Robin hood has been called so many strange names and then gets no recognition when they want to strike at the root of the problem.
RobinHood’s PR problems are entirely self-inflicted.
I don’t really have a horse in this race, I am just trying to understand how it’s ok for them to put their thumb on the scale in this way and then say that they didn’t have enough collateral and someone that is retail investors’ problem.
The grocery store doesn't deserve to go out of business if they run out of paper towels sometimes.
> but if I am bringing cash to a transaction, why is it suddenly restricted?
They can't use your cash as collateral due to preexisting rules (part of new regulations after 2008). They have to use their own, and in this case it wasn't infinite.
I clearly don’t understand the regulations around this. It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no? And it’s also a problem that their inability to trade that stock affects the price. So what is the correct solution here?
> It seems to me that when stock is volatile is exactly when I should be buying and selling and if my broker can’t make that happen it’s a problem, no?
If a stock is volatile you should not be buying it, that's how you lose money. The people who profit are market makers like RH's Citadel, who get paid on every trade.
> And it’s also a problem that their inability to trade that stock affects the price. So what is the correct solution here?
Technological improvements like the one RH's CEO wrote this article about. Btw, for reasons I've forgotten RH's collateral issues got even worse as the price went down again - if it kept going up it'd actually be more possible for them to continue providing buys.
Tell that to Melvin Capital.
https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...
And where the price is now is arguably the direct result of their actions. The price would be higher if they didn’t restrict buys while allowing hedge funds to gobble up the panicked sells from retail investors.
Judging by the sentiment on WSB it seems that this is far from over. Hedge funds have overshorted several stocks and those guys have figured out that if they simply buy up a large portion of the available stock they can name their price when the hedge funds need to buy to cover the shorts. It is of course impossible to quantify but casually looking at the posts, nobody is talking about selling GME at all, and every dip in price just means more retail investors can afford to buy into this. It’s a bubble for sure but it seems a lot of the users there are mostly interested in using it as a weapon against hedge funds more so than making money off it.
DTCC protects brokerages from each other. Brokerages post collateral to insure each other in case a brokerage fails, and the customers, at other brokerages, on the other sides of the trades from the failed broker, need to be made whole. The clearinghouse isn't insuring against you the customer not being there with the $15 to buy your GME share tomorrow. It's insuring against something horrible happening at Robinhood that zeroes out all its accounts, drives it out of business, traps all its staff in a deep sea diving bell, that kind of thing.