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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

#461

Post by infinite8s »

015a wrote: post #419
erehweb wrote: post #405

Earlier quoted context omitted.

So if RH would just make you wait 4 days before you could trade again, then there wouldn't be any problem? But then it would be a lot less attractive / addictive app.

This is not a Robinhood thing; every single brokerage does this. Robinhood is a bit unique with their instant bank deposits feature, that's something traditional banks don't generally do, but its really just a minor extension of this same idea. Robinhood is accessible, so it has serviced the bulk of the retail investor spike that happened this week. Additionally, I expect that their net liquidity is far, far lower th…

You do realize that their Instant bank deposits feature is a fiction? Until the money clears you are trading with their float - they just paper that over.

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

#462

Post by bobsmooth »

nrmitchi wrote: post #401
bobsmooth wrote: post #392

Earlier quoted context omitted.

Getting margin called is one thing. Being prevented from buying a stock is something completely different.

Being prevented from being able to buy a stock if the brokerage can not afford to legally sell it to you is the expected outcome. If you want to argue that Robinhood should have been bigger, and thus had more flexibility and been able to handle this, sure. Why not. But then you're complaining that the company you're dealing with isn't big enough to float your risky position. Would you have preferred the alternative w…

A brokerage being unable to perform its sole function is, by definition, a shitty company.

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

#463

Post by infinite8s »

disgrunt wrote: post #364
iNic wrote: post #282

Earlier quoted context omitted.

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.

In this case, it has nothing to do with trading on margin and everything to do with Robin Hood having to cover 10% with the NSCC per the Dodd-Frank rule. [0] [0]: https://www.zerohedge.com/markets/cash-strapped-robinhood-sc...

Apparently DTCC raised that to 100% for a few of the meme-stocks (GME).

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

#464

Post by lovehashbrowns »

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…

My understanding on how collateral works is wrong. This is more accurate: https://twitter.com/KralcTrebor/status/1354952686165225478

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

#465

Post by ajsharp »

015a wrote: post #386
posix_compliant wrote: post #372

Earlier quoted context omitted.

So you’re saying the issue is “what if the grocery goes insolvent before it can hand you the milk, but after you’ve paid”? I’m still not understanding how robinhood lost money in the first place.

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…

I just checked in on this from yesterday and this is just fantastic. Such a clear explanation of T+2 and all the extra stuff specific to Robinhood that's probably a further drain on their cash position. So thanks SO much for this.

Also, it should probably exist somewhere a bit more first-class than buried in an HN thread, because it's just unbelievably educational.

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

#466

Post by rajacombinator »

arcticbull wrote: post #11
rajacombinator wrote: post #5

Robinhood has been known to be sham for a very long time. Anyone with money there is willfully ignorant.

It’s not a scam it’s just a pretty mediocre broker with a fancy ui. Lest we forget they introduced many traders to options, for better and worse. They are/were WSBs broker of choice. They changed the fee landscape in trading US-wide. It’s hard to say they weren’t impactful, though we can disagree on the positivity of the impact itself.

Sham not scam. (Although that’s arguable as well.) The lack of attention to detail I would expect from Robinhood users.

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

#467

Post by rajacombinator »

arcticbull wrote: post #218
MaxikCZ wrote: post #57

Earlier quoted context omitted.

Can you point to any above average, or dare to say, good brokers?

Always depends what you're looking for. I personally use IBKR because their margin interest rates are less than 1%, they have excellent fills and order routing, access to an overwhelming amount of products (equities, equity options, index options, futures, futures options, foreign markets, bonds, etc.) and features. Their portfolio margin feature lets you trade with a margin maintenance rate as low as 15%. If you don…

Yep IBKR, although I’m biased. They’ve been the only ethical company in the business for decades.

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

#468

Post by [deleted] »

015a wrote: post #386
posix_compliant wrote: post #372

Earlier quoted context omitted.

So you’re saying the issue is “what if the grocery goes insolvent before it can hand you the milk, but after you’ve paid”? I’m still not understanding how robinhood lost money in the first place.

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…

[deleted]

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

#469

Post by cameldrv »

krupan wrote: post #394
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…

“But, the deeper issue is the US financial system and its molasses speed of moving money around.” Sorry, I’m going to be That Guy here and point out that when people accuse Bitcoin of having slow transactions, this is what they should be comparing against, not Visa card transactions. Actual settled transactions. Bitcoin takes 10 minutes. US financial system takes days.

A Fed Wire is a settled transaction, and it is settled in seconds. The only reason they're not used more is that they cost about $10. OTOH a Bitcoin transaction has been more than that recently, and it doesn't settle in seconds.
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