Robinhood and Didi to Kick Off a Hot IPO Summer
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This is something I'm pleasantly surprised by in 2021: Deposit crypto. Transact pre-ipo futures, stock futures, commodities like lumber etc. 24/7 with solid-liquidity.
Ish. Creating derivatives around private assets is hard. Anyone who bought FTX swaps in e.g. Coinbase pre-IPO lost money on bad pricing alone. It’s for these reasons that their product is not compliant with decades-old U.S. securities law. Unfortunately, it’s free to roam in younger jurisdictions.
Disclaimer: I work in the private markets. I used to make markets in derivatives. I haven’t seen a single solution, to date, that competently combines the two.
Is this when they're buying, or when they're selling?
FTX isn't a trading venue for shares. They create tokens representing the shares [1].
When they sell a token representing Coinbase stock at 3x what the stock is trading on private stock venues, and a bit more compared with where it IPO'd, that gain isn't necessarily going to other FTX customers. It's going to their captive broker-dealer, a German-regulated (i.e. virtually unregulated) entity.
Given Coinbase shareholders weren't allowed to transfer shares on unapproved platforms, there were zero authorized Coinbase sellers on FTX. The winnings went to the house.
[1] https://help.ftx.com/hc/en-us/articles/360051229472-Tokenize...
Not sure what you're talking about here, I bought it & I certainly didn't...
I think for both shorting puts, there's a lockout period after the stock is issued. And limited inventory for borrowing.
Or has that changed?
I see almost all recent high-flying IPOs as overly inflated investor cashouts. Steve Blank had a post about this...
Sell call options? Buy puts?
Once the chain is open, you can sell as many puts as your heart desires (or as many as your broker will let you) FYI, shorting puts is long delta, so you’d want the price to go up if you sold puts. Long puts and short calls are negative delta (short)
When the stock market collapses, it probably won't move inflation directly rather the collapse in demand across the economy will. second order effects as credit is no longer available due to banks panicking and govts intervening...
Of course, that's assuming Uber's valuation is sane, which is not a bet I'd personally be willing to take.
To whom? 0% interest and the Fed put have a massive impact on valuations, particularly growth stocks.
Possibly they are rushing to IPO before facing court.
I would neither buy shares IN Robinhood nor would I buy shares using a Robinhood account.
Robinhood actively colluded with their hedge fund owners, by blocking buy orders — but not sell orders — under the guise of “increased margin requirements”.
In fact, those margin requirements were being set by Robinhood’s prime broker and investor, Citadel Securities — who were set to lose billions if retail were allowed to keep buying.
If you have a Robinhood account then you risk Robinhood making decision that lose you money so that the hedge funds make money.
>In fact, those margin requirements were being set by Robinhood’s prime broker and investor, Citadel Securities
To clarify, you're saying NSCC(DTCC) National Securities Clearing Corporation was instructed by Citadel to increase margin requirements? Example story: https://www.cnn.com/2021/02/01/investing/robinhood-gamestop-...
Regardless of whether NSCC acted independently or under secret pressure from Citadel, what could Robinhood have done differently? If they didn't have the billions in the bank to control their destiny, what other options do they have? If the clearing house cuts off Robinhood's trade settlement, what are the realistic alternatives?
What is integrity?
Unfortunately, due to the low level of public understanding of how stock trades actually settle, the conspiracy narrative you're presenting was the one that made it into the public consciousness.
There's no such thing as an instant stock trade. Retail brokerages are a leaky abstraction over what is actually an incredibly messy settlement layer. This abstraction holds when everything is normal, and leaks when stock prices become too volatile.
The same clearing house used by Robinhood were the same people illegally naked-shorting GME.
This is collusion, plain and simple. No part of this is representative of the “free” market.
They raise their collateral requirements during a period of high volatility. As it turns out, when you run a zero-fee brokerage, you don't just have a couple of extra billions of dollars lying around that you can put up as collateral on a moment's notice.
> illegally naked-shorting GME.
You don't understand how shorts work.
You don't need anyone doing a naked short for a stock to exceed 100% short. This has been explained hundreds of times, both here, and on Reddit.
The SEC made naked short selling illegal after the 2008 financial crisis. Market makers are not allowed to naked short.
> Clearing houses don't lose anything during a short squeeze, as long as funds committed to a trade actually clear
Exactly my point — as long as funds clear, which they were at risk of not doing, thus putting clearing houses like the DTCC on the hook, in the event of a margin call.
Let me break it down:
- Melvin Capital were aggressively shorting GME
- Retail investors used Robinhood to take advantage of a short squeeze opportunity
- During the short squeeze, Citadel (who partly own Melvin Capital) bailed-out Melvin with a $2.8bn investment
- Citadel is Robinhood's prime brokerage, paying them for preferential order flow
- Citadel's global Head of Operations is on the board of the DTCC, the clearing house responsible for increasing collateral requirements
- As a market maker, Citadel care a huge amount about GME exploding, because if Melvin Capital were margin-called, Citadel end up holding the bag
- If Citadel are margin-called themselves, the DTCC clearing house end up holding the bag.
This is really just the tip of the iceberg. I'm consistently surprised at how defensive comments on HN seem to be towards hedge funds and the whole short-squeeze debacle — which is still very much ongoing. I can happily point anyone with an open mind in the direction of excellent research summarising the ongoing situation, and there's mounds of evidence indicating hedge funds never actually covered in January.
Not to mention the math on vote tallies in GME's latest 8-K filing from 2 days ago clearly proves more GME shares exist than should be mathematically possible, enabled only by naked short sellers who never covered.
Oh, and whilst I'm at it, their 8-K also disclosed that they've been working with the SEC since May to assist them with an active investigation in to market manipulation. Doesn't get much more obvious than that, does it?
But if it's easier to turn a blind eye, then each to their own.
You mean the 8-K that showed 55M votes out of 70M shares outstanding? How does that prove anything? Maybe you're confusing shares outstanding with the float.
For context, last year's 8-K showed 66% of shares voted. The 8-K also reported a total of 42,886,817 shares voted last year. This year's 8-K, issued 2 days ago, showed 55M votes out of 70M possible. Therefore, 78.5% of shares were voted.
However, unusually, this year's 8-K did NOT report the total number of votes actually received.
Unsurprisingly this is likely because 8-K filings cannot legally show over 100% of shares voted. GME's votes were counted by Computershare [1]. When more votes are received than shares outstanding, the vote tabulator (Computershare) will "scale" the votes proportionally to never exceed 100%. Computershare have publicly documented procedures in place for how they scale votes in the event of overvoting [2].
An off-by-1 rounding error in the 8-K on votes for Lawrence Cheng, compared to all the other board members, is highly suggestive votes have been scaled.
Retail brokers like eToro reported only 63% of eligible votes were cast [3]. Countless international brokers either refused or were unable to allow their shareholders to cast votes.
Since the initial squeeze, the buy-sell ratio as reported by Fidelity [4] vastly favours buying over selling. It's slightly lower than it has been at the moment (currently 76% buys), but back at April 14th when the vote deadline was, it was higher than it is today. This shows retail are not selling, only buying more.
Additionally, the broker non-vote figures in this year’s 8-K are significantly less than in previous years. This is another indicator of vote scaling, given the huge push from retail investors to vote their shares.
These filings are only 2 days old, and truthfully, only time will tell what will come of this. I’ve been watching the price action of GME follow very predictable patterns around option expiry and settlement dates over the past few months, clear patterns are emerging. For more on this you can search “GME FTD cycles”.
My comments here really just cover the tip of the iceberg, and I hope they provided some food for thought for others. I didn’t even start on the blatant media coverups, or the obvious patterns of brand new Reddit accounts almost exclusively being used to encourage sell-offs. Nor coordinated pump-and-dumps on WSB for stocks Citadel own long positions in. Or crypto markets tanking within minutes before liquidity tests begin. Or CNBC abruptly cutting off guests who mention naked shorting. Or brokers who are unable to locate shares. Or Michael Burry, the famed investor who made billions from shorting the housing market in 2008, having taken a long position on GME. Or GameStop only actually publicly acknowledging the potential of a squeeze on their social media, the exact same day their chairman would have received the initial (non-scaled) vote counts.
I could keep going on in more detail but I’ll let others do their own research. I feel I’ve read enough to be confident in my assessment that shorts have not covered, but if I’m wrong, I don’t have more skin in the game than I can afford to lose. We’ll see!
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[1] Page 11, section 9: https://news.gamestop.com/static-files/8f795a88-54a3-4320-b3...
[2] https://www.computershare.com/ca/en/Documents/CPU_OVER_VOTIN...
[3] https://twitter.com/eToro/status/1402643555403829256
[4] https://eresearch.fidelity.com/eresearch/gotoBL/fidelityTopO...
Before that they used Apex.
This commenter seems disastrously uninformed about something they have very strident beliefs about.
Nonetheless, all the conflicts-of-interest between Citadel, Robinhood, and Melvin still stand. Citadel own Melvin, Citadel are market-makers for Robinhood, Citadel are members of the DTCC, Robinhood users cost Melvin billions, Citadel are footing the bill.
You don’t need the connection to Citadel. If any member of DTCC blows up DTCC holds the bag. But all that means is all members of DTCC hold the bag, including the members holding the non-settled long positions because all public equities in the US trade through DTCC or one of its members.
Actually, they are allowed to naked short. It’s essential for them to be able to do so to hedge their exposure and provide a bid/ask at all times.
Citadel (probably[0]) isn’t going to naked short GME to take a directional position, they just want to capture the bid/ask and hedge the directional risk, which sometimes requires naked shorting. I suppose they could (and might) use synthetic shorts (long atm put, short atm call) to hedge. I’m not sure if only a designated market maker is allowed to naked short, or if supplemental liquidity providers or other types of MMs I don’t know about are also allowed to naked short.
[0] I say this only because I’m not Ken Griffin and don’t know with absolute certainty, but generally a market maker aims to stay delta neutral.
Robinhood has since deleted that post from its site.
And no matter how you cut the cake, if you put your money into Robinhood then you risk losing it when Robinhood changes the rules.
That’s the message people need to hear.
In fact, when has it EVER happened before, or since?
If it was normal wouldn’t there regularly be stocks that can’t be bought but can be sold?
And when they do, they aren't solely driven by retail investor mania pig-piling the exact same brokerage.
And, uh, particular brokerages have stopped uni-directional trades for volatile stocks in the past, for the exact same reason. You may notice that no retail brokerage makes any guarantees to its customers that they will be able to trade anything, anytime they want. They don't carry a collateral that can meet any such guarantee.
My understanding is that Robinhood is self-clearing, not that Citadel is its prime brokerage.
The clearing margin requirement came from NSCC. Clearing margins CANNOT be satisfied using client funds. So it’s Robinhood’s own capital—and whatever credit lines they’ve negotiated—that would need to meet those requirements.
If I deposit 100k into Robinhood and keep it there as cash for 2 years, then one day I plunk all of it into GME, then until all my trades settle two days later, Robinhood will have increased clearing margin requirements based on the VaR of my unsettled trades. (Unless, my trade offsets someone else’s from within Robinhood, in which case I believe RH’s margin would reduce—but I’m not sure about this part.)
And if one day after my trades, GME’s stock goes up 10x, the VaR goes up roughly 10x as well. Even though I would have a claim to a lot higher value in my account once everything is settled, until the trades are settled, it’s a major cash crunch for RH.
The fact of the matter is that RH was not under-capitalized or have disproportionately small credit lines as a portion of their AUM, as compared to other brokerages. It’s just that their users were the ones that acted in a most coordinated way on a stock whose VaR was going through the roof.
I don't think they were automatic? They were raised way more then what was standard.
I would not trust them with a single dollar.
Other retail brokerages, that were less popular with the WSB crowd never even stopped purchases of GME, because GME is was a small fraction of their trade volume - and thus, their collateral obligations did not grow much.
You are correct for not wanting to use them to trade, for two reasons.
1. If you are actively trading, you are almost certainly throwing away money. Don't actively trade. Just buy an index fund and forget about it.
2. If you are actively trading, and you are a serious, informed individual (which already excludes the overwhelming majority of people who were buying GME), and you want 24/7 uptime, you shouldn't use a discount zero-fee brokerage that's popular on WSB. They won't be able to guarantee that uptime when WSB decides to take one side of a huge trade.
RH is a front for organised crime, selling data to Citadel so the can front run retailers trades. Hope to see Senate action on it at some point.
> supporting the short selling hedge funds
Just to be clear: Robinhood claims that they prevented buying certain stocks because of increase collateral requirements by DTCC due to high volatility. Do you have any evidence that's untrue. Let's establish that before we move on to the claim that Citadel front-runs retail flow.
If your strategy for driving a short squeeze, or a pump-and-dump does not take into account counterparty risk, you are going to get taken to the cleaners. When you making money causes the brokerage you are using to be unable to execute that trade, this is 100% your fault.
As the saying goes, don't invest in financial instruments you don't understand. Entering a long position in a volatile, high-volume stock through a discount brokerage was a financial instrument that most of /wsb did not understand, and it blew up in its face.
The people who will invest in the IPO aren't going to be the people who lost money due to RH locking the purchasing of stocks and stopping the price from sky rocketing.
But in terms of a customer base, in terms of a company, RH are dust.
Yes but RH didn't have the billions of $$$ deposited at the clearing house for their trades to be honored. Buying stock to settle a few days later requires collateral that RH didn't have.
It may help to read through the answers: https://money.stackexchange.com/questions/136272/why-would-c...
This is why they scrambled at the last minute to raise billions to meet the higher collateral requirements: https://www.google.com/search?q=robinhood+2.4+3.4+billion
RH does some questionable things but their "restriction of the buying" is an inevitable consequence of not having the billions to meet any margin calls. They were the tail not the dog.
Right, because sell orders would lower the clearinghouse margin requirements. If there are $100M GME buys on RH with 2 days to clear and $100M GME sells with 2 days to clear, their clearinghouse margin requirement is $0.
Whether Robinhood should have had more capital or how those margin requirements were handled is a serious question but that's entirely separate than these accusations which seem to be made by people who have no idea how the system actually works.
You know the one right?
So then panel two: Buying meme-stocks
And panel four: Buying stonks in the platform that everyone is using to buy meme-stocks.
It’s too bad that I don’t actually have any money to buy Robinhood IPO though :^) :’)
You probably shouldn't talk condescendingly about things you clearly are so behind on.
Which part of my comment seemed condescending to you? For the record, no part of it was intended to be.