in some money laundering scandal, investment scandal or other, and their customer service was always very good. They also tend to have a more "local" focus. For example, one of their saving account is used to finance local entrepreneur. If you…

This is true of “credit unions” in the US which are (probably?) similar as a legal structure. They exist as a service for a group or community - e.g. a union of policemen for example, or any citizen of a city.

Often their loan rates are generous, their fees low, and perhaps most importantly, they do not join into the blacklists that commercial banks use which prevent people from ever using a bank at all.

If you can qualify for a credit union I would definitely recommend that you try them.

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

#307

Post by kryogen1c »

jonathanstrange wrote: post #299
kryogen1c wrote: post #292

Earlier quoted context omitted.

actually im glad you said this. this is the core problem with this WSB/RH/GME event. a certain percentage of people in WSB only want to light a pile of their money on fire for the sole purpose of bankrupting some hedge funds. they expect no returns and only want to cause pain to people with more money than them that they dont like. another percentage of people (i think this group is much, much larger than the first)…

Wait a minute, I've read that they and other brokers did not halt trade, they stopped or limited purchasing but not selling. Not only that, some of their customers apparently were informed about this beforehand (as alleged by insiders on Twitter). People argue that this is criminal market manipulation.

> I've read that they and other brokers did not halt trade, they stopped or limited purchasing but not selling.

you are correct, I used the term "trade halt" incorrectly. i clumsily meant the portion of trading that was has halted, which is neither clear nor an appropriate usage of the term.

> People argue that this is criminal market manipulation.

shrug. some people wouldve said that if it WAS a full trade halt - if people can't sell to get their gains before a crash, thats illegal market manipulation right?

regardless, it seems clear that RH couldnt cover more volatile stock buys so they halted volatile stock buying. maybe they shouldve taken different actions, but they have well-known legal and contractual requirements about liquidity and cash-holdings for the volatile stock trades they broker.

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

#308

Post by devoutsalsa »

irjustin wrote: post #273
michaelt wrote: post #266

Earlier quoted context omitted.

> 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…

In RH everyone who opens an account starts as an Instant amount. The Instant means any security sold you can immediately use that cash. Normally you can't go that. You have to wait 3 days for it to settle in the clearing House. The Instant accounts are using margin to make the cash instantly available.

Another small example. Robinhood gave me one share of GE when I joined. I didn’t want it, so I sold it and withdrew the money. I initiated the withdrawal request yesterday for $10.69. It’d be amusing to me to find they would have been fine if I only withdrew $10.68.

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

#309

Post by Gaelan »

drcongo wrote: post #258
onion2k wrote: post #96

Earlier quoted context omitted.

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…

You might want to look a bit closer at Monzo, there was an entire episode of BBC's Watchdog [0] about them closing accounts and keeping people's money. Mine was frozen for well over a year with about three grand in it, no explanation, no apology. I only got it back in the end by involving the financial ombudsman via a website [1] specifically set up to help people who Monzo have scammed, because there are literally t…

I (US citizen, freshman at a UK university) tried to set up a Monzo account a few months ago. They refused to give me an account, and refused (both in their app and over email) to tell me why. Left a bad taste in my mouth.

Ended up going with Nationwide, who are a bit behind tech-wise (they do this weird thing where they ask for 3 digits of a 6-digit PIN I'm supposed to memorize, which seems far less secure than a long random password in my password manager), but generally have been great. I tried to sign up for their student account, got told no and redirected to their no-credit-check account with no issues. (That's probably also an indication of what went wrong with Monzo.)

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

#310

Post by Gaelan »

design-material wrote: post #300
nly wrote: post #233

Earlier quoted context omitted.

TW have all the functional features of a bank lots of people care about. A debit card, direct debits, standing orders etc. I of course recognize they aren't a fully licensed bank, but for EUR balances they are worth a look

The reason a Bank is strictly defined is that TW does not guarantee any cash that you have stored with them. With a bank you have up to £85,000 insured and guaranteed e.g. if the bank fails

IIRC TransferWise holds all your money in escrow (as opposed to investing it or w/e), so they don't need to guarantee it. I'm not sure off hand if that's just what they claim, or if they actually make a legal promise to that effect.
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