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Comment by zarkov99 | Hacker News Reader

Sure. Robinhood got a call from someone very powerful in their circle, politely asking them to stop the amateur plebes from interfering with their professional market manipulation. We are taking about people commanding titanic amounts of capital and (indirect) regulatory power. Robinhood then had the choice, do we make enemies out of these people or do we just screw, er, I mean protect, our customers? Unburdened by a moral compass or fear of retribution, the RH leadership made the obvious choice.

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This is so true. It's all connected. It's probable that Reddit, Discord, RobinHood have all received calls to disrupt retail traders from political players or financial backers. There's no evidence of this, the truth is we'll never know, but how its most obvious reason. If only RobinHood would live up to its namesake. It is alarming that "soft" circuit breakers are being used to target retail traders on exchanges.

<rant>

I rarely emote but this stinks to high heaven, corporates and politicians doing anything to keep necks under boots.As upsetting as it is to see folk fighting back capped at their knees, the broader issue is that of censorship, of the soft or hard variety, and coordination across firms to limit movements.

</rant>

When Wall Street is making billions off of selling balloon interest mortgages with no income verification the position is "The consumer is an adult and can make decisions for themselves and read the fine print.... blah blah blah .. personal responsibility."

When the people are causing Wall Street to lose billions on their absurdly large short position, suddenly they are concerned for the "amateur" investors. The "unsophisticated" investors. "We need to save them from themselves, we have to do something, they don't know what they are doing! How could they possibly be responsible adults taking this position that is hurting us financially? I know! Let's strap on these training wheels for their own good so they cannot hurt themselves cough or us cough. "

That's pretty much it.

I remember seeing something similar during Tesla's run up, where firms would force individual investors to sell their call options because the investor would have tax liability once their call options were profitable.

Course, it also had the effect of reducing the amount they would have made by forcing them to sell early.

Tails we win, heads you lose.

Just as a note - Elizabeth Warren is pretty much on the same page:

> “For years, the same hedge funds, private equity firms, and wealthy investors dismayed by the GameStop trades have treated the stock market like their own personal casino while everyone else pays the price.”

I find it interesting that folks feel empowered to call out the BS even when they've got a pretty big spotlight on them - instead of being shushed to quiet by monied interests.

Socialism for the rich, capitalism for the poor.

I look forward to the investigations on market manipulation that RH, Schwann, and TD did by not allowing their customers to trade on that stock.

Or is it normal for brokers to independently halt trades on stocks they deem too risky?

> Or is it normal for brokers to independently halt trades on stocks they deem too risky?

Absolutely not, and I almost typed "LOL" in front of that because your question - while genuine and sincere - is so ridiculous in the context of the stock market that it actually made me laugh out loud.

Brokers are more than happy to allow unsophisticated investors to buy or sell any stock. They won't let you use sophisticated products like options, etc., but simple buying and selling? Absolutely. What's happening here is simple. The wrong people are getting rich. The wrong people are losing money. That cannot be allowed.

There is something called the "pattern day trading rule" wherein someone buys and sells the same security several times and their ability to buy and sell gets restricted, but that's not what's happening here. People wanting to buy $GME are wanting to buy and hold. Not sell.

This may be another genuine but ridiculous question, but...

I think "the wrong people are losing money" is right on point, and to be clear, I don't think Robinhood has any business stopping people from buying stocks if they want to. But I am really wondering about how many people are getting rich from this stock pop. When the dust from all this settles, aren't a lot of the folks buying the stock over the last week or so going to end up underwater? My assumption has been that they saw that as an acceptable price for a jolly time Sticking It To The Man. And, back in the long ago (e.g., last week) when the stock price was $20 or $30 a share, that makes sense if you have the money to burn. But at $200+ a share, what's the rationale for holding on?

> how many people are getting rich from this stock pop

The people getting rich are the market makers. This is the hole in the Wall Street vs. the Rebels argument the media seems to be trying to pigeonhole this into.

The first-order losers are the hedge funds who, for some stupid reason, expressed their short view through actual shorting versus through puts and the retail investors who bought at inflated prices. The second-order losers will be the brokers, who will likely face margin losses, options-settlement losses, investor lawsuits, regulatory fines and Congressional attention for enabling the pump and dump and then ham-fistedly trying to stop it.

The other first-order losers are RH retail investors who just made a huge unrealized gain and are not allowed to realize the profits by selling in time. I'm on TD and they arent allowing in-the-money call option sell-to-closes to execute.

That's what I'm mostly concerned about, yes. If my understanding about the initial involvement of the Reddit crowd is correct -- that it was really about "let's pump this stock up to screw hedge funds that are shorting it" -- that group is presumably okay with losing their investment. But I can't help suspect that over the last few days, that group has become outnumbered by investors who figured they could take advantage of this weird pop by buying and selling within a very short time frame, which it sounds like you're in, and possibly even by investors who want to hold the stock, not understanding that -- even without Robinhood's interference -- it's likely set up for a fall just as quick as its rise.

Part of the thing is -- I dont have a margin account. I'm not leveraged. The whole bit about "protecting the retail investor" is absurd. There is nothing to protect and they face no harm from me since its not margined. I can lose all my equity and that is it. I am the one who faces harm -- because I cant actually get out of the trade of a lifetime.

Second thing -- I think there were many things going on and many cohorts on WSB.

- Cohort 1: possibly pump and dump (though, this happens all the time with hedge fund managers also trying to move their position...)...or perhaps 22yos excited by GameStop, not that hard to imagine. GME has been a huge discussion on WSB for months.

- Cohort 2: 22yos YOLO'ing their weekly stipend and stimulus check. No real though about pump and dump and more so just silly gambling.

- Cohort 3: Intelligent investors seeing an opportunity, not manipulating any more than a hedge fund manager does (see: Infinite Gamma Squeeze notice: https://www.reddit.com/r/stocks/comments/l3e54f/gme_infinite...)

- Cohort 4: Downtrodden retail "investors" looking to stick it to the man: https://twitter.com/inactivist_/status/1354537152445521923/p...

- Cohort 5: Onlookers on WSB (im a frequent reader, never post) looking to hitch a wagon to the runaway train.

I think you're touching on why brokerages have tried to come down hard on GME. The brokerages themselves have exposure as you explain -- they have a direct financial stake.

Maybe someone at RH ran the numbers on how much they stand to lose if things go sideways and decided it poses an existential threat.

It's the only reason I can think of because halting GME when more than half of their customers hold GME seems like a company ending event.

> more than half of their customers hold GME

This is incorrect. See the correction at the bottom of the article that originally reported that figure [1]:

Correction: An earlier version of this article stated that 56 percent of Robinhood users hold GME stock. This is incorrect, based on a misreading of a statistic on Robinhood. Motherboard regrets the error.

[1] https://www.vice.com/en/article/m7ak7y/r

"This is Wall Street, Dr. Burry, if you offer us free money, we are going to take it."

https://www.youtube.com/watch?v=Cxjdj5_5yNM

Everything that's happening is just reminding of the Big Short, Flash Boys and generally what Michael Lewis has been saying

It reminds me of Reminisces of a Stock Operator (1923) https://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Opera... Wall Street does not exist so that an individual can invest $100 and make a profit. It exists so that financial institutions can invest $100M and make a profit. It benefits from the illusion of the former though so the public is encouraged to believe that.

"I'm sorry, are you for real? You want to pay against the housing market and you're worried we won't pay you?"

On the pattern day trading rule its also worth noting that you are exempt from that above $25k on Robinhood. As I watched the subreddit over the past few weeks I saw a lot of folks happy that their account was now no longer subject to the pattern day trading rule. They started out below $25k but growth in GME value pushed them over $25k

Edit: A lot of people fixating on the fact broker-dealers aren't investment advisors...

https://www.sec.gov/rules/other/2013/34-69013.pdf

SEC has already started providing guidance on that loophole. They're not a fiduciary, but there's a want from the SEC to have their operation start to be more in line with if they were one ("harmonization")

After all RH does advertise popular stocks, they put out news branded digests of the market, it does show users gamified views of things like options, they have an entire "learning platform" meant to guide you through the market.

It's not an investment advisor, it doesn't have a fiduciary duty but the SEC wants broker-dealer behavior to better reflect the fact that retail investors assume that the platforms they use to trade are aligned with their financial goals

----

So disclaimer: I was holding large amounts of GME and AMC and sold this morning as a direct result of this news.

But I really don't get why people are so shocked.

People who started this wanted to buy and hold until shorts are kill.

Then people who heard about this plan after it started working joined, they still wanted to hold but their reasoning was starting to get a little removed from the original goal. This group is slightly bigger than the first

Fast forward a few days and suddenly this stock that just keeps going up by hundreds of dollars a day is in the news, people don't quite get what's happening, but it looks like a magical money fountain. And as a bonus this magic fountain is a big FU to the man? Sign me up! This group is exponentially bigger than the first, and exponentially less understanding of why this is happening.

At this point retail money is flooding into this stock left and right, and people are starting invest money they cannot afford to lose.

The problem for these brokers is when this musical chairs dance stops, retail investors will be holding the bag. Full stop.

But more importantly, those clueless people just buying GME because they have some vague idea of "it goes up" and "we're rebelling" are going to lose their shirts. The people in the first group who were doing this for the principle of it and as a YOLO don't really care, it's "fuck Melvin" all the way...

But the people in the last group are going to feel blindsided.

This feels like damned if you do, damned if you don't. The action of trying to insulate these people from losing their money will actively make people lose money. The dip to the low $130 was directly caused by the actions they're taking.

But on the flipside, imagine what would have happened during the rally to $400 this morning. We likely would have seen another breakout that puts all options ITM...

The fact is, the dance will end. The idea is buy and hold... but for the newest cohort there's an implied "until the money fountain stops".

And the higher the share price is when that happens, the more it will hurt. (and make no mistake, some hedge fund might be hurting, but the big guy can navigate this. If it takes making Congress halt these stocks they'll do it)

This has been a fun ride, and thrust the insane inequality of our financial systems for normal individuals and cash flushed "institutions" into the spotlight... but I can't pretend I don't understand why it's happening.

From what you describe, brokers are protecting the retail investor? Awesome, I can feel free to make any speculative decision and they will protect me from myself if it goes south. Where can I sign up to one of these brokers that guarantee I am safe?

I disagree with your assessment, these brokers are preventing purchases of these stock, there is no risk for the broker in this regard.

These companies are still businesses. They won't care if you, a single retail investor, screw up and lose a lot of money. However it is dangerous for the future health of their business if a sizable portion of their retail investors take a bath on this, get turned off by that experience, and end up stop using the service.

You aren't thinking straight. Millions of people bought GME for a single reason and Robinhood denied them that reason. If anything this is going to piss them off even more.

I don't even have a Robinhood account and it is now guaranteed that I will never use Robinhood in my entire life because they are total scumbags.

Those people might be angrier at this specific moment, but I don't think that will last long. Losing real money currently in your possession is always going to be more painful than losing out on future earnings that were always theoretical. Once GME drops back down to some normal levels, which is only a matter of time, the anger of restricting trades will fade. The anger from people who lost a lot won't fade as easily.

I don't have a Robinhood account either. They are plenty of reasons why I would avoid doing business with that company. I still don't think this is as bad a business move as some people here are claiming.

How will those investors feel when they are paternalistically told the trade they want to make is too risky, and then end up losing out on 3x gains as a result?

Let's not beat around the bush, RH doesn't care about it's users, it cares about it's clients. Including Citadel, who has a LOT to lose if all the options are ITM tomorrow.

Brokers are covering their asses. You're projecting a positive spin on this when I literally said "this is actively hurting investors"

Something insane is happening, claims of market manipulation are flying, Congress is saying they're going to investigate, what started as a meme is suddenly picking up more daily volume than SPY...

There's going to be a bloodbath, and their options are:

- do absolutely nothing, watch people get slaughtered. This is what they normally do!

- start removing yourself from the blast radius and pop the bubble, watch people get slaughtered.

The second case still hurts people, it's not some benevolent thing they're doing! They're doing it because it covers their asses a bit.

Because this time with all the tricky stuff happening with claims of manipulation, the insane volatility, the insane publicity, and most importantly the insane volume, they're afraid they might be opening themselves up to some sort of liability.

sec.gov/rules/other/2013/34-69013.pdf

Broker-dealers aren't supposed to hold your hand, but there is guidance that they should provide some meaningful sort of hand rails for retail investors.

Usually they make money either way and sit back, but this time the same way the masses have been concentrated at a stock ticker, the masses (and Congress) could end up concentrated at their door step asking why they let this happen...

They'd rather have AOC threatening to ask why a stock that's been spiked %1,400 in a month was deemed too high volatility for clients than the SEC asking why they let so many people take a bath on a meme gone wild...

>At this point retail money is flooding into this stock left and right, and people are starting invest money they cannot afford to lose.

Yes, lets do them a favor by destroying the value of their life savings they just invested.

>The problem for these brokers is when this musical chairs dance stops, retail investors will be holding the bag. Full stop.

Are you new? That's the entire reason wallstreetbets exists in the first place. It was always about losing money on purpose.

> Yes, lets do them a favor by destroying the value of their life savings they just invested.

Comment pointed out that this hurts retail investors badly. I literally attributed an almost 50% drop to their actions.

But it covers their asses, and it reduces the number of people who can lose their life savings with them. Note the "with them" part

> Are you new? That's the entire reason wallstreetbets exists in the first place. It was always about losing money on purpose.

Are you new? WSB has always had clueless people trying to ride it's coattails, there's the "As and the Rs" for a reason. That's why it used to go private even more often than this.

My comment explains like 3 different ways that the people who did this made a YOLO with "fuck melvin" in mind don't care.

But there's suddenly an entire clueless public trying to clutch onto it, and they don't really know or care what Melvin and yolo and WSB are, they just see a ticker keeps going up because of those reddit guys

You should read comments before you reply. It's a lot of words but if you're willing to take the effort to reply, take some effort to read.

You've been defending the actions of the brokers and defending the hedge funds since yesterday. What's up? Hate the little guy much?

What kind lazy non-comment is this?

I didn't talk about any actions of any brokers yesterday or hedge funds yesterday, and besides, do you think a hedge fund has a HN account?

Also, hate rationale discussion much? You couldn't refute a single thing I said, the brokers can do something that: I don't like, was self-serving, and good for shorts... but was also the least damaging call for retail... all at the same time.

It sounds like you're taking a bath because you didn't respond to the most blatant sell signal I've ever seen in my life and looking at someone to lash out at...

Pro tip for next time: If your plan works because people are buying and holding... if they can't buy it's probably going to go south.

It was a lose lose situation, the point of halting buys is to stop the pump... if it didn't stop the pump they would have halted the stock.

In fact if GME breaks out and doubles again count how long until it gets halted period for an "investigation".

Everyone was playing musical chairs and the music stopped. Don't get mad at me because you didn't try and find a seat.

Brokers aren’t fiduciaries.

Brokers can and do change margin requirements in times of high volatility. For instance, IB raised margin reqs going into the election on many products.

Also, I am fairly certain that no broker is under obligation to provide you trading access to any specific stock or futures contract. There are many futures I would like to have access to trade but are unavailable at retail.

If you have an existing position, they are likely obligated to allow you to close out.

https://www.finra.org/rules-guidance/rulebooks/finra-rules/5...

Without such regulation what would stop any bad actor from colluding with brokers to halt trading a moments that benefit themselves? Pretty hard to enforce or prove in practise but the idea that brokerages can prevent groups of users from accessing markets willy nilly is absurd. This is for cash products no any futures/options, even for those once they grant access it should not be taken away

Nothing in that regulation stipulates that a broker must provide access to a market in any (and therefore every) security. Specifically, it refers to any transaction Clearly, a transaction can't occur unless the broker agrees they will provide that security for trade.

As to your second point, it would not be in a broker's best interest to change access to certain securities 'willy nilly' as they will lose business and clients. Whap happened today was not an arbitrary decision.

Would you be arguing if these brokers raised the margin requirement on Gamestop, etc to 99%? That is within their rights to do so, the SEC only sets a regulatory minimum margin req, not (to the best of my knowledge) a maximum.

People seem to forget that many people "trading" Gamestop and the like are doing so on margin. As such, the broker dealer has financial risk that you will not be able to pay your loan back, ie by a close out of positions. Is it reasonable or unreasonable to expect that the eventual decline in these stocks will be rapid with sizable gaps? How many of the Robinhood traders are going to cry bloody murder when they are automatically closed out 10s, perhaps a hundred points lower from when the call was triggered?

In my comment, I specifically said trading with cash. Easy to argue it was not arbitrary when there's a whale no one know about and the stock is obscure and the whale pays the brokerage more money that is worth to risk losing a few customers in that obscure stock. That's why these rules exist, even though they are more in-principle than anything

This is unlikely. The regulators are on the side of the financial institutions since the unusual activity is coming from retail traders.

The NASDAQ CEO, Anna Friedman has already said they will stop trading on a stock if they match chatter from social media with a stock's movement. Her justification is to allow them "time to investigate" the situation.

SEC lawyers have stated also that justification for investigation come when "volatile trading fuelled by opinions where there appears to be little corporate activity to justify [price movements]".

It's a ridiculous assertion since several banks and funds use alternate data sources to inform their buy and sell decisions. These alternate, or non-traditional, sources of data are usually many steps removed from corporate company announcements and news headlines.

Saying all that to say that legal positions are shoring up on the side of the exchanges and professionals.

> The regulators are on the side of the financial institutions since the unusual activity is coming from retail traders.

I call BS. I mean you might be right that they are on the side of the institutions, but it's not because retail is unusual, it's because it's a big old boys club and they don't want the plebs getting uppity. MM's exposed themselves by massively naked short selling into very risky territory, which is illegal and what the regulators should be more interested in, as it is what enabled all this to happen in the first place!(1)

It's well known that the SEC is a toothless wonder that doesn't go after the malfeasance right under it's nose but loves to go after middle and low end people, with maybe a smattering of high profiles just for the optics (come to think of it, very much like the IRS). The legal system is part of that corruption. So you may be right that the legal positions are shoring up on their side (though I think its very possible you are wrong), but that doesn't make it the right, or just, state of things!

I think we are living in a moment of history that will lay bare just how abusive and illegally manipulative the whole system is against retail and there is going to be a backlash that isn't inconsequential.

[1] https://www.sec.gov/answers/nakedshortsale.htm

Are they going to start monitoring Bloomberg chat now as well?

Of course not. They're probably just going to wait until this blows over and get back to business as usual.

The way it's panning out now they probably won't go down the regulatory route. They already have levers that they can pull if the behaviour happens again, through the platform (Robinhood and the like) limiting trading or having Reddit or Discord ban or suspend groups on spurious grounds such as hate speech.

Why go down the legal route when you can give a soft nudge to board members and still get the desired outcome?

No, of course not. It's perfectly fine when they do it.

Brokers don't have a fiduciary interest, unlike Asset Managers. So, no. They have no obligation to halt trades, usually they make money on volume of trades and would encourage people to trade more. https://www.forbes.com/sites/forbesfinancecouncil/2020/06/17...

Do they have the legal privilege to do it? I suspect not, because if they did, they would be able to kill a company by not let anyone buy its share.

Idk if it is or not but it feels like crazy levels of illegal to be able to just halt buy orders like that. Imagine the inverse, if they just halted sell orders on a stock they were deeply invested?

If not criminal it sounds like a class action lawsuit.

Others in this thread are pointing out issues with arbitration, which really muddies the water on how this can be handled. Definitely complaining to the SEC though. Imagine if they did the inverse of this, and stopped anyone from being able to sell a stock they were heavily invested in. That would be absolute madness. It’s the exact same ass-covering.

Arbitration is usually bad for consumers but in volume it can be terrible for the offending company. Ususally folks dont go through it with but if you get WSB to ally and do mass arbitration to stick it to the man robinhood is an a world of hurt on legal costs.

I think RH can probably hide behind the excuse of "We thought it was a pump and dump scheme and tried to cool down the market". I'm not certain this isn't, somewhere in its core, a pump and dump scheme, even if the majority of people buying seem to be honest in their intentions.

This is purely fundamental. As of this morning, short interest was still 139% of float - which means that there are still exist buyers who will pay any price, no matter how high - or default on their shorting obligation.

Is it anything but rational to buy something you know someone is willing to pay any price (at this point in time) with the intention of selling it later?

https://www.reddit.com/r/wallstreetbets/comments/l6yrs3/we_a...

Usually it's the exchange that halts or throttles trading.

Exactly. The entire market should be impacted equally. A brokerage making this decision is problematic. I'd fear now the WSB gang turns to class action lawsuit on RH et al for preventing them from exiting their positions, after ... well, allowing them to enter those positions. You know, the job of a brokerage.

Robinhood has not prevented anyone from closing their position. They've only prevented people from buying these stocks.

Right I’m seeing Vanguard not allowing it which I don’t believe is connected to Citadel.

"Investigations for thee and not for me." Or, I think no investigation will occur.

Pretty sure what the WSB traders were doing could qualify for market manipulation and various securities frauds in broad daylight.

I honestly hope not, and that RHb etc are in the wrong. But it’s sure to be informative anyway.

There's something different about "organizing" raids in the public eye though.

There's no actual group consensus, no agreements, no negotiation, none of the processes that are required to actually "cooperate".

What happens is a a leader throws a bet at the wall and says "FOLLOW ME!". But no one is compelled or committed to any kind of action. This is the same thing as any analyst or short seller publishing their thesis and disclosing that they have a position. Its protected as freedom of speech.

Now, if the discord group or elsewhere have private circles about which stocks to raid and when, that is obviously a different matter. But I don't think that is the phenomenon that is occurring. This is a broader social movement.

> g to insulate these people from losing their money will actively make people lose money. The dip to the low $130 was directly caused by the actions they're taking.

> But on the flipside, imagine w

Due diligence and disclosing your position is not "market manipulation". Mainstream media wants it to look like that. Even the DFV, who spearheaded the GME position got a lot of flack early on.

That's the same as any market analysis you can read on any blog or mainstream media though. Somebody will just say "buy that stock" and people might agree with the analysis or not. If you think what they have done is market manipulation, so is every other financial newspaper out there.

I've noticed that EFTs that typically happened in 24 hours all the sudden require nearly a week. Even from places that have auto-drips enabled.

There won't be any serious investigation leading to a bombshell revelation like "Citadel told Robinhood to stop buying in $GME." The same people pressuring RH, Discord, etc are also quite adept at pressuring politicians and regulators.

There will probably be some hearings for show, but nothing more.

Are they really going to be investigated? Like honestly.

> Or is it normal for brokers to independently halt trades on stocks they deem too risky?

Yes. It is exactly normal.

One. Brokers are required to act in the best interests of their clients. What is that? Well...

"A broker who becomes a fiduciary of his client must act with utmost good faith, reasonable care, and loyalty concerning the customer’s account, and owes a duty to keep informed regarding changes in the market which affect his customer’s interests, to act responsibly to protect those interests, to keep the customer informed as to each completed transaction, and to explain forthrightly the practical impact and potential risks of the course of dealing in which the broker is engaged."

— Rupert v. Clayton

Two. Robinhood is already under scrutiny already for trying to gamify trading, on the premise that it encourages people to treat things like a casino and lets them get hurt in the name of their own profit. They are on thin ice as it stands.

Three. This whole thing is going down like the Pequod, complete with the impassioned revenge monologue. "To the last I grapple with thee! From hell's heart I stab at thee! For hate's sake I spit my final breath at thee!"

If Robinhood didn't do something, they would soon learn what the true wrath of the regulators really looks like. Much, much better to drop Gamestop like a hot potato.

Some recent examples of similar actions: https://www.reuters.com/article/us-tvix-brokerages/schwab-co...

Brokers are not fiduciaries. https://www.forbes.com/sites/forbesfinancecouncil/2020/06/17...

Best interests means facilitating trades as best as possible, not trying to protect clients from their own trades. No broker is attempting to preserve your capital.

What they will do is protect their capital over yours by raising margin requirements and initiating special rules to limit their risk. They don't care if you blow up your account, as long as you don't owe them at the end.

The reddit narrative is wrong. WSB marked their sub private for a little while to address a huge influx of bots and spam. They were only down for maybe an hour or so.

We already know that this is not what happened with reddit. And there's absolutely no reason to think RH has done this either. It is also grossly naïve to think that any investor who wasn't short on GME isn't already on the bandwagon.

It didn’t make much sense to me yesterday when Chamath and others were saying the system was rigged against the small investors. It totally does today. These actions are nothing but The powerful signaling to the small investors whose turf they encroached on.

I just shutdown my Robinhood (they have the audacity to use that name while stealing from the poor) account

This narrative doesn't make any sense. Hedge funds aren't a monolithic entity. Some hedge funds lost billions of dollars on shorts. Redditors made millions of dollars. Where do you think the rest of the money went to? That's right, other, more powerful, hedge funds. BlackRock held 9.2 million shares as of a few weeks ago.

There is a saying that if you're not paying for a product, you are the product.

Robinhood's real customer, the paying customer isn't the users of its app, which they offer out for free. It's actual paying customers are HFT firms, and specifically Citadel, the same Citadel that on Monday bailed out Melvin Capital with a 3 billion dollar loan.

Wouldn't surprise me one bit to find out Citadel called up Robinhood and said either shut this GME trading down or they're pulling the plug.

Melvin Capital closed out their short positions, so what exactly does Citadel stand to gain here?

I do admit to speculating here, but I am speculating that Melvin Capital did not close out their short position. Their claim to CNBC leaves a lot of room for interpretation, misunderstanding, and it's an informal statement.

We won't know what Melvin Capital did until they submit their next 13F filing.

BlackRock isn’t a hedge fund, it’s (primarily) an index provider and just holds stocks including GME on behalf of clients who invest in wide swaths of the market at once. Most of the profit has probably gone to passive investors who own a little bit of GME as part of a diversified portfolio. (I’m pretty sure that group includes me but I’m not even 100% certain of that.)

BlackRock hold everything. It doesn’t really mean anything to say that they hold a lot of shares in some particular company. You might as well have just written “GameStop is a publicly traded US company” and one would deduce that BlackRock owns a lot of shares in it.

BlackRock had 13% of GameStop. That's more consistent with taking a real stake than just happening to own it along with a piece of everything else.

https://www.reuters.com/article/us-blackrock-investment-game...

BlackRock owns a similar % of the entire market, so this isn't too surprising. BlackRock has about $9 trillion AUM, and the global stock market is worth around $100 trillion. (Not all of that $9 trillion is stocks, but BlackRock still owns a notable percentage of the total stock market.)

Linkedin is your friend. A lot of top people came from Blackrock. lol.

not having a RH account, can you trade there on leverage? I imagine if a huge number of retail traders are ending up leveraged to high hell, RH may have ended up in an uncanny financial position because of this.

You can (and people frequently do) trade options on RH, which are inherently leveraged. But RH is just a broker - it’s not on the other side of the trades itself.

ah okay. I wasn't sure what services RH offered and didn't. The amount of meme-ery around them had me wondering if they had decided to go beyond being a broker to try and extract more money from users like they do by selling access to their order flow.

I think the biggest thing RH offered that they may have been justified in curtailing is fractional stock buys and buys on margin. But to stop trading on buys outright is very strange.

Then they can enact a moritorium on leverage buys to protect themselves. They have no liability for clients who are buying without leverage.

Now they made enemies of most of their clients. I bet not more than few weeks before you will see advertising from big shot lawyers on national TV welcoming you into class action lawsuits. Frankly, I am terribly disgusted by this news from Robinhood and I hope they will be sued into eternity... and then hopefully DOJ step in an see what they did was illegal. If you have Robinhood account, write you state AG. Show your outrage in writing so they can also get involved.

> you will see advertising from big shot lawyers on national TV welcoming you into class action lawsuits

Like all darling start-ups, Robinhood has a section of its terms of use whereby users give up their right to sue.

Because courts are only for the rich and those with the power to negotiate. The rest of us clicking on take-it-or-leave-it contracts can pound sand.

Section 38: https://cdn.robinhood.com/assets/robinhood/legal/Robinhood%2...

What if you're not a user and these trade restrictions affected your trades outside of the RH platform?

It's illegal to dump products on a market (physical products) below price... yet some a-hole can force their plaform into "sell-only" mode and it's all cool.

Hi! Sorry, not an american.

Exactly how is it legal to forego your right to a fair trial on an "agreement" between two parties who for any intents and purposes do not know each other?

Clauses like this are put in there to try and protect from nuisance lawsuits. But in a case like this, it will certainly not protect them.

Speaking of which, https://twitter.com/ljmoynihan/status/1354836830169006081

there are lots of other ways to trade stocks and they will all limit your ability to trade any old thing depending on the state of the market, the state of your balance sheet, the state of their balance sheet. why do you care about one particular crappy retail broker?

Citadel runs robinhood transactions and Citadel bailed out the hedgefunds.

The house(Citadel) always wins.

While what you say is plausible, can't it also simply be that they saw a gigantic portion of their userbase making these incredibly risky bets and they were worried that it'd end up blowing in their face?

A broker is nit your friend who refuses to buy junk food for you because he suspects you’ll be sick.

A broker is yiur fiduciary/agent; their discretion at refusing your order should be limited to well defined circumstances, and I would be surprised if this is one of them.

(I would not be surprised if the EULA lets them do what they want, but I would be surprised if it would actually be found legal in court —- though it will likely take ages to test because it likely contains a binding arbitration clause)

It's not what I was trying to say, of course they're not your friend, I'm not that naive. But on the other hand if many of their users go bankrupt because of poor trades that could backfire against Robinhood themselves, directly or indirectly (for instance by motivating new regulations).

Sorry, but no. Concern for the little people isn't even slightly indicated by Robinhood's actions.

WSB have been yoloing their trades since forever.

This is some anticompetitive bullshit, plain and simple.

That doesn't make any sense because they still allowed them to sell, realizing a loss. Why not stop buying and selling?

This right here. Only allowing sells appears to be blatantly anti-retail investor, intended to help drive down prices for those with short positions needing to be closed.

Exactly. How are retail investors supposed to benefit if they are forced to wait until the stock they just bought tanks? If anything that's a direct attack at the value of your portfolio.

Try calling up your local Charles Schwab office to ask them if they'll stop you from making bad trades. While you're there, also see if they'll help you get your money back if you lose money on bad trades.

D1 capital is a Robinhood investor and was reported to have lost 20% in the markets due to this revolt.

Yep, how is this not market manipulation?!

https://www.crunchbase.com/organization/robinhood/company_fi...

https://www.bloomberg.com/news/articles/2021-01-28/dan-sundh...

I'm sure there are other investors on that list losing money from this whole thing too.

All robinhood orders go to Citadel for execution because that is how they make money. Citatel just bailed out Melvin who shorted GME https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddi... So the call to Robinhood was probably from Citadel. It's disgusting that instead of saying just this, they hypocritically "protected" their users.

To the two downvoters , this is 1h after I wrote the comment: https://twitter.com/justinkan/status/1354853920762253315

It’s Citadel, they are holding the shorts, and they are the main customer of Robinhood.

I think Citadel is winning this war, but people are moving in masses to Fidelity now that they learned why Robinhood is ,,free’’

So the exact opposite of what the real Robinhood would do?

100% this, very eloquently said

Yeah there’s something going on here. But they don’t realize that the Streisand effect will be or in full force in this. People are going to freak.

What would "they" do if they were enemies of Robin Hood? Short Robin Hood stock? Or send contract killers?

If by "they" you mean Wall Street - pull the data sharing contracts that underpin Robin Hood's business model in the first place.

If by "they" you mean WSB - for now, they just nuked RH's app in Play Store, but they're already calling for a class action lawsuit.

Don’t just pull RH’s, pull all brokers’. Paying a commission doesn’t protect you from anyone maximizing profits.

All the discount brokers sell order flow.

> Schwab earned 1.4% of revenue from payment for order flow, TD Ameritrade about 8.4%, and ETRADE about 6.1%.

They all make half or a lot less of their revenue from commissions.

> The contribution to revenue across the discount brokerages is minimal: 6.8% at Schwab, 28% at TD Ameritrade, and 17% at ETRADE.

> Interactive Brokers is the one standout, largely because it caters to high-volume professional and semi-professional traders; it makes 49% of revenues on commissions.

All RH did was run a tight ship on costs and cut commissions to zero. In theory, commissions could go less than zero.

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

Everybody screaming "class action lawsuit" is lying to themselves. I'm pretty confident this is totally within Robinhood's rights according to their terms and conditions (that everybody with an account agreed to).

Robinhood isn't only limited by its terms and conditions; there are also laws it has to comply with.

EULAs can't override federal law.

That said, even if the SEC does rule against Citadel I wouldn't expect the fine to be anything that bothers Citadel. The message time and time again is that the fees are way less painful than not cheating in the first place.

So is closing the account and moving to a better app.. Robin Hood is going to take this on the chin.

We detached this subthread from https://news.ycombinator.com/item?id=25941689.

https://i.redd.it/qwo8tf71f4e61.png

Source?

If I had a source I would be reporting it to the SEC, the FBI and any newspaper that would print it, though of course that would likely be none. This is all speculation, obviously.

“You know: we can buy market information elsewhere”.

This is not a source but.

The problem with huge power is that one loses control of the size of one’s decisions.

https://cdn.robinhood.com/assets/robinhood/legal/RHS%20SEC%2...

Lol

Please don't post unsubstantive comments here. We're trying for something a bit different than internet default.

https://news.ycombinator.com/newsguidelines.html

https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...

Hackernews, everyone!

Please also don't post unsubstantive comments here. We're trying for something a bit different than internet default.

https://news.ycombinator.com/newsguidelines.html

https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...

is robinhood a publicly traded company? are there any alternatives?

They're very close to doing an IPO. Or at least they were, before today. This could very well end up destroying the company.

Only a small fraction of RH's customers bought into the fantasy they are fighting some kind of revolution against hedge funds (or that 'the smoking man' paid them a visit in the night...). The vast majority don't care about any of these stocks. Also, by making trading so easy RH has a responsibility to protect amateur investors from making terrible financial decisions. If you really want to buy game stop stock or whatever there are plenty of ways to do so. So they are by no means "screwing" their customers.

> Also, by making trading so easy RH has a responsibility to protect amateur investors from making terrible financial decisions.

I strongly disagree with this. Nobody can know beforehand what is a good investment or not. The omnipresent disclaimer applies: "All investments involve risks, including the possible loss of capital."

The idea that the professionals know something that the rest of us don't, is quite controversial and there are many articles giving evidence to the contrary.

https://www.researchgate.net/publication/234025489_The_Activ...

This idea is also quite condescending (my own opinion, no references given).

>The vast majority don't care about any of these stocks.

Are you crazy? Robinhood just sent a message to retail investors (it's entire customerbase) that they are going to crush you at any given time. By using Robinhood your are exposing yourself to extreme risk of losing your investments no matter what stock you trade.

>Also, by making trading so easy RH has a responsibility to protect amateur investors from making terrible financial decisions.

WSB is about making terrible financial decisions as a sport. That's the entire point.

Protecting them is one thing, but ceasing all buys before the market opens and without warning is irresponsible.

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