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Comment by this_user | Hacker News Reader

Peterffy of Interactive Brokers said essentially the same thing. The broker is on the hook for the money as far as the clearing house is concerned. If they cannot get it from their customers, they will be left holding the bag. And in a security as volatile as GME, that could certainly happen.

In fact, we have seen things like that happen before. Forex broker FXCM blew up after their customers lost large amounts of money in the Swiss Franc in early 2015.

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Surprisingly Peterffy came across as super transparent, trustworthy and honest unlike Vlad. He stated outright this was a joke and and that GME is a $17 stock trading at a crazy price because of some games (short squeeze) and he's not sure the people on the hook to pay up for the shorts are going to be able to- which is why they have to stop and get a handle on it. https://www.cnbc.com/video/2021/01/28/pro-watch-cnbcs-full-i... .

Don’t they already HAVE the money from the customers? These are cash buys, not margin.

They key point that's missing here is that ALL stock trades are on "margin" because in reality it takes 2 days to settle a trade, but that is abstracted away from you by the brokerage and clearing house, and made available to you instantly. Caveat: I'm just starting to learn about all this, so it's probably not a perfectly accurate analogy.

Well not really, a lot of people were transferring money into Robinhood but they let you trade before the money is available. I imagine that had a huge impact on their cash crunch. Still weird they weren't straight forward with the reason or why they wouldn't enable trades for cash accounts.

Robinhood has defaulted new users to "Robinhood Instant" for years now

So the "default" RH experience is heavily based on margin but *not! in a transparent way. Deposits from banks are instant under a certain amount (10k for me but it varies) and no T+2

It should be mentioned that Ribbonhood has a history of eating losses when kids go hundreds of thousands of dollars in debt from bad bets. They simply ban the user instead of pursuing them into bankruptcy.

This is tangential to RH, but nevertheless related issue: For many years now I was wondering how exectly the ETF work and whether when I buy an ETF I can be 100% sure the issuer can follow through on their obligations?

What mechanism are there in place to insure that ETF will not deviate from the underlying stocks it should represent?

I found it difficult to understand the intricacies related to this question.

Here is one example: Suppose I was holding ETF with GME stock in it, the ETF issuer might have decided he knows better and sell the stock expecting its price to drop in the future. Meanwhile the issue will attempt to "follow" the stock by other means. Ultimately is there a way to be sure the issuer will not fail, if GME beats all anticipated expectation the issue might fail to reflect the new GME price...

What mechanism are there in place to insure that ETF will not deviate from the underlying stock?

Ok, so they can do what Merrill and other brokers did and require you to have 100% margin restrictions to ensure they get their money from you.

And let's not even begin talking about how they halted only buying and not selling. Or that they delisted the entire stock from their platform so you couldn't even search it.

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