Transfer Stocks Out of Your Robinhood Account
robinhood.com
robinhood.com
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
This approach goes back to the Great Snowden Snow-In of 2013, and has served HN well since then.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
With new accounts starting with Instant capability, they are all on margin until the transfer clears.
But only on specific stocks they selected? They still had liquidity for other stocks?
If I were a clearer, and Robinhood were my client, and they had some collateral in deposit with me and a ridiculously large long position in GME in excess of the posted collateral, and GME were suddenly extremely volatile, then I would consider requiring more collateral and/or telling Robinhood that they may not purchase more GME. Because my #1 job as a clearer is to make sure that, at the end of the day, all the money I am owed is actually there.
If GME crashes, then the total portfolio of Robinhood and its clients will lose a lot of value. In theory, Robinhood and its clearer has no skin the the GME game, but, in practice, there are quite a few examples of financial companies taking massive hits when their clients go under.
So yes, the clearer could easily be willing to let Robinhood buy more stock that is seen as uncorrelated to GME but be extremely uncomfortable with the size of Robinhood’s position. This is similar to how Robinhood won’t let its clients hold positions when they have insufficient margin to cover the anticipated possible loss.
The clearing house needs enough money from you to be able to go buy those shares in the open market 2 days from now if you vanish overnight tomorrow. If the stock is going up or down 2% a day, it's a lot easier to predict how much they would need than if it's going up or down 200% a day.
I would never apologize for RH, I thank them for pushing mainstream retail commissions to $0, but I don't do business with them (and never have) because they don't seem to have focused on the important parts of being a brokerage.
https://robinhood.com/us/en/support/articles/margin-overview...
https://robinhood.com/us/en/support/articles/robinhood-accou...
That's because they don't. The entire application and order flow seem designed to limit the amount of information given to the actual user, in order to make them more confident in the decision. More confident users trade more stock.
I guess you could argue that "a brokerage makes more money the more stocks are traded, so they are doing the best of the brokerages", but would personally argue that a brokerage should have a responsibility to at least partially work in the best interest of their clients.
Out of curiousity I went through their option buying flow the other day (100% expecting to lose that money); it felt more like buying a lottery ticket than a financial investment.
I feel gross agreeing with Robinhood here, but it doesn't really sound like they were in a position to not take the action they did (this time).
Robinhood may be able to control what happens on their own platform (typically heavily based on regulation), but that doesn't mean they can stop buy/sell activity on the whole market.
We can discuss the trading halts separately.
This isn't a positive. Had they charged fees, they wouldn't today be doing the bidding of of their real clients.
Robinhood forced the major brokers to do $0 stock trades, just need a few others to do $0 option trades too. The fees aren't crazy, but they add up if you do lots of spreads.
> Commissions are way down there; in 2018, they represented a bit less than 7% of Schwab’s net revenue.
https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr...
I'm much happier paying $0 than $20 for the privilege of turning my compensation into cash. The spreads decreased a bit over that time too, which is also nice.
I'm not saying it has no place in the market, but a more informed user might calculate the risk and decide to use a fee-based brokerage instead (like ProtonMail vs Gmail).
That’s false. They’re legally required to get the national best bid or ask just like any other broker. Routing trade flow doesn’t change that, it just gives the recipient the ability to match or beat those prices. If there was a better price elsewhere they’re mandated by law to attain that price. If they’re not doing that the SEC would be en route.
"How Robinhood makes money on customer trades despite making it free" https://www-cnbc-com.cdn.ampproject.org/v/s/www.cnbc.com/amp...
At Gmail's launch, Hotmail was offering only 2MB of free space, while Gmail was offering 1GB. At the time, that was a game changer, and how they captured a good chunk of the market.
The 1GB storage was so ridiculously large, that many assumed it was an April Fool's joke (also because GMail was launched on April 1st).
- If you waited 3 business days for your deposit to clear
- If you waited for stock settlement before buying other stock.
Basically no margin, no 'instant' deposits, and needing 25k+. You wouldn't even bother using robinhood.
Most of the people talking about various conspiracy theories about brokerages have clearly very little idea of how brokerages work on the back end (and not very many people do know this) or what regulatory duties brokerages have and hwo that might inform decisions they make.
If you are a bit of a masochist, you can read all about it in After the Trade is Made https://www.amazon.com/After-Trade-Made-Processing-Transacti...
Here is a place to start:
Straight from the horse’s mouth
Trump’s executive order in November is forcing Americans to divest from a bunch of Chinese companies - liquidating orders only.
This wasn't "just" privacy violations or psychological manipulation with ads, this was Robinhood deciding what to do with YOUR money to cover their ass. Whether they lent it to you or not doesn't matter, because if the bad trade were going the other way, then you, the sucker, would absolutely be on the hook.
Whether it's fraud or flawed or whatever else is beyond my experience or knowledge, but after today I think ending up on the wrong side of the deal with Robinhood again will rightfully be met with suggestions that you should have known better.
While this is all true (and realistically Robinhood has killed their brand and probably won't survive), those same users were also suckers for falling for this ridiculous GME pump.
What Robinhood did was absolutely in self-interest, but it was trying to cover up a mess that fundamentally wasn't of its own devising. They were either going to get sued by a bunch of people that got fleeced in a clear pump and dump scam or they were going to get sued by users they prevented from losing money, and they chose the latter.
I'm not sure what is making you think all of the RH users were suckers, many of them have made quite a bit off of this. I don't personally use RH currently (although I have in the past). Ideally the bag holder in this situation would be those covering their short positions. But there is no doubt some will get burned. It's far from over though and there has been plenty of opportunity to cash out. In fact it's way up in aftermarket again this evening.
So what was done was regulations were put in that forced brokers to limit risk. So RH followed those regulations and now people are pissed.
A friend was telling me a few hours ago that she's exiting once GME hits $5000 - yes, five thousand dollars, I specifically checked that was what she meant. She (and a few other friends who didn't name dollar amounts) have been misled about what a short squeeze is, and believe there's some specific future event called "the short squeeze" where they're guaranteed to make money if they're holding GME when it happens.
It seems that the reddit community has been expecting this for quite a while, though maybe they didn't expect it to get noticed outside of wallstreetbets.
15 days ago, with discussion on upcoming gamma squeezes and eventual short squeeze. Price was $20. https://www.reddit.com/r/wallstreetbets/comments/kwb827/gme_...
1 month ago: "shorts are still ~100% short and running out of time" https://www.reddit.com/r/wallstreetbets/comments/kh9na8/gme_...
4 months ago: "bankrupting institutional investors for dummies, ft Gamestop" https://ns.reddit.com/r/wallstreetbets/comments/ivs6dw/bankr...
(added) another from 4 months ago, focusing even more on a short squeeze: https://www.reddit.com/r/wallstreetbets/comments/ip6jnv/the_...
(I just found these via the search function.)
The stock is still up like 250%. By definition, far more of them are still in their positions than out. You only "make" money when you sell.
Facebook is free and supported by advertisers.
And Robin Hood is free because they sell your trade data to the hedge funds — ironic name, “Robin Hood”.
Guess who pays their bills. If their actual customers went bankrupt, how would they make any money? Think about it!
For more info see
It's a great marketing tool and definitely had a hand in getting RH to where it is today. Personally, I like the instant settling.
Ideally RH would have just turned off trading to specific securities that required float. i.e. "Cash" accounts can still trade everything, but maybe they can't make that separation... simply on for all or not at all.
It sounds like FINCEN requirements require a 2-day settlement period. This period allows fractional trading to work (they pool orders and execute on day 2). Those same restrictions also appear to restrict a broker/dealer from using customer funds to cover this float. From there it's pretty easy to interpret the end results - risk rises, fees rise, and suddenly RH has to pony up massive amounts of liquidity to cover the DTC float.
Fuckery is certainly possible. This explanation still begs the question; at what point can a business decide not to cover the 'cost of doing business' and instead, create explicit downward pricing pressure.
They're covering for the market makers and shorts who are on the hook for all the options bought and shares shorted.
Institutions could enough to ameliorate their pain while the only option given to everyone else was sell.
They should have instead stopped trading so everyone could borrow whatever they needed to pay for the bets they lost.
Someone's gonna complain and ask "why didn't they just disallow buying but allow selling".
They picked the least painful option for themselves. Three options existed:
- Halt all trading - Halt buying - Halt selling
Everyone is pissed no matter what. The first is perhaps the most fair. The last helps the big institutions in this circumstance, the second retail traders.
They've been defrauding people for quite some time already. I remember reading this on HN in September.
When you transfer money in, Robinhood doesn’t actually get that money until a couple days later. They allow you to buy stock immediately, but that happens (transparently) on margin. Robinhood is loaning you the money to make it happen.
Likewise, when you buy or sell a stock, the trade doesn’t settle for t+2 days. Robinhood again transparently loans you the money while waiting for the stock trade to settle.
If Robinhood exceeds the SEC-mandated limits for margin they can extend, or their creditors decide it’s too risky to continue loaning them the money, the whole show grinds to a halt. They chose to press the pause button on the primary meme stocks driving them toward this cliff. I imagine the only alternative was to hit the pause button on the entire platform until the credit issue was resolved, but it’s much harder to get additional credit when your service has ground to a halt.
Then they can reduce the purchasing power for certain stocks to just the money already transferred.
This thread explains the math in detail: https://twitter.com/kralctrebor/status/1354952686165225478?s...
I know the popular narrative is that this was some sort of conspiracy, but the truth is likely far more banal. Unprecedented volatility and volume are exceeding the limits of these systems. No one budgeted for a single stock dominating news headlines and swinging wildly while millions of retail investors tried to enter at the exact same time.
Whatever changes they make, those changes need to enable them to not intervene in that manner ever again.
The solution would be to disallow this feature, not to stop trading of certain tickets on all accounts, most of which are seasoned and funded
Full explanation with math here: https://twitter.com/kralctrebor/status/1354952686165225478?s...
Also, it’s not realistic to expect them to completely retool their entire app and infrastructure in a matter of hours to disallow margin-based trades of only certain securities. If this was a long-term concern I’m sure they’d do exactly what you suggested. However, this even ramped up in only a couple of days. Let’s be realistic about what they can re-engineer, test, and deploy to end users in that timeframe.
If I'm reading the Twitter thread right, what killed Robinhood was the component of ">30% of your flow is in one stock", which is something that I could absolutely see never having happened to Robinhood until now.
They do have the ability to change the margin requirements for a particular stock, as well as disable “instant deposits”. They don’t let you withdrawal money until it’s cleared so adding the ability to hold the funds in the account until they clear wouldn’t be hard if it’s not already there.
Margin investing is offered to eligible customers through Robinhood Gold, a suite of premium investing products including Nasdaq Level 2 market data and Morningstar Research Reports, for only $5 a month. The first $1,000 of margin is included in the $5 monthly fee. After that, customers pay a flat 2.5% yearly interest rate on any amount used above $1,000. Our pricing is straightforward and the same for every eligible customer, regardless of their account size.
https://blog.robinhood.com/news/2020/12/21/robinhood-lowers-...
"(4) equity of at least $2,000 except that cash need not be deposited in excess of the cost of any security purchased (this equity and cost of purchase provision shall not apply to "when distributed" securities in a cash account). The minimum equity requirement for a "pattern day trader" is $25,000 pursuant to paragraph (f)(8)(B)(iv)a. of this Rule.
Withdrawals of cash or securities may be made from any account which has a debit balance, "short" position or commitments, provided it is in compliance with Regulation T and Rules 400 through 406 of SEC Customer Margin Requirements for Security Futures and Rules 41.42 through 41.49 under the CEA, and after such withdrawal the equity in the account is at least the greater of $2,000 ($25,000 in the case of a "pattern day trader") or an amount sufficient to meet the maintenance margin requirements of this Rule."
https://www.finra.org/rules-guidance/rulebooks/finra-rules/4...
If a large percentage of their customers were new, young, fairly low income (and thus more likely to have their transactions bounce), and they all wanted to buy long positions in a stock that very likely could drop 90% in the next two days, the risk is far higher.
In the old days one would have to formally request margin. Then the broker would give you stern warnings, have you sign a form, mail you a nice booklet explaining margin, options and shorting. I assumed it was a legal requirement, but maybe not?
Well, kind of. If you use the proceeds to do another stock trade, that second trade also settles T+2, so it doesn't require RH to put any of its own capital up.
(Options settle T+1.)
"To let you trade instantly, we lend you money. Because lending is risky, we won't let you use it on high-volatility stocks like GME. We screwed up by applying the same restrictions to confirmed deposits, which no longer involve loan risks. Our team is working on a fix."
[1] https://www.joelonsoftware.com/2002/11/11/the-law-of-leaky-a...
They didn't announce anything to anyone until it went into effect, despite programming their systems in advance for the changes.
Every explanation they've provided has a million holes in it.
In a different life, I worked for a well known discount brokerage in 2005 processing corporate actions. Mergers, splits, divided payments, proxy voting, exercising bond contract provisions, warrants, short covering etc.for retail customers. Not glamorous work to be sure.
I can tell you unequivocally that to deliver the simplicity, affordability, and transaction efficiency we now take for granted, many MANY layers of broker/dealer process and manpower are built on top of pretty archaic systems and processes and regs. I’m sure that’s something most HN readers would roll their eyes at because of how low tech and antiquated it was. But that’s how the market actually functionally works for retail investors. And those regs are often granular and exist because of historical failure.
Just being able to buy stock, and not worry about getting the literal paper stock in your own name is an innovation we take for granted by having securities held in street name. We in fact had some paper stock in a safe because some clients insisted having in their name.
When we processed shorts we literally would hold the short against a specific humans named account or go borrow shares by picking up the phone and calling another broker. Shorts don’t happen out of thin air. It’s someone else stock you’re selling.
In 2005 I would log into a black screen DTC terminal and pull money down at a firm level by manually typing the values in (lord knows what happens if this gets messed up).
If accounts went over minimum margin requirements we would pick up the phone and call them to explain why they needed to close positions or add collateral. One time we closed the entire account an mailed them a check for the balance because they kept ignoring.
When corporate action transactions settled (T+5) we would manually allocate them to accounts, and then print out the accounts affected for manual QA. The print out went into a filing cabinet for compliance reasons.
All of this is to say...it seems like HN model of how retail financial markets work is like super efficient APIs that transact like magic plumbing. In reality it’s more like an anthill built on top of a Rube Goldberg machine. You may not want to believe that RH and other brokerages have to abide by insanely complex and Byzantine rules and regs and systems and interactions because they make a drop dead simple experience in their app...but they almost certainly do.
Exactly, just because it's abstracted away doesn't mean it isn't there. What else can this startup be other than a client application to a service that isn't theirs?
Citi accidentally paid back a $900 million loan they weren't supposed to. The recipients mocked them and refused to give it back.
I'm not sure of the biz aspect of this, but given the criticism RH historically got for pay-for-flow schemes (even while they were using Apex) I would assume it was RH which got the market-flow kickbacks - not Apex. So it's safe to assume that's how it still works today. Yet, Apex also halted orders for these tickers. This goes to show you the very real risk these types of retail clearing companies are facing in this market. So, I'm not absolving RH just saying they might have some real reason to have paused.
All this also shows you "there is nowhere to hide". There will always be somewhere somecompany which will put its perceived viability or PR before "sacrificing" for their loyal customers. Especially, given the fact that most of these platforms just one company for clearing anyhow.
RH didn't have to send out a patronizing "we're doing this for your own good" email.
RH didn't have to continue failing at anything resembling forthright communication. (Including their tweets, blog posts, and outright false in-app messages that implied users sold their own shares and cancelled their own orders)
Worst of all, RH absolutely didn't have to sell people's shares out from under them at a dip in GME's price.
They were going to burn some amount of goodwill, but that could have been reduced from company-destroying magnitude to mere bad day had they simply not acted shady at every possible point. That last point is probably going to land them in severe legal hot water, their ToS won't mean much especially if/when the SEC comes knocking.
It seems to me that if you are holding GME, the last possible thing you want is being stuck in a position for a while.
For this particular case, it might be a better choice is to liquidate your position, cash out and just open another brokerage account. I know this is the total opposite of what the WSBs are looking for but the alternative is transferring a position with $50k and when you can trade again its only worth $500.
*As others have mentioned, this is an ACAT not just ACH transfers. ACATS usually have fees. I also have done an ACAT but it was by chance that it was with one of the three companies listed in the link with $0 fees.
I didn't notice that, that's bullshit.
https://topratedfirms.com/brokers/fees/brokerage-account-tra...
You can see most brokerages charge around there, some charge nothing, some charge more.
https://www.reddit.com/r/wallstreetbets/comments/l6omry/an_o...
Further, at the moment there are still 62m outstanding short positions (with 71m yesterday). However, there was only 50m (likely revolving) trading volume today on GME.
Honestly, it looks like the redditors are going to successfully cause a squeeze.
The way to profit is to sell when the shorts are squeezing the profits out.
The early buyers will probably sell a little bit to lock in profits. This drives the price down. They’ll then go on to social media and pump GameStop everywhere with memes and stories about taking down Wall Street. This brings in new money to pump the price back up.
This is what they’re already doing: Pumping the stock to bring in new money, which they collect by selling the new entrants some of their shares. The new entrants catch on to the game and start recruiting more people to pump the price further, and so on.
Eventually people realize this can’t go on forever. New entrants might see their value drop 50% as old entrants cash out. They’ll panic and sell everything, which triggers more people to panic and sell, which drives the price down.
Some will try to buy the dip, but eventually the pump will run out of steam and new players will get tired of bleeding money for a mythical “infinity squeeze” that never happens.
Humor me for a second - what happens the the (unlikely event) they ALL hold until it hits $10,000, and the "infinity squeeze" really does happen?
At some point, you can't squeeze infinite money out of short sellers. In theory, if they're still short when the price passes a threshold higher than their margin limits, they'll get margin called and forced to sell. If the brokers and clearing houses didn't get the risk math right, they'll have to cover some of the difference. This is part of why RH had to pay (a lot) extra into collateral pools just to trade GME at all today. I don't exactly know which parties bear the risk in extreme scenarios.
Practically speaking, if they suspect a squeeze is happening they'll start competing against each other to get order fills. If they all set sell limits at $10K, they risk losing out to someone who sets their sell at $9999. That person risks losing out to someone who sells at $9800, and so on down the line. Again, there isn't actually infinite money to be extracted from the system, so it becomes a competition to sell before your WSB peers.
Even worse, the subreddit will be full of posts about "buy the dip" and "diamond hands" that encourage the naive players to not exit the trade. This creates more room for savvy players to get their sells in before the situation resolves and the price comes crashing back down. Again, it's a race to the bottom.
Sadly, much of the profit going to WSBers will come not from hedge funds, but from other WSBers who think they're "buying the dip" or front-running a short squeeze when in reality they're just buying shares from other WSBers.
New entrants are the bag-holders. The ones left holding the bag after everyone has pulled the money out.
Actually the bag holders are likely anyone foolish enough to try and transfer GME to another brokerage and ends up watching the share price plunge while they wait for them to show up in their new account.
The price is fueled not by holding a stock, the price changes when the stock sells. The current blitz is being fueled by Johnny come lately bag-holders.
At some point the buyers will run out, the price will go down and the only ones left will be the broke bag-holders.
WallStreetBets is a heavily moderated subreddit. They remove any posts or comments that don’t toe the line.
Make no mistake, it’s a pump-and-dump group. They’ve been honing the narrative and it finally triggered all the right points to go viral.
This idea that Redditors are only hurting hedge funds is completely false at this point. They’re also going to be taking a lot of money from each other on the way down.
People who opt to transfer shares are going to be locked out of trading them for days, maybe weeks.
When the GME stock comes crashing down (it will), you don’t want to be locked out of selling. Despite what the memes are saying, you won’t come out on top by holding the stock forever (while everyone else sells)
I have no skin in this game (neither GME or Robinhood), but lets try to stay informed and not grab pitchforks based on non proven allegations.
Then they came out and said it was a liquidity issue. If it was simply a liquidity issue, why weren't just margin orders halted? Why did they stop people with cash in their hand from buying stock?
None of Robinhood's statements provide a full explanation. People are within their right to be absolutely livid at this moment and demand answers.
Some facts:
1) There is a conflict of interest when Robinhood routes the majority of trades through a high frequency trading firm that has an interest in short positions. Citadel bailed out Melvin who [probably] illegally naked shorted 150% of the float.
2) The CNBC interview explaining the liquidity issues that aired today was filmed yesterday.
3) Mainstream media has been feeding lies to the public. Who is buying the stock? (It's foreign entities who hate America and capitalism!) Will the SEC come after the little guy?! Can they sue these investors?! (Absolutely not. Why the hell are you trying to put fear and doubt in the heads of these people?)
These facts along with Robinhood's BS explanations lead people to believe that the reason that this happened is simply that the WRONG PEOPLE LOST MONEY.
Yeah. Misinformation.
#1. Melvin seems to have held a significant number of puts as far as I can tell.
#2. Even if they were stupid enough to short 150% of the available shares, I don't believe there's anything illegal about that.
Why not?
Person A has 100 shares. Melvin borrows 40 shares from A, and sells it to Person B.
Person A + Person B now have 140 shares combined (while Melvin has -40 shares). If PersonA + PersonB agree to loan shares to Melvin for another short sell, they've become able to drop to -140 shares, by borrowing 60 of Person A's remaining shares, and then 40 shares from B.
Nothing illegal here, as long as Person A and Person B agree to the terms.
----------
And again: Melvin seemed to hold puts, not shorts. So this entire point is moot anyway. Puts are a bear-bet, but they're kind of unrelated to short-selling.
Also there are still outstanding questions regarding liquidity issues: why did they not first disallow margin buying, then possibly with unsettled funds? did these knobs not exist? was there some sort of mismanagement on their side?
I think there is plenty of room for RH to come out of this poorly even if the citadel story ends up being false and it was in fact a liquidity issue.
Allowing traders to only sell, and blocking buying is wrong. Who is allowed to buy at that point? Very few retail traders, but every major player who has an upside down stake still can. The price was then tamped down during the lock out so hedges and old money are able to minimize their loses. Anyone pretending this didn’t happen is delusional. RH enabled it.
RH lost a lot of their customers. Possibly millions of them by the time this is over.
To be fair though, it wasn’t just RH and GME either though. Multiple brokers locked out multiple symbols.
https://www.theverge.com/2021/1/28/22254863/etrade-gamestop-...
https://old.reddit.com/r/wallstreetbets/comments/l7bpf5/30_s...
What I find fascinating is these same people think nothing of the downside of Robinhood being commission-free. It's no secret that one way Robinhood makes money is by selling their order flow and choosing the exchange to fill your order that makes them the most money. Oh and that order flow goes to Capital. This enables frontrunning of retail orders.
How can you have issues with privacy and user data and be OK with being monetized by Robinhood, which literally costs you money through poorer trade prices and reporting on customer trades to a party who seeks to profit off that information?
So it's not a bad idea to transfer your shares out but the reasons for that predate GME.
Oh and if you look at the likes of Schwab as a replacement, which is also commission free. They also sell order flow.
Sometimes it's just better to pay for a service. At least then your interests are largely aligned (although with brokerage the provider has an incentive to encourage churn).
Sure, I might be losing some amount over time, but I'm still executing orders at the rate that I want
> Nobody owns stock. What you own is an entitlement to stock held for you by your broker. But your broker doesn't own the stock either. What your broker owns is an entitlement to stock held for it by Cede & Co., which is a nominee of the Depository Trust Company, which is a company that is in the business of owning everyone's stock for them. This system sounds convoluted but actually makes it easy to keep track of things: If I sell stock to you, I don't have to courier over a paper share certificate, or call up the company and have it change its shareholder register. Our brokers just change some electronic entries at their DTC accounts and everything is cool.
That simplifies things a bit, but basically yes, no paper transfers ever. There's a warehouse somewhere with all the paper certificates in it, they all technically belong to Cede & Co, and when (say) dividends are paid out, they all go to Cede & Co, who transfers the correct amounts to the various brokerages, who transfer the correct amount to their customers.
There's a hilarious story (by Matt Levine, from which that quote is from) about some of the quirks in the system here: https://www.bloomberg.com/opinion/articles/2015-07-14/banks-...
(Although it should be noted, it works fine for an absurdly large volume of transactions; the story is interesting because it is unusual, not because it reveals any deep flaws in the system.)
I put a request to transfer today for just a single reason and it has nothing to do with me me being mad at them for halting trades. I simply don’t trust Robinhood anymore. I feel they are too leveraged and too exposed to the cross-winds of retail investors. Flashmob trading is officially a thing and Robinhood will be the most exposed brokerage when it comes to volatility and lack of liquidity.
After what happened today it’s clear they can’t be trusted with my securities and even less with my liquid cash.
I don’t want to have any kind of money in Robinhood because I have the weird feeling it could go down. That’s how much I distrust them at this point. If they really halted transactions because of lack of liquidity, imagine what could happen with them if we experience a bubble burst or any other major economic event that impacts public markets.
I’m certain I’m not the only one feeling like this. If I could I would sell and re-buy at another brokerage but I want to avoid a tax event.
The message they displayed was:
Due to recent volatility in certain securities and to reduce risk of market volatility, we will be placing restrictions on certain securities, including increased margin requirements and/or limiting transactions. Game Stop (GME) and AMC Entertainment Holdings (AMC) are now blocked for opening transactions and they have also been moved to a 100% margin requirement for existing positions. Additionally, opening orders for GME and AMC will be cancelled including Day and Good-till-Cancelled (GTC) orders.
If you're doing the meme stock with RH, it is probably safer to leave it there for a bit.
I can imagine the emergence of a different sort of activist investor: large groups that find distressed companies they really want to do well, and instead of the company getting eaten by a private equity shark, they're given the resources for a turn around. (Some-- many? -- would fail anyway)
I recognize this probably unrealistically optimistic, but I imagine some Occupy Wall Street veterans are having a big laugh right now either way.
Softbank bought Sprint with the intent to give it the resources needed to do well. They pumped money into the company to cover debt service until eventually it merged with T-Mobile.
AMC got out of $600mm of debt as a result of its share price appreciation in all this madness.
https://www.marketwatch.com/story/amc-entertainment-to-issue...
Share price is not arbitrary. It has ramifications for a company's credit, debt load, and ability to make acquisitions.
For AMC debt: wow, that's pretty insane. Lots more cash, much less debt. They should encourage employees to become premium reddit members as a thank-you
Buying shares only sends money to the company if they issue new ones. I am not aware of Gamestop doing that.
Robinhood decided to halt trading on a number of stocks due to uncommon volatility, just for a day, so they can assess the matter. [0]
And as is common practice in the trading world... when a market is closed, you are still allowed to close your position.
Which means that you are allowed to sell, and not buy.
(If robinhood allowed for true shorting then people could still technically buy by closing their short positions as well.)
It's not some huge conspiracy to keep the price down for the little guy.
It's actually a fairly common practice in financial exchanges around the world.
[0] https://blog.robinhood.com/news/2021/1/28/an-update-on-marke...
I don't think it implies there's a huge conspiracy, but it does implicate certain bad actors in the financial system. No, not everyone is bad. But the idea of some participants evading the rules is extremely plausible. It's happened in the past (see: 2008 GFC). Saying everyone thinks it's a 'huge conspiracy' is a straw man fallacy of the more legitimate concerns raised today.
Edit: better link
Is that fabricated, or did Robinhood really sell someone down against their will?
edit: and with the new link you sent, it says the customer probably didn't have collateral. They will absolutely sell on a margin call.
A margin call you can settle with cash. There's nothing here that says "you didn't deposit cash so we're selling your position(s) of value to make margin"
I mean it's possible, but I'm in no way going to default to that explanation absent evidence.
Edit: it explicitly cites the "risk of brokering your position" in GME shares. If this isn't faked it's an astoundingly, jaw droppingly, nakedly and utterly amazing thing to do.
You can be charged for securities fraud just by tweeting baloney if you are important enough. Ask Mr Musk. This is 100X worst. So no, you dont need actual transactions to be charged with fraud.
What about APEX clearing which enforced this rule with all of their customers?
Looks like it was briefly blocked on TW, though.
> Apex Clearing, who acts as the custodian of all tastyworks accounts, has informed us that the following symbols (AMC, GME, & KOSS) will be set to closing only order status immediately. You will only be able to submit orders to close out any open positions that you have in these symbols.
> New opening orders will not be accepted at this time. We will update our clients should the clearing firm lift the Closing Only status in the near future.
I was able to trade GME options in IBKR today without any restrictions.
This is the main problem with Robinhood, it’s designed to attract a core audience of clueless children.
You are lucky the NYSE hasn’t shut down BME trading for all of February. Yet.
Actually I would have loved to see Robinhood do nothing do when GME inevitably crashes back down below $10 it’s forced into bankruptcy holding the bag on so many non paying accounts.
- They don't let any retailer buy stocks(i'm not even talking about options/leverage).
- They only let retailers sell only (to hedge funds).
- Then they come up with the " clearing houses" explanations...sure..but the price moved in the "right" direction right? Probably the hedge funds shorted even more as the bet was sure: block them from buying and the stock surely won't go up!
- Good news: the situation in monitored and "limited" trading will be allowed tomorrow...probably enough to make people dump the stock and let the hedge fund managers cover their naked shorts.
Let's hope the retailers will not get scared off, hold their ground and push the hedge funds into gamma squeeze!
Can someone confirm?
In general consumer brokerages have little incentive to move fast when you are leaving them.
Citadel > Robinhood
Robinhood kicking you off wouldn't be a problem if you could immediately switch to another means like you can for speech
You’ll pay a fee for trading through them even if you are engaging in activity that would get you a rebate on the exchange so they are taking their cut in other ways.
Also, exchange rebates are usually very small amounts of the total trade, so for people who the fixed fees matter the most (people with less money in their account) the rebates would be insignificant.
https://www.bloomberg.com/news/articles/2021-01-25/citadel-p...
It closed today at 194. Anyone who bought shares since Wednesday morning's peak of 300 is in the red.
I'd be happy to bet you that it's a better indicator of actual price than the close.
$100 to a charity of the loser's choice that GME will open closer to $314 than $194?