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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

#441

Post by hcknwscommenter »

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…

You are papering over the fact that even cash accounts require Robinhood to have sufficient cash to cover amounts liable until the trade is actually settled. There is an entire web of relationships between DTCC, robinhood, bank LOCs, etc. that make robinhood's capital requirements explode when GME stock explodes 1000% up and becomes the most traded share in the entire universe of stocks.

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

#442

Post by brute »

snickms wrote: post #391
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…

Would it make sense for these companies to make bets against their customer's trades? My guess it that the customers are wrong most of the time.

https://xkcd.com/2270/

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

#443

Post by feelix »

briefcomment wrote: post #350
feelix wrote: post #318

Earlier quoted context omitted.

it's not. Here's an example Scenario 1: 1. Client buys share for $400 2. Hedge funds get short squeezed (because trading is not restricted by Robinhood) 3. Stock shoots up to $1000. Client made $600 Scenario 2: 1. Client buys share for $400 2. Robinhood restricts buying the shares (so the short squeeze doesn't happen) 3. Shares plunge to $50 because the short squeeze failed to happen (ie the hedge fund did not have t…

comboy is saying that the lottery ticket buyer is being kept from participating in a winning strat, which is what's happening to retail investors right now, which is the same thing you outlined. You're both saying the same thing. Not downvoting you btw.

it's not the same because many retailers do lose money because the short squeeze fails to execute. They dont just not make money, they buy shares for $300 and have to sell them for $100

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

#444

Post by kryogen1c »

TeMPOraL wrote: post #404
kryogen1c wrote: post #400

Earlier quoted context omitted.

> They screwed it up big time. because people are mad at them? you think they shouldve gone public during a high-volume, high-volatility feeding frenzy with tens of billions flying around and said "we're insolvent, but its ok we're taking action to recover our position"? it looks to me like their actions were totally rational and at least a good-case scenario, if not best-case. platforms have been deleted in the past…

> you think they shouldve gone public during a high-volume, high-volatility feeding frenzy with tens of billions flying around and said "we're insolvent, but its ok we're taking action to recover our position"? Sure, why not? Everyone knows the situation is extremely unusual and not indicative of RH's ordinary performance. This way, they'd stay on the friendly side of everyone. > its like saying theres no technical p…

> Sure, why not?

because if youre having liquidity problems, telling everyone that creates an incentive for them to liquidate on your platform and leave, creating a death spiral resulting in the destruction of your company and preventing everyone from liquidating in the first place. a bank run, but for RH and their clearing firm(s).

in other words, they were and are doing whats best for their customers.

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

#445

Post by sidibe »

beagle3 wrote: post #433
sidibe wrote: post #393

Earlier quoted context omitted.

Well the original shorts claim to have already closed their position and as it went up I think people are probably jumping on that side of the bet as well. Short interest doesn't mean it's going to go up forever this thing is just moving up on ponzi energy not short math

CNBC reported Melvin Capital closed the shorts, and then it turned out they didn’t. This is very likely criminal market manipulation, but I’d be surprised if it ends up with more than a slap on the wrist to anyone. And ... at the time I wrote that, si/float was still more than 100%, so - no, they most definitely not. (Am on phone now, will check later)

The idea that the shorts are for sure going to pay a higher price is super misleading and is the fuel for this ponzi. Everyone already knows the value of Gamestop is a tiny fraction of its price, so even if some shorts have to close, others will open short positions. To the people who believe they won't be the bag holders because of high short interest, this basically means the stock will always go up, and when enough people realize that's not true, the party is over and the ones opening short positions or closing long positions recently will be the only ones walking away with actual money.

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

#446

Post by 015a »

mempko wrote: post #439
015a wrote: post #412

Earlier quoted context omitted.

I do think, if more people knew the extent to which the US financial system is a house of cards, cryptocurrency would be even more popular. Not necessarily concerning fundamentals, as the US is still fundamentally strong. Primarily concerning the edges of the system and the institutions we interface with every day. I know Robinhood, and other firms, are trying to downplay what happened yesterday (and is continuing to…

Except you misunderstand one important part in the system, and that is credit drives the wheel of growth. Cryptocurrencies, while transactions settle much faster, are designed around a "hard-money" ideology. You know what's worse than inflation? Deflation. Now, there are pushes for credit in the cryptocurrency world, but as of now, it doesn't seem widespread. Of course credit systems have their own problems, like deb…

Credit absolutely can, and actively does, exist in the crypto world. If I have 10 bitcoins, I can lend them to whoever I want. I have to rely on the legal system to get them back in the case of a bad actor, but there are other emerging coins which encode the idea of credit into the blockchain itself. I doubt they'll work very well; the legal system is still critical to ensuring credit functions, and that doesn't have to go away with crypto.

Credit systems are not created by the government. Sure, the government is the biggest player, but at the philosophical level, credit systems are created by anyone who has an asset but doesn't need it right now.

The bigger thing that crypto does actively do away with is actively managed monetary policy. The populace hates on the people in power (banks, funds, government) for their quest for wealth and power, but for all the wrong that happens, monetary policy has been the single biggest driver in providing creature comforts and a modern lifestyle for the average citizen of the planet.

There absolutely is a substrate of "holy shit nothing is actually anything" at the very core of our economy. We print money to pay off loans given to us by other countries bought with their printed money. Nothing actually is anything. But, computers aren't cool with that; there is very real, hard math in the deepest parts of cryptocurrencies. You can take one of two sides in this argument, and I'm not sure either is absolutely correct (partly because, I'm not even sure there is a definition for was "correct" means in this context): Either you believe that substrate should be hard math, and modern economics is a farce, or that you believe monetary policy is the only way to ascend an economy beyond trade and barter, that we need men in suits at the top pulling levers and twisting dials to keep this machine running another day.

Maybe its alright that nothing is actually anything, and it can stay that way forever, chasing infinite growth as we expand into the cosmos. Or, then, maybe someone hacks our computer and changes the value of the Blemfark from One of its itself to Zero of itself.

Here's what I do know; whether or not it would be better, people seem to increasingly desire less top-level control and less delegation of so much power to wall street firms. Crypto is going to continue to get more and more popular, even if its against the best interests of the people, because our government and wall street underestimated how much influence the 300 million people that aren't them actually have. That's the cost of democracy and a free society; it sometimes takes the wrong path.

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

#447

Post by ev1 »

hnrodey wrote: post #398
015a wrote: post #386

Earlier quoted context omitted.

That's an accurate enough analogy. When you sell a stock on Robinhood, it takes ~2 days to "clear" the transaction. So, Robinhood credits your account, but Robinhood doesn't see that money for 2 days. They don't allow you to withdraw the money from Robinhood until its cleared, but you can purchase other stocks with the money, and if you do that, Robinhood now needs to send something to the seller. All brokerages, and…

Just my two cents. I created a Robinhood account on Wednesday evening and transferred $1000 via Plaid. My account is still not active and AFAIK that $1000 is in limbo. The app tells me "We're reviewing your application and your deposit is pending. Application approval may be delayed. We'll notify you when you can begin trading."

Note that if you start being able to use those funds before several weeks have passed, you're almost certainly going to be trading on margin even though you made a "cash deposit", because ACH funds will not settle for up to a month.

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

#448

Post by jmalicki »

AmericanChopper wrote: post #162
Clewza313 wrote: post #127

Earlier quoted context omitted.

There's day trading, and then there's taking out credit card cash advances to buy leveraged call options on a stock that's already gone up 1000% in a month. Both are risky, but the day traders I've known wouldn't touch the latter with a barge pole.

Would the day traders you know be happy using a brokerage who’s liquidity issue mean it’s had to ban trading certain securities? Even if they don’t want to YOLO like a maniac, why would you trust a company that’s had so many very public blunders with your money? It’s not like there aren’t more reputable zero-fee brokerages out there.

At least special margin requirements have always existed, and usually day traders know to avoid them or how to deal with the special requirements with a broker that allows you a more sophisticated view of the market. e.g. for Interactive Brokers, you look at this list and know you're going to have a pain trading these stocks:

https://www1.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2F.....

Because RH abstracts those details away to make the interface easier, the only hammer they could use was to ban trading in those securities.

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

#449

Post by ric2b »

MattGaiser wrote: post #41
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.

Would you have kept it with a near insolvent one? I suspect they lost you as a customer either way.

Yeah, well, there are more competent players in the space. We owe them nothing.

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

#450

Post by jiofih »

nrmitchi wrote: post #440
franklampard wrote: post #430

Earlier quoted context omitted.

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 disagr…

I'm not spending the time to watch some Youtube video you're posting, especially if you don't link to a specific timestamp/context. I highly suspect that the link you're saying is that a broker would be responsible to cover loses on trades they made if the clearing house does not; not that the brokerage is required to accept unlimited risk just because someone wants them too. > But that is Robinhood's liquidity issue…

> services that they may not be able to actually cover.

That’s exactly the point the parent commenter is making: there is nothing to cover for stock purchases on accounts with a balance. No liquidity issues can arise from that. You can say it’s easier to just turn off everything at once, but there is no actual reason to prevent stock purchases without margin, the buyer bears all risk.

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