Revolut has stopped trading GME and AMC | Hacker News Reader

Revolut has stopped trading GME and AMC

mrhack.io

74 pointspowerandr35 comments

A friend is seeing a message from Revolut saying that the reason is due to increased capital requirements, and not something they have done of their own volition.

> Trading Update for GME and AMC

> Unfortunately, our broker-dealer in the US, DriveWealth, can no longer offer Buys on GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) due to increased capital requirements set by the Depository Trust Company (DTC) in the US.

> While we apologise for the inconvenience this may cause, this is not a decision Revolut has made. As DriveWealth is our broker-dealer, we can only reflect the stocks they make available. We will however keep you informed as and when this situation changes.

> For customers with no holdings in these 2 stocks, neither GME nor AMC will appear in search. Please check the email we are sending out to all Revolut Trading Ltd customers for additional information about this situation.

> Capital at risk. Share prices can go up as well as down and you may get back less than what you initially paid.

Isn't that what Robinhood was also saying?

Yes.

After a while yes, what caused the initial issue was their initial press release that made no mention of not having enough money to cover transactions for GME/AMC. They said it was to "protect their users", which is what triggered the widespread outrage.

RH does their own custody & clearing, so the DTCC was telling them directly what type of collateral they needed to post. Companies like Revolut outsource this function to DriveWealth, which coincidentally are the backend for many trading-focused fintechs. So there is 1 level of indirection.

On the other hand - not too clear why everyone is claiming some massive conspiracy. There are rules around liquidity and collateral and they are directly tied to volatility of a stock.

I thought they used apexclearing

https://robinhood.com/us/en/support/articles/whats-clearing-...

They are self-clearing.

Nope. They were pretty vague about why they did it:

"We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only." The statement, which was posted on Robinhood's websiteand sent via email to its millions of users, also went on to say, "Amid significant market volatility, it's important as ever that we help customers stay informed."

https://www.fool.com/the-ascent/buying-stocks/articles/why-d...

A lot of people in finance said they should have said they didn't have the capital to cover these positions instead of what they did say. I'm pretty sure they would've faced the same rage mob regardless of what they said - it was what they did that got people so fired up.

Here's the full statement from their site:

https://blog.robinhood.com/news/2021/1/28/keeping-customers-...

DTCC [1] is increasing collateral requirements for these shares. Last week they raised them by over $9 billion, which is why Robinhood stopped the trading. So the question is...who at DTCC made the decision to raise the collateral requirements, and why? Was it discretionary, or was there a long-standing policy spelling out exactly when they raise collateral requirements? If I were a hedge manager having my career destroyed in a matter of minutes by a bunch of amateurs, I'd pressure someone with the power to cause the halt of trading across the market - not just a single brokerage.

So while it is not a smoking gun of any wrongdoing, if wrongdoing has occurred, it occurred between a hedge fund and DTCC.

[1] https://www.dtcc.com/

Can someone explain to me how the volume of GME compares to the FAANG stocks? How can a few retail investors create such an impact that clearing houses are hitting limits compared to the daily amount of value traded on the top 100 caps.

I mean we have the SEC watching over everything so I am sure there is nothing shady going on here. /s

Seriously: Can someone explain as I would like to understand it?

5-day volume AAPL 121,284,172 * 135$

5-day volume GME 58,017,305 * 119$

https://www.barchart.com/stocks/quotes/AAPL/technical-analys...

https://www.barchart.com/stocks/quotes/GME/technical-analysi...

You have to first realize that the market doesn't work in vacuum. These are not just retail investors, it's a lot of actors.

From Revolut

> Hi,

From today, we will only be able to facilitate the selling of GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) stocks for the time being. Unfortunately, our broker-dealer in the US, DriveWealth, can no longer offer Buys on these stocks due to increased capital requirements set by the Depository Trust Company (DTC) in the US.

What does this mean for me? You can only sell out your existing holdings in these stocks. Any outstanding buy orders on these two symbols made after Monday’s (1 February) close will automatically be cancelled prior to market open on 2 February, 2021.

None of our other stocks are affected at this time and are available to trade as normal.

For customers with no holdings in these 2 stocks, neither GME, nor AMC will appear when searched. This is a standard practice when a position moves to sell only, as we don't want to show you stocks you’re not able to buy at that time. As soon as they become available to buy again, you’ll be able to see them in the app.

Why is this happening? When a stock is traded, it takes two days for the proceeds to go from the broker to the clearing house. This is known as T+2 settlement. Within this time, the clearing house requires the broker to front cash or capital guarantees to ensure funds are available through the settlement process.

The required amount of capital is usually around 10-15% of the value of a security’s holdings on broker’s books. However, this percentage can vary based on stock volatility. In the case of GME and AMC, the DTC has enforced an increase of capital requirements by 250% upon DriveWealth’s clearing partners. This increase means that DriveWealth is now obligated to restrict trading in GME and AMC, as stock has its own capital requirement rather than a broker wide requirement.

When will they be available again to buy? This is not a decision Revolut has made, simply one that we are obligated to carry out. We are monitoring the situation very closely and will update you when our partner, DriveWealth, re-enables Buys for GME and AMC. We apologise for any inconvenience caused.

Team Revolut

A smart fintech platform would allow customers to post their own cash collateral. For every $1 you trade you need $2.50 in cash in your account, which we sweep at the end of the day.

I don’t really get the advantage of RH or Revolut compared to Fidelity or Vanguard. I mean in terms of UI/UX, the Fidelity app is on par to RH (maybe RH is slightly better). Why not trade using a company that is more reliable and trustworthy?

Like many things in tech: first mover isnt always a winning strategy. Many people had free trading before RH. RH just did it better with a mobile-first gamified experience.

The same dopamine hit you get from sharing or liking on social media, well you get that when your net worth just went up by a few pennies. The RH UI/UX enforced this gambling-like environment.

A killer product would have brought something like r/wsb+RH into 1 app- focus on sharing your "gain porn".

Hint: if something is free, you might be paying for it in other ways.

The collateral obligations to run a brokerage are a real thing and these under capitalized brokerages are messing with the market.

There's a reason the big boys trade through the prime brokerage. The carpet got pulled out from under the Robinhood because there's a game going on that they didn't even know they were in.

Robinhood meanwhile is collecting fat lending fees for lending out the GME shares all their "diamond hands" members are holding.

Yet more evidence is a clearing and collateral issue, not a massive conspiracy...

Conspiracy just shifted to the clearing side

Of course. No conspiracy is ever disproven. If we proved the CIA didn't kill JFK, plenty of people would just reply that we were part of it! Or it was Mosad and they framed the CIA (those bastards!)

It's no different to any other religious belief.

con•spir•a•cy [noun] - A secret plan by a group to do something unlawful or harmful.

Going by the definition, you're right. Not a conspiracy since they aren't hiding it, they're brazen.

Conspiracy claims are from people who have no idea how financial market works, and just bought their first stock last week, because of the hype.

It’s like someone buying their first computer, and saying it’s government conspiracy that it crashed, after they’ve installed random software from a link they got in spam.

Please enlighten us on how this is not the fault of RH for not being properly capitalized to handle some volatility.

Stocks go up 10X in a day every day. GME just happens to be the stock du jour, trade in scary pharma and you get this sort of thing very often.

Incompetent and overhyped Silicon Valley business doesn’t mean it’s conspiracy.

Maybe not a conspiracy, but surely a fix. "the DTC has enforced an increase of capital requirements by 250% upon DriveWealth’s clearing partners" .. Why for just these two stocks and is this true for all of the Hedge Funds? Do they now need to magically provide guaranteed liquidity? This is a circle the wagons moment for Wall St. They don't want anyone messing up their printing press. Who will watch the watchers? no one (see 2008)

Sorry guys, my bluehost site crashed here is my vid: https://www.youtube.com/watch?v=1d2bB1PfSTI

Getting 500: Internal Server Error.

Getting 500: Internal Server Error.

Mild irony on a .io domain.

I'm not following, why would a 500 be ironic from site with a domain that belongs to a bunch of islands in the Indian Ocean that the Brits seem to think they own.

Are you under the impression that people on HN buy .io domains because they're fans of the Indian Ocean, and not to evoke the tech term "input/output?"

Do you also believe that Google bought .dev because the guy who runs the TLD is named Devon?

I wonder when will people learn to always set up at least microcaching, because you can never know when the ~slashdot effect~ hug of hackernews will hit you.

Question, if using NGINX with static HTML would caching still be necessary?

I'm assuming something like wordpress where it hits the database on every request is where you'd want microcaching.

Probably not, although caching in memory is still faster than disk access. More commonly sites that fail under load are dynamically building pages, hitting DB, etc. though.

Alternate source for Revolut and GME news: https://conservativeinvestingnews.com/2021/02/02/gamestop-bu...

"British financial technology startup, Revolut stopped users from investing any further in Texas-based video game retailer GameStop and movie theatre chain AMC. The challenger app attributed the move to new restrictions imposed by their technology provider, the US broker-dealer, DriveWealth, LLC."

If only there was some technology to prove settlement occurred, an eansy tiny bit faster than 2 business days, so that brokers don't have to come up with their own additional capital to clear other people's trades.

Yeah, they need to replace those carrier pigeons with something more akin to an interconnected, world-wide network of sorts... Hmmm

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