Saying you can only sell an asset but not buy is clearly going affect the price - regardless of the reason they did it.
If a broker can't do their job they should be forced to shut down completely until they can.
Its pretty clear they don't have the liquidity/assets to handle their customers transactions. Letting brokers manipulate asset prices so they can avoid shutting down is a dangerous precedence to set. Really hope IB/RH and everyone else involved gets blown up by this.
I understand where you’re coming from, but if they halted selling and it came out that people were stuck in positions they couldn’t sell out of, people who wanted to sell and couldn’t would be even madder than people who wanted to buy are now (and might also have more legal standing.)
Put another way, just because they have to halt buying, they don’t owe it to their customers who are holding to not allow other customers who want to sell to do so.
>I think that shitstorm is preferable to allowing brokers to manipulate asset prices to protect themselves.
I don't think that "biting off the nose to spite the face" is the approach I would prefer when it comes to my money. And, I think, a lot of people would agree with me this.
Also, the whole "protect themselves" line sounds like pure outrage without thinking about the actual consequences. If your brokerage doesn't "protect itself" and implodes, what do you think is gonna happen to the value of your assets sitting in that brokerage (as well as the assets of everyone else in that brokerage)?
I doubt there are many people on RH that wouldn't get covered fully by SIPC even in the worst case.
The idea that a broker going under wipes out all its members assets is just not true. MAYBE some stuff in flight would have issues. All the capital requirements and regulations are designed specifically so the brokerage fails first before customer assets are at risk. And again, still SIPC insured.
They didn’t manipulate squat, they were fighting to save their life. If they were manipulating GME price they would have tried to pump it higher because each time it crashed their DTCC margin requirements went up.
Driving GME price down before all these trades clear likely kills Robinhood.
Robinhood would have no customers if it implemented that system.
And Robinhoods actions affect on GMEs price was likely small. The investing world is far larger than Robinhood, and Citadels own statistics show retail investors have been net sellers of GME since Monday.
And again, every time that GMEs price crashed, Robinhood’s collateral requirements increased. Why would they try to kill themselves?
Saying they manipulated GME trading is like saying one pirhana quitting the school is manipulating the feeding frenzy.
If it doesn’t every Robinhood trader will have their account locked, and will only ever get paid a fraction of its value years from now.
While that is more than fair for WSB traders who caused this mess, there are likely many hundreds of thousands of innocent customers who may have not bought one share in GME getting the same punishment.
They are SIPC insured and every single regulation and capital requirement is designed so the broker fails first before any customer assets are at risk. Maybe some stuff in flight might have issues.
It might create a liquidity crunch for some people but the idea that people would only get a fraction of their account is pretty much FUD.
But the idea they could go months or years without getting access to the stocks in their account isn’t. And it’s small consolation to get all your GME shares back only when it’s trading back at $20.
Hedge funds didn’t bury Robinhood under 100,000 bad reviews. Both the shorts and longs have a vested interest in keeping Robinhood afloat, but the WSB doesn’t seem to realize that.
There was nothing illegal in what Robinhood did, and every broker has the right to determine which instruments they are willing to sell or buy, at any time.
Would you prefer Robinhood to implode so you have to wait years to get a small fraction of your account paid?
The issue was between Robinhood and DTCC, and couldn't be resolved by having customers' settled cash because of the rules that forbid using the customers cash as collateral. Though it might have worked if it just slowed down buys enough.
I'm not tuned in enough to know the exact relationship between RH and DTCC.
I am tuned in enough to know there is a big difference between rolling up and asking for credit saying "Hey I've got X dollars in settled cash to buy Y. Please lend me some money." and saying "Hey I've lent out X dollars to buy Y. Please lend me some money."
I said I don't know the exact relationship between RH and DTCC because it isn't public. Why would they be asking the DTCC for credit? That is absurd on the face of what collateral is there for.
They can borrow money and use that for collateral which is exactly what they did. And there is a massive world of difference rolling up to a bank/investors saying "Hey I have settled funds, I need to borrow money to post as collateral" vs "Hey I lent people a bunch of money, I need to borrow a money to post collateral".
They were told by their clearing house they aren't allowed to continue allowing $GME trades due to capital requirements, and they have to let customers unwind their positions at any time.
If they had stopped all trading of the security because their clearing house wouldnt agree to the deal, thats one thing. When they limited only one type of trading which had an asymmetric affect on the different groups trading this security, then it looks like market manipulation, sounds like market manipulation, walks like market manipulation
Links? 100% of what I've seen is clearing required more collateral. I haven't seen one reliable source saying a clearing house outright forbid trading GME.
> They didn’t manipulate squat, they were fighting to save their life.
These two things don't seem mutually exclusive. Actually, it seems like they'd be positively correlated. If you're fighting to save your life, aren't you more likely to resort to manipulation? And certainly when the cost of fines is several orders of magnitude less than the cost of closing your position at that point, it seems downright economical.
If Robinhood wanted to manipulate the GME market, they would have banned selling, not buying. Driving GMEs price lower increases Robinhoods collateral requirements and pushes them closer to bankruptcy.
Why assume they'd only want to distort prices up rather than down?
On the contrary, it seems to me that "banning selling, not buying" could be a useful tool for helping out some hypothetical buddies who would rather that a large tranche of 115s & 320s don't end up very inconveniently in the money.
It's entirely possible that RH doesn't care if the hedge fund loses all its money from the short and RH's buddy Citadel has to do a bail out to the tune of billions. In that scenario, RH still has to pause buy trades to save their own ass because they're running out of cash they need for the collateral that's required.
Do note that RH is not the only one that paused buy trades.
What I find more suspicious on RH's part is the timing of this all. RH should have known well before this week that GME was going to be a highly volatile stock. They should have already reached out to investors and banks for credit. They should have already had over a billion lined up to take on the volatility. I can understand other brokers like TD not being prepared because they might not be used to this Reddit-driven WSB volatility. RH, on the other hand, should have been ready. They've been aware of WSB and their antics since its inception. Yet they waited until Thursday to pause trades. That's where I start to go into conspiracy mode.
No, the issue is that Robinhood is a startup brokerage with likely very few actual assets.
Go try to get a $2M short term loan using a $1M home as collateral. You will get laughed out of every bank in the country.
Now try to get investors to invest $2M for half of your home, again the mirth and laughter will be rampant. Eventually you will find someone to lend or invest $700K but it will take months to close and meanwhile Robinhood is dead.
Reading closer, they supposedly got ~$500 million from its banks as loans and $1 billion from existing investors. My issue is in not knowing when this was all initiated and how long it takes for the money to go from its current place(s) to Robinhood.
Regardless, I am still learning all of this so thank you for replying and adding clarity.
They're flooded and can't handle the scenario - but they definitely can't stop people from selling because that would be locking them into positions.
I don't like RH as a company, but if they are facing difficulties, this is a reasonable thing to do.
People are giving RH heat for this most recent policy but frankly that's not remotely the reason they should be upset. I for one, basically believe RH on it. The reason 'RH' is 'shady' is for their normal business practices.
Frankly, the notion of 'free option trading for unsophisticated investors' sounds like the biggest hustle ever. Surely there are a lot of folk using it who really know what's what, but mostly not.
Exactly. IMO if there was a liquidity issue / settlement issue they should've gone to the SEC / NYSE and HALTED trading. Not manipulate the market dynamics via volume. It's incredibly shady, and I've already withdrawn what assets I could from their platform.
If the only way for you to comply with regulations is to violate other regulations (market manipulation), you must shut down your company.
It's really quite simple.
Robinhood is like some guy driving without a license who gets pulled over by a cop and says "but I'm ineligible for a driver's license, so obtaining one would be illegal fraud, so I didn't do that". Guess what buddy, you don't get to drive.
If a broker can't do their job they should be forced to shut down completely until they can.
Its pretty clear they don't have the liquidity/assets to handle their customers transactions. Letting brokers manipulate asset prices so they can avoid shutting down is a dangerous precedence to set. Really hope IB/RH and everyone else involved gets blown up by this.