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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

#421

Post by franklampard »

nrmitchi wrote: post #414
franklampard wrote: post #411

Earlier quoted context omitted.

> float your risky position Nobody is complaining Robinhood disabled naked calls/puts on volatile stocks. How is not illegal for Robinhood to disable cash accounts from buying stocks? Your cash is transferred and deposited. If the stock price crashed, it crashed, investors still own the stocks with their cash paid.

A large part of Robinhood's entire product is papering over the difference between a cash account and a margin account, and hiding the intracacies and timing of the underlying market. > Your cash is transferred and deposited. When you open a new account, and start a transfer from your bank, that is not instantaneous. "Cash" doesn't magically appear in Robinhoods' account. Until that deposit clears, you are effectivel…

You have many misunderstandings and I am happy to clear them.

1. No, not all Robinhood accounts are margin accounts, a simple google search tells you that: https://robinhood.com/us/en/support/articles/robinhood-accou...

2. Yesterday, all Cash accounts were disabled from trading GME, that’s a fact and please defend that again.

3. Trading with a margin accounts and trading on margin is different. I can have a margin account and borrow $0 on margin to trade.

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

#422

Post by jaywalk »

shadowgovt wrote: post #396
neximo64 wrote: post #124

Earlier quoted context omitted.

Your bank actually has to lie to you to remain solvent. All banks do. The Central Bank also encourage it. Last year you saw both that banks were 'forced' to withhold dividends and they were perfectly capitalised. Both cant be true of course. If they hide it from you your money and everyones money is safe. If they tell the truth everyone loses, so it is actually the best outcome for you and everyone else. The fraction…

Lying in what sense?

Lying about the fact that your money is actually there. Individually, the money in each account is at the bank. You can go withdraw all of the money in your account without any issue. But collectively, all of the money in all of the accounts is definitely not there.

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

#423

Post by shadowgovt »

jaywalk wrote: post #422
shadowgovt wrote: post #396

Earlier quoted context omitted.

Lying in what sense?

Lying about the fact that your money is actually there. Individually, the money in each account is at the bank. You can go withdraw all of the money in your account without any issue. But collectively, all of the money in all of the accounts is definitely not there.

Thank you for the clarification.

I've never considered that a lie, because I've never encountered a bank the claims to be holding all the money. They merely claim that I will be able to withdraw my money, and that's on average true.

I consider that claim to be in the same category as the grocery store claiming I'll be able to buy toilet paper today. Sure, unless there's a pandemic. But usually? No pandemic.

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

#424

Post by 8note »

FabHK wrote: post #413
xur17 wrote: post #376

Earlier quoted context omitted.

It feels like slow movement of money in our financial system causes a lot of these problems. Customer deposits take several days to settle (during which time Robinhood has to front the funds). Settlement of the stock trades / transfer of collateral to the DCC likely takes several days, etc.

The mismatch between the speed of trading and the speed of settling can under extreme circumstances cause problems, evidently. > It feels like slow movement of money in our financial system causes a lot of these problems I'd turn that around and say that the hyper fast trading causes a lot of these problems, and in particular creates more problems than it solves. Introducing a Tobin Tax and replacing continuous tradi…

What's a Tobin tax?

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

#425

Post by FabHK »

8note wrote: post #424
FabHK wrote: post #413

Earlier quoted context omitted.

The mismatch between the speed of trading and the speed of settling can under extreme circumstances cause problems, evidently. > It feels like slow movement of money in our financial system causes a lot of these problems I'd turn that around and say that the hyper fast trading causes a lot of these problems, and in particular creates more problems than it solves. Introducing a Tobin Tax and replacing continuous tradi…

What's a Tobin tax?

Oh, sorry, it's this very simple idea that every trade is subject to a tiny fee (a few basis points). Totally irrelevant if you buy for the long term, but utterly destroys the business model of HFT.

https://en.wikipedia.org/wiki/Tobin_tax

EDIT to add: Appropriately enough, Wikipedia says:

> Another term for these broader tax schemes is Robin Hood tax, due to tax revenues from the (presumably richer) speculator funding general revenue (of whom the primary beneficiaries are less wealthy)

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

#426

Post by nrmitchi »

franklampard wrote: post #421
nrmitchi wrote: post #414

Earlier quoted context omitted.

A large part of Robinhood's entire product is papering over the difference between a cash account and a margin account, and hiding the intracacies and timing of the underlying market. > Your cash is transferred and deposited. When you open a new account, and start a transfer from your bank, that is not instantaneous. "Cash" doesn't magically appear in Robinhoods' account. Until that deposit clears, you are effectivel…

You have many misunderstandings and I am happy to clear them. 1. No, not all Robinhood accounts are margin accounts, a simple google search tells you that: https://robinhood.com/us/en/support/articles/robinhood-accou... 2. Yesterday, all Cash accounts were disabled from trading GME, that’s a fact and please defend that again. 3. Trading with a margin accounts and trading on margin is different. I can have a margin ac…

> No, not all Robinhood accounts are margin accounts,

I don't think I said that; I said that Robinhood papers over the differences in a way such that the end user doesn't explicitly interact in a hugely different way, and it's not explicitly clear what kind of account you have.

I did imply that new accounts are all technically margin accounts. The link you provided seems to prove that?

> When you sign up for a new account, you’ll automatically start with a Robinhood Instant account, which is a margin account.

> 2. Yesterday, all Cash accounts were disabled from trading GME

Yes, but I didn't say that this was because they were "margin". I said that this appears to be because Robinhood, as the broker, still requires additional cash on hand to cover these positions until they settle. This is a different thing than the margin issue.

> 3. Trading with a margin accounts and trading on margin is different.

Yes you're right. But a new user that just signed up may be thinking they are using a cash account, but it's actually a margin account. It also appears that you have to manually downgrade from an "Instant" (margin) account, to a "Cash" account[0], and I highly suspect that most people didn't do that, and thus are still using a margin account.

[0] (yes, it is really bad that this link is broken at the moment) https://robinhood.com/us/en/support/articles/downgrading-fro...

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

#427

Post by jasonhoch »

thorwasdfasdf wrote: post #395
aphextron wrote: post #370

Earlier quoted context omitted.

Robinhood is a joke. Not just because of these shenanigans, but because their lack of technical stability and customer service is unacceptable. They reliably crash on every major trading day. And there's no US based support. Never ever use a broker where you can't pick up the phone and talk to a real human being. They all have zero commissions now so there's no excuse.

Sure, app crashes undermine confidence in Robinhood. But, if you're a buy and hold investor, it shouldn't be an issue.

If you're a buy and hold investor... why in god's name would you use Robinhood?

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

#428

Post by billmalarky »

jasonhoch wrote: post #427
thorwasdfasdf wrote: post #395

Earlier quoted context omitted.

Sure, app crashes undermine confidence in Robinhood. But, if you're a buy and hold investor, it shouldn't be an issue.

If you're a buy and hold investor... why in god's name would you use Robinhood?

Serious question, why would you not? It's designed to be incredibly convenient and the trades are zero commission. Why not use Robinhood to buy and hold, if you're just making simple plays (buying ETFs etc) and don't need high performance (ie executed immediately etc) trades?

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

#429

Post by nikanj »

lovehashbrowns wrote: post #301
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…

So in left pocket RH has $200 from me, cash. And RH can't make a buy order for $200, because they need $200 in right pocket as collateral? Why not just use my cash as the cash collateral?

I still don't see how they need a billion-dollar cash hoard for non-margin buyers.

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

#430

Post by franklampard »

nrmitchi wrote: post #426
franklampard wrote: post #421

Earlier quoted context omitted.

You have many misunderstandings and I am happy to clear them. 1. No, not all Robinhood accounts are margin accounts, a simple google search tells you that: https://robinhood.com/us/en/support/articles/robinhood-accou... 2. Yesterday, all Cash accounts were disabled from trading GME, that’s a fact and please defend that again. 3. Trading with a margin accounts and trading on margin is different. I can have a margin ac…

> No, not all Robinhood accounts are margin accounts, I don't think I said that; I said that Robinhood papers over the differences in a way such that the end user doesn't explicitly interact in a hugely different way, and it's not explicitly clear what kind of account you have . I did imply that new accounts are all technically margin accounts. The link you provided seems to prove that? > When you sign up for a new a…

I will not argue with you about what Robinhood did to any of the margin accounts, if people borrowed money to trade stocks and Robinhood think that's risky, they have the right to close positions as part of standard risk management.

But I am against what they did to the cash accounts (and margin accounts not borrowing money to trade). It seems that you think it's a small portion of all of the accounts, which I disagree.

Even if it's only a small portion, what Robinhood did to these cash accounts was unprecedented and unacceptable as a broker.

For point 2, I think you are referring to the clearing process. Brokers were liable to cover if clearing houses do not[0]. But that is Robinhood's liquidity issue and not does justify Robinhood disabling cash accounts from buying stocks.

[0]https://www.youtube.com/watch?v=7RH4XKP55fM&feature=youtu.be

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