Robinhood is automatically initiating GME sell orders on users' behalf(twitter.com)
twitter.com
Robinhood is automatically initiating GME sell orders on users' behalf
https://twitter.com/555sunny/status/1354854993946406917
315 comments
Obviously, margin calls are legitimate. But Robin Hood obviously played an important role in the price direction that led to the margin calls. I honestly don't know how anyone could trust RH as a neutral party after this.
Did anybody confirm whether Robinhood was automatically initiating GME sell orders for those holding not on margin?
I wonder if that will make them liable when it goes to court. The combination of forced liquidation after banning buying the security seems super sketchy to me.
What brokerages hit you with a margin call when you're UP on a stock? Margin calls are for when you fall BELOW a certain liquidity event.
His shares are for $118.93. He's up over 60%.
His shares are for $118.93. He's up over 60%.
They can up the margin requirement, if he/she bought the shares with margin before it theoretically could trigger a margin call.
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Who would accept GME as collateral for a loan?
RH is a pretty awful broker. Anyone who cares about such things pulled out a long time ago
RH is a pretty awful broker. Anyone who cares about such things pulled out a long time ago
Most of the brokers where not allowing margin for buying GME since last week and Robinhood is one of them.
Disallowing margin buying is one thing. Not letting you use our money to buy a volatile stock, that's fair game. But not letting you use your own money, that's a scam.
I am concerned for myself here. I got 3.0xxx shares on Wed. 1/27 on Robinhood for 999 bucks. I'm pretty sure I began a transfer to Robinhood of $1,000 from my bank account BEFORE I bought them. Well, the shares were in my possession in a matter of seconds after but my $1,000 won't clear until Feb 2. I have NO idea if I bought on margin and if am subject to margin call/ holding liquidation etc. If anyone has any insight I would very much appreciate it!!!! Thanks-- An idiot
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It wasn’t rh alone, it’s also most other discount brokerages.
https://www.marketwatch.com/story/gamestop-amc-trading-is-no...
Not just discount brokerages.
Not just discount brokerages.
There's a huge difference between limiting margin trading for GME and closing positions without asking a user or offering an option to put up collateral. Many brokerages did the former, and at least Schwab/Fidelity/TDA all seem to be otherwise up and running so retail investors can still buy and sell GME.
TD Ameritrade restricted buying from users not on margin.
Closing without recourse during margin call if you are way below maintenance is normal operation. This is the problem with GME, it is extremely volatile and brokerages don't want to be left holding the bag when the bubble bursts and everyone who bought it on margin goes bust.
You can't buy GME on margin at most brokerages, for several weeks at least.
This is probably legit, unlike delisting it. You are taking a loan from them with the understanding that they can (in some circumstances) liquidate your investment to lower their own risk. This absolutely seems like one of those circumstances.
A margin call on a stock you halted trading in smells like fraud.
It’s like the bank banning selling your home then repossessing it when the value falls.
Crooked entirely.
It’s like the bank banning selling your home then repossessing it when the value falls.
Crooked entirely.
Not exactly. It would be as if the bank that mortgaged your house then prevented people from buying it, then turned around to you and said "See? Nobody wants it! You need to lower the price. Oh! What's this? The price has gone down, I need to reposses it. Thanks, come again!
Ding ding ding.
These "here's why it's OK" legitimations are sounding just as cynical as the high profile insiders' rage against WSB that we have been hearing.
This is fast becoming a symbol of brazenly rigging of financial systems to ensure the house wins.
Hypocritical appeals to responsibility are half of what's causing all this rage. Sure, a responsible broker might reserve a right to liquidate your position in order to limit their risk. This isn't a responsible broker. They might also liquidate your position to limit their losses at your expense... or because the cabal said to.
We are not starting from the assumption that they (RH, Citadel, NASDAQ,etc... even the SEC) are acting responsibly, or in the interest of "mom & pop." They are playing heads I win, tails your lose... again.
The hedge funds got caught holding $10m puts with $1bn (so far) long tail risk. RH are in some sort of similar position. They make high, steady returns from such positions. Typical insider deal. When that long tail risk materializes, all bets are off... and this is not even a figure of speech!
The asymmetry is dumbfounding. Responsible actors! Market Fundamentals! The hypocrisy of it.
These "here's why it's OK" legitimations are sounding just as cynical as the high profile insiders' rage against WSB that we have been hearing.
This is fast becoming a symbol of brazenly rigging of financial systems to ensure the house wins.
Hypocritical appeals to responsibility are half of what's causing all this rage. Sure, a responsible broker might reserve a right to liquidate your position in order to limit their risk. This isn't a responsible broker. They might also liquidate your position to limit their losses at your expense... or because the cabal said to.
We are not starting from the assumption that they (RH, Citadel, NASDAQ,etc... even the SEC) are acting responsibly, or in the interest of "mom & pop." They are playing heads I win, tails your lose... again.
The hedge funds got caught holding $10m puts with $1bn (so far) long tail risk. RH are in some sort of similar position. They make high, steady returns from such positions. Typical insider deal. When that long tail risk materializes, all bets are off... and this is not even a figure of speech!
The asymmetry is dumbfounding. Responsible actors! Market Fundamentals! The hypocrisy of it.
I consider this to be the funniest part.
It's a cat and mouse game. This is a once in a lifetime event where you can push everything to extreme limits. As wall street gets more desperate they will resort to extreme and more extreme tactics. The average retail investor is not going for a win. They are trying to make the house expose all of the cheap tricks.
The end result is a checklist of publicly confirmed anti retail strategies.
Short selling above and beyond? Check
Bailouts among wallstreet? Check
Deplatforming? Check
Control conventional media? Check
Prevent buying stocks? Check
Forcibly sell shares? The jury is still out
It's a cat and mouse game. This is a once in a lifetime event where you can push everything to extreme limits. As wall street gets more desperate they will resort to extreme and more extreme tactics. The average retail investor is not going for a win. They are trying to make the house expose all of the cheap tricks.
The end result is a checklist of publicly confirmed anti retail strategies.
Short selling above and beyond? Check
Bailouts among wallstreet? Check
Deplatforming? Check
Control conventional media? Check
Prevent buying stocks? Check
Forcibly sell shares? The jury is still out
But for the part where the current valuation was widely viewed as much too high. It does smell bad. I agree with how you framed it. I’m really grateful you wrote it that way as it makes it very clear how this feels deeply corrupt. I suspect this is a corner case which could bankrupt a broker though.
How can it be too high when there was a know market to buy them? Short seller positions are public, and they had already agreed to buy the stock by such and such date.
The price looks just right to me.
The price looks just right to me.
> It’s like the bank banning selling your home then repossessing it when the value falls.
Apples and oranges. If you bought a house on margin, the way a brokerage defines margin, they would absolutely be allowed to do that. Margin and mortgage are fundamentally different types of loans.
I agree that halting buys was absolutely wrong. Definitely see where you're coming from, if you look at the two actions together..it doesn't paint a very pretty picture.
Apples and oranges. If you bought a house on margin, the way a brokerage defines margin, they would absolutely be allowed to do that. Margin and mortgage are fundamentally different types of loans.
I agree that halting buys was absolutely wrong. Definitely see where you're coming from, if you look at the two actions together..it doesn't paint a very pretty picture.
Isn't buying a house on margin... basically just a normal mortgage?
You don't get a margin call if your house or car is underwater. You can just keep making the payments until you own it.
> You don't get a margin call if your house or car is underwater.
Except... You can!
If you ever took a mortgage, take a very, very, very good look on the loan agreement.
A surprising amount of banks simply put it as "bank reserves the right to recall the loan in full, at its sole discretion, at any moment"
Except... You can!
If you ever took a mortgage, take a very, very, very good look on the loan agreement.
A surprising amount of banks simply put it as "bank reserves the right to recall the loan in full, at its sole discretion, at any moment"
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No like I said they are fundamentally different. In a normal mortgage the bank cannot take your house if you make payments. With margin they can force you to sell if your account becomes too risky (usually happens because your positions lost value, but could also happen in cases like these where an investment is deemed to have a high probability of losing value). They can do this even if you are paying the interest on your margin on time.
> In a normal mortgage the bank cannot take your house if you make payments.
Depending on a loan agreement... It can
The last time this has happened en masse was as recently as 12 years ago.
Since then, people started reading loan agreements a bit more carefully, hence the decline in the number of banks demanding completely unconditional recall clauses.
Depending on a loan agreement... It can
The last time this has happened en masse was as recently as 12 years ago.
Since then, people started reading loan agreements a bit more carefully, hence the decline in the number of banks demanding completely unconditional recall clauses.
No. A mortgage is a collateralized loan.
Margin loans more like a performance bond. Unlike a mortgage, it gets called in when you cannot cover the loan. Speculation with margin is dumb for most people.
Margin loans more like a performance bond. Unlike a mortgage, it gets called in when you cannot cover the loan. Speculation with margin is dumb for most people.
To be clear, RH (and others) blocked their users from trading those stocks. That’s separate from trading halts, which are initiated by the listing exchange based on algorithmic rules and apply for all trades in the US. The broker is in its right to give you a margin call anytime. It cannot liquidate your position if the stock is halted by the exchange, because all trades are halted during that time.
All that said, my personal opinion is that they couldn’t check in a code change to handle the increased collateral requirements, so the only feasible and somewhat legal way to save RH was to prevent its users from buying more. Pretty shitty, but then again, ever since RH crashed on 2020-02-29 because none of their devs thought of leap years, I can’t say I expect very much from them technology-wise.
All that said, my personal opinion is that they couldn’t check in a code change to handle the increased collateral requirements, so the only feasible and somewhat legal way to save RH was to prevent its users from buying more. Pretty shitty, but then again, ever since RH crashed on 2020-02-29 because none of their devs thought of leap years, I can’t say I expect very much from them technology-wise.
What code change would you recommend? Sure, prevent margin buys-- but that's not enough. You'd need to require that the cash from a transfer has actually shown up. Perhaps even crossed some time after that.
And that's enough to make people pretty not-happy.
It sounds like now that they have a bunch of additional cash in hand they're going to allow (with limitations) GameStop buys again.
And that's enough to make people pretty not-happy.
It sounds like now that they have a bunch of additional cash in hand they're going to allow (with limitations) GameStop buys again.
I'm ignorant. In your example, the bank manipulated the housing price and now owns the house, earning them an asset. The the Robinhood example, they (maybe) manipulated the price, and then forced you to sell, so you now have the money. They don't now own the proceeds from the sale (except what you already owed them). These don't seem similar.
If you only look at Robinhood, sure, they're not gaining anything.
But look further up, and you'll see that their main client (~40% of their revenue), Citadel, is looking at major losses if this keeps going.
But look further up, and you'll see that their main client (~40% of their revenue), Citadel, is looking at major losses if this keeps going.
Especially if they don't at least provide the opportunity to collateralize the position so the user can avoid selling at a loss if they want to try & wait out the trade ban.
I agree that it’s crooked to block buying of gme stock, but the resulting margin calls are well within the risks you agree to once you start trading with borrowed money
AFAIK you could always sell the stock, just not buy it.
More like “you didn’t read your contract”.
Browing the top of reddit right now is really reminiscent of /r/The_Donald, particularly the shift from a bunch of 'ironic' jokers to conspiracy theories and shouty chest beating and calls for upvotes.
I'd treat anything like this with a huge pinch of salt.
I'd treat anything like this with a huge pinch of salt.
Not just Reddit. It's here too. It's wild to see people being whipped into a frenzy in real time.
I'm following the discussions a bit, lots of comments by people spreading conspiracy theories, comments asking for evidence are just downvoted, or met by the conspiracy theorist's favorite, "do your research", comments spreading disinformation like "citadel owns robinhood" with a tweet as the only source, people who have no idea how market functions talking about "naked shorting", etc. The disinformation spreads faster than it takes to rebut it.
I'm following the discussions a bit, lots of comments by people spreading conspiracy theories, comments asking for evidence are just downvoted, or met by the conspiracy theorist's favorite, "do your research", comments spreading disinformation like "citadel owns robinhood" with a tweet as the only source, people who have no idea how market functions talking about "naked shorting", etc. The disinformation spreads faster than it takes to rebut it.
One of the most common techniques of making a class of people seem crazy is associating conspiracy theories with them. CIA has been doing it for nearly a century by now.
I like how this is a meta conspiracy theory. We're way beyond the land of the falsifiable at this point.
To be specific, we're in the land of confirmable and obvious.
Consider:
* Most conspiracy theories are false.
* Many conspiracies do exist. I've seen people involved in a few.
In conspiracies, people keep secrets. Ergo, there's a poor mapping between actual conspiracies and conspiracy theories. People are speculating with no evidence. On the other hand, the conspiracies I've seen, you haven't heard of, and you probably won't.
The CIA is quite literally the US government covert agency set up to meddle in foreign affairs. It's raison d'être is to:
1. Collect covert intelligence for the US
2. Undermine enemies of the US / support friends of the US
A vague statement like "The CIA is involved in conspiracies" or even slightly less vague "The CIA lies and sometimes vilifies people" are almost vacuously true. That's literally what a covert government agency is designed to do.
A conspiracy theory is much more specific. "The CIA assassinated [leader] on [date] by [some action that looked like an accident] in order to [favorable outcome]." Most of those, with blanks filled in, are paranoid nonsense. If the CIA is doing it's job, I'll never find out about whom it assassinated or why. On the other hand, a blanket statement like "The CIA sometimes engages in assassinations" is obviously true. We have plenty of records from times the CIA slipped up.
As far as associating people with crazy by associating conspiracy theories with them, we're not even at the level of CIA. We're at the level of municipal politics, divorce cases, executive battles, and corporate PR smear campaigns.
If the CIA isn't involved in conspiracies, where are my tax dollars going?
Consider:
* Most conspiracy theories are false.
* Many conspiracies do exist. I've seen people involved in a few.
In conspiracies, people keep secrets. Ergo, there's a poor mapping between actual conspiracies and conspiracy theories. People are speculating with no evidence. On the other hand, the conspiracies I've seen, you haven't heard of, and you probably won't.
The CIA is quite literally the US government covert agency set up to meddle in foreign affairs. It's raison d'être is to:
1. Collect covert intelligence for the US
2. Undermine enemies of the US / support friends of the US
A vague statement like "The CIA is involved in conspiracies" or even slightly less vague "The CIA lies and sometimes vilifies people" are almost vacuously true. That's literally what a covert government agency is designed to do.
A conspiracy theory is much more specific. "The CIA assassinated [leader] on [date] by [some action that looked like an accident] in order to [favorable outcome]." Most of those, with blanks filled in, are paranoid nonsense. If the CIA is doing it's job, I'll never find out about whom it assassinated or why. On the other hand, a blanket statement like "The CIA sometimes engages in assassinations" is obviously true. We have plenty of records from times the CIA slipped up.
As far as associating people with crazy by associating conspiracy theories with them, we're not even at the level of CIA. We're at the level of municipal politics, divorce cases, executive battles, and corporate PR smear campaigns.
If the CIA isn't involved in conspiracies, where are my tax dollars going?
[deleted]
Someone not wanting to explain what is in 50 news articles to new commenters does not make them a conspiracy theorist, why should they do your google searches for you?
If someone is saying "This morning Robinhood conspired with Citadel to halt trading", that is a claim. If I ask for source on the claim and they say "It's in the logs, go see for yourself?", my, and most other people on this sites assumption is "This person has no evidence of this claim, or any evidence they do have is eminently debunkable". Handwaving the claim away as "It's obvious" when to most people, "no it isn't obvious whatsoever", or in the worst case "It obviously is not", marks you at best as uninterested in having a real conversation, at worst a conspiracy theorist.
Maybe you shouldn't assume that? Sure sometimes there will be no evidence, but you should only come to that conclusion after you shake off the laziness and go look. Again, someone not wanting to tell you something that you can easily check out yourself does not make them a conspiracy theorist by default. I'm sure you are special enough in your mind that every poster you reply to should take time to type you a personalized response but that is not the case. However, I think you are special.
Someone not wanting to explain what is in 50 news articles to new commenters does not make them a conspiracy theorist, why should they do your google searches for you?
Yes, this is definitely one of the cookie-cutter responses. Dubious claims of "so many sources" but they are just super busy and can't be bothered to link to a single one.
Yes, this is definitely one of the cookie-cutter responses. Dubious claims of "so many sources" but they are just super busy and can't be bothered to link to a single one.
Honestly, I'd say a lot of time there aren't any "legitimate sources" to prove the claims being made. That's a good chunk of the problem, because it seems that legitimate investigation and "linking" of said facts to prove the claims is next to impossible without serious government-level powers of acquiring evidence. So inference needs to be used, unfortunately. And once you start inferring without direct evidence, you start sounding like a conspiracy theorist, which is now being used to shut-down dissent and questioning.
It's not like a journalist right now can tell Robinhood "give us all your internal emails so we can verify the reason you've stopped trading these stocks". Or "Hey Discord, let's look at your internal slack comms so we can figure out what evidence you had to conclude that the WSB chat rooms were filled with hatespeech." Or "give us a data-dump of all the users and comments you identified as hatespeech".
How about some regulation in that regard? Hey EU? Here's an idea for a possible scenario and how it could look:
1. Public company makes contentious claims.
2. Curious individual (maybe journalist) makes formal request for data to confirm.
3. By law, company above is obligated to provide access.
4. Individual gets given a secure-room, no-data-copying-allowed physical access to inspect and analyze said data.
5. Individual is allowed to report on said data.
Edit. Formatting.
It's not like a journalist right now can tell Robinhood "give us all your internal emails so we can verify the reason you've stopped trading these stocks". Or "Hey Discord, let's look at your internal slack comms so we can figure out what evidence you had to conclude that the WSB chat rooms were filled with hatespeech." Or "give us a data-dump of all the users and comments you identified as hatespeech".
How about some regulation in that regard? Hey EU? Here's an idea for a possible scenario and how it could look:
1. Public company makes contentious claims.
2. Curious individual (maybe journalist) makes formal request for data to confirm.
3. By law, company above is obligated to provide access.
4. Individual gets given a secure-room, no-data-copying-allowed physical access to inspect and analyze said data.
5. Individual is allowed to report on said data.
Edit. Formatting.
Excellent points, well said. If any claims that were not immediately supported by secret video were not at least thought about then no investigations would ever start. At this point the allegations are 50/50, either true or false, the onus is on our regulators/journalists/whistleblowers to investigate and find out if the claims are true.
One of the top posts on WSB this morning was a supposed Robinhood engineer who overheard a call between their CEO and the White House instructing them to stop trading $GME. The /r/The_Donald comparisons seem apt at this point.
Justin Kan, founder of Twitch and Atrium(net worth over 9 figures) tweeted that he got a tip that Citadel(the company that executes trades for Robin Hood) reloaded their shorts before they told Robinhood to stop allowing users to buy GME.
If you think Kan is a conspiracy theorist making baseless accusations, we see the world very differently. Which is fine. Diversity of thought is always welcomed in my opinion. But I am curious how you can have that opinion. It seems so clear to me, so I'm a bit confused as to how someone can hold the oppsite view.
https://twitter.com/justinkan/status/1354853920762253315?s=2...
If you think Kan is a conspiracy theorist making baseless accusations, we see the world very differently. Which is fine. Diversity of thought is always welcomed in my opinion. But I am curious how you can have that opinion. It seems so clear to me, so I'm a bit confused as to how someone can hold the oppsite view.
https://twitter.com/justinkan/status/1354853920762253315?s=2...
If there's no evidence backing it then it is a conspiracy theory, whether coming from an anonymous Reddit post or from a billionaire's Tweet. I don't know Justin Kan's background but he could very well have his own angle behind all this, or just faulty information. And even if he is correct, he is saying something very different from the post I mentioned.
It seems clear to me that you don't become a billionaire by leaving evidence of your ill acts. Certainly not when the spotlight of the entire country is on you. If you don't mind me asking, do you interface with these kind of people? I don't and I'm wondering if you have some kind of insight I'm missing.
> If you don't mind me asking, do you interface with these kind of people?
Yes, I do, multiple people in fact (which I refuse to name drop). That’s why I replied to you the way I did in my other sibling comment. Him tweeting it means somebody told him, and likely he trusts that person. Billionaires are humans like anyone else, they sometimes trust the wrong people. They can also fall victim to “hearing what they want to hear”. They also have a lot of folks who want to win favor with them and thus will intentionally or unintentionally take information out of context and oversell it as something it isn’t. The ultimate point is that thinking a billionaire won’t possibly be misled/deceived themselves and then share wrong info (Elon Musk has had this happen a few times as an example, but he’s far from alone), or won’t deceive others for their benefit (there’s a “household name” in the US that immediately comes to mind as an example, leave it to you to decide who I mean), just seems naive to me.
Yes, I do, multiple people in fact (which I refuse to name drop). That’s why I replied to you the way I did in my other sibling comment. Him tweeting it means somebody told him, and likely he trusts that person. Billionaires are humans like anyone else, they sometimes trust the wrong people. They can also fall victim to “hearing what they want to hear”. They also have a lot of folks who want to win favor with them and thus will intentionally or unintentionally take information out of context and oversell it as something it isn’t. The ultimate point is that thinking a billionaire won’t possibly be misled/deceived themselves and then share wrong info (Elon Musk has had this happen a few times as an example, but he’s far from alone), or won’t deceive others for their benefit (there’s a “household name” in the US that immediately comes to mind as an example, leave it to you to decide who I mean), just seems naive to me.
Thank you for sharing your experience in such a thorough manner. Makes sense to me, and I agree.
I was definitely assigning him some kind of value that he may or may not have based on his success. Thanks for pointing out this flaw in my train of thought.
Have a wonderful day!
I was definitely assigning him some kind of value that he may or may not have based on his success. Thanks for pointing out this flaw in my train of thought.
Have a wonderful day!
> I was definitely assigning him some kind of value that he may or may not have based on his success.
Which is definitely reasonable, but my point was that doesn’t necessarily lead to the conclusion you assumed. Hope I’ve helped, but either way, have a wonderful day yourself!
Which is definitely reasonable, but my point was that doesn’t necessarily lead to the conclusion you assumed. Hope I’ve helped, but either way, have a wonderful day yourself!
Yep. I’m bagging what you’re raking.
Donald Trump is a billionaire. It is also plainly clear that he has conspiratorial thinking and is often fooled by completely incorrect information. Somebody being a successful tech entrepreneur has almost nothing to do with being able to develop deep understanding of rapidly changing situations off third hand evidence.
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> Justin Kan, founder of Twitch and Atrium(net worth over 9 figures) tweeted that he got a tip that Citadel
So rich people are never lied to by people they trust? I get it, you trust him, but thinking just because he “has a source” saying it doesn’t automatically makes it factually correct. Maybe it is, but appeals to authority and essentially calling anyone who disbelieves crazy doesn’t compute for me.
So rich people are never lied to by people they trust? I get it, you trust him, but thinking just because he “has a source” saying it doesn’t automatically makes it factually correct. Maybe it is, but appeals to authority and essentially calling anyone who disbelieves crazy doesn’t compute for me.
I would believe Justin got that tip but that does not mean it was true.
It doesn't even make a lot of sense as the part of Citadel that executes trades cannot talk to the part of Citadel that takes short positions, and vice versa.
It doesn't even make a lot of sense as the part of Citadel that executes trades cannot talk to the part of Citadel that takes short positions, and vice versa.
You really believe that the departments don't communicate? Once again, finding out that a lot of people see the world very differently than me. Why don't you think they communicate? It seems so clear to me that the departments work in cohort behind closed doors.
> Why don't you think they communicate?
Probably because it’s the law that there’s barriers put in place, that’s why? Like some communication will inevitably happen, but there are compliance teams who’s job it is to ensure it’s at a minimum.
Probably because it’s the law that there’s barriers put in place, that’s why? Like some communication will inevitably happen, but there are compliance teams who’s job it is to ensure it’s at a minimum.
In my mind I was assuming that there is some communication between the two groups. Not at work, and definitely not where you can be overheard, but it just seems crazy to me that they don’t talk at all. But I’ve never been in a position to actually know, im just assuming.
I’m sure there is some friendly banter, but I also assume they’d not risk it. Compliance in this context would be very invasive to an average person not in the field, like monitoring your communications, social media, call logs, etc, so I’m not sure they’d risk just casual banter of prohibited topics.
So I am going to play a TRUMP card here on billionaires pushing conspiracy theories.
Thank you, I will be here all day.
Thank you, I will be here all day.
> supposed Robinhood engineer who overheard a call between their CEO and the White House instructing them to stop trading $GME
Isn't everybody working from home? How do you overhear things?
Isn't everybody working from home? How do you overhear things?
You don't think any of the high finance billionaires who were losing billions of dollars reached out to the people in the government whose campaigns they funded for support?
Calling this a conspiracy theory is...inaccurate in my opinion.
Calling this a conspiracy theory is...inaccurate in my opinion.
There is a difference between believing in corruption and believing a specific conspiracy based on anonymous hearsay.
So yes. It's literally a conspiracy theory.
So yes. It's literally a conspiracy theory.
I think the specific nature of the baseless accusation is what makes it a conspiracy theory.
Market manipulation is happening but mostly cuz Robinhood doesn't do anything on their own they rely on other companies
Market manipulation is happening but mostly cuz Robinhood doesn't do anything on their own they rely on other companies
In the words of Agent Kay from MiB "A person is smart. People are dumb, panicky dangerous animals and you know it."
Movements like /r/The_Donald ended up with attempted insurrection, dead people, guns and pipe bombs confiscated. Are you suggesting we might have another one coming, this time directed at the Hedge fund managers?
Losing a lot of money very quickly is a hell of a motivator for action.
He was margin called. This is literally how margin works, has nothing to do with GME or the Robinhood furor.
That was my thought process as well, but no where in the app message or email does it say the position was closed out due to a margin call.
If you have a margin account, the broker calculates a risk based margin and can close any position they wish if they deem it a risk. They don't have to give you any justification. With increased buying power comes increased risk.
In some sense this was basically inevitable. Robinhood allowed (perhaps even encouraged) a huge mass of clueless investors to flood into the market. As long as the going was good, nobody complained, but as soon as things go south, people have started to learn expensive lessons.
This is not the first time this has happened. Almost every single market stress for the past 20 years has caused grief to retail in some way as they were caught out on something they didn't know about.
One clear example that comes to mind is when the Swiss national bank has removed the currency peg and a whole bunch of FX retail has made the expensive discovery that stop limit orders are not guaranteed to execute...
In some sense this was basically inevitable. Robinhood allowed (perhaps even encouraged) a huge mass of clueless investors to flood into the market. As long as the going was good, nobody complained, but as soon as things go south, people have started to learn expensive lessons.
This is not the first time this has happened. Almost every single market stress for the past 20 years has caused grief to retail in some way as they were caught out on something they didn't know about.
One clear example that comes to mind is when the Swiss national bank has removed the currency peg and a whole bunch of FX retail has made the expensive discovery that stop limit orders are not guaranteed to execute...
Maybe it's a good time to stop calling them investors and instead call them speculators.
They're not investing in anything, their money doesn't contribute to any form of progress.
They're not investing in anything, their money doesn't contribute to any form of progress.
I assume Gamestop the company (and all the people they employ) are better off than they were a week ago. Maybe there won't be many lasting positive effects from having their stock briefly worth a lot more than it rationally should, but on the other hand you could make a reasonable case that they have been significantly harmed by short sellers, and that if a bunch of hedge funds lost their shirts because of their short positions they'll be more careful about shorting Gamestop or any other company in the future. Maybe that's a good thing.
Welcome to the stock market
The fact that this margin call happened at the bottom, but this user likely could not have closed their position themselves 15 minutes earlier at a better price, seems like it should be illegal if it is not already.
If you're long on margin, the position will of course be closed when the stock price drops (and the value of the position (= stock price * number of stocks minus margin loan) approaches zero), not when it rises.
And it was impossible on RH and other brokers to buy more shares, selling (liquidating a long position) was always possible, AFAIK.
And it was impossible on RH and other brokers to buy more shares, selling (liquidating a long position) was always possible, AFAIK.
It seems like this was his whole position on margin, rather than bringing them back to the margin maintenance which isn't normal.
The screenshots I've seen aren't due to margin calls, also not end of day yet
There is no “end of day” only requirement on margin calls. A brokerage firm could margin call you 2min after the market opened, as an example. The trigger is when your account is out of balance with the established risks the brokerage is willing to extend to you, which they can change the criteria at will.
More details on margin calls here:
https://www.thebalance.com/what-is-margin-call-358106
More details on margin calls here:
https://www.thebalance.com/what-is-margin-call-358106
Sounds like a margin call [0] which is absolutely “business as usual” and not something to be upset over.
Some of the margin calls may have been triggered earlier than investors may have anticipated given that (I believe) Robinhood recently adjusted their margin requirements for GME. (It’s also normal for brokers to raise margin requirements on particularly risky stocks, which GME clearly is at the moment)
[0] https://www.investopedia.com/terms/m/margincall.asp
Some of the margin calls may have been triggered earlier than investors may have anticipated given that (I believe) Robinhood recently adjusted their margin requirements for GME. (It’s also normal for brokers to raise margin requirements on particularly risky stocks, which GME clearly is at the moment)
[0] https://www.investopedia.com/terms/m/margincall.asp
we placed it to mitigate the risk on your account
Wow, that's pretty awful since liquidating the position may actually put the user at a net loss, which wouldn't avoid risk: It would actually "instantiate" the potential risk of having to sell the stock after falling below the purchase price.
Why not give users the opportunity to provide more collateral for their margin?
Wow, that's pretty awful since liquidating the position may actually put the user at a net loss, which wouldn't avoid risk: It would actually "instantiate" the potential risk of having to sell the stock after falling below the purchase price.
Why not give users the opportunity to provide more collateral for their margin?
They are mitigating the risk to themselves since if the user turns insolvent RH will still be out the margined amount. If they cash the user out, even if user has 100% loss, they save themselves.
The users have the option to buy the stock with their own money at any time. RobinHood loaned that money and decided that the risk of user default was too great, so they forced sale. I expect they did this only for the riskiest users who bought a lot of Gamestop stock on margin.
First of all, it does reduce risk because it avoids further downside. Just because a stock can come back up doesn't mean it didn't lose real value even before realizing the loss.
Second, this is not about the individual's risk of losing money. This is about Robinhood losing money because they lent him money.
And about why they didn't give him a chance to provide further collateral is simply because there wasn't enough time. I watched the stock drop from over $400 to $125 in just over an hour. Not sure what you could expect Robinhood to do in that situation.
Second, this is not about the individual's risk of losing money. This is about Robinhood losing money because they lent him money.
And about why they didn't give him a chance to provide further collateral is simply because there wasn't enough time. I watched the stock drop from over $400 to $125 in just over an hour. Not sure what you could expect Robinhood to do in that situation.
A realised loss is not a risk though. A position where there is margin and could be an even bigger loss is a risk.
Risk isn't money lost, its all about uncertainity of outcomes from a finance perspective. A realized loss isn't risky; since they've changed an uncertainty into a certainty (i.e. you will lose this much).
Because they are using an app with no fees. This is what fees get you on some other platforms.
Most major retail brokerages in the US have eliminated fees for stock trades.
https://www.stockbrokers.com/compare
https://www.stockbrokers.com/compare
Thats not quite accurate - a lot of the brokerages have only introduced it commission free on certain conditions. For example IBKR still has other fees if you want to use any of their more advanced features.
Yes, that's fair and it's certainly more accurate, but I assume the OP is comparing the fees of Robinhood to those of other platforms. Robinhood tends to not have many of those advanced features that other brokerages still charge for, as far as I can tell. Is there a specific feature or features you were thinking of?
Yeah, brokerages will do that if the stock takes a big drop like it did today. Oh, did you not read that part of your margin agreement? According to thread, some are just now getting to that part. Those same folks shouldn't have been trading GME on margin.
If it's any consolation, I've had Fidelity, IB, et. al., do the exact same thing when a trade turned sour. Difference is, I didn't run to Reddit to display my ignorance to the world.
If it's any consolation, I've had Fidelity, IB, et. al., do the exact same thing when a trade turned sour. Difference is, I didn't run to Reddit to display my ignorance to the world.
I honestly didn't read the agreements on Robinhood. Before you call me stupid or irresponsible, I'm going to say practically no one reads these agreements, and even fewer understand them.
The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line:
> A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tech companies’ policies. That number would probably be much higher today.
https://www.nytimes.com/2021/01/23/opinion/sunday/online-ter...
When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage, checking that I understood them. Absolutely no one has done this for Facebook, throwing a few hundred into Robinhood, etc. It's not worth it, and the terms change with such frequency that it would be outdated immediately.
I don't think having such impossible terms that you "agree" to are in good faith.
I'm not ignorant, I'm pretty typical, and I'm not going to spend 1/3 of my time simply sitting reading TOS.
The NYT a few days ago had an opinion piece on how no one reads the TOS for things like this. A very choice line:
> A 2012 Carnegie Mellon study found that the average American would have to devote 76 work days just to read over tech companies’ policies. That number would probably be much higher today.
https://www.nytimes.com/2021/01/23/opinion/sunday/online-ter...
When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage, checking that I understood them. Absolutely no one has done this for Facebook, throwing a few hundred into Robinhood, etc. It's not worth it, and the terms change with such frequency that it would be outdated immediately.
I don't think having such impossible terms that you "agree" to are in good faith.
I'm not ignorant, I'm pretty typical, and I'm not going to spend 1/3 of my time simply sitting reading TOS.
>When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage, checking that I understood them. Absolutely no one has done this for Facebook, throwing a few hundred into Robinhood, etc. It's not worth it, and the terms change with such frequency that it would be outdated immediately.
I still have my binder from my closing. Worked in the mortgage industry for a while in college. If they truly had you read through every page with explanations it would have taken you multiple days to do your closing. I think you're misremembering.
What they likely did was went through page by page, giving you a summary of each page as they went, and gave you the option to read it in its entirety or just sign based on their summary. You might have read through the first 4 pages before you realized you would be there for the aforementioned multiple days if you wanted to read through every line of every page.
I still have my binder from my closing. Worked in the mortgage industry for a while in college. If they truly had you read through every page with explanations it would have taken you multiple days to do your closing. I think you're misremembering.
What they likely did was went through page by page, giving you a summary of each page as they went, and gave you the option to read it in its entirety or just sign based on their summary. You might have read through the first 4 pages before you realized you would be there for the aforementioned multiple days if you wanted to read through every line of every page.
When i closed on my house I insisted the package be sent to me days ahead so I could read it over. Made everyone unhappy that was necessary including me. But I was in a position to do that and I did. I think most good notaries go over a verbal summary of the documents at the time of signing - but it's obviously not binding if there is a misunderstanding.
Margin accounts someone could read over after the fact - but the length and lack of a critical summary on most agreements is ridiculous.
Margin accounts someone could read over after the fact - but the length and lack of a critical summary on most agreements is ridiculous.
Really? I _know_ I read everything, both for my loan and for the purchase, when I bought my apartment. It wasn't really that much. It took a few hours. I didn't read every law that the contract referred to, but I read the contract itself.
Is a house really that much worse when it comes to paperwork? Or is the US just that much worse with this stuff?
Is a house really that much worse when it comes to paperwork? Or is the US just that much worse with this stuff?
I still have my closing documents from our house and it's about an inch and a half of paperwork.
X Hours = xh$ with probability you misunderstood something
Compared to paying lawyer to explain it to you in let's say 1/10 of the time and better understanding
X/10h$ + lawyer fees
Compared to not reading and just trusting
No upfront cost, but probability of bad outcomes increases.
I think when buying a house that makes sense.
Buying 100$ worth stock? Not sure. 10k worth? Hmmm maybe
Compared to paying lawyer to explain it to you in let's say 1/10 of the time and better understanding
X/10h$ + lawyer fees
Compared to not reading and just trusting
No upfront cost, but probability of bad outcomes increases.
I think when buying a house that makes sense.
Buying 100$ worth stock? Not sure. 10k worth? Hmmm maybe
TOS on websites aren't the same the agreement to a margin account. Not reading that would be like not reading your mortgage agreement or your auto loan agreement. I agree they're long and confusing but financial agreements are super important to read and if you can't understand it hire a younger/cheaper lawyer for an hour. Every contract I've signed for employment I've hired someone to confirm the law in that state and it really makes a difference knowing what is in there.
> Every contract I've signed for employment I've hired someone to confirm the law in that state and it really makes a difference knowing what is in there.
That's really cool to be able to do. For the average American, that's pretty much impossible to afford.
That's really cool to be able to do. For the average American, that's pretty much impossible to afford.
It’s not impossible to afford. You can a lawyer to review a employment contract for a few hundred dollars. Many, many Americans can afford that.
Apparently only 39% of Americans can afford a $1,000 emergency expense. I'm sure that hiring a lawyer to read over an employment contract does not even fall under "emergency expense" for the vast majority of people, thus making the number of people who can afford it even lower.
https://edition.cnn.com/2021/01/11/success/1000-emergency-ex...
https://edition.cnn.com/2021/01/11/success/1000-emergency-ex...
This isn't just TOS though. It's a pretty short and easy agreement that you're accepting.
https://cdn.robinhood.com/assets/robinhood/legal/RHF%20and%2...
You'll find a similar concise and clear statement from every broker when you enable margin trading.
https://cdn.robinhood.com/assets/robinhood/legal/RHF%20and%2...
You'll find a similar concise and clear statement from every broker when you enable margin trading.
I would read each and every word of a four page document, especially if it's finance related. Unfortunately, some people won't read anything longer than a tweet.
This is about having a very basic understanding of buying stocks on margin entails. It isn't your money, they do what they need to in order to protect themselves. You don't need to read their TOS because this isn't specific to Robinhood. It applies with every broker.
> I'm going to say practically no one reads these agreements, and even fewer understand them.
This might be true for the myriad of free online services and applications most people use on the daily.
But with anything I plan to spend or invest my money in/give my real personal information to I will most certainly take care to properly read and understand what I'm agreeing to there.
In that context, comparing your mortgage agreement with signing up for Facebook is apples to oranges. One of those is a very real very long-term financial liability directly and undeniably tied to your real identity with a legally binding contract, the other is a service that tries to monetize whatever data you give to them based on EULA and ToS that in many jurisdictions are not even legally enforceable.
This might be true for the myriad of free online services and applications most people use on the daily.
But with anything I plan to spend or invest my money in/give my real personal information to I will most certainly take care to properly read and understand what I'm agreeing to there.
In that context, comparing your mortgage agreement with signing up for Facebook is apples to oranges. One of those is a very real very long-term financial liability directly and undeniably tied to your real identity with a legally binding contract, the other is a service that tries to monetize whatever data you give to them based on EULA and ToS that in many jurisdictions are not even legally enforceable.
> I will most certainly take care to properly read and understand
And when you don't understand the dense legalese how did you get clarification? Did you pay a few hundred dollars to have a lawyer review the contract and explain it to you? Perhaps call the company up to have a minimum wage call center employee explain it to you? Or just come up with an interpretation of the text that seems to make sense and conclude that must be what they mean?
After awhile even doing that grows tiresome for all but the most important services. So, we really do need something better.
And when you don't understand the dense legalese how did you get clarification? Did you pay a few hundred dollars to have a lawyer review the contract and explain it to you? Perhaps call the company up to have a minimum wage call center employee explain it to you? Or just come up with an interpretation of the text that seems to make sense and conclude that must be what they mean?
After awhile even doing that grows tiresome for all but the most important services. So, we really do need something better.
> when you don’t understand the dense legalese
This confuses me a bit because I have personally never encountered anything in a legal document that I didn’t understand. I am not in support of reading all of the TOS, as that seems like an impossible feat, but when I have read any TOS or contract, it seemed understandable.
The hardest thing for me is comma separated if statements written in plain English. But that’s mainly because it can be difficult to hold the conditionals in short term memory - but it has always been manageable.
What’s an example of dense or unintelligible legalese?
This confuses me a bit because I have personally never encountered anything in a legal document that I didn’t understand. I am not in support of reading all of the TOS, as that seems like an impossible feat, but when I have read any TOS or contract, it seemed understandable.
The hardest thing for me is comma separated if statements written in plain English. But that’s mainly because it can be difficult to hold the conditionals in short term memory - but it has always been manageable.
What’s an example of dense or unintelligible legalese?
I opened a new bank account earlier this week, I've got 8 documents to review. Here's a section at random on how interest is calculated.
> We calculate interest each month based on the lowest Daily Closing Balance. We pay interest on the last Business Day of April and October. To earn any interest, the account must stay open for one full calendar month before the payment date.
Not dense language at all. But, note how Daily Closing Balance is title case, so that means its been defined elsewhere, so I need to flip back and refer to the definition then flip back to page 8. The definition which by the way isn't how you'd likely define a closing balance. Next part of interest is April, and October. So, interest is only paid twice a year⁉ That makes no sense, so I scan around and see this is for the Savings X account. But, I don't think that's what the name of my account is called, so now I have to flip through all 8 docs to find what specifically my account is named. Except none of the docs actually tell me which product I signed up for, instead I figure this out by comparing the fees outlined in the account types with what I wrote down when choosing the plan with the agent that I spoke with earlier.
Now back to the paragraph above and realize I'm realizing I've been analyzing the interest schedule for an account that isn't relevant to me. Scanning for my account I find that the interest is calculated as one would expect--some special conditions around the daily closing balance.
I'm frustrated and growing tired, but that is only 1 paragraph in 1 of 8 documents. The bank clearly made no effort to include only the sections that apply to me. So there is a great chance that I'm either going to miss a nuance in a section (like how they've defined daily closing balance to have some exclusions), or ignore a section believing that it doesn't apply to me.
Keep in mind you and I are likely both college educated, have training in logic and can figure this out if we spend the time/energy. Do you think the average American has a chance to understand what they've signed?
> We calculate interest each month based on the lowest Daily Closing Balance. We pay interest on the last Business Day of April and October. To earn any interest, the account must stay open for one full calendar month before the payment date.
Not dense language at all. But, note how Daily Closing Balance is title case, so that means its been defined elsewhere, so I need to flip back and refer to the definition then flip back to page 8. The definition which by the way isn't how you'd likely define a closing balance. Next part of interest is April, and October. So, interest is only paid twice a year⁉ That makes no sense, so I scan around and see this is for the Savings X account. But, I don't think that's what the name of my account is called, so now I have to flip through all 8 docs to find what specifically my account is named. Except none of the docs actually tell me which product I signed up for, instead I figure this out by comparing the fees outlined in the account types with what I wrote down when choosing the plan with the agent that I spoke with earlier.
Now back to the paragraph above and realize I'm realizing I've been analyzing the interest schedule for an account that isn't relevant to me. Scanning for my account I find that the interest is calculated as one would expect--some special conditions around the daily closing balance.
I'm frustrated and growing tired, but that is only 1 paragraph in 1 of 8 documents. The bank clearly made no effort to include only the sections that apply to me. So there is a great chance that I'm either going to miss a nuance in a section (like how they've defined daily closing balance to have some exclusions), or ignore a section believing that it doesn't apply to me.
Keep in mind you and I are likely both college educated, have training in logic and can figure this out if we spend the time/energy. Do you think the average American has a chance to understand what they've signed?
> And when you don't understand the dense legalese how did you get clarification?
By asking people knowledgeable in the field I trust, if it's big and relevant enough I might even invest in a lawyer, but at the very least I will put effort into trying to understand it.
If that doesn't work then I will be way more skeptical of whatever I'm supposed to agree to because anything written to be purposefully vague, and difficult to understand, does not entail a lot of trust nor confidence in me.
But not understanding, and making no efforts on your end to understand, is a very poor defense for entering anything legally binding: Making sure you understand is ultimately up to you and only you because at the end of the day it will be your ass and your assets on the line.
Which is a mindset even shared by WSB: That submission is full of regulars reiterating how people have been told not to buy GME on margin exactly because of what ended up happening.
By asking people knowledgeable in the field I trust, if it's big and relevant enough I might even invest in a lawyer, but at the very least I will put effort into trying to understand it.
If that doesn't work then I will be way more skeptical of whatever I'm supposed to agree to because anything written to be purposefully vague, and difficult to understand, does not entail a lot of trust nor confidence in me.
But not understanding, and making no efforts on your end to understand, is a very poor defense for entering anything legally binding: Making sure you understand is ultimately up to you and only you because at the end of the day it will be your ass and your assets on the line.
Which is a mindset even shared by WSB: That submission is full of regulars reiterating how people have been told not to buy GME on margin exactly because of what ended up happening.
This is not about reading a TOS, this is about borrowing money from a brokerage and then losing them on the stock market
That makes sense, but presumably the financial industry pretty regularly needs to enforce specific terms in financial contracts. So here we're seeing -- from one day to another -- people complaining that Robinhood and other financial intermediaries won't let unsophisticated traders easily access particular kinds of financial trades and products, and also that complicated terms may apply to those same trades and products. Couldn't these two issues be related?
(I don't mean to accuse people of hypocrisy by mentioning this! I just mean that I genuinely think financial intermediaries are in a tough spot as they're pressured to allow everyone to trade things where quite a lot of customers don't quite know what they are or what they signify.)
(I don't mean to accuse people of hypocrisy by mentioning this! I just mean that I genuinely think financial intermediaries are in a tough spot as they're pressured to allow everyone to trade things where quite a lot of customers don't quite know what they are or what they signify.)
You are saying that you willfully entered into a loan agreement without reading the terms of the contract. I just don't see that as a defensible position. I don't know how Robinhood does it, but TD Ameritrade was very clear with me what the terms of my margin account were. It's one thing to ignore TOS on an application, it a whole other world to sign a loan agreement without reading the fine print.
Here's the thing though, it's always been this way with margin agreements. Even before tech cos with impenetrable ToS agreements.
I'm beginning to wonder if the people who rushed into this "war" really ever knew what they were getting themselves into? Especially the ones who bought on margin. It's such a risk, and obvious loss in this situation, that I can't imagine any non-suicidal financial actor doing it?
I'm beginning to wonder if the people who rushed into this "war" really ever knew what they were getting themselves into? Especially the ones who bought on margin. It's such a risk, and obvious loss in this situation, that I can't imagine any non-suicidal financial actor doing it?
There is a big difference between a website TOS which is mostly legal ass covering and a loan agreement with is what margin is.
If you take a loan and didn't check the interest rates, term, and basic conditions, that's on you.
If you take a loan and didn't check the interest rates, term, and basic conditions, that's on you.
>I don't think having such impossible terms that you "agree" to are in good faith.
These are standard terms and you are borrowing money from them so logically they will have a lot of say in terms of that money. Credit cards will have interest rates, collateral loans will have liens on property, etc, etc. Nothing about this is impossible.
I do find it funny how the people who complain about this are also complaining about government oversight, robinhood stopping trades, etc. If you want full freedom then it's on you to pay attention to the details and not expect someone else to bail you out of your own ignorance.
These are standard terms and you are borrowing money from them so logically they will have a lot of say in terms of that money. Credit cards will have interest rates, collateral loans will have liens on property, etc, etc. Nothing about this is impossible.
I do find it funny how the people who complain about this are also complaining about government oversight, robinhood stopping trades, etc. If you want full freedom then it's on you to pay attention to the details and not expect someone else to bail you out of your own ignorance.
Your position of “TOS are too long and complicated therefore I should be held to them” is completely ridiculous.
There is eventually a point where if you want to make independent financial decisions as adult, you need to be responsible for understanding what you’re getting into.
Do t read the TOS for your Facebook account? Low risk. Don’t read the agreement for your RH margin account? That’s just dumb.
There is eventually a point where if you want to make independent financial decisions as adult, you need to be responsible for understanding what you’re getting into.
Do t read the TOS for your Facebook account? Low risk. Don’t read the agreement for your RH margin account? That’s just dumb.
[deleted]
Yes. Is that one way of describing the "find a bigger fool" strategy of investing?
Is that the purpose of these apps? To get uninformed liquidity into the market to benefit investment banks?
Is that the purpose of these apps? To get uninformed liquidity into the market to benefit investment banks?
As a general rule, we should always keep in mind that startups are founded to make money for the startup's founders. If other stakeholders such as customers, employees, investors, and so on are able to make money off of it, that's a plus. But we shouldn't expect founders to do anything other than act in a manner facilitating the generation of wealth for themselves.
RH is no different than any other startup in this regard. They aren't going to open themselves up to the risk of not following a margin agreement in the name of "the revolution!" They are in the business of making money, even if that means users lose their shirts.
And if people have been trading GME, AMC, et al on margin? (I mean, unless the government steps in or something?) I'm afraid a lot of them are going to be losing their shirts in the coming weeks.
RH is no different than any other startup in this regard. They aren't going to open themselves up to the risk of not following a margin agreement in the name of "the revolution!" They are in the business of making money, even if that means users lose their shirts.
And if people have been trading GME, AMC, et al on margin? (I mean, unless the government steps in or something?) I'm afraid a lot of them are going to be losing their shirts in the coming weeks.
It's not worth it
Well, there you go. You determined it wasn't worth it, so don't be surprised if there's an outcome you don't like.
I read terms quite often and have flatly refused to use services because of them, or in some cases told them in writing I don't accept a problematic clause (for whatever that's worth). It's a real pain and I typically have very little bargaining power.
Maybe if the world wasn't full of people who simply don't care we could effect some change here.
Well, there you go. You determined it wasn't worth it, so don't be surprised if there's an outcome you don't like.
I read terms quite often and have flatly refused to use services because of them, or in some cases told them in writing I don't accept a problematic clause (for whatever that's worth). It's a real pain and I typically have very little bargaining power.
Maybe if the world wasn't full of people who simply don't care we could effect some change here.
Thank you for being honest about it. As far as I understand, not reading the terms of a contract you agree to is not a defense, assuming the TOS are presented clearly and you acknowledge your acceptance with some unambiguous action. You don't have to read the terms, but you are bound by them anyway if you agree to them.
> When I bought my house, the attorneys sat down with me and had me read through and explained to me every single term of the purchase agreement and my mortgage
Really? Because that would make closing take forever. I mean, even after the purchase agreement and mortgage terms, there are a ton more documents to go through.
Really? Because that would make closing take forever. I mean, even after the purchase agreement and mortgage terms, there are a ton more documents to go through.
They attorneys have done the same with me through all three of my closings, and yes, they do take forever, precisely for that reason.
They take forever, but if I had to have been explained each line for each form, it would have taken a week.
Instead, our attorney got a copy of all forms the day before closing for him to review. Then he could review them quickly, looking for anything unusual. Then, during closing, we didn't have any questions, so this made an already long process a bit more efficient (still took over an hour).
Instead, our attorney got a copy of all forms the day before closing for him to review. Then he could review them quickly, looking for anything unusual. Then, during closing, we didn't have any questions, so this made an already long process a bit more efficient (still took over an hour).
> practically no one reads these agreements, and even fewer understand them
Argumentum ad populum. Not very convincing.
There is a reason the finance industry is so heavily regulated, and, at least in terms of intent, it is not to allow the elites to hoard all of the capital (although that may be a side effect).
Argumentum ad populum. Not very convincing.
There is a reason the finance industry is so heavily regulated, and, at least in terms of intent, it is not to allow the elites to hoard all of the capital (although that may be a side effect).
This isn't some little detail hidden in the TOS. This is what a margin account is. If you do not have your required maintenance margin (and that may be a complicated calculation), the broker can and will sell things for you to protect themselves.
This is, frankly, common sense. If you deposit $100, buy $300 of stock, and that stock falls below $200, your account's equity will go below zero and your broker is in trouble. If this happens on a large enough scale, the market will be in trouble. The broker will try to protect itself by liquidating your position before this happens, and they may even be required to by market rules.
(The actual calculation of required margin is quite complex for good reason.)
This is, frankly, common sense. If you deposit $100, buy $300 of stock, and that stock falls below $200, your account's equity will go below zero and your broker is in trouble. If this happens on a large enough scale, the market will be in trouble. The broker will try to protect itself by liquidating your position before this happens, and they may even be required to by market rules.
(The actual calculation of required margin is quite complex for good reason.)
Are all of the forced GME sales in the situation you describe? (Not a rhetorical question, I'm actually wondering if it's the case.)
Let's say your scenario is a little different: you deposit $100, buy $300 of stock, and the stock goes up to $600, then drops to $400. Then the broker sells your shares at $400 to "protect themselves". If that's what's going on here, that seems wrong. On the other hand, if it's as you describe that seems reasonable.
Let's say your scenario is a little different: you deposit $100, buy $300 of stock, and the stock goes up to $600, then drops to $400. Then the broker sells your shares at $400 to "protect themselves". If that's what's going on here, that seems wrong. On the other hand, if it's as you describe that seems reasonable.
I don’t know what Robinhood is actually doing, but I think your scenario isn’t necessarily problematic.
Suppose I deposit $100 and Butt $300 of stock. Now I have -$200 of cash. (The UI doesn’t necessarily show it like that, but that’s what’s in my account.). If the stock goes up to $600, I still have -$200 of cash. If the stock drops to $400, I still have -$200 of cash. If the volatility estimates change such that a rapid crash to $199 seems likely, the broker should margin call me, as a crash to $199 would send my account value negative.
Contrast this with non-margin trading. If I deposit $400 and buy $300 of stock, I have $100 of cash, and the broker doesn’t particularly care what happens to the stock price, since they are taking no risk. Their clearer may impose requirements on them, but that’s a somewhat separate issue.
Suppose I deposit $100 and Butt $300 of stock. Now I have -$200 of cash. (The UI doesn’t necessarily show it like that, but that’s what’s in my account.). If the stock goes up to $600, I still have -$200 of cash. If the stock drops to $400, I still have -$200 of cash. If the volatility estimates change such that a rapid crash to $199 seems likely, the broker should margin call me, as a crash to $199 would send my account value negative.
Contrast this with non-margin trading. If I deposit $400 and buy $300 of stock, I have $100 of cash, and the broker doesn’t particularly care what happens to the stock price, since they are taking no risk. Their clearer may impose requirements on them, but that’s a somewhat separate issue.
>Difference is, I didn't run to Reddit to display my ignorance to the world.
Erm isn't the point of communities like Reddit to discuss? The implication that there's a certain class of people who are suited to stocks and a certain class that isn't is exactly why people are so impassioned about this right now.
Erm isn't the point of communities like Reddit to discuss? The implication that there's a certain class of people who are suited to stocks and a certain class that isn't is exactly why people are so impassioned about this right now.
[deleted]
The difference here is they prevented people from starting new positions while still allowing closing them .. effectivly being the cause of the drop.
> cause of the drop
Not sure I understand this perspective. GME was a balloon floating around in a needle shop.
Not sure I understand this perspective. GME was a balloon floating around in a needle shop.
You don't understand how disallowing people to buy into a stock causes the price to drop, or you disagree that disallowing the purchase of a stock causes the price to drop? From my perspective it seems rather straight forward that if you artificially limit demand and not supply, you'll almost always see price drop.
It's going to pop no matter what actions RH (or anyone else takes). Who cares which needle pops it?
No, it's not going to pop no matter what, that's not how the market works - and presumably most everybody cares how it happens. Most people aren't big on artificial market manipulation.
This whole kerfuffle is a blatant publically advertised mass market manipulation effort. The reddit posts are still visible.
No one believed GME was worth over $40 a week ago, but now suddenly they pretend they honestly believe it's worth $300+? There's no book depth beyond the short squeeze.
If Valve made a full buyout offer at $100/share, management wouldn't take it?
No one believed GME was worth over $40 a week ago, but now suddenly they pretend they honestly believe it's worth $300+? There's no book depth beyond the short squeeze.
If Valve made a full buyout offer at $100/share, management wouldn't take it?
if buying stock as an individual based on the recommendation of other, non-insider individuals, is artificial market manipulation to you - exactly what is "regular" trading to you?
(This is just a structured analysis on what is going on, not financial advice). Alright boys and girls, sit down while I tell you what on earth is happening.
It's a once in a lifetime historical event.... It's insane. At least 1 hedge fund has gone bankrupt, thanks to a group of average joes on Reddit. By the end of the week, there will be a line of bankruptcies.
So let's start at the beginning:
First of all, stocks are pretty simple, when they go up in value, you make money, because it's worth more than you bought it for. Stock goes up- you make money. Stock goes down- you lose money. Short selling, is the opposite. Short selling makes money when the stock goes down in value. Short sellers borrow someone else's shares, and sell them, with the goal of buying them back later, and pocketing the difference as profit. So, Tim borrows Bob's shares in GME, and sell them for $10, he pays Bob $1 to do this, and promises to give all of Bob's shares back. Then, if the stock goes down to $5, Tim buys the shares back at a cheaper price. So Tim's profit is $10-$5-$1 = $4 profit. So that's where we start. A hedge fund tried to force down the price of Gamestop, and short the stock. It usually works fine. It's been done thousands of times, with no problems. So they shorted Gamestop (GME) from $20, to $10, to $4. Their greed kept compounding. They kept doing it again, and again, for months. Making billions of dollars, and almost bankrupting this company.
Enter Wallstreetbets. A trading/investing subreddit. Someone noted that these hedgefunds shorted 140% of all shares available. These hedgefunds were so damn greedy, they borrowed more shares than actually existed. That's how arrogant and dumb they were. They borrowed 140% of all the available shares. It was literally impossible for them to buy them all back. So someone on Wallstreetbets realized this, and told everyone. Now, the rule with short selling is that ALL those shares that they borrow, MUST be paid back. And so we reach our main story of how the hedgefund's greed ruined them.
Realizing that these hedgefunds shorted GME by a ridiculous amount, these Redditors (a bunch of regular Joes like you and me), bought every share they could get their hands on. Driving the price up as much as possible. Why? Because these hedgefunds eventually (within a few months) HAD to buy all those shares back, at whatever price they could get them. They didn't have a choice. So if they borrow a million shares, and sold them for $10. They made $10 million in immediate profit. But eventually, they HAD TO buy those million shares back. They didn't have a choice. That was the deal they made when they borrowed the shares. So these Redditors bought the shares, driving the price up, forcing these hedgefunds to buy back at crazy prices. Yeah, the hedgefund sold and made $10 million, but now they had to spend $147.98 million getting those same shares back. A HUGE FUCKING LOSS of $137.98 million.
So eventually, the due date for when these hedgefunds need to return the borrowed shares comes closer. And what do they do? They double down. They short MORE. Because they're sure that they can manipulate the stock enough to get it to crash, thereby saving themselves. Fast Forward a few days, every attempt to crash the stock fails. Oh it works temporarily, but not enough for them to save themselves. Everyone knows what they're trying to do, so people keep buying the stock. And with every additional bit of media attention, more and more people are buying the stock, destroying the greedy hedgefund in the process. Eventually Melvin Capital- a multi billion dollar hedge fund, needs a bailout, because it has lost so much money shorting GME. They borrowed billions off another hedgefund. That was yesterday. The stock price was $76.
Today, the stock ended up at $147.98 for every share. Up from $4. These hedgefunds are STILL shorting the stock, at 130% of available shares. That's how fucking greedy these guys are. All those millions of shares STILL have to be paid back. And that's where our story picks up. Hedgefunds are crying on CNBC, on CNN, on FoxNews. On literally every every platform they can get their hands on. They want the government to stop trading. They want this reddit forum investigated and banned. They're screaming ''market manipulation'', when in reality these hedgefunds were the ones manipulating the stock, but they got caught, and are now trying to take their ball and go home.
Now, if you haven't realized it yet: With a normal investment, when buying stocks normally, the maximum you can lose is your original investment. When short selling, your losses are theoretically infinite. Because you HAVE to buy back at whatever price is available. So while these hedgefunds are on every news channel, every investing segment screaming about Reddit and Wallstreetbets, they inevitably draw attention to themselves, and what's going on.
Enter the ''whales''- individual investors who can make a splash and impact the stock. Millionaires and billionaires that have a bone to pick with hedgefunds and short sellers. Elon Musk famously despises short sellers, because they tried to cripple Tesla so often. With a single tweet, Elon sent the share price skyrocketing from $147.98 to $230. And along with Elon Musk, a huge number of wealthy ''whales'' have started to jump in. Buying up HUGE amounts of stock, at crazy prices. But these investors don't care. They don't care how expensive they buy the stock for. Because they KNOW these hedgefunds MUST buy the shares back. For many of them, they don't actually care if they lose money. They just want to watch these hedgefunds burn.
So what happens next? No one actually knows. The hedgefund Melvin Capital is definitely bankrupt. They've already gotten one bailout. They probably won't get a second. As time goes on, and as hedgefunds fight to buy back as many shares as possible (driving up the prices more on each other), their bill will eventually be due, and they will have to return the borrowed shares. More will likely be bankrupt. But it's not guaranteed. Does this mean you should buy GME? I'm not gonna answer this question, because you obviously shouldn't be listening to strangers on the internet when it comes to your money.
There's a lot of upside to buying GME, but there's also a crazy amount of downside. Tomorrow the share could go back to $4 and you could lose everything. These shares are obscenely overvalued, and the only reason they keep going up is that people are gambling that the hedgefunds will buy them for a higher price (they likely will, but up until what point?).
It's a game of chicken.
When the game ends, the house of cards will crumble, and people will lose millions. This is not financial advice. This is just me trying to explain what the hell is going on right now. We're witnessing a once in a lifetime event that will undoubtedly change the markets, and how hedgefunds and other big businesses operate.
The only thing I can recommend is that you grab a beer, and keep an eye on GME and enjoy the fireworks.
It's a once in a lifetime historical event.... It's insane. At least 1 hedge fund has gone bankrupt, thanks to a group of average joes on Reddit. By the end of the week, there will be a line of bankruptcies.
So let's start at the beginning:
First of all, stocks are pretty simple, when they go up in value, you make money, because it's worth more than you bought it for. Stock goes up- you make money. Stock goes down- you lose money. Short selling, is the opposite. Short selling makes money when the stock goes down in value. Short sellers borrow someone else's shares, and sell them, with the goal of buying them back later, and pocketing the difference as profit. So, Tim borrows Bob's shares in GME, and sell them for $10, he pays Bob $1 to do this, and promises to give all of Bob's shares back. Then, if the stock goes down to $5, Tim buys the shares back at a cheaper price. So Tim's profit is $10-$5-$1 = $4 profit. So that's where we start. A hedge fund tried to force down the price of Gamestop, and short the stock. It usually works fine. It's been done thousands of times, with no problems. So they shorted Gamestop (GME) from $20, to $10, to $4. Their greed kept compounding. They kept doing it again, and again, for months. Making billions of dollars, and almost bankrupting this company.
Enter Wallstreetbets. A trading/investing subreddit. Someone noted that these hedgefunds shorted 140% of all shares available. These hedgefunds were so damn greedy, they borrowed more shares than actually existed. That's how arrogant and dumb they were. They borrowed 140% of all the available shares. It was literally impossible for them to buy them all back. So someone on Wallstreetbets realized this, and told everyone. Now, the rule with short selling is that ALL those shares that they borrow, MUST be paid back. And so we reach our main story of how the hedgefund's greed ruined them.
Realizing that these hedgefunds shorted GME by a ridiculous amount, these Redditors (a bunch of regular Joes like you and me), bought every share they could get their hands on. Driving the price up as much as possible. Why? Because these hedgefunds eventually (within a few months) HAD to buy all those shares back, at whatever price they could get them. They didn't have a choice. So if they borrow a million shares, and sold them for $10. They made $10 million in immediate profit. But eventually, they HAD TO buy those million shares back. They didn't have a choice. That was the deal they made when they borrowed the shares. So these Redditors bought the shares, driving the price up, forcing these hedgefunds to buy back at crazy prices. Yeah, the hedgefund sold and made $10 million, but now they had to spend $147.98 million getting those same shares back. A HUGE FUCKING LOSS of $137.98 million.
So eventually, the due date for when these hedgefunds need to return the borrowed shares comes closer. And what do they do? They double down. They short MORE. Because they're sure that they can manipulate the stock enough to get it to crash, thereby saving themselves. Fast Forward a few days, every attempt to crash the stock fails. Oh it works temporarily, but not enough for them to save themselves. Everyone knows what they're trying to do, so people keep buying the stock. And with every additional bit of media attention, more and more people are buying the stock, destroying the greedy hedgefund in the process. Eventually Melvin Capital- a multi billion dollar hedge fund, needs a bailout, because it has lost so much money shorting GME. They borrowed billions off another hedgefund. That was yesterday. The stock price was $76.
Today, the stock ended up at $147.98 for every share. Up from $4. These hedgefunds are STILL shorting the stock, at 130% of available shares. That's how fucking greedy these guys are. All those millions of shares STILL have to be paid back. And that's where our story picks up. Hedgefunds are crying on CNBC, on CNN, on FoxNews. On literally every every platform they can get their hands on. They want the government to stop trading. They want this reddit forum investigated and banned. They're screaming ''market manipulation'', when in reality these hedgefunds were the ones manipulating the stock, but they got caught, and are now trying to take their ball and go home.
Now, if you haven't realized it yet: With a normal investment, when buying stocks normally, the maximum you can lose is your original investment. When short selling, your losses are theoretically infinite. Because you HAVE to buy back at whatever price is available. So while these hedgefunds are on every news channel, every investing segment screaming about Reddit and Wallstreetbets, they inevitably draw attention to themselves, and what's going on.
Enter the ''whales''- individual investors who can make a splash and impact the stock. Millionaires and billionaires that have a bone to pick with hedgefunds and short sellers. Elon Musk famously despises short sellers, because they tried to cripple Tesla so often. With a single tweet, Elon sent the share price skyrocketing from $147.98 to $230. And along with Elon Musk, a huge number of wealthy ''whales'' have started to jump in. Buying up HUGE amounts of stock, at crazy prices. But these investors don't care. They don't care how expensive they buy the stock for. Because they KNOW these hedgefunds MUST buy the shares back. For many of them, they don't actually care if they lose money. They just want to watch these hedgefunds burn.
So what happens next? No one actually knows. The hedgefund Melvin Capital is definitely bankrupt. They've already gotten one bailout. They probably won't get a second. As time goes on, and as hedgefunds fight to buy back as many shares as possible (driving up the prices more on each other), their bill will eventually be due, and they will have to return the borrowed shares. More will likely be bankrupt. But it's not guaranteed. Does this mean you should buy GME? I'm not gonna answer this question, because you obviously shouldn't be listening to strangers on the internet when it comes to your money.
There's a lot of upside to buying GME, but there's also a crazy amount of downside. Tomorrow the share could go back to $4 and you could lose everything. These shares are obscenely overvalued, and the only reason they keep going up is that people are gambling that the hedgefunds will buy them for a higher price (they likely will, but up until what point?).
It's a game of chicken.
When the game ends, the house of cards will crumble, and people will lose millions. This is not financial advice. This is just me trying to explain what the hell is going on right now. We're witnessing a once in a lifetime event that will undoubtedly change the markets, and how hedgefunds and other big businesses operate.
The only thing I can recommend is that you grab a beer, and keep an eye on GME and enjoy the fireworks.
I would think thats the obvious thing to happen when supply outweigh demand
Yeah, but the wishful thinking in the other threads I've seen was that by the time it popped, all (or most) of the holders would be the short sellers, not the wsb people who pumped it up. In that sense it would be "fine".
You think a lack of volume from retail traders on Robinhood is the cause of the drop? To put it mildly, that's a little naive.
> You think a lack of volume from retail traders on Robinhood is the cause of the drop? To put it mildly, that's a little naive.
You think that the presence of volume from retail traders of Robinhood wasn't the cause of the increase to begin with? To put it mildly, that's delusional.
You think that the presence of volume from retail traders of Robinhood wasn't the cause of the increase to begin with? To put it mildly, that's delusional.
I’m pretty sure all of the GME bubble is driven by retail, and since most retails prevented new buy orders then yeah, it affected the price action. Remember, GME is small.
Please feel free to explain what's so naive about that.
Are you sure you didn't just have a margin call up to the margin maintenance rather than get everything on margin liquidated immediately like here?
You know, you might be right. Last time I had a margin call was a long time ago. Then again, I don't recall ever trading a stock on margin that swings 100% either direction in one day.
Speaking of margin calls, a brokerage usually gives you the courtesy call saying, "either you liquidate (or give us more money to cover), or we'll do it for you", but on GME I could see skipping that call given the volatility.
Speaking of margin calls, a brokerage usually gives you the courtesy call saying, "either you liquidate (or give us more money to cover), or we'll do it for you", but on GME I could see skipping that call given the volatility.
Are you sure this was a margin account, not sure what info in the tweet supports that.
I think a lot of retail traders didn't read the ToS but also with this situation the notice about automatic liquidating doesn't reference margin.
I though they would generally give you the opportunity to provide more collateral for your margin though. Or am I wrong on that?
Used to be you had three days. I would fault no brokerage for not waiting three days for a Robinhood account holder to cough up the dough on a GME margin call. Hell, wait three hours and RH might have to come back asking for more.
Market manipulation is still market manipulation whether you write them in tiny font letters or buried under a pile of legal verbosity.
Spirit of the law is always considered in situations like this when it isn't explicitly made clear (like on the splash screen) will always fall under scrutiny and rejected at the jury level.
You can sign away your life but it doesn't make it legal because there are fundamental laws that pertain to human rights in the West as such are security laws.
RH broke the trust and if what we are hearing is true, they may have colluded with the conflict of interest parties that took massive short positions before pressuring RH to halt trades may lead to actual jail times for the people involved.
In the past the Obama administration has been soft on wallstreet but the Biden administration has signaled they are willing to play big government. Especially as politicized as the whole GME/WSB has gotten, there's zero chance they will pass up on the opportunity to win the popular support.
Spirit of the law is always considered in situations like this when it isn't explicitly made clear (like on the splash screen) will always fall under scrutiny and rejected at the jury level.
You can sign away your life but it doesn't make it legal because there are fundamental laws that pertain to human rights in the West as such are security laws.
RH broke the trust and if what we are hearing is true, they may have colluded with the conflict of interest parties that took massive short positions before pressuring RH to halt trades may lead to actual jail times for the people involved.
In the past the Obama administration has been soft on wallstreet but the Biden administration has signaled they are willing to play big government. Especially as politicized as the whole GME/WSB has gotten, there's zero chance they will pass up on the opportunity to win the popular support.
This is ONLY if you enable margin trading via Robinhood Gold - they increased their margin requirements recently on GME and this will not happen to you if you are trading on cash.
It's not just Robinhood Gold.
All accounts are "Robinhood Instant" by default. You need to permanently opt-out of Robinhood Instant (or wait for deposits/trades to settle) to opt-out.
Edit: to add a link. This info is fairly well buried: https://robinhood.com/us/en/support/articles/robinhood-accou...
All accounts are "Robinhood Instant" by default. You need to permanently opt-out of Robinhood Instant (or wait for deposits/trades to settle) to opt-out.
Edit: to add a link. This info is fairly well buried: https://robinhood.com/us/en/support/articles/robinhood-accou...
Yes, but "Robinhood Instant" is limited to a subset of the funds you are depositing. It is set up as a margin account to allow them to trade on your behalf before the money hits your Robinhood account. But the money will be hitting, so you will have cash to cover the trade. It's not the same as actual margin trading (where, for example, in this case, the user did not have cash to cover and so his position was liquidated by the broker.)
This feels like RH is going to go under if they don’t make this move? Are they holding a lot of risk by not doing this or something?
And what repercussions would they face, surely they’ve flagged that risk and are doing it anyway.
And what repercussions would they face, surely they’ve flagged that risk and are doing it anyway.
> And what repercussions would they face
Nothing worth worrying about. Every single case in the financial sector over the past two decades has resulted in fines that are a fraction of the profits. I mean, you had banks laundering money for cartels, Malasians were looted, etc etc... every single time they fine the culprits a tiny fraction of their profits.
The US has made criminal activity profitable, even if you get caught.
So Citadel and RH probably just made the smart move. Screw the rules, because the punishment for breaking them will be more than worth it.
Nothing worth worrying about. Every single case in the financial sector over the past two decades has resulted in fines that are a fraction of the profits. I mean, you had banks laundering money for cartels, Malasians were looted, etc etc... every single time they fine the culprits a tiny fraction of their profits.
The US has made criminal activity profitable, even if you get caught.
So Citadel and RH probably just made the smart move. Screw the rules, because the punishment for breaking them will be more than worth it.
100% agree.
Pretty sad to see most of HN willfully ignoring this fact and jumping to the defense of Hedge Funds and the billionaire class.
Pretty sad to see most of HN willfully ignoring this fact and jumping to the defense of Hedge Funds and the billionaire class.
FWIW, I think there are no conspiracies here on the side of Robinhood, and the attacks by the revolutionary mob are misguided.
Having said that, there is no question that banks ruined the economy during the GFC, and didn't pay enough of a price, and hedge fund managers often make a killing, while paying very little in taxes, and HFT make a killing without providing any social value.
But the answer to that is not, I'm afraid, hyping some gaming stock and trying to squeeze a few shorts.
The answer is political action - voting, pushing for proper regulation. There are lots of proposals out there: stringent capital requirements for banks; closing the "carried interest" loophole; changing the structure of markets (eg auctions every minute instead of continuous markets).
Having said that, there is no question that banks ruined the economy during the GFC, and didn't pay enough of a price, and hedge fund managers often make a killing, while paying very little in taxes, and HFT make a killing without providing any social value.
But the answer to that is not, I'm afraid, hyping some gaming stock and trying to squeeze a few shorts.
The answer is political action - voting, pushing for proper regulation. There are lots of proposals out there: stringent capital requirements for banks; closing the "carried interest" loophole; changing the structure of markets (eg auctions every minute instead of continuous markets).
That's an inaccurate characterization, as anyone reading these threads can easily see.
[deleted]
Doing this will already probably kill them, so they must be afraid of worse.
Who would remmain using them after this?
> Who would remmain using them after this?
Most users who don’t know anything about WSB probably
Most users who don’t know anything about WSB probably
Over half of Robinhood account holders had a position in GME as of yesterday, you can’t tell me those people had done that without knowing about WSB.
I will bet you anything this will actually help them overall.
Some people have speculated (big sign reading SPECULATION SPECULATION NO PROOF above this post) it might make sense if RH was trading for itself and taking the other side of its client's trades, like Goldman was accused of doing in '08. In which case they are in big hot water.
ed. yes, on the chance that this wasn't just a margin call
ed. yes, on the chance that this wasn't just a margin call
This is blatant anti-competitive behavior on the part of Robinhood and Citadel.
Ultimately, they know that their SEC Fine will be less than the $50B+ in losses they face from their irresponsible naked short selling.
Did we learn nothing in 2008? Are we just going to continue to allow wall street to get away with fleecing everyone else in America / the world?
Ultimately, they know that their SEC Fine will be less than the $50B+ in losses they face from their irresponsible naked short selling.
Did we learn nothing in 2008? Are we just going to continue to allow wall street to get away with fleecing everyone else in America / the world?
For anyone saying, "Most likely trading on margin"
Remember:
This morning Robinhood conspired with Citadel to halt trading amid a short ladder sell to drive the price lower, allowing shorts to cover their losses with no competition.
This is blatant market manipulation and anti competitive behavior, and must be stopped.
Why does everyone insist on protecting billionaires who insist on playing the game with a different set of rules than the rest of us?
Remember:
This morning Robinhood conspired with Citadel to halt trading amid a short ladder sell to drive the price lower, allowing shorts to cover their losses with no competition.
This is blatant market manipulation and anti competitive behavior, and must be stopped.
Why does everyone insist on protecting billionaires who insist on playing the game with a different set of rules than the rest of us?
Do you have any evidence of this or are you just spamming every thread with the same accusations?
captainarab(1)
also, you're an obvious hedge fund industry shill, see your comment history
Hey, I'm afraid you broke the site guidelines badly and repeatedly. We ban accounts that do that, regardless of how wrong other commenters are or you feel they are.
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and sticking to the rules when posting here, we'd be grateful.
If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and sticking to the rules when posting here, we'd be grateful.
OK, but they are almost certainly also trading on margin right?
You trade with robinhood's money, then they can decide not to lend it to you anymore for nearly any reason they want. ¯\_(ツ)_/¯
You trade with robinhood's money, then they can decide not to lend it to you anymore for nearly any reason they want. ¯\_(ツ)_/¯
> You trade with robinhood's money, then they can decide not to lend it to you anymore for nearly any reason they want.
Can they? I thought margin calls were you personal debt. It's like the bank deciding to sell your house that you have mortgage on because they think the market is too volatile. Makes little senes.
Can they? I thought margin calls were you personal debt. It's like the bank deciding to sell your house that you have mortgage on because they think the market is too volatile. Makes little senes.
> One of the most important things to understand about margin calls is that your brokerage firm has discretion as to when you are required to increase the equity in your margin account. Some firms will attempt to contact you to tell you additional equity is required, but they're not obligated to do so. Whether or not your firm has contacted you, they can take immediate action to increase the equity in your account if they decide the equity is too low and is not in line with the risk of your account. This means they can immediately sell out whichever securities they choose, regardless of the financial and tax obligations for you.
https://www.fidelity.com/learning-center/trading-investing/t...
https://www.fidelity.com/learning-center/trading-investing/t...
Sure, no argument from me on here.
You have to admit, though - that is disingenuous. Those plays were profitable, no need to call them (unless there has been irresponsible behavior on the behalf of the broker)
You have to admit, though - that is disingenuous. Those plays were profitable, no need to call them (unless there has been irresponsible behavior on the behalf of the broker)
That is entirely up to the broker. They make no guarantees to you that they'll underwrite your risk taking with no limits. If you don't want this to happen, go to a reputable broker and make sure you are not trading on margin. This is not rocket science, but does require a basic level of understanding.
I agree that this is the technically correct definition of how margin is typically utilized, and that investors should be prepared for this in the case of high volatility.
The fact does remain, though, that the way the data is presenting itself seems to indicate that there was disingenuous behavior on the behalf of market makers and a number of hedge funds. To be seen, I guess.
The fact does remain, though, that the way the data is presenting itself seems to indicate that there was disingenuous behavior on the behalf of market makers and a number of hedge funds. To be seen, I guess.
I mean, assuming manipulative self-interested disingenuous behavior on the part of market makers and hedge funds on a daily basis is usually a safe bet. Also on the part of nearly anyone interacting with the stock market who has the power to do it. It's kind of the whole game. True, that may not be how they teach it to you in high school.
Citation?
It's in the logs, go see for yourself?
GME purchases blocked this morning on apps where Citadel is the clearing house.
SOMEONE proceeds to ladder short sell GME to cause a massive price dump.
Users are margin called from previously profitable positions (without being able to provide buying pressure needed to fight against a ladder short sell)
Shorts are able to unethically cover your position.
Read into this... it's all over the news and verifiable with documentation from various regulatory agencies.
SOMEONE proceeds to ladder short sell GME to cause a massive price dump.
Users are margin called from previously profitable positions (without being able to provide buying pressure needed to fight against a ladder short sell)
Shorts are able to unethically cover your position.
Read into this... it's all over the news and verifiable with documentation from various regulatory agencies.
Citadel is not a clearing house...
It is in their T&Cs that they can do this if your account is trading on margin. If not, then it feels like there's a potential for a class action lawsuit.
This is blatant anti-competitive behavior on the part of Robinhood and Citadel.
As i say elsewhere - this margin call was FORCED by RH because they blocked users ability to buy shares as Citadel + others were ladder short selling to artificially lower the stock price of GME, forcing the margin call.
This is horrific, criminal, and should be prosecuted.
Ultimately, they know that their SEC Fine will be less than the $50B+ in losses they face from their irresponsible naked short selling.
Did we learn nothing in 2008? Are we just going to continue to allow wall street to get away with fleecing everyone else in America / the world?
As i say elsewhere - this margin call was FORCED by RH because they blocked users ability to buy shares as Citadel + others were ladder short selling to artificially lower the stock price of GME, forcing the margin call.
This is horrific, criminal, and should be prosecuted.
Ultimately, they know that their SEC Fine will be less than the $50B+ in losses they face from their irresponsible naked short selling.
Did we learn nothing in 2008? Are we just going to continue to allow wall street to get away with fleecing everyone else in America / the world?
> Did we learn nothing in 2008?
Yep, that we are going to have to pay their losses.
Yep, that we are going to have to pay their losses.
Something else we learned from 2008 is that the government and taxpayers made money on the bailout because it was paid back with interest, see sources like: https://projects.propublica.org/bailout/
A stock market is a high stakes gambling system. The smart and the powerful win. You'll never limit winners to just the smart. If you someone did for a period of time, those smart people would become powerful and decide to limit other smart people.
But so what if you did allow just smart people win? Most people aren't that smart and you'd wind-up with a fleecing. So making this game fair isn't particularly in the average not-genius-with-nerves-of-steel person's interests. It's more in the average person's interests to have an index-traded-funds go up a reliable amount each year.
Fleecing Reddit geeks isn't fleecing everyone in America.
Edit: My point is - sure it might be against the rules but this affair is between smart speculators and big speculators. Saying it's crime against everyone is ridiculous.
But so what if you did allow just smart people win? Most people aren't that smart and you'd wind-up with a fleecing. So making this game fair isn't particularly in the average not-genius-with-nerves-of-steel person's interests. It's more in the average person's interests to have an index-traded-funds go up a reliable amount each year.
Fleecing Reddit geeks isn't fleecing everyone in America.
Edit: My point is - sure it might be against the rules but this affair is between smart speculators and big speculators. Saying it's crime against everyone is ridiculous.
I disagree with you.
"It's more in the average person's interests to have an index-traded-funds go up a reliable amount each year."
You are saying that people are too dumb to decide what to do with their own money, and that's not your call.
The reason this is a crime against everyone is because there's allegedly a "free market", but moments like this show that the emperor has no clothes and that in fact that's not the case.
"It's more in the average person's interests to have an index-traded-funds go up a reliable amount each year."
You are saying that people are too dumb to decide what to do with their own money, and that's not your call.
The reason this is a crime against everyone is because there's allegedly a "free market", but moments like this show that the emperor has no clothes and that in fact that's not the case.
> Are we just going to continue to allow wall street to get away with fleecing everyone else in America / the world?
Well yeah. Why would you expect anything else? And if anyone complains about it, the complaints will get scrubbed off the internet. And if you go to private messengers to complain, your session keys will get escrowed because "terrorism" or "misinformation" or something and you'll be banned. Keep in mind that the WallStreetBets Discord server was banned for "hate speech" right in the middle of all the recent drama. Does anyone actually believe that was the real reason?
It's because of shenanigans like this that I'm categorically against any sort of control whatsoever over flows of information.
Well yeah. Why would you expect anything else? And if anyone complains about it, the complaints will get scrubbed off the internet. And if you go to private messengers to complain, your session keys will get escrowed because "terrorism" or "misinformation" or something and you'll be banned. Keep in mind that the WallStreetBets Discord server was banned for "hate speech" right in the middle of all the recent drama. Does anyone actually believe that was the real reason?
It's because of shenanigans like this that I'm categorically against any sort of control whatsoever over flows of information.
It won't be long before the Biden Administration is declaring members from WallStreetBets to be domestic terrorists acting in concert to attack the US financial system (it'll be part of the broader War on Domestic Terrorism program that they've begun). The powers that be in DC and on Wall Street will never allow this kind of action to go unchecked indefinitely.
They'll probably make it a crime to organize large groups of individuals to herd buy/short a stock.
They'll probably make it a crime to organize large groups of individuals to herd buy/short a stock.
> They'll probably make it a crime to organize large groups of individuals to herd buy/short a stock.
You'd better believe that something will be done to ensure that the rabble can't insult their betters like this ever again.
You'd better believe that something will be done to ensure that the rabble can't insult their betters like this ever again.
It is called a margin call. Nothing specific to Robinhood or to GME.
There is a regulatory framework, enforced by the SEC, that prevents firms from collaborating on trades in attempts to manipulate stock prices.
When an army of retail investors openly collaborate on messaging platforms to manipulate a stock's price, essentially a crowd-sourced "pump and dump," it falls under SEC enforcement. A retail investor can still be prosecuted for violating SEC regulations, such as using insider information, when trading.
This is yet another example of unintended consequences with regards to social media and its power to concentrate misinformation and incite mob behavior. I'm sure the vast majority of the people on Robinhood trading up Gamestop (GME) have no idea of the potential legal harm they may be exposed to, not to mention financial harm, even though the T&C's they signed on opening their accounts (especially margin accounts) almost certainly spelled out those risks.
Robinhood business model is the canary in the coal mine.
When an army of retail investors openly collaborate on messaging platforms to manipulate a stock's price, essentially a crowd-sourced "pump and dump," it falls under SEC enforcement. A retail investor can still be prosecuted for violating SEC regulations, such as using insider information, when trading.
This is yet another example of unintended consequences with regards to social media and its power to concentrate misinformation and incite mob behavior. I'm sure the vast majority of the people on Robinhood trading up Gamestop (GME) have no idea of the potential legal harm they may be exposed to, not to mention financial harm, even though the T&C's they signed on opening their accounts (especially margin accounts) almost certainly spelled out those risks.
Robinhood business model is the canary in the coal mine.
It's interesting because none of what you say is true. Hedge funds definitely collude and not behind closed doors, but also out in the open. Hedge funds announce their picks and go from hedge fund to hedge fund explaining the decisions they made and why they made the stock pick they did. Thousands of analysts in the stock market influence the stock price based on what they see as future investments to be made and are very vocal about it. Wall street bets is no different, reddit just seems to have beat them at their own game.
Read this. https://www.investor.gov/introduction-investing/investing-ba...
If you happen to work in the industry, you've probably had to certify compliance with SEC regulations to stay employed.
If you happen to work in the industry, you've probably had to certify compliance with SEC regulations to stay employed.
How are users on wsb openly discussing GME any different than huge banks with analysts saying “we rate GME as a strong buy”? Also, look at some of these hedge funds and their leverage—-a $3B fund with 10x leverage is going to be able to “manipulate” a stock price with big orders in almost any way they choose, and they do it in secret!
Now I don’t personally think GME is worth $300/share, but the people buying it think they will be able to sell it for more, and that is their right. They aren’t being “tricked” with deliberate misinformation, there are indeed a lot of shorts still out there that will eventually need to cover.
Now I don’t personally think GME is worth $300/share, but the people buying it think they will be able to sell it for more, and that is their right. They aren’t being “tricked” with deliberate misinformation, there are indeed a lot of shorts still out there that will eventually need to cover.
The combination of unique trading features offered as part of Robinhood's business model combined with the social media and relatively inexperienced investors acting in concert is prone to unintended consequences for both the business as well as the investor. That was my main point.
Here's a more comprehensive article on the subject.
https://www.cnbc.com/2021/01/28/gamestop-now-called-a-pump-a....
Most likely margin calls.
Yep. I’ll repeat what I said in another thread:
It’s really kind of ironic. People are knee-jerk blaming RH for closing margin positions because they didn’t fully understand how they work and the risks involved. Simultaneously, the same people are blaming RH for stepping in the way of what very certainly would have turned into a bad trade for a lot of people.
I don’t take RH’s side but it’s hard to see a winning play for them, it’s damned-if-you-do-damned-if-you-don’t.
It’s really kind of ironic. People are knee-jerk blaming RH for closing margin positions because they didn’t fully understand how they work and the risks involved. Simultaneously, the same people are blaming RH for stepping in the way of what very certainly would have turned into a bad trade for a lot of people.
I don’t take RH’s side but it’s hard to see a winning play for them, it’s damned-if-you-do-damned-if-you-don’t.
Nonsense. People are allowed to make bad trades every second of every day without protection from the platform; but now they develop a conscience and save people from themselves? If this is true, RH and other platforms pulling smiliar stunts should be sued out of existence. Might not be a bad idea to significantly increase taxation on derivatives trading too.
but now they develop a conscience and save people from themselves?
No, RH is saving their own asses from the poor financial decisions of their clients. They don't want to be on the hook when those accounts crater along with GME.
If this is true, RH and other platforms pulling smiliar stunts should be sued out of existence.
Take it up with the SEC. Oh, wait, the SEC is at least partially responsible for such rules being in place. It's a conspiracy, I tell ya!
No, RH is saving their own asses from the poor financial decisions of their clients. They don't want to be on the hook when those accounts crater along with GME.
If this is true, RH and other platforms pulling smiliar stunts should be sued out of existence.
Take it up with the SEC. Oh, wait, the SEC is at least partially responsible for such rules being in place. It's a conspiracy, I tell ya!
It’s easy to develop a conscience (or the functional equivalent) when you know regulators and press have you in their sights, so yes.
This is the same RH that extended Margin accounts to complete amateur investors with practically no vetting before-hand.
People that think they'll get rich off pocket-change investments, are not in a position to understand trading on margin, nor it's risks.
People that think they'll get rich off pocket-change investments, are not in a position to understand trading on margin, nor it's risks.
Agreed, almost certainly the case.
However, they should have inserted some notice in the UI that this was a result of a margin call that couldn't be met, given the level of knowledge of many of their users.
However, they should have inserted some notice in the UI that this was a result of a margin call that couldn't be met, given the level of knowledge of many of their users.
Could be, but the wording is super vague and obscure, though.
I agree. Wall street is desperate but they are not that desperate. Don’t do crazy things on margin.
captainarab(2)
Are these users trading on margin?
Yes, that's the big question here. If it's a margin trade, the broker is also a lender and has some discretion. If it's a cash trade, the broker has no risk and should not interfere. Does anyone know? This matters.
100% they're on margin. Otherwise the broker would have no right to make trades on their behalf.
In contrast, once you're on margin you give them the right to liquidate any part of your portfolio, at any time, to cover your margin balance.
What they can't do is liquidate beyond the margin balance. Once they've covered the balance they would have to stop closing out your positions.
In contrast, once you're on margin you give them the right to liquidate any part of your portfolio, at any time, to cover your margin balance.
What they can't do is liquidate beyond the margin balance. Once they've covered the balance they would have to stop closing out your positions.
It is really interesting reading all this.
Someone reuses passwords all over the internet, gets hacked and loses savings of a lifetime, HN says “OMG sooo stupid, you have to have minimal computer literacy in life” etc.
People get burnt on literally run-of-the-mill situations with trading and get angry with the world, and vent in a rigged system.
Of course there is space for outsiders to challenge the establishment, but assuming you grok finance because you installed Robinhood app is... naive!!!
Someone reuses passwords all over the internet, gets hacked and loses savings of a lifetime, HN says “OMG sooo stupid, you have to have minimal computer literacy in life” etc.
People get burnt on literally run-of-the-mill situations with trading and get angry with the world, and vent in a rigged system.
Of course there is space for outsiders to challenge the establishment, but assuming you grok finance because you installed Robinhood app is... naive!!!
The idiotic takes on this GME situation are beyond belief. What did people think was going to happen? GME goes to a million and everyone becomes a millionaire?
> What did people think was going to happen?
That brokerages would remain neutral and allow buy and sell orders of listed stocks like they do on other days. It's totally fair to acknowledge a sudden and unpublished rule change at the market open that foreseeably led to big price swings.
At a minimum, the SEC needs to step in and describe the exact circumstances when brokerages are allowed to unilaterally halt sales of securities. Markets where people don't understand the rules are worse than casinos.
That brokerages would remain neutral and allow buy and sell orders of listed stocks like they do on other days. It's totally fair to acknowledge a sudden and unpublished rule change at the market open that foreseeably led to big price swings.
At a minimum, the SEC needs to step in and describe the exact circumstances when brokerages are allowed to unilaterally halt sales of securities. Markets where people don't understand the rules are worse than casinos.
I don't know where you got this-- I saw a lot of people who were investing not even for a profit but simply 'to be a part of a movement'. Yes I'm sure there are plenty of naive fools in the mix, it still is the stock market after all. But the complaint here isn't that a bunch of misinformed people thought they'd be millionaires-- it's that a bunch of people made a conscious decision to invest and now brokerages are manipulating the markets. Ironically some of them justify it as being BECAUSE 'retail investors don't know what they're doing'. There's a lot of condescension towards retail traders, which is weird when 12 years ago the 'smart' institutional investors and hedge funds managed to crash the global economy. Looking at the whole picture, I don't see why it's so ridiculous that people get a piece of the action when the majority are acknowledging they might not make any money at all on this
Hey, it worked for Bitcoin. I never expected that. I thought Bitcoin was overpriced at US$20.
I think the Bitcoin example was exactly what the investors were thinking. A stock that magically always goes up and everybody gets rich.
With a real stock, somebody has to be left holding the bag at the end. (Probably with BitCoin as well, but that's a separate discussion.)
My understanding was that, with the short squeeze, for a certain number of those stocks the buyer would be the hedge funds. But it seems like at this point there must be way more stocks that the buyers have bought than the hedge funds have shorted, no?
With a real stock, somebody has to be left holding the bag at the end. (Probably with BitCoin as well, but that's a separate discussion.)
My understanding was that, with the short squeeze, for a certain number of those stocks the buyer would be the hedge funds. But it seems like at this point there must be way more stocks that the buyers have bought than the hedge funds have shorted, no?
I mean, that's exactly what's been happening with Tesla for months.
Do you believe that the Tesla buyers are trying to manipulate the market, and have no expectation that the company itself is valuable?
Do you believe that GameStop buyers think that the company is as doomed as the short-sellers did? The origin for this whole thing was a DD post that argued that it was a value stock that was over-shorted. And there were institutional investors and analysts like Michael Burry who also saw this happening.
I don't know if they thought it was doomed, but I highly doubt a single one of the buyers think it's worth $500+ a share. That's not why they're buying it.
Unless there's some other scheme that I'm unaware of, I think Tesla buyers do think it's worth that much, though they may be wrong about that.
Unless there's some other scheme that I'm unaware of, I think Tesla buyers do think it's worth that much, though they may be wrong about that.
I doubt that a majority of Tesla buyers realistically think the company is worth as much as most of the rest of the auto industry. In both cases you have overvalued meme stocks, it's just with GameStop there's an ideological/activism motivation.
Robinhood's behavior here is wicked and wrong. Yes, Robinhood's EULA technically allows them to do this wicked thing. The same EULA says that Robinhood can't be sued over it or anything else.
It's about time we talk about how it's not in the public's interest to allow companies to put arbitrarily user-hostile terms in their user agreements.
It's about time we talk about how it's not in the public's interest to allow companies to put arbitrarily user-hostile terms in their user agreements.
EULA allows them to close out a margin call, but not sell shares held for a client. Selling held shares without a standing order from the client is illegal, no matter what an EULA says.
The challenge in this case is that many people want this. They see it as only fair that the little guy should be allowed to invest on the same (sometimes user-hostile) terms as big institutions do. If you pass a new regulation saying that margin calls feel scummy so nobody can offer small investors a margin account, is that really a win for small investors?
Are you looking at a particular clause in the EULA? Where do we find the EULA?
Yes I can confirm. Robinhood sold 3 of my GME options as I was selling some of my other positions in order to exercise 3 GME $115C JAN29 for $150 and 6 ACM $7C for ~$5 for me at 2:13pm on 1/29/21.
This was when both stocks were near the lowest point during the day.
I had ~$110,000 total portfolio with many positions holding penny stocks strictly so I would be able to unload in the afternoon. I had been exercising AMC $7C all day and 2 of them were not sold automatically as I had sell limits on them.
Immediately after, both GME and AMC prices went up.
This is criminal on a level I have not seen before. An options contract gives me the right to buy the shares at a certain price and that right was taken away from me.
The total difference in the GME contracts from the point at which they sold mine and the average price all day was about $35k less. This. Is. Criminal and it must be shut down completely.
This was when both stocks were near the lowest point during the day.
I had ~$110,000 total portfolio with many positions holding penny stocks strictly so I would be able to unload in the afternoon. I had been exercising AMC $7C all day and 2 of them were not sold automatically as I had sell limits on them.
Immediately after, both GME and AMC prices went up.
This is criminal on a level I have not seen before. An options contract gives me the right to buy the shares at a certain price and that right was taken away from me.
The total difference in the GME contracts from the point at which they sold mine and the average price all day was about $35k less. This. Is. Criminal and it must be shut down completely.
This story has so many twists. I just bought some today to raise the middle finger after I noticed politicians batting for the hedge funds.
I was confident I would lose it all, but now I am actually thinking this will go to court and I could make some money.
How bad for RH is this exactly, if some people affected weren’t margin trading?
https://twitter.com/themaxburns/status/1354874931092348933
https://twitter.com/themaxburns/status/1354874931092348933
The automatic sell aside, isn't just restricting trades on the given stocks just bad enough already?
13G recently filed shows larger holders liquidating -- couple that to the crap financials in GME, then you can see the writing on the wall. However, insiders will be roasted by the DOJ.
Liquidate, restructure, hose commons.
It's GME -- it's a dead company trapped in yesteryear.
Liquidate, restructure, hose commons.
It's GME -- it's a dead company trapped in yesteryear.
For pointers to other vertices of this story graph, see https://news.ycombinator.com/item?id=25933543.
[deleted]
I've seen people say this is all part of a move by big finance to protect entrenched interests.
I'm cynical enough to entertain that possibility, but what really would be the leverage/pressure they could put on Robinhood to accede to this? Presumably these moves will hurt Robinhood with their users and possibly introduce legal liability.
I'm cynical enough to entertain that possibility, but what really would be the leverage/pressure they could put on Robinhood to accede to this? Presumably these moves will hurt Robinhood with their users and possibly introduce legal liability.
Robinhood's behavior shows why blockchain-based finance, with its censorship resistance and permissionless participation, is the future.
It's already the case that many of ethereum's DeFi apps can't betray users.
Unlike a centralized financial institution, a DeFi app's smart contract code can be shown to be a public API that treats all users fairly and correctly, with no admin keys or back doors.
Smart contracts can fail for other reasons, such as bugs or bad economics. But, what they can't do is call up their friends and ask them for some favoritism.
In DeFi, we say that smart contracts that can't betray users are "credibly neutral". https://nakamoto.com/credible-neutrality/ (by Vitalik Buterin)
As an example, one important DeFi app that is credibly neutral is Uniswap, a decentralized trading exchange that did $700M in volume yesterday. The main Uniswap app is here https://app.uniswap.org/. Financial stats for Uniswap are available here https://info.uniswap.org/. Yesterday, Uniswap made $2M in fees for its liquidity partners (anyone can provide liquidity). Fee data can been seen here https://cryptofees.info/.
Many tokens on Uniswap are pump-and-dumps or projects that won't succeed. Anyone can list any token. Yet, users seem to love the control and reliability given to them by Uniswap and other DeFi apps.
It's already the case that many of ethereum's DeFi apps can't betray users.
Unlike a centralized financial institution, a DeFi app's smart contract code can be shown to be a public API that treats all users fairly and correctly, with no admin keys or back doors.
Smart contracts can fail for other reasons, such as bugs or bad economics. But, what they can't do is call up their friends and ask them for some favoritism.
In DeFi, we say that smart contracts that can't betray users are "credibly neutral". https://nakamoto.com/credible-neutrality/ (by Vitalik Buterin)
As an example, one important DeFi app that is credibly neutral is Uniswap, a decentralized trading exchange that did $700M in volume yesterday. The main Uniswap app is here https://app.uniswap.org/. Financial stats for Uniswap are available here https://info.uniswap.org/. Yesterday, Uniswap made $2M in fees for its liquidity partners (anyone can provide liquidity). Fee data can been seen here https://cryptofees.info/.
Many tokens on Uniswap are pump-and-dumps or projects that won't succeed. Anyone can list any token. Yet, users seem to love the control and reliability given to them by Uniswap and other DeFi apps.
Is this the prelude to https://www.politico.com/magazine/story/2014/06/the-pitchfor...?
Has anyone confirmed this was a margin account? Let's confirm that before supporting the decision.
The only not silly response to that silly situation would be to GME to quickly sell enough stock to stabilize the price at some reasonably high valuation and them maybe use money from that to do some stock buybacks later if it falls to an unreasonable low level.
From [1]: On September 2, 2020, the Wall Street Journal reported that Robinhood was under SEC investigation for failing to fully disclose selling clients' orders to high-speed trading firms, with a potential $10M+ fine.[6] Robinhood paid $65M to settle the SEC investigation on December 17, 2020.
Gee.. I guess a slap on their wrist will make them behave NEXT time. How come people are not in jail for this?? I hope this time around politicans will make enough stink that SEC will actually forward indictments to DOJ.
[1] https://en.wikipedia.org/wiki/Robinhood_(company)#SEC_Probe_...
Gee.. I guess a slap on their wrist will make them behave NEXT time. How come people are not in jail for this?? I hope this time around politicans will make enough stink that SEC will actually forward indictments to DOJ.
[1] https://en.wikipedia.org/wiki/Robinhood_(company)#SEC_Probe_...
I saw this on Twitter and couldn't find any sources to confirm that the e-mail screenshot is real. Take this with a pinch of salt, it might be fake.
Blue checkmarks seem to confirm this:
https://twitter.com/dreamwisp/status/1354865709998723072
edit: My bad, it's "just" cancelling their orders, not selling anything on their behalf.
https://twitter.com/dreamwisp/status/1354865709998723072
edit: My bad, it's "just" cancelling their orders, not selling anything on their behalf.
A canceled buy order is very different from an automatic sale. Buy orders can be canceled all the time for various reasons, though in this case it's likely Robinhood's well-documented purchase restrictions.
Also that user does not have a blue check.
Also that user does not have a blue check.
Yes, I noticed it and already edited my comment, my bad. The person below is a blue checkmark.
[deleted]
[deleted]
Can anyone confirm this is a margin call? If so it's legal, if not they are going down.
If they weren't leveraged, this is basically theft.
Hope evrebody leaves Rh after this action
This is not a margin call and I'm sure it's in the ToS. They sold your stock so the shorts could start their cover.
> due to the unreasonable risk involved in brokering your position, we have closed your X shares of GME for an average price of Y
What in the world??
"In order to protect you from yourself, we have taken away your free will. Thanks!"
What in the world??
"In order to protect you from yourself, we have taken away your free will. Thanks!"
Yes, that is how it works when you buy stock on margin and do not have the cash to cover. When the price dips, the risk increases to the broker, and so they may liquidate your position to cover.
I see. I think that's a critical piece of context missing in that tweet: "Note: these particular shares were bought on margin. Buying on margin is borrowing money from a broker to purchase stock"
I thought RH was forcibly selling a customer's stocks that the customer had previously purchased with their own money.
I thought RH was forcibly selling a customer's stocks that the customer had previously purchased with their own money.
Where does tat say "to protect you from yourself"? Reads to me a lot more as "since brokering your position is an unreasonable risk to us, we stop doing so" (and the right to do so is likely lined out in their ToS)
Could you expand on what the risk to Robinhood is here? From what I understand, users purchased stock for money. What is Robinhood holding here that can create risk for them?
Some users purchased stock for money. Others purchased the right to buy stock later. Still others trade on margin, or, borrowed money. Robinhood offers all three, and it's not clear which this is, since it conflates the first and the third in the UI.
Ahhh, I see, understood. If RH (or any brokerage) tried to sell shares of stock I owned outright (i.e. exchanged USD for a share at market price) I would be livid. But it sounds like this article is maybe overblown.
Thanks for the clarification!
Thanks for the clarification!
I was primarily commenting on the framing. The RH message never pretends it isn't acting in RHs interest, so the representing it as a "we knows what best for you" doesn't make sense.
I don't know if it's only about shares on margin or how the process exactly works behind to judge if there actually is a threat to RH or not.
I don't know if it's only about shares on margin or how the process exactly works behind to judge if there actually is a threat to RH or not.
The company that owns Robinhood is the same company that was shorting all the GME stocks.
Right, I’m aware. I don’t think that’s a valid defense for what RH did today and was curious to hear if others thought there was a valid defense. If RH is just calling in open margin orders, then that’s just the game. If RH is selling outright owned securities, that’s wrong.
you are using their brokerage. their rules. free will has nothing to do with it.
It's not possible for someone like me to purchase a publicly traded security without going through a broker. So what you're saying is that market participants can only participate if they do what the people making the market want?
Well they now have 1 star on both app stores and can say goodbye to their upcoming IPO. While it is true their rules may have specified such a situation (I'm not a lawyer and not sure how legal this is), they are still a platform that rely on user trust, and they just destroyed any they had. You can't really call yourself "robin hood" when you bow over to the first big guy that shows up.
Interesting counter point to the "elites-pulling-levers-to-protect-hedgies" conspiracy theory: https://twitter.com/arampell/status/1354859474658312196?ref_...
That's not a counter point. The IB Chairman explicitly said they put in the restrictions to protect market makers rather than their customers: https://www.youtube.com/watch?v=7RH4XKP55fM
Forgive me I don't know a lot about this. I think he is talking about protecting intermediaries like the clearing houses and the exchanges themselves. The exchanges only work if counter party risk doesn't exist. To solve this, the exchanges back stop every trade and act as one common counter party [0].
He is concerned that there is a $15 billion loss out there due to options on GME. This could wipe out the intermediates guaranteeing the trades. Further that $15 billion can grow arbitrarily as GME is in a short squeeze and disconnected from reality.
[0] - https://www.cmegroup.com/clearing/risk-management.html
He is concerned that there is a $15 billion loss out there due to options on GME. This could wipe out the intermediates guaranteeing the trades. Further that $15 billion can grow arbitrarily as GME is in a short squeeze and disconnected from reality.
[0] - https://www.cmegroup.com/clearing/risk-management.html
So, point blank, you believe these restrictions were implemented to protect hedge funds and financial elites?
Do you not believe there could be simpler explanations to brokers halting buying of the meme-stonk tickers that are 1) explained by their own financial incentives and risks, and 2) not by a shadowy conspiracy of financial elites pulling levers behind the scenes?
Do you not believe there could be simpler explanations to brokers halting buying of the meme-stonk tickers that are 1) explained by their own financial incentives and risks, and 2) not by a shadowy conspiracy of financial elites pulling levers behind the scenes?
The reason he gave in that video was because of margin ("the cust not being able to pay"), which doesn't explain not being able to buy with cash.
this is despicable.
Smelled like scam, is a scam. So glad I didn't fall into the robinhood trap, I was really close to.
Edit: yes this comment isn't related to the linked article.
Edit: yes this comment isn't related to the linked article.
Fidelity and every other brokerage of which I have knowledge would let you do the same thing (get into a bad trade, and then liquidate your position when you exceed margin limits). This isn't a "Robinhood" thing, this is an "ignorant gamblers who shouldn't be allowed anywhere near a margin account" thing.
Yes. Understand that if you buy on margin, and the stock goes down too much, you owe the broker money. The broker can ask you to deposit more money to cover a margin call, or sell out your position.
What's unusual about RobinHood is that they make buying on margin very easy. It's a feature of a "Robinhood Gold" account.[1] "You can try Gold for free for the first 30 days. Sign up anytime from your account settings." This gets people trading on margin who probably shouldn't be trading on margin. Many of them are going to be busted down to zero. Those prices aren't going to stay up once the fad is over.
Here's RobinHood's margin agreement.[2]
[1] https://robinhood.com/us/en/support/articles/gold-overview/
[2] https://cdn.robinhood.com/assets/robinhood/legal/RHS%20Custo...
What's unusual about RobinHood is that they make buying on margin very easy. It's a feature of a "Robinhood Gold" account.[1] "You can try Gold for free for the first 30 days. Sign up anytime from your account settings." This gets people trading on margin who probably shouldn't be trading on margin. Many of them are going to be busted down to zero. Those prices aren't going to stay up once the fad is over.
Here's RobinHood's margin agreement.[2]
[1] https://robinhood.com/us/en/support/articles/gold-overview/
[2] https://cdn.robinhood.com/assets/robinhood/legal/RHS%20Custo...
Kinda....
1) I'd expect a credible brokerage to treat me like a human being. Call me up. Talk to me. Allow me to add money to my account if need be. Simply liquidating my position with no notice with an automated script isn't how I'd like my money to be treated.
2) This is among a rather large number of sketchy practices.
I have no horse in this game. My money's mostly in index funds and mutual funds, with maybe 1% actively managed. There's a certain way I expect solid financial institutions to behave with my future. There's a different way fly-by-night institutions behave. This very much sets of my fly-by-night detector....
1) I'd expect a credible brokerage to treat me like a human being. Call me up. Talk to me. Allow me to add money to my account if need be. Simply liquidating my position with no notice with an automated script isn't how I'd like my money to be treated.
2) This is among a rather large number of sketchy practices.
I have no horse in this game. My money's mostly in index funds and mutual funds, with maybe 1% actively managed. There's a certain way I expect solid financial institutions to behave with my future. There's a different way fly-by-night institutions behave. This very much sets of my fly-by-night detector....
They changed margin requirements intra-day, started liquidating positions no questions asked, and stopped buying of the stock. How many coincidences do you need to say that this was the planned outcome?
You should really read up on finance before making any of these decisions. It's no scam, it's margin.
I didn't lose a cent, i made over 60% the last few days. If i was using robinhood, i'd be blocked from doing that.
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Commenters saying that this is understandable and simply how margin trading works might be missing this part of the story:
https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
>We also raised margin requirements for certain securities.
Is that how margin trading always works? The broker can just without prior notification increase your collateral requirement and liquidate you instantly?
https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
>We also raised margin requirements for certain securities.
Is that how margin trading always works? The broker can just without prior notification increase your collateral requirement and liquidate you instantly?
Of course, you're literally borrowing money from them to buy securities.
Alright, I didn't know that. It does sound like a bad deal. Imagine if a bank suddenly changed the terms of your mortgage and repossessed the house. You're literally borrowing money from them after all.
Apples to oranges.
The bank's collateral is its lien on the house. A bank is not interested in foreclosing as long as you keep paying interest + principal every month. In fact, if the value of your house drops 90% it is in your interest to drop the keys off at the bank and say: "You guys can have it".
A broker's collateral, when you buy on margin, is the security you bought. As the value drops, collateral goes towards 0. Of course they're going to cover their own a*. It's in the agreement you signed when you opened a margin account.
Nobody changed any terms.
The bank's collateral is its lien on the house. A bank is not interested in foreclosing as long as you keep paying interest + principal every month. In fact, if the value of your house drops 90% it is in your interest to drop the keys off at the bank and say: "You guys can have it".
A broker's collateral, when you buy on margin, is the security you bought. As the value drops, collateral goes towards 0. Of course they're going to cover their own a*. It's in the agreement you signed when you opened a margin account.
Nobody changed any terms.
Fair enough, thanks for the explanation.
Yes. Happens with regularity.