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.
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.
I disagree with your assessment, these brokers are preventing purchases of these stock, there is no risk for the broker in this regard.
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.
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.
-
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...
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.
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.
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.
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?
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.
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.
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.
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.
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.
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
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?
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 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?
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.
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?
I honestly hope not, and that RHb etc are in the wrong. But it’s sure to be informative anyway.
> 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 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.
There will probably be some hearings for show, but nothing more.
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...
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.