swampthing

I don't know that it would be accurate to assume that Robinhood was not prepared for the possibility of their deposit requirements changing. I think it's more likely that they were unprepared for the magnitude of changes in a lot of their underlying assumptions. There were 600k downloads of their app on Friday alone, which is roughly 4x the previous daily high water mark, which itself was an anomaly. On top of that, most of those people are signing up to purchase shares in just a very small number of companies. I think there are very, very few businesses that are prepared for a black swan event of a magnitude that Robinhood experienced.

I am just responding to blaming them for not having enough cash on hand to meet the DTC's new deposit requirement, which did come out of the blue. You can say that Robinhood could have anticipated that at some point it may need to back up 100% of the activity of their customers with deposits, given that it is a possibility that is laid out in the DTC rules. But I don't think any brokerage is well-capitalized enough to handle that for every scenario.

But I understand that Robinhood has had other problems (reliability, customer support, etc.), and has also gamified stock trading in a way that is probably harmful. I am sympathetic to those criticisms.

Because that is basically what happened. There is a reason why WSB and GME have been in the news. It's because what happened is surprising. Sure, in hindsight, you can identify causes for the phenomenon. But if you rewind back to January 1, I don't think most of us would have predicted this at any level of certainty beyond a theoretical possibility.

I agree with you that Robinhood did put itself at higher risk of this happening, but I don't think that means they did something wrong. Just like I don't think most people would blame the innocent driver in your hypothetical. Who, if we were to make the analogy more applicable, might be an Uber driver trying to make some extra cash.

You could call it that, but these are obligations that appear to have been unilaterally decided by the DTC without prior notice. As far as I can tell, any brokerage using the DTC could potentially suffer the same fate if the stars aligned.

It sounds like you think that what happened is related to margin accounts. I don't think that is accurate (see the blog post this thread is on).

Robinhood does keep the equivalent of auto insurance, by the way of the deposits they make with the DTC (and probably other measures). So the analogy is that you keep insurance, and you suffer some catastrophic accident due to some crazy driver coming out of nowhere. Are you at fault?

But I do agree that they didn't do their job, with respect to PR / communications. And I agree that this blog post seems designed to mitigate the effects of that.

I don't think this is the same as what you're referring to. Under the DTC rules, this would likely have been an "Additional Participants Fund Deposit". The rules seem intentionally vague about what happens if you don't make this payment. As far as I can tell, the rules allow the DTC to unilaterally demand an uncapped deposit from a participant at any time.

Fidelity has $3.3 trillion AUM. Imagine if all its customers decided to take some actions that led the DTC to demand an "Additional Participants Fund Deposit" equivalent to 100% of what's at risk, like in Robinhood's case. Would Fidelity's inability to pay that be viewed as due to a failing on Fidelity's part?

If you own a car, you should know that you could be in a catastrophic accident at any time based on the behavior of others. If you are driving lawfully and someone t-bones you out of nowhere and you die, did you make a mistake in your driving?

Not a primary source, but: https://stu2b50.dev/posts/why-robinhood-d3580b

> Brokers cannot use client money to satisfy their clearing fund obligation. So whether or not the accounts had a settled balance didn't matter - as you can see from the other brokers which halted buys and did not have "instant transfers".

Do you consider them having their collateral requirements changed on them at 3am to be them messing up? If your bank tells you your mortgage payment is going to be 10x this month, and you have to scramble to cover that, did you mess up your personal finances?

That sounds plausible, but even then, if Robinhood couldn't meet the new deposit requirements, I think the existing trades just wouldn't settle (and obviously they wouldn't be accepting new ones)? I'm not seeing how Robinhood would have gone bankrupt in such a situation.

Where are you reading that they messed up their collateral calculations?

Where are you reading that they would have gone bankrupt even with the trading restrictions they put in place?

I don't think that's true. They raised the additional capital so that their customers could continue buying shares of those 8-50 companies. Had they not raised that capital, they would have just had to keep blocking those buys, but they would have been fine otherwise.

"nearly goes under because it over extended itself" is not really accurate. They took the steps necessary to prevent that from happening, by blocking the behavior that would have led to that. Unfortunately, those steps, in combination with poor communication on Robinhood's part, and emotion, ignorance, and paranoia on the part of the general public, has led to a PR crisis for them.

They do have margin accounts, but as I understand it, that was not what caused these deposit requirements to shoot up. I.e. the margin accounts were not what caused the problem.

They are legally prohibited from using the customer's funds for the deposit requirements.

Certainly, writing that is simpler than writing out the reasons behind 3 separate events. But I think Occam’s razor is more about actual simplicity, and would cut against arguing that there was an elaborate conspiracy that involves multiple large companies acting against their own interests.

Agreed. It's sad/shocking to see a China-run company out-execute a homegrown, well-funded US startup on public relations with the US market.

Does there have to be one single explanation for 3 separate events?

Having capital is not binary. It's not like once you meet a magic threshold, you can then allow for unlimited trades. Robinhood raised $1B on Thursday, then another $2.5B or whatever today. By your logic, they had the capital on Thursday, so why would they need to raise more today?

> That didn't protect any small investors. Whom did it protect?

This question is irrelevant in the case of Robinhood, because they had no choice. It seems like that is also fundamentally why they didn't restrict selling — because they wren't required to, whereas they were required to restrict buying. I.e. they imposed the minimum necessary restrictions. This is exactly what you would want from someone in Robinhood's position. You don't want them making their own decisions about who can buy or sell.

> Somehow I doubt perjury attaches to an untranscripted chat on a celebrity-only private audio app. Everything at that third link seems highly lawyered: "From our perspective", "I wouldn’t impute", passive voice, etc.

If something was highly lawyered, do you really think they would go with a lie that would be this easy to disprove? I.e. a lie that relies on people with no interest in Robinhood to uphold it?

> From a guy named "Vlad" who looks like Dracula. I guess it was just prejudice that caused me to expect someone from Sherwood...

I don't know that it makes sense to base whether or not you believe him on things he has no control over.

As I understand it, the deposit requirements imposed on Robinhood were not because of the margin accounts.

The funny part is people migrating to brokers who are even less prepared than Robinhood, not realizing that the only reason the same thing didn't happen to those brokers is because they didn't have the volume that Robinhood had.

"Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.

That is the narrative that the mob would like you to believe, but it's actually not true. Here are some examples of that happening in the past:

* https://mobile.reuters.com/article/amp/idUKKCN2253T2 * https://mobile.reuters.com/article/amp/idUSKBN1FT2S4

Robinhood was in a no-win situation. You can read about why they were forced to restrict buying here: https://www.cnbc.com/2021/02/01/elon-musk-on-clubhouse-robin...

If they restricted sells too, they would have been lambasted, likely even more than they currently are, by people trying to get out of their positions either to capture gains or avoid loss.

Robinhood's only move was to mitigate the fall-out with customers through messaging, which they failed miserably at. It's unclear to me whether this failure was due to incompetence or because they were (or thought they were) restricted from providing certain information by law or contract.

https://mobile.reuters.com/article/amp/idUKKCN2253T2 https://mobile.reuters.com/article/amp/idUSKBN1FT2S4

That seems like a good thing for incoming US air passengers. It lowers the risk of infection from the flight.

Co-founder of Clerky here :) It's generally less controversial for advisors because it's unlikely that an acquirer will want to retain the advisers for a company it's acquiring.

Hinodeya broth was about as light as you can get. And I have had equally fatty broth in Japan.

Hmm, restaurants from Japan have opened locations in SF though. E.g. Hinodeya, Mensho, Tsuta. Did you feel even those weren't authentic?

Similarly, Crystal Jade (RIP) re Chinese food.

I think the Marina is considered desirable by the real estate market in general.