How is this not evidence of a corrupted free market system? A CEO of one company can call up his connections in retail trading platform firms, CNBC, and Nasdaq and protect his profits? Why is Reddit the scandal and not that?
Reddit is full of rocket emojis and YOLO jokes. But what we see here, especially with the moralizing about gambling, is an elitism on full display.
The people are sick of it.
Trading is still ongoing at the exchanges. It’s just the free platforms, where it’s shut down. If someone wanted guaranteed access to the exchange, then they shouldn’t have used a free broker. Are you saying that Robinhood should be forced to continue providing a free service at a loss?
If they can’t, then some advance notice is needed. Making this decision instantly without giving customers time to move their holdings elsewhere is not okay.
That being said, I’m surprised people are still using them for day trading. They don’t have a great track record.
Read the TOS. This was never promised.
They may be legally entitled to do what they've done. That doesn't make it right.
My comment is an "ought" comment, more than an "is" comment. Regulation should moot TOS's that allow this kind of rug-pulling.
You should be aware that if you're citing the TOS in any context other than a court case, most people are going to like you less as a result.
Users would then know, in advance, if a particular ticker will be restricted. Either through specific advanced notice, or because they were told that all securities that exceed a volatility of X over Y time period will be restricted.
Whatever the rule, it can't be a snap decision that leaves users with no recourse.
If you're not an appropriate day-trading app, then don't act like one until you suddenly don't want to be one anymore. Make the rules in advance, communicate them, and let the market decide if you're appropriate for their needs.
I said in another comment that my thoughts on this are in the "ought" category, not the "is" one.
As I see it, regardless of how it should be, one needs to accept that trading with RH has limitations/trade-offs compared to a "proper" brokerage. I get your statement, but like you said, their track record already speaks for itself.
If you have direct access to the market, you go directly to the market (i.e., have a seat on the exchange.) Also, you very much aren't a plebe in that case.
I'm a casual investor at best. I have some investments as savings through the bank, and use WealthSimple Trade here in Canada. It charges fees. It hasn't gone down. I still wouldn't trust it for any volatile action as they alert me well in advance that they have a delay of about 15 minutes. I don't expect anything more from that. I also wouldn't buy anything with the intention of time-critical sells there. If I cared more, I'd seek using a higher-performing platform. (Also worth noting, they never pinched any buys or sells during this fiasco. What's the old adage: "you get what you pay for". I don't see how this situation is any different)
If someone gave you that oil under fraudulent pretenses then it would absolutely be their fault..
Now to say that Robinhood is engaging in outright fraud, but having your service expectations subverted like this is going to rightfully piss people off whether or not the underlying service is free. There's all sorts of malfeasance that Robinhood could engage in with its free service that would clearly be unethical/illegal.
I mean, pragmatically speaking a buyer should be more wary of a situation like this. But motor oil is not the same thing as brokerages. It is very common for trades to be executed with no fee these days. It’s a market norm.
It is not a market norm at AutoZone to have $5 quarts of oil sitting next to free quarts of oil.
Add in any case, ethically speaking, it is still the fault of whoever mislabeled that olive oil.
I'm an outsider, but that's how this appears to me. They weren't lied to, they misjudged—and mainly because of a lack of understanding.
Traditionally, acting without understanding but still a high degree of confidence was called hubris.
And it appears the institutional traders expressed hubris when they over-leveraged, and this subset of retail investors expressed hubris when they didn't properly understand the capabilities and limitations of the app they decided to use to engage with the stock market.
I haven't seen people on other platforms complain in the same ways. I mean, for instance I haven't been restricted on my platform. I haven't heard anything about Questrade or E-Trade or anything.
To go back to my contrived motor analogies, it looks like a lot of people also expected a lawnmower to compete with a Tercel, never mind a Ferrari.
RH's decision here isn't an inherent limitation of their platform. It's an active decision they made. One they did not have to.
Also, what RH has done isn't harming just their own customers, but the entire market. People using Questrade or E-trade are finding that they have fewer buyers for their shares. If RH is going to act like a Tercel on the racetrack, they have no business entering the race in the first place. They're a danger to the other participants.
(BTW, analogies are fun. Thanks for the opportunity to torture them like this :)
If Robinhood (et al—sorry RH you're the de facto stand-in now) can't meet the standard of keeping up with the ... other cars in the race... then they shouldn't be allowed to enter. In that case, the analogy helps since most races have minimum qualifier rounds before you're allowed to enter.
I've got no arguments there. But that's the kind of thing RH [et al] were founded to confront or change, wasn't it? Or were they just circumventing previous regulation about market interfaces? This is where we get into the weeds and me out of my depth.
In the case of Robinhood, I can't just liquidate my money out of Robinhood and move it into a new platform and buy GME today if I wanted. I had a reasonable expectation that I'd be able to do this yesterday, and now that expectation was subverted in a way that's costly/inconvenient to me even if the service is free I have every right to complain.
"You" (well not you but you get what i'm saying) picked the service...
If folks are capable of investing directly in stocks they should be expected to understand the ramifications of picking a free service like Robinhood.
They ESPECIALLY should with all this populist banter going around...
But apparently Interactive Brokers is now doing the same. Much stronger argument to be made there. They're a pay service, with supposedly big-boy ideas about their clients, right?
EDIT: Also, note that Robinhood's decision isn't just affecting their own clients. They're screwing the wider market by restricting the pool of buyers. People who have no relationship with RH are now seeing their holdings lose value because fewer bids are making it to the books. I'm a TDA client. I didn't agree to Robinhood's TOS.
And pretty much every other broker on the planet who made trading stocks free?
How is a user, no matter how "capable", supposed to predict this?
[1] https://www.axios.com/robinhood-gamestop-restrictions-370adf...
IB clearly is concerned about the credit risk, when the stock could literally rise or fall by a factor of ten in a day. They’re still allowing trading in the underlying stock.
Obviously if people are selling options / etc. downside can be uncapped.
This seems like an honest framing of the situation!
Free market assumes that buyers can make their own decisions. This is a fundamental requirement. If you are "free" to decide something, but then your decision gets overridden when it doesn't suit a particular third party, you aren't really free. The mechanism of enforcement and excuses given afterwards don't change the fundamentals.
I can almost guarantee you that this decision was made to protect retail clients -- not as part of some conspiracy against them. It's very clear that retail is going to lose their shirts in the end of all of this, and by blocking new buy orders, the brokerage is effectively protecting its naive clientele.
Come back to your comment in a month, and I think your perspective will have shifted.
The retail brokers bailed out the hedge funds!
No matter how paternalistic the intent may have been on Robinhood's end, the message is all the same to us on the outside: the game only has rules when we get to win it