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Comment by Someone1234 | Hacker News Reader

> “HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from VCs (virtual currencies),” HSBC said in a statement.

But you wouldn't be? This is a product literally called "InvestDirect" where private individuals are buying stocks and assuming all the risk.

If you don't want to offer margin on virtual currency products, more power to you, that is your risk. But if customers are buying with cash, it seems pretty suspect for the bank to claim that is increasing the bank's risk exposure.

Honestly it wouldn't be the worst idea to have a "Net Neutrality" for brokers.

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Knowing absolutely nothing about this particular situation I’d be willing to bet this decision is a lingering side effect of HSBC’s most recent (and seemingly perpetual) AML issues. I suspect they’re trying to appear squeaky clean and an action like this is quick, easy to implement operationally, and looks good to regulators who are uneasy about cryptocurrency’s reputation for facilitating criminal activity online.

I don't see how kyc/aml applies to this particular stock over every single other ticker they will happily sell you? There's no difference, they aren't selling cryptocurrency here.

Buying or shorting this stock to the tune of billions of dollars might be a good way for a drug dealer to mitigate the currency fluctuation risk to his big pile of illicit bitcoins stashed under his bed.

Easier and cheaper to do with Bitcoin futures

> I don't see how kyc/aml applies to this particular stock over every single other ticker they will happily sell you? There's no difference, they aren't selling cryptocurrency here.

It's the equivalent of security theater. Do something conspicuous that they can spin as having done something about the problem. That serves their purpose regardless of whether it actually does any good or makes any sense.

On top of that, cryptocurrency kind of competes with banks, so they have an excuse to cause trouble for the competition.

They already have a version of Net Neutrality for brokers: reg NMS.

HSBC are well within their rights to refuse to accept bad orders. HSBC are exposed to specific regulatory risk not shared by US banks. Having a ton of customers go bust because a regulatory change nuked some meme stocks seems undesirable to me. If you don't like it you can always find another broker.

> If you don't like it you can find another broker

It's like saying that net neutrality exists, because "if you don't like throttling you can find another ISP"

There are a lot more brokers available than ISPs

Why would an exchange allow a "meme stock"?

MicroStrategy has been around since the 80s hasn't it? I thought they made business intelligence software. They are not some weird company that appeared overnight out of nowhere.

HSBC does a lot money laundry for rich people around the world, and now it is worrying about risks? I don't think so. But it is a telling for potential direction of US government is taking for bitcoin. HSBC is doing many things to please the US government, this may be one of them.

> HSBC does a lot money laundry for rich people around the world, and now it is worrying about risks?

Says a lot about the 'risks' involved with that business model.

Maybe they have issues with people taking on a margin that they cannot afford? Cryptocurrencies being as volatile as they are shorting them on a margin can result in high losses that HSBC prefers not to be involved with? Just a guess.

Not impossible, but IMO highly unlikely: stocks, especially smaller ones can be way more volatile than any currency with over 1T market value. And you can still buy those on margin.

That's true. Maybe something to do with regulations then? HSBC is already being accused of being involved with money laundering quite a lot. Also, what other coins except BTC have market cap >1T?

I suspect regulation (or fear of impending one) is the likely culprit; but again, not sure. Re: size -- I was including regular fiat currencies, not just digitals.

>you can still buy those on margin

That is absolutely not the case in a categorical sense.

Brokers can and do apply different margin requirements on a stock by stock or customer by customer basis. There's nothing out of the ordinary about a security not being marginable or having increased requirements due to risk assessment.

For example, here is a list of stocks at one broker with particular margin requirements, and it says it "changes frequently":

https://invest.ameritrade.com/cgi-bin/apps/u/MarginReq

Given that there are hundreds starting with "A", I'd assume the entire list is in the thousands, of securities that have individual margin requirements.

I think in fact the ticker GBTC which is a trust that owns Bitcoin isn't marginable.

Note, the page you linked to requires login.

Well, here is a public page (with just GME) that proves the point that they can and do apply requirements to individual stocks, anyway:

https://www.tdameritrade.com/td-ameritrade-trading-restricti...

Here's another with GME and AMC:

https://www.schwab.com/margin-updates

But there are also lots of others you never heard of, that aren't mentioned.

Doesn't the market volume have a multiplicative effect, though? In other words, it's not just volatility, it's volatility x volume. Or something like that.

I'm pretty sure bitcoin has less volatility than some of the meme stocks (eg. GME or AMC).

Meme stocks cannot be traded on margin by any sensible broker

Are you saying that trading on market sentiment is an invalid trading strategy?

I'm saying that a broker will offer little or no margin on a meme stock

If they're concerned about exposure, they could simply set the margin trading leverage below 1 (e.g. offering 0.1x leverage so that customers have to post $10 in margin to buy $1 in MicroStrategy shares).

Are you saying someone would need to post more than the value of the share?

> Are you saying someone would need to post more than the value of the share?

Yes, as an alternative to not allowing the trade.

If the bank considers something highly risky, it makes sense to protect themselves and the customer by making sure they've got some money locked up outside of the trade (a bankrupt customer is no longer a customer, after all). It would basically cap the percentage of net worth that they could put at risk, where they'd need to have $10 set aside for every $1 in the risky position.

There’s no need for a bank to nanny their customers. If you don’t want to book the trade, don’t book it. Going beyond that in some tortured logic to ensure they tie up extra money (possibly incurring unjustified margin calls on other positions) has almost exclusively downsides for HSBC.

> Honestly it wouldn't be the worst idea to have a "Net Neutrality" for brokers.

and/or we could tokenize securities onto permissionless and decentralised ledgers and stop feeding the intermediaries

note that a ledger with transaction validation rules which enforce KYC can still be permissionless and decentralised

bitcoin isn't "permissioned" just because you need a valid signature to spend an output

> if customers are buying with cash, it seems pretty suspect for the bank to claim that is increasing the bank's risk exposure

Cash trades still expose brokers to volatility due to settlement.

This policy is likely one part regulatory theatre and one part customer selection. Customers buying MicroStrategy stock are unlikely to be lucrative customers for the banking products HSBC hocks.

Yeah if they were worried about settlement risk they could just not release funds/shares until they settle. But that’s probably harder to implement than a blanket ban and they have nothing to gain by catering to the meme shares crowd.

> if they were worried about settlement risk they could just not release funds/shares until they settle

This doesn’t solve the problem of clearing collateral. That said, HSBC is a money centre bank. It isn’t worried about clearing collateral.

The policy is almost certainly a filter. If you’re trading MicroStrategy, you’re probably not a fit for their banking and wealth management services.

Not to get too far in the weeds (as I agree with your point) but why wouldn’t holding the funds/shares until settlement cover the clearing? Especially given they control the order routing and risk systems involved?

They just have appetite for drug and weapons money laundring.

https://www.theguardian.com/business/2012/dec/14/hsbc-money-...

This is one of the reasons that HSBC are so strict now.

this seems to clearly fall under "facilitate" tho.

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