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Comment by hanniabu | Hacker News Reader

And Robinhood deactivated the BUY button https://www.reddit.com/r/Superstonk/comments/1cqq713/robinho...

For everyone still saying crypto is pointless, this is the point

Robinhood deactivated the BUY button because it didn't have enough liquidity to execute the trades. The apes blew through all of its pool of liquid money in a day.

You get what you pay for with a discount brokerage that you can load through a friggin' credit card. One thing that you don't pay for is 100% uptime for being able to do any trade you want, at any time you want.

Contrary to what you see on your bank's/broker's website, it takes actual time for monetary transactions to settle, and the NYSE does not value charge-backable IOUs from retail investors at 1:1. It actually wants real money delivered to them when trading closes. Money that Robinhood did not have on short notice, no matter how many credit cards you maxed out to buy shares on it.

> it didn't have enough liquidity to execute the trades.

Robinhood needs FedNow support. That settles within 10 seconds. Then people can lose money faster.

The problem is not RH paying its counterparties, the problem is me, a retail customer paying RH. It takes time for my money to settle with them, and they can't pay their counterparties until it does.

They keep a pool of cash on hand to deal with this, but that pool was not big enough to absorb the GME mania. Robinhood eventually borrowed enough money to solve their liquidity problem, but by the time they did, the bubble popped, and the bagholders started screaming about fraud and collusion.

Few banks support consumer-initiated FedNow transfers. The main near-term application is receiving government payments: Medicare, tax refunds, and such. The US Treasury wants to convert over, to reduce customer service issues. ("Where's my Social Security check?") If it only takes seconds, customer service and actual money transfer are in sync.

Banks are dragging their feet on customer-initiated transfers because of the fraud problem. If you send money by FedNow, it's gone. So there's a lot of scam potential. Wells Fargo supports bill pay via FedNow to known payees, which is useful. Pay a bill, and the payee gets paid immediately. Both sides can see the transaction as completed. That's useful.

The ability to send your entire bank account to anybody in seconds with no way to reverse the transaction is rather risky.

Historically, everyone looses their ass on these pump and dump schemes. And when that happens, people say things like "Why didn't the SEC step in to prevent the losses?"

How would crypto help this? Robinhood could accept crypto as payment and still turn off the buy button.

I believe OP means that a decentralized trading network (not sure how that would be implemented with lowish latency) would circumvent this, not that the transaction needs to be done in a cryptocurrency

Robinhood disables stuff because stock settlement gets wonky if there's too much volatility. This is "fixed" by crypto because there's no settlement, at least in layer 1.

What OP means it that crypto's peer to peer nature means we wouldn't have to go through gatekeepers that can turn off the "Buy" button.

But stock ownership, as a relationship between the stockholder and the company, is fundamentally not peer to peer. There's no way for you and I to settle a trade of Gamestop stock ourselves; we have to either contact Gamestop to transfer the registration or go through a trusted third party broker who holds the registration on our behalf.

There used to be bearer certificates for shares that could trade without a third party being involved.

They went away both because of the obvious downsides (fraud, loss etc) and the obvious upsides (efficiency) of more consolidated clearing.

What’s probably less obvious but more important for securities trading is the consolidation of the extension of credit. We no longer need to go verify the cash is available with every different counterparty pair, we can instead extend the credit just by using central rules, including the turning off of the buy button.

It’s not obvious to me how crypto equity trading, even if decentralized, solves the credit issue at the cash off ramp. Unless that off-ramp is truly a society that actually uses crypto as a currency.

The stocks themselves should be tokenized. Tradfi is an antiquated system. Thankfully Larry fink understands this.

Why this doesn't count as a market manipulation? They can influence stock prices this way, can't they?

A broker not executing a trade that requires the broker to spend liquidity, because the broker doesn't have any liquidity is not market manipulation.

It's not market manipulation to not do something that you're not allowed to.

You are getting close to the heart of the matter, though. There was a kind of distributed market manipulation, as is inherent in any crowd mania. Largely coming from the people on reddit screaming 'DIAMOND HANDS' and 'BUY AT ANY PRICE' and 'WE WILL ALL TO THE MOON TOGETHER' and 'BELIEVE IN THE MOVEMENT', and ...[1] while they were quietly unloading their positions to bigger fools.

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[1] My absolute favorite was 'If we just diamond hands Uncle Sam will cover all of Melvin Capital's losses and will turn over ownership of the entirety of the world's economy into the hands of the apes, because contracts, are, like, sacred, and we found the infinite money glitch, and the USGov is somehow responsible for bad trades done by a shitty hedge fund.'

Why are people posting on Reddit a manipulation? Anyone can post anything on Reddit and no serious investor will blindly follow this. On the other hand, companies (brokers) that allow people to trade have a power to manipulate the market by enabling/disabling trade of specific stock at necessary moment.

Also if people posting on Reddit can cause serious losses to greedy capitalists then it is fun.

As if Robinhood wouldn't disable crypto buy/sell buttons if needed.

What’s the point?

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