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Comment by dudeinjapan | Hacker News Reader

Maybe not apples-to-apples, but... I worked on Lehman's Tokyo electronic trading desk in 2008. When we went bankrupt, it wasn't our clients, or even the exchanges which stopped our trading. It was our clearing banks.

Interestingly, we weren't cutoff uniformly in all markets. NY desk was trading about 75% of regular volume for 4 days into the bankruptcy before someone (SEC?) told them to knock it off.

There's a lot going on in Robinhood's back office and legal teams of which we are not aware. While I'm as pissed as anyone that they shutoff trading, I'm open to the idea that the shutoff was for far more mundane reasons than collusion with Citadel and Point 72.

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“I’m as pissed as anyone that they shut off trading,”

Robinhood did not halt trading or shut off trading.

Robinhood prevented _buying_ Gamestop and only allowed selling.

That’s entirely different. It can only do one thing - drive the price down which is market manipulation. It’s supposed to be illegal.

Playing devil's advocate, it's possible that the lawyer/clearing bank/regulator gave the instruction to cutoff all trading in the name, and cutting off only buys was the lesser of bad options. (Had they also cutoff selling, it would have been even worse!)

Reading the SEC's letter (in the OP), you can clearly see the SEC wants everyone to sell out of their position and make this whole thing go away. RH no doubt has an army of lawyers and compliance people whose entire jobs/careers is to predict what the regulator wants and proactively be their lapdog. (The regulators meanwhile are completely free to be Monday-morning quarterbacks and retroactively assess fines to anyone, despite providing no concrete guidance of what to do in an unprecedented situation like this one.)

They did halt both buying and selling of net new positions. They did not halt adjustments of existing positions (calls & shorts).

This was actually a very fair, by-the-books standard trading halt. It just happened to benefit the short sellers who had been squeezed because they could easily find people willing to sell.

You definitely could still buy GME if you found some extremely random call option holder who needed to sell to cover their position. This would not be changing a net new position, just like selling to someone looking to cover a previous short, and this was never blocked - it’s just there was no volume for this, nobody owned calls and needed to sell.

Robinhood's collateral requirements increase when their users buy stock, and decrease when their users sell stock.

If they hit their collateral limits, they have two options.

1. Stop all trading for a few days, as the trades settle, the funds clear, and the collateral requirements drop. Cue millions of pissed users who want to close their positions, but can't.

2. Only stop trades that increase their collateral requirements - buys.

There's also option 3 which is 'immediately get kicked off the settlement networks and go into bankruptcy, because they are trading past their collateral requirements.'

Which of these three options would manipulate the stock price less, and screw over fewer people, in your estimate?

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