Wait, what? Can anyone legitimately make the claim that the massive drop in value that cut off the price rise at the knees and allowed the worst short positions to cover their losses sub-$200 didn't materially harm the users? This is absolute madness.
Very probably. The general principle of Article III jurisprudence is that you have to demonstrate concrete, particularized harm to bring a case, not generalized, theoretical harm.
If your allegation is that your harm arises from "I could have made a killing if I bought and sold the stock at appropriate times," well that is theoretical harm (especially when you undercut buy alleging that you could have done so on other platforms). You'd probably have to allege that you attempted to buy (alternatively, sell) the stock and Robinhood prevented you from doing so, but the fact that you signed a contract saying that you acknowledge that Robinhood can prevent you from being certain stocks is going to be a challenging hurdle to overcome.
Like if I'm fishing, I might not catch a fish that day, but if you collapse the pier I'm fishing from then you've concretely caused particular harm to my chances of catching a fish?
Answering this sort of question likely requires digging through cases at the district and circuit court level to find people who made this kind of argument, and seeing if the court bought it or not. I'm not paid to do that, and the people who are are paid big bucks to do so.
But my suspicion is that you have to draw a pretty strong link between the actions of the defendant and your losses, to the point that you really no had other option than to eat the losses. In the case of the pier collapse, you might be able to swing that if there were nowhere else you could fish from. But in the case of Robinhood, I'd be surprised if you could sustain that argument, especially because you've signed this pesky contract.
Of the stuff I see on court listener:
* 3 don't have documents available (and I'm not going to bother signing up for PACER just to find out)
* 1 has a claim predicated on "I could have bought or shorted GME" (yeah, not gonna fly)
* 1 has a claim predicated on "the value of GME stock fell, causing me loss" (doesn't mention if the stock was actually sold, so it's purely paper loss, so really not gonna fly)
* 1 has a claim predicated on "I tried to buy, but couldn't" (best chance of succeeding, but I think they're still screwed anyways)
It's a good message board power-up, I guess.
Much of the nice and fast experience that Robinhood offers ("Just signed up? You can start trading!", "Initiated a transfer? Start trading now!", "Just sold something? Rebuy something else immediately!") are all powered by the fact that these are all technical using margin.
"I intended to buy at a higher price in order to manipulate the price of an asset well above its value, and was harmed by being delayed until a later time where I could buy it at a lower price" -- not going to fly.
If RH is inadequately disclosing the risks of margin trading then some of their customers that had positions closed due to margin requirements might have cases.
"I was harmed because I was delayed from buying at a higher price and instead could only buy at a lower price later!" -- only being able to buy at a lower price later is only a "harm" in the sense that it prevented price manipulation.
This is an easily quantifiable and concrete claim that might be brought up by every Robinhood user with cash in their account.
They would be safer if the stock had continued to drop.
>However, Robinhood is not legally bound to carry out every trade and the lawsuits will not succeed without evidence the company restricted trading for an improper reason, such as to favor certain investors, according to several legal experts.
As mentioned in other threads, robinhood wasn't able to come up with the deposit needed for their customers trades. In that case I don't see how it's any different than a service outage causing you to lose money, but you don't have a SLA in place.
This isn't going to be an obvious clear cut case, and there will be plenty of gaslighting as part of the TENS of billions of $ on the line.
If the story about Robinhood running out of money is true, why wouldn't they just ban buying on margin and not all buying? I don't understand that.
https://finance.zacks.com/tax-rules-use-proceeds-stock-sales...
https://www.fidelity.com/learning-center/trading-investing/t...
https://finance.yahoo.com/video/heres-why-robinhood-restrict...
>And we just can't afford-- well, we're not a clearing firm, but our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it.
Edit: Answered in another chain.
Because DTCC requires cash collateral while the transaction is settled whether the transaction happens in a margin account or a cash account. There's no distinction from DTCC's perspective. DTCC (reportedly) increased the collateral on $GME transactions to 100% of the transaction price compared to the typical 1-3% of the price.
Citadel would know before anybody else in the market that the massive number of buy orders from RH had just gone to zero. They would also know that sell orders were still coming in.
This would allow Citadel to profit massively on the backs of the RH customers even if there was no direct collusion.
The thing is, RH isn’t stupid. They knew that Citadel (their biggest customer) would see that orders went to zero before anyone else and could move accordingly. RH didn’t need to explicitly warn Citadel in advance - the very nature of their relationship meant that they would be told in advance.
Can you explain the actual trade you are suggesting happened?
That's not true, they only blocked trades on those specific stocks. If it was really a liquidity issue then they could have rate limited all trades equally regardless of the stock in question.
"but we could have driven the price up by cornering the market" I hear RobinHood/WSB users say.
Maybe, but that would be illegal market manipulation. So if your case is that you lost out because RobinHood wouldn't facilitate a crime, you have a poor case.
Every time artificial limits were imposed by RH, the price dropped in __all__ the restricted stocks. That is when they restricted shares to 0, or to 2, and subsequently to 1, and again to 0.
On Friday, there were puts expiring and HFs stood to lose a lot, they didn't, and the answer is obvious as to why.
What does make sense to me is that cutting off a substantial amount of retail flow would reduce buying pressure, causing all market participants to regain at least a little confidence in a reversion to the mean. It just seems pretty tinfoil-hatty to me to view this as some sort of elite cabal, as if RH and Citadel were somehow the only participants who could effect price changes.
Reopening auctions concentrate trading volumes. This may look more suspicious because volume is so concentrated, but in reality they give about five minutes for many participants to join and it all executes at one price. Prices I see for reopenings are approximately
330 290 265 226 170 140 120 141 170 210 216
The idea that the 120,140 were lower than "market prices" is solidly in tail-wagging-dog category. GME sold off hard, yes, but it was over the course of almost an hour and with substantial trading across the entire price range. This is natural when any imbalanced order flow has previously pushed prices and then subsides.
Note that 120 was the low and prices retraced through about half of the prior range. That retracement started at around 11:20 ET. Do you know when RH or other brokers had opening buy orders blocked and subsequently unblocked? Given that RH needed to secure cash for DTCC'S requirements, I expect that retracement was during the blocked period still.
Overall this still looks like tinfoil hat theory from WSB. Volatility looks crazy and it's easy to see demons in the shadows.
https://www.reddit.com/r/wallstreetbets/comments/l9auf5/impo...
https://seekingalpha-com.cdn.ampproject.org/v/s/seekingalpha...
The description of a short ladder attack from 2014 strongly implies that the short party is attemping to manipulate a stock from its prevailing fundamental value. There is a key difference in that GME's fundamental value is nowhere near the $300+ range that it was trading it on Thursday!
There need not be a misinformation campaign or "attack" for well-capitalized fundamental traders to see opportunity to sell into this. Especially after seeing the capital crunch nailing retail brokers.
I wondered if it was autocorrect but it's all over reddit too.
As best as I can see, they're saying the price falls if hedge funds decide to lower the bid price. That doesn't make much sense to me, but I'm not (quite) all knowing so...
Yes, because you'd have to prove that Robinhood volume alone caused that drop in price. Robinhood isn't that big, and GME volume was crazy on Thursday.
It's equally likely (and equally impossible to prove) that Robinhood saved their users money by preventing them from investing in a stock that was already up 500% and clearly overvalued relative to its fundamentals.
This is the part that gets me about this: even now, after the mania has passed, everyone still thinks that GME was somehow a "sure thing" investment driven by a clearly incorrect understanding of how short trading works. And even now, after the magical short call rapture that was supposed to have come on Friday never materialized, people still want to believe that it would have kept going up and up and up.
Guys, it wouldn't. It's a bubble. They pop. Everyone trying to buy at the peak was making a terrible investment decision.
The 1000000-dollar question is “when”.
Zerohedge (banned here) has been forecasting the pop of SPX and Nasdaq for several years now...
[1] Obviously people are taking out new shorts like crazy on this stock given the bubble.