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Comment by vergessenmir | Hacker News Reader

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>

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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. "

Socialism for the rich, capitalism for the poor.

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.

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?

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...

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.

> 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.

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.

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.

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

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

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.

> 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.

> 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.

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.

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.

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.

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...

Brokers aren’t fiduciaries.

>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.

"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

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

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.

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

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

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.

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.

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.

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

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

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?

> 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

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.

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

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.

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