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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

#351

Post by richrichardsson »

Person5478 wrote: post #349
rtkwe wrote: post #312

Earlier quoted context omitted.

They have to have a certain amount to cover the value of all the stocks held by their clients so when 50% of their account holders have a stock that suddenly gains 2-20x value things get tight. In your analogy the price of the milk is relatively stable in the case of gamestop the value of the milk is fluctuating wildly between the time you sent the kid, when he got to the store, when he picked up the milk, etc etc. e…

> except the kid is legally required to deliver the milk or make you whole. ... *milk*? The poor boy will have to pull on teats until he fills the pail, how terrible. /I'll show myself out.

Please do, this is not reddit.

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

#352

Post by IG_Semmelweiss »

cashewchoo wrote: post #341
IG_Semmelweiss wrote: post #313

Earlier quoted context omitted.

The real reason is as follows: You cannot use customer funds to cover dtcc collateral terms. Your milk example does not work, because you are not settling up the milk buy 2 days after. You settle your milk purchase on the spot.

Huh I didn't know that. The firm I worked for did self-clearing, and we had no customers (prop trading). I guess that means these requirements didn't really matter for us because everything was ours?

even if you self clear , you are still a broker clearer and you end up touching the DTCC.

This is exactly what Robinhood is doing too.

This twitter user explains, although it gets quite technical:

https://mobile.twitter.com/wallstcynic/status/13550134381546...

Look at the tweet at 7:41PM EST.

" But if RH takes in 500m of new money and 300m buys GME, then at minimum they are looking at posting 30m+ from just that exposure at NSCC. They cannot use client money - RH has to use their own resources to post. And if GME stock drops, RH has to post the loss pre-settlement."

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

#353

Post by slfnflctd »

kryogen1c wrote: post #345
slfnflctd wrote: post #327

Earlier quoted context omitted.

> left holding stock they bought for $100, $200, $300, or $400 a share (WSB was memeing share price was gonna go into the thousands) that is worth Many people said the same thing about TSLA before it stabilized at higher levels. I bought at under $40 and sold around $80 because I thought fundamentals mattered. Turns out they don't right now. Everyone talking about what GME is 'actually worth' is spouting bullshit. Th…

>Everyone talking about what GME is 'actually worth' is spouting bullshit. The fact is, no one knows. Because it's up to the market. youre right in that no one, least of all me, can predict future stock prices, but i think youre missing the point. even if GME stabilizes at $150 - which is an unlikely tripling of value - most of the people involved are going to lose most of their investment. the fundamental principal…

> the only way this doesnt happen is if the original market was wrong about GME to the tune of 1000%

The reason I used TSLA as an example is because this is pretty close to what happened there! The future scenarios 'priced in' to that company now are several degrees beyond ludicrous. I don't think I'm missing the point at all, which to me is: massive swaths of the entire market are super irrational right now, and have been for a while, with no end in sight.

> no one, least of all me, can predict future stock prices

This seems more true to me today than it ever has been. After all the shit I've seen happen with stocks in the past few years (2020 especially), things I used to consider impossible I no longer do. None of this makes any sense any more. I don't really have the stomach for it, honestly, the whole thing makes me nauseous. But if I want my meager savings to do anything other than lose value, I still have to try to evaluate what's going on to weigh my choices.

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

#354

Post by bradleybuda »

rattray wrote: post #335
IG_Semmelweiss wrote: post #314

Earlier quoted context omitted.

Correct. And more to the point, RH cannot use customer funds to cover that timeframe. It must be its own funds. And the requirement of funds to be covering (collateral) can change on them with very little warning

Who determines the collateral required?

It’s federal law, part of the Dodd-Frank reforms in the wake of the 2008 financial crisis. I recommend this: https://twitter.com/kralctrebor/status/1354952686165225478?s...

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

#355

Post by multjoy »

TeMPOraL wrote: post #170
marton78 wrote: post #165

Earlier quoted context omitted.

I read once that in Islam taking interest on loans is forbidden, therefore Islamic banking operates based on some kinds of cooperatives. Is switching to an Islamic bank maybe an option? For those in Germany I recommend GLS bank. They have an ethical charter on whom they invest in and their loans are fully backed.

Can't find the source now, but I read that while Islam (and Judaism, at least in the past) forbids usury and this sort of extends to low interest too, the concept of interest is useful enough (or at least in demand) that people developed all kinds of practices that work almost exactly as interest.

The whole reason that the Jewery got a bad rap in mediaeval days is that they were the only people who could charge interest, and people find it very easy to be turned against The Other who is also making money from them.

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

#356

Post by drcongo »

mocko wrote: post #295
drcongo wrote: post #258

Earlier quoted context omitted.

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…

This x100. A few months ago Monzo froze my account without warning or any reason. Thankfully they de-froze it after an hour, but I've spent months since then in a kafkaesque nightmare trying to get an explanation for their actions. "It was a mistake" ... "the law says we cannot tell you why" ... "if it was a mistake why does a law protect you from having to explain?" ... "the law says we don't have to answer that" ..…

Very much mirrors my experience, and that of several friends.

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

#357

Post by IG_Semmelweiss »

rattray wrote: post #335
IG_Semmelweiss wrote: post #314

Earlier quoted context omitted.

Correct. And more to the point, RH cannot use customer funds to cover that timeframe. It must be its own funds. And the requirement of funds to be covering (collateral) can change on them with very little warning

Who determines the collateral required?

The NSCC sets the framework, but it is spelled out in Dodd-Frank that they have to do so by law.

There are some other items, but that's the basic idea - full details are here: https://dtcc.com/-/media/Files/Downloads/legal/policy-and-co...

If you want to dive further i recommend this thread :

https://mobile.twitter.com/KralcTrebor/status/13549526861652...

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

#358

Post by mzi »

rattray wrote: post #335
IG_Semmelweiss wrote: post #314

Earlier quoted context omitted.

Correct. And more to the point, RH cannot use customer funds to cover that timeframe. It must be its own funds. And the requirement of funds to be covering (collateral) can change on them with very little warning

Who determines the collateral required?

I only knows how it works in otc derivatives and then the collateral is equal to the cost of taking an offsetting position, and is calculated inter-day. But I would guess it is something similar on the stock market.

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

#359

Post by briandear »

Gaelan wrote: post #309
drcongo wrote: post #258

Earlier quoted context omitted.

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 lo…

Monzo refused because of FATCA. That happens with banks outside the US to “US persons” all the time. They should have told you that, but you can blame FATCA for the cause (passed during the first two years of the Obama administration.)

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

#360

Post by ghaff »

daniellarusso wrote: post #250
blueblisters wrote: post #77

Earlier quoted context omitted.

Are brokerage deposits / holdings protected by insurance? I'm genuinely fearful of losing my holdings in Robinhood at this point.

You can transfer your stocks to another brokerage without having to sell them.

You can. However, it tends to be a rather manual and long (days to weeks) process.
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