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Comment by franklampard | Hacker News Reader

Much of the outrage is caused by the fact that they disabled only BUYING of certain stocks.

Systematic risks should be addressed, yes. But a broker should never do such manipulation.

Just to be clear here, they are restricting opening new positions. If you are short on GME, you are allowed to buy in order to close out your position. However, most people are long, so they only have the option to sell.

Just a side note but Robinhood does not allow shorting on their platform.

Options (calls/puts) are permitted.

I assume they allow writing of calls and puts in order to do common option strategies. I wonder if they’ll let you buy the stocks to cover your calls.

I have no dog in this. I've stayed away from RH as I always suspected they are shady. However, blocking people also from selling is even worse imho. If the exchange does it then that's OK because trading halts for everyone. But if RH does it, people can still sell on other platforms. I would be very upset if my trader is blocking me from selling. I do understand that disabling buying caused the stock to tank, but I think it would've happened even if they disabled both. Was that their way to manipulate the stock price? idk but it makes sense.

I'm confused why you're bringing up "blocking people from selling". Has that ever happened? It certainly isn't happening here.

Edit: I'm guessing it's because the above comment said "only BUYING". I think that was a distinction from blocking both buying AND selling. If you block only one, it forces the market.

Someone somewhere has to still be able to buy if RH is still allowing people to sell. It's just not the people on RH.

Do you honestly think the situation would have been better if they prevented both buying and selling? At least with the current approach people could sell their shares as the price dropped. It would have been much worse in my opinion if people just had to sit and watch as the value of their positions evaporated with no recourse.

Better for the retail investors? No.

For the retail investors, if a broker didn’t foresee systematic risks and cannot clear, the better thing can happen is the broker own up to mistakes and go bankrupt.

Bankruptcy is legal and investors understand such risks.

>Bankruptcy is legal and investors understand such risks.

The type of retail investor that is using RH doesn't understand the bankruptcy process and certainly wouldn't be happy to be stuck in SIPC limbo while the value of their stock plummets. When it comes to what is best for RH users, this seems like it was one of the least bad options among a collection of horrible options that are due to the way RH is managed.

> The type of retail investor that is using RH doesn't understand the bankruptcy process That's your rationale for manipulating the market? SMH

The price dropped because there was no buying pressure (speculation of players shorting the stock at the top aside). Disabling the ability to buy in several brokerages removes the price discovery aspect of the system.

The price dropped because it is in an insane bubble at the moment. Whether that drop would have happened today or some other day without RH's actions is unknowable. But if a lesser drop still did happen today and people couldn't sell their positions, that would have been even worse for users.

> The price dropped because there was no buying pressure

Robinhood is not the entire market. I don't know what the exact number is, but I doubt they're even a material number of the entire stock market.

If Robinhood is the entire buying market, to the point that Robinhood pausing buying is detrimental, then how does that not make it clear that this entire situation is setting up Robinhood users to lose everything they buy?

Robinhood was not the only firm blocking buying new positions. Schwab did, TD Ameritrade did, and ETrade did, IBKR did for varying lengths of time. That is the majority of retail.

Here is a fascinating interview with the CEO of IBKR where he literally says they prevented buying for retail and closed large short positions for others: https://streamable.com/ycdec9

Sec would crack down if you didn’t let me people close their positions and RH would be on the hook for any losses incurred. I assume you can still buy GME on RH if you wrote a call option or shorted the stock. You’ll also still able to execute your call option to get shares.

If Robinhood couldn't meet their collateral obligations then they should have just gone into default/bankruptcy. They absolutely should not be allowed to make market manipulation decisions that bail themselves out.

I'd also like a reporting of when they force closed some of their customers positions - did they do it selectively at a time when GME was lowest? From the examples I've seen it was later in the day. If they were already taking action before market open, then why didn't they also close those accounts then?

Disabling buying on margin would be one thing, but disabling all together is another

They did the latter didn’t they?

Exactly. I have a RH account with zero margin and was not able to even look at GME in the RH app (i.e. not even see a chart – didn't show up in the search results at all).

People who already owned shares were able to sell, but nothing else.

They disabled it altogether, cash and margin.

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