I'm out of the loop on what Robinhood did, and the news articles on this fine seem to be a bit vague. What did they do that is manipulative and predatory?
1. They released a "checking account" that they claimed was FDIC and/or SPIC insured when it was not. (yes, they backed off of this one when they got caught).
2. They've gamified buying/selling stocks using addictive dark patterns (like confetti explosions). FOMO-inspiring push notifications are another example here.
3. They have such a terrible level of support for a product which involves people's real money.
4. They let people start trading options without any of the due-diligence typically performed.
5. They released an initial options product which was quite literally "Do you think this stock is going to go UP or DOWN?"
6. Their entire product is based on people having margin accounts that do not know that they have margin accounts.
7. Their Payment for Order Flow is (or at least was) significantly higher than industry standard.
Overall, their business model is taking a variety of complex financial instruments and wrapping them up in lipstick to sell to people who overwhelmingly do not understand the thing they are actually buying (or selling).
I'm sure I'm forgetting a couple but I'm also multi-tasking at the moment.
Edit:
I forgot about the "infinite money" "glitch", which was a situation explicitly called out in regulation as prohibited (regarding counting outstanding margin credit as assets when calculating margin credit)
I'm sure some people did.
I personally have never said these were a good thing, and am still not saying they were ever a good thing.
> Robinhood made advanced financial instruments accessible to the average Joe
This is definitely a very charitable interpretation of what I said.
The catch, though, is that you "fail" this training period if you don't make a profit (or enough trades) during that month. You are also prevented from attempting another training period with that service (or any other service) for another 11 months.
This would have the dual effect of locking out the large proportion of users who don't know what they are doing, and also preventing a sudden influx of users from taking advantage of (or falling victim to) some meme scheme that generates a lot of short-term media attention.
We should not be encouraging day trading. A better test would be if you put the money in non-penny/non-meme stocks and didn't touch it for the remainder of the month.
Just to elaborate a bit, with payment for order flow the broker essentially gets a kickback for executing a trade with a particular firm. They pass on part of the kickback to the customer as a rebate, and keep some of it for themselves.
Robinhood was (is?) keeping a bigger cut for themselves than other brokers who do payment for order flow (practically all retail brokers at this point, I guess), while advertising that they have the best execution.
If I remember right, they didn't get dinged for keeping a bigger cut because that's not necessarily illegal, they got dinged for lying about it - you can't say you have the best execution in the industry if you're taking more hidden fees than everyone else.
Did they really think they could get away with this? Or did they have a severe cascade of miscommunication? It is incredibly irresponsible and careless behavior either way.
The combination of robinhood's ineptness and their users ignorance created an environment in which a lot of crazy thrived.
Robinhood may have simply been coerced to do this, but regardless, it eroded my trust in their ability to provide me with any share I want in any quantity I can afford. I and many other retail investors switched to bigger firms that won’t have liquidity issues, or enact arbitrary restrictions on stock purchases because of those issues or their close relationships with the billionaires on the other side of the trade.
source for margin requirement only increasing for longs but not shorts?
Some non-nefarious explanations I can think off the top of my head:
* hedge funds and their prime brokers has much easier access to credit than retail brokerages, which allow them fulfill their deposit obligations than a discount brokerage
* since the hedge funds shorted GME a long time ago, the trades were already settled, so they're not subject to any deposit obligations (since deposit obligations only exist for unsettled trades)
Not even just easier access to new capital, but you can be sure they are able to move money faster than someone doing an ACH transaction to Robinhood that would take multiple days to actually settle.
There are tons of reasons why (counter-party risk, correlated risk of brokerages with high exposure, T+2 settlement, etc). You seem particularly keen on ignoring them though.
> Robinhood may have simply been coerced to do this, but regardless
Please stop ignoring known facts in favor of your conspiracy theory.
> I and many other retail investors switched to bigger firms that won’t have liquidity issues
It is completely logical that larger brokerages will be able to weather liquidity issues more easily. If this was super important to you, going with the discount brokerage was a poor decision in the first place.