We Are Preparing a Class Action Lawsuit Against Robinhood(old.reddit.com)
old.reddit.com
We Are Preparing a Class Action Lawsuit Against Robinhood
https://old.reddit.com/r/wallstreetbets/comments/l6yrs3/we_are_preparing_a_class_action_lawsuit_against/
466 comments
This. If your business is to provide a trading platform, you can't forbid your clients of doing the business they want, with their money. You step in the middle of the process, you're liable for your interference.
Unfortunately, RH most likely made the decision already taking into account the potential costs of making it (including lawsuits and fines by regulators). Their alternative was probably “biting the hand that feeds them”, hence more likely an existential risk to them.
Being cynic about it, nothing of consequence will come out of this. RH will just pay up and continue business as usual. WallStreet will have successfully crushed the little guys, ironically, doing the same they are complaining about, market manipulation. And in the future people will think twice before attempting something like this again.
Being cynic about it, nothing of consequence will come out of this. RH will just pay up and continue business as usual. WallStreet will have successfully crushed the little guys, ironically, doing the same they are complaining about, market manipulation. And in the future people will think twice before attempting something like this again.
I dunno, if wall street had let the bubble burst, and WSB gets scared off with losses, this all could have gone down as "stupid emotional plebs and their tulips". But now that there is definitely lawsuit material, the bigger questions are now firmly part of the narrative and will continue to unfold in the media probably long past the extent of the bubble.
They probably should have let it proceed.
I won’t speculate on the legal matter, but it sounds like a good witch hunt!
Really, a few rich targets may likely suffer (...or not, when it is so likely deserved).
I’m concerned that many Elanors, who’s teachers’ pension fund & retirement plans, were potentially compromised here.
I don’t think pensions belong in hedge funds is the bottom line.
(Combining unaccredited investor portfolios might look something like combining subprime loans, but...)
I won’t speculate on the legal matter, but it sounds like a good witch hunt!
Really, a few rich targets may likely suffer (...or not, when it is so likely deserved).
I’m concerned that many Elanors, who’s teachers’ pension fund & retirement plans, were potentially compromised here.
I don’t think pensions belong in hedge funds is the bottom line.
(Combining unaccredited investor portfolios might look something like combining subprime loans, but...)
I think it's important to realize that all these knee jerk reactions were shown to be incorrect only 3 days later, but most people will never hear the truth. The truth is that the FTCC increased Robinhood's capital requirements, and they did not have the funds to meet this. Thus they could not allow buy orders legally, although they could allow cell orders because that would reduce their capital requirements.
Good point about keeping the game alive. I can't blame RH for making whatever call is in its best interest to survive. Whatever the outcome is here I hope it's transparent.
For RH to survive? They robbed us blindly this week. They created a buying dip on the backs on panic selling & people lost fortunes. This company is done for.
>RH most likely made the decision already taking into account the potential costs of making it (including lawsuits and fines by regulators).
Yep. It's very possible that RH just knowingly violated whatever rules/regulations in full expectation that this would still be in their long-run best interest, particularly if they were financially exposed in whatever ways on the shorts that were generating losses. We'll see how this works out for them - they'll take a reputational hit but honestly most people do not have an incentive to leave the platform other than smoldering moral outrage or because they think that GME-like opportunities will continue to present themselves in the future (unlikely imo.)
Yep. It's very possible that RH just knowingly violated whatever rules/regulations in full expectation that this would still be in their long-run best interest, particularly if they were financially exposed in whatever ways on the shorts that were generating losses. We'll see how this works out for them - they'll take a reputational hit but honestly most people do not have an incentive to leave the platform other than smoldering moral outrage or because they think that GME-like opportunities will continue to present themselves in the future (unlikely imo.)
I’m not sure it’s that simple. They pissed off their most loyal and active customers. I doubt they’ll be back. What to say RH will not do this again in the future?
They picked their company name evoking a certain moral ethos, and the first time their customers consciously acted on that ethos, they pulled the plug.
Whether you agree with that ethos or not, I think we can at least agree that RH lacks the courage of its convictions.
Whether you agree with that ethos or not, I think we can at least agree that RH lacks the courage of its convictions.
I think it's more accurate to call the name manipulative marketing and what we're seeing is just a company out to make money and save its ass.
Much like Facebook, RH’s users are not its customers. RH’s actual customers are no doubt thrilled with what the company has done.
Well, what are people going to do about it?
Look at Facebook and Google, they keep abusing their users, but without a good alternative, there’s very little to do about it.
Edit: eloquently put by a sibling comment, the issue isn’t having an alternative today, but what would happen when those other alternatives are faced with the same conflict of interest as RH is facing, and the answer is that they would probably react the same way, here’s the link: https://news.ycombinator.com/item?id=25947300
Look at Facebook and Google, they keep abusing their users, but without a good alternative, there’s very little to do about it.
Edit: eloquently put by a sibling comment, the issue isn’t having an alternative today, but what would happen when those other alternatives are faced with the same conflict of interest as RH is facing, and the answer is that they would probably react the same way, here’s the link: https://news.ycombinator.com/item?id=25947300
Thread on alternatives to Robinhood. https://news.ycombinator.com/item?id=25946366
There numerous retail equity brokers that now offer free trades, mobile apps, and every other feature provided by RobinHood. Unlike Facebook, there is no network effect and unlike Google vs other search engines, different brokers are largely fungible.
There's alternatives to Robinhood though. Robinhood doesn't have the same social network effect as Facebook.
There are a lot of brokers though
This suffers from the illusion that there always is some "choice" or power average people have if a big entity pushes them around in the market.
>doubt they'll be back
Going where instead? Perhaps going to nowhere and not investing anymore, but if that's the alternative RH won't lose much on the margins vs if the "free market" wasn't really just a meme.
We live in a financial oligarchy. If we didn't, this blatant corruption with no recourse wouldn't be happening.
>doubt they'll be back
Going where instead? Perhaps going to nowhere and not investing anymore, but if that's the alternative RH won't lose much on the margins vs if the "free market" wasn't really just a meme.
We live in a financial oligarchy. If we didn't, this blatant corruption with no recourse wouldn't be happening.
> Going where instead?
To another brokerage? This question doesn't make sense. RH isn't the only brokerage around, and there is a mass migration of people into other brokerages. Their app is currently at 1.0 stars.
To another brokerage? This question doesn't make sense. RH isn't the only brokerage around, and there is a mass migration of people into other brokerages. Their app is currently at 1.0 stars.
If other brokers had the mass of users attempting this same trade, it would have been halted there as well. I guess time will tell.. we can't run the experiment over again.
But the fact RH would simply throw its customers away to appease hedge funds tells you something about who's in charge.
To be clear I'm not saying people won't "want" to go somewhere else that let's them trade how they want to trade (though the low friction and UX on RH itself needs to be re-implemented to equate a like for like substitution), and I agree they should and RH deserves to get ruined by users leaving en masse... I'm saying they won't be allowed to do so if another instance of this same dynamic occurs. Additionally, that there are calls for censorship of wsb, the future co-ordination on social media is also in question
But the fact RH would simply throw its customers away to appease hedge funds tells you something about who's in charge.
To be clear I'm not saying people won't "want" to go somewhere else that let's them trade how they want to trade (though the low friction and UX on RH itself needs to be re-implemented to equate a like for like substitution), and I agree they should and RH deserves to get ruined by users leaving en masse... I'm saying they won't be allowed to do so if another instance of this same dynamic occurs. Additionally, that there are calls for censorship of wsb, the future co-ordination on social media is also in question
All the pretty UX in the world doesn't mean a thing if there's a pretty message in the app saying that you are not allowed to do the thing you want to do.
I'm not sure. Plenty of brokers are still allowing trades. I can buy and sell on Vanguard in my brokerage account right now. If there's an issue with my trade I can call them, they show their phone number on the confirmation page.
They have some warnings amounting to "this thing is crazy, we'll do our best", but they haven't stopped me from trading. Other brokers are the same.
I think Robinhood cost themselves their business today. Anytime someone says "what broker should I use" the first answer is going to be "not Robinhood, they screwed everyone over" regardless of how true that statement is. I think the industry is about to come under fire too. Heads are going to roll on this one. Action across the board is widely supported by both sides of government. If it is even close to as bad as it looks, Wall Street firms just cost themselves much more than their short positions.
They have some warnings amounting to "this thing is crazy, we'll do our best", but they haven't stopped me from trading. Other brokers are the same.
I think Robinhood cost themselves their business today. Anytime someone says "what broker should I use" the first answer is going to be "not Robinhood, they screwed everyone over" regardless of how true that statement is. I think the industry is about to come under fire too. Heads are going to roll on this one. Action across the board is widely supported by both sides of government. If it is even close to as bad as it looks, Wall Street firms just cost themselves much more than their short positions.
Schwab has a note that they're limiting volumme on specific stocks today. I agree with the point that any of the major brokers would have done the same, but I think that's more an indictment of all of these organizations than a defense of RH.
I'm just not sure about that until I see the volume and see that as a reason for them to not let me buy a security. They can have their systems go down... I mean obviously that's not ideal but that's something that could happen due to volume - but Robinhood didn't go down. Vanguard didn't go down. I can still buy via Vanguard right this second - what does the volume have to do with it?
There are plenty of brokers which are being migrated to right now that are not stoppping trades. European brokers not at all, and in the US Fidelity and Vanguard are still accepting trades (and handling the massive sign-up influx).
Furthermore, the fact that EU brokerages are not stopping trades is something to be considered, no?
Furthermore, the fact that EU brokerages are not stopping trades is something to be considered, no?
They won’t cuz they r going bankrupt. Pull funds & watch the rest.
It completely defies the vision and purpose of their company. They should at least change it to Robbing Hood
robbingood
The people behind RH may come back, but the brand seems to be burned at this point.
We're not talking about a non-tangible issue here like Facebook abusing their users' privacy.
Customers see their raw money being lost by this service.
The GME move is costing BILLIONS to hedge funds, at that scale I’m sure the costs of a million dollar fine is taken into account.
Perhaps that's the way a broker should be, but what Robinhood, TD and other brokers did is 100% legal and has been done thousands of times in the past. There's absolutely nothing new or illegal about brokers using their discretion to restrict trading of any stock or asset at any time for any reason.
With the risky bets Robinhood encourages, this is an interesting time to get a conscious. At lest the WSB crowd sort of knows what they're doing--it's not like the guy who committed suicide.
Spot on. When retail investors were losing their shirts, that was supposedly OK, but now that hedge funds are losing money suddenly there is so much "concern" about retail investors who have made a killing of a profit on the market.
I don't think the WSB crowd has a clue what they are doing. They practically turned GME into a ponzi scheme, encouraging more and more people to pump up the price by buying it.
It was funny when it was just hedge funds losing millions of dollars because they shorted it, but eventually all the WSB people buying the stock are going to be stuck with something worthless once it inevitably comes back down to Earth.
Trading on GME probably should have suspended a while ago. Now we're stuck in a situation where RH has blocked purchases, and people are going to blame them when the stock tanks and they lose their money rather than themselves for buying ridiculously overpriced stock to begin with.
It was funny when it was just hedge funds losing millions of dollars because they shorted it, but eventually all the WSB people buying the stock are going to be stuck with something worthless once it inevitably comes back down to Earth.
Trading on GME probably should have suspended a while ago. Now we're stuck in a situation where RH has blocked purchases, and people are going to blame them when the stock tanks and they lose their money rather than themselves for buying ridiculously overpriced stock to begin with.
"It's fine as long as they do it legally"
Why is this the pertinent question? Even if it wasn't legal, they would just re-interpret the rules in their own favor.
Additionally, this is presented as if any of us had any say whatsoever in the writing of these laws or their enforcement or non-enforcement.
It's a distinction without a difference. It implies that "if we don't like it we should change the laws". But none of us wrote the laws in the first place, and certainly if we had the power to change the laws we never would have written them this way. If we had the power to change the laws we would change them. So it's an irrelevant point.
The entire point of the situation is "these are the laws" either officially, or unofficially but in practice.
Why is this the pertinent question? Even if it wasn't legal, they would just re-interpret the rules in their own favor.
Additionally, this is presented as if any of us had any say whatsoever in the writing of these laws or their enforcement or non-enforcement.
It's a distinction without a difference. It implies that "if we don't like it we should change the laws". But none of us wrote the laws in the first place, and certainly if we had the power to change the laws we never would have written them this way. If we had the power to change the laws we would change them. So it's an irrelevant point.
The entire point of the situation is "these are the laws" either officially, or unofficially but in practice.
But they didn't restrict the trading of stock. They restricted the buying of stock. People were still able to sell. Blocking only one side of the transactions is blatant market manipulation.
Correct me if I'm wrong, but I believe they disallowed opening of new positions. I.e. if you are currently long, you can sell to close your position or if you are short, you can buy to close position, but you are not allowed to open new longs or new shorts.
But something like 99.9% (guesstimate) of the RH users happen to have long positions opened. So they're allowing something to the tune 99.9% of longs to close by selling, and 0.1% of shorts to close by buying (I take it the big shorters like Melvin Capital aren't shorting on RH).
This is so close to "allowing sells but not buys" that it is blatant market manipulation.
This is so close to "allowing sells but not buys" that it is blatant market manipulation.
I think it all goes to show that manipulation is a fact of life, and especially of markets. There's 0 doubt that both sides are trying to manipulate to make money from the other. Maybe some folks on WSB believe GME is fairly valued at $80 or $100, but no one with half a brain truly thinks that it's worth $400 or $4200.69 or whatever price they want. I think it'll fall right back down to $20 once this sorts itself out eventually, and I think most of the WSB crowd thinks that too. The only reason people are buying at those prices is to try to force a short squeeze, to effectively steal money from the hedge funds by forcing them to buy at irrational prices as they get margin called.
Now the hedge funds are of course trying to prevent this by calling favors from the brokers and putting out fake news that they've already closed out. Both sides are using manipulation and displaying the worst parts of our markets, our capitalism and even our character for the whole world to see.
At the end of the day, humans are greedy beings. It's totally natural, and we need to accept that. But as we accept it, we need to figure out ways to regulate that greed so that it is a force for good overall. Capitalism is based on greed, but that doesn't mean it's not the best economic system. On the whole, a group of entirely self-interested individuals can still work together in a sense to grow our economy, build new technology and make the world a better place.
Now the hedge funds are of course trying to prevent this by calling favors from the brokers and putting out fake news that they've already closed out. Both sides are using manipulation and displaying the worst parts of our markets, our capitalism and even our character for the whole world to see.
At the end of the day, humans are greedy beings. It's totally natural, and we need to accept that. But as we accept it, we need to figure out ways to regulate that greed so that it is a force for good overall. Capitalism is based on greed, but that doesn't mean it's not the best economic system. On the whole, a group of entirely self-interested individuals can still work together in a sense to grow our economy, build new technology and make the world a better place.
Each trade is two way right? Who is buying the retail orders being forced to sell? Does being able to sell (to those already short, who can close their position) not seem like blatant manipulation to help those already short?
Or if only retail is unable to open new positions, why are institutional investors allowed to open new positions and profit from the moves while retail cannot?
Or if only retail is unable to open new positions, why are institutional investors allowed to open new positions and profit from the moves while retail cannot?
Sure, but paraphrasing Rick and Morty, that sounds like blocking only buying with extra steps.
Clearly this arrangement only benefits short sellers.
So what?
That is unfair? If my short position blows up, I pay. Nobody halts buying because I will have to liquidate everything.
Apparently they forced the sale of some peoples' shares.
https://twitter.com/555Sunny/status/1354854993946406917?s=20
https://twitter.com/555Sunny/status/1354854993946406917?s=20
TD's restrictions were on margins & shorts, which both put the brokerage itself at risk. They did not restrict general or options trading.
That would be right if we were talking about a trading platform, but what we are actually talking about is a brokerage. A brokerage places orders on trading platforms on behalf of its customers and brokerages can make various rules about the orders they will or will not place. For example, Robinhood has restricted trading of box spreads for quite a while following an incident of attempted fraud on their platform (which was partially their fault to begin with). Brokerages also have leeway to stop potential crimes they observe their customers committing, which is what happened here.
For what it's worth, Robinhood was not the only brokerage that is restricting trading GME. TD Ameritrade, Interactive Brokers, and WeBull also have restrictions in place right now.
For what it's worth, Robinhood was not the only brokerage that is restricting trading GME. TD Ameritrade, Interactive Brokers, and WeBull also have restrictions in place right now.
At a minimum they should've waited for the market to close before implementing the restriction.
The timing of it makes it unethical.
The timing of it makes it unethical.
The thing is ... If you don't step in, you could be liable. Let's not pretend that US financial regulation is fairly, evenly, or even logically applied.
I could see the case if trading for the stock was halted, they'd be liable for the inaction of continuing to allow trades on the platform.
But this is straight-up market manipulation. There's no justifiable reason to halt trading on GME except as a means of cooling the market long enough for Important People to exit their bleeding positions.
There's a big ass disclaimer that you sign saying that markets fluctuate and that Robinhood isn't liable for losses of capital.
But this is straight-up market manipulation. There's no justifiable reason to halt trading on GME except as a means of cooling the market long enough for Important People to exit their bleeding positions.
There's a big ass disclaimer that you sign saying that markets fluctuate and that Robinhood isn't liable for losses of capital.
It’s not that unusual for exchanges to call a halt on certain instruments when they’re overheated, fyi.
The exchange hasn't done anything, though.
It's only certain retail brokers, and, mystifyingly, mostly the ones who have hedge funds with significant ownership interests.
It's only certain retail brokers, and, mystifyingly, mostly the ones who have hedge funds with significant ownership interests.
Yeah, that’s clearly problematic. I’m no fan of WSB, but it sure as hell looks like Robinhood has done something very bad here.
But the general case of “the market should never interfere with trading” isn’t true, but typically we only allow that at the exchange level.
But the general case of “the market should never interfere with trading” isn’t true, but typically we only allow that at the exchange level.
No, it's not unusual. And, in fact, the exchanges HAVE used brief halts in trading to curb volatility in GameStop stock. But those were done in accordance with standard policies that simply reference a certain amount of change within a certain timeframe.
What Robinhood has done is apparently to ALLOW trading, but only selling, not buying. At a time when a close partner of theirs is at significant risk if the stock price goes up.
What Robinhood has done is apparently to ALLOW trading, but only selling, not buying. At a time when a close partner of theirs is at significant risk if the stock price goes up.
The justifiable reason is because if they continue to allow purchases of GME, they might get hit with an even bigger lawsuit from retail. See JumpCrisscross's comments: https://news.ycombinator.com/item?id=25943058
Robinhood is stuck between a set of large lawsuits and a set of even bigger lawsuits. It seems like their internal counsel has decided halting trading will lead to the set containing the smaller lawsuits of the two.
Robinhood is stuck between a set of large lawsuits and a set of even bigger lawsuits. It seems like their internal counsel has decided halting trading will lead to the set containing the smaller lawsuits of the two.
AIUI Robinhood has halted buying shares and options, but they haven't halted selling.
If it was purely a halt on all trading I could see the logic, but only preventing people from buying seems fishy to me.
(I'm not involved one way or the other; I don't trade shares at all)
If it was purely a halt on all trading I could see the logic, but only preventing people from buying seems fishy to me.
(I'm not involved one way or the other; I don't trade shares at all)
If they halted selling you know as well as I do that there would have been an immediate "Robinhood is holding my money hostage! They didn't let me sell and the price dropped, so they are responsible for my losses" lawsuit.
Which, lets be honest, would have more merit than a "I missed out potential gains" lawsuit.
Which, lets be honest, would have more merit than a "I missed out potential gains" lawsuit.
Selling is important because it lets people close out their positions as they need to. If Robinhood halted all trading they would have a huge mess à la the complete shutdown back in March.
Buying exposes them to additional risk in the form of potential future lawsuits.
Buying exposes them to additional risk in the form of potential future lawsuits.
Actually they halted the opening of new positions. If you have a short position, you can still buy to close.
That sounds like a stretch.
You think they are legitimately scared of being successfully sued for "tricking people" into buying through gameification? That looks like CYA-BS from here. If that were a legitimate concern, why wasn't the interface de-gameified long ago?
You think they are legitimately scared of being successfully sued for "tricking people" into buying through gameification? That looks like CYA-BS from here. If that were a legitimate concern, why wasn't the interface de-gameified long ago?
Robinhood have themselves to blame. They made it dead-easy to trade on margin and do irresponsible naked option plays all these years. And they benefited from that massively in terms of revenue from Citadel (order flow) and raising their own valuation. All of a sudden they care about investor risk?
From the comment:
> If a retail customer loses money and makes a FINRA complaint that Robinhood induced them to buy through its gameified interface, it is liable
This seems like an attempt to pass the buck to FINRA, and I'm fairly skeptical, but open to being convinced. Have there been FINRA complaints that resulted in substantive enforcement actions centered on a broker's gamified user interface?
> If a retail customer loses money and makes a FINRA complaint that Robinhood induced them to buy through its gameified interface, it is liable
This seems like an attempt to pass the buck to FINRA, and I'm fairly skeptical, but open to being convinced. Have there been FINRA complaints that resulted in substantive enforcement actions centered on a broker's gamified user interface?
That is a real stretch. Plenty of people have lost fortunes on /r/wsb using robinhood without anything of note happening.
Any lawsuit that said "you let me freely trade a stock and I lost money" would be laughed out of court.
My understanding is that brokerages are generally not liable for what happens on their platform so long as they ensure trades remain legal (eg margin requirements) and they don't make false promises and keep appropriate disclaimers.
On the other hand, manipulating the market seems like a good way to lose a business.
On the other hand, manipulating the market seems like a good way to lose a business.
Liable for what exactly in this instance?
Liable to get on the SEC, and industry's bad side.
Regulators are (intentionally) designed to be able to exert pressure with a lot of discretion. The financial industry is having a ferocious rage fit. The NASDAQ CEO even went on air calling for immediate SEC regulation... the irony didn't even seem lost to him.
Getting on the industry and SEC's bad side is the liability, and that kind of pressure is a big part of hw the SEC actually "regulates." It isn't strictly through rules.
Regulators are (intentionally) designed to be able to exert pressure with a lot of discretion. The financial industry is having a ferocious rage fit. The NASDAQ CEO even went on air calling for immediate SEC regulation... the irony didn't even seem lost to him.
Getting on the industry and SEC's bad side is the liability, and that kind of pressure is a big part of hw the SEC actually "regulates." It isn't strictly through rules.
Customers use a trading platform for access to buy and sell on stock markets. If one day you prevent me from doing that but don’t tell me before I sign up when you would restrict my ability to interface with the market it seems like a interference.
Platforms are there to enable interface with market, not decide what I can and cannot buy from that markets.
Platforms are there to enable interface with market, not decide what I can and cannot buy from that markets.
I think the parent comment is suggesting that the very powerful people in hedge funds could use their power to create severe consequences.
Some folks on WSB may know what they're doing, but many folks are joining Robinhood and buying GME and AMC due to the hype and that they heard they can make a quick buck. When GME eventually crashes, many of them will lose a fair bit of money and blame Robinhood for the poor experience.
I think that both things can be true: people are going to get screwed, and fiddling with the rules in the middle of the game is a really bad look.
I'm not arguing either of those (and wholeheartedly agree with you). I'm simply stating a potential concern/justification that Robinhood may have or use.
I think this is a reasonable attempt at "what RH did was right", although I'd certainly be happier if the timing and coordinating were brought to light:
https://www.bloomberg.com/opinion/articles/2021-01-28/robinh...
https://www.bloomberg.com/opinion/articles/2021-01-28/robinh...
This is not a concern specific to gme
If Citizens United says money is speech, the financial system effectively has no guard rails
Except when it does for the institutions
If Citizens United says money is speech, the financial system effectively has no guard rails
Except when it does for the institutions
You have been reading too many memes. Citizens United does not say money is speech.
Citizens United says specifically that when a bunch of people take their money and get together and start a new corporation (Citizens United) (a not-for-profit corporation in this case, though not a charity) and the corporation proceeds to engage in political speech (by filming a movie named Hillary: The Movie)...
then the corporation, as an entity, is considered to have the rights like the right to free speech, because it is owned by people who have rights, and this is a way for those people to exercise those rights together. Therefore this political speech is protected by the First Amendment, and restrictions on it are evaluated on the standard of strict scrutiny, and the FEC cannot halt this distribution just because the corporation was using money to make it happen.
(You will notice that people are not allowed to band together and exercise the right to vote, and thus corporations don't get to vote.)
Citizens United says specifically that when a bunch of people take their money and get together and start a new corporation (Citizens United) (a not-for-profit corporation in this case, though not a charity) and the corporation proceeds to engage in political speech (by filming a movie named Hillary: The Movie)...
then the corporation, as an entity, is considered to have the rights like the right to free speech, because it is owned by people who have rights, and this is a way for those people to exercise those rights together. Therefore this political speech is protected by the First Amendment, and restrictions on it are evaluated on the standard of strict scrutiny, and the FEC cannot halt this distribution just because the corporation was using money to make it happen.
(You will notice that people are not allowed to band together and exercise the right to vote, and thus corporations don't get to vote.)
The financial system has _many_ guard rails including licensure (see the FINRA exams), regulations and regulatory bodies, and orders to halt or limit trades and positions on volatile securities.
This concern is relevant to GME, BB, AMC, etc. because folks are joining Robinhood, Webull, and similar apps in record numbers in a rush to jump in on these hyped-up opportunity.
This concern is relevant to GME, BB, AMC, etc. because folks are joining Robinhood, Webull, and similar apps in record numbers in a rush to jump in on these hyped-up opportunity.
And what if their decisions cause it to crash?
Right now the retail investors are winning. But imagine if they lost tons of money instead. You might have regulators yelling that Robinhood is not doing enough to inform and protect their customers from self harm. Or even that they were encouraging risky behavior.
If the stock plummets 90% in minutes are they capable of allowing half their users (the amount that owns GME) to exit their positions? Probably not
Go look at past instances of Robinhood going down and the amount of people who claim they're going to take action because of lost money
Go look at past instances of Robinhood going down and the amount of people who claim they're going to take action because of lost money
The SEC or the exchange (ie: Nasdaq) should be the one to step in. They are the ones concerned.
Yeah, but all they can do is halt trading for everyone, that's not what Citadel wants.
Citadel wants to stop retail investors from buying so they can both buy and sell to themselves and drive the price down and scare retail investors into selling.
Citadel wants to stop retail investors from buying so they can both buy and sell to themselves and drive the price down and scare retail investors into selling.
> you could be liable
What is a brokerage liable for by doing their job?
What is a brokerage liable for by doing their job?
They were screwed if they did and screwed if they didn't.
If they didn't do anything, the precedent of courts and regulators giving retail investors wins because someone's gameified UI induced them to trade would leave them with untold liability. In this branch of reality, they're going to get sued--and deservedly.
If they didn't do anything, the precedent of courts and regulators giving retail investors wins because someone's gameified UI induced them to trade would leave them with untold liability. In this branch of reality, they're going to get sued--and deservedly.
Of course you can. Happens all the time.
>with their money
With your money. Most people are trading on margin, because they're gambling addicts.
EDIT: I'm not sure if it's most that are trading on margin. Certainly it's everyone I've seen, but people who share their trades publicly are probably not representative.
>with their money
With your money. Most people are trading on margin, because they're gambling addicts.
EDIT: I'm not sure if it's most that are trading on margin. Certainly it's everyone I've seen, but people who share their trades publicly are probably not representative.
Robinhood could put a margin freeze on trading these stocks on margin or borrowing against shares of GME. It would protect them and be fair to retail investors.
This is what I don't get. Why do they care if an investor is buying GME shares with their own money? They could easily disable margin trading. I can't point to anything other than blatant manipulation.
If we assume for a moment that Robinhood is acting in good faith (Seems like a stretch but work with me here).
It's possible they are doing this to protect investors. It's pretty clear GME is going to crash at some point in the near future. Having thousands of investors on their platform go broke at once is just bad for everyone (who isn't short). By blocking these trades, RH is protecting investors from potential loss.
In a way, it's almost like preventing someone from investing in a Ponzi scheme. While it might piss you off, it will save you in the long run.
Of course... that's assuming RH is acting in good faith.
It's possible they are doing this to protect investors. It's pretty clear GME is going to crash at some point in the near future. Having thousands of investors on their platform go broke at once is just bad for everyone (who isn't short). By blocking these trades, RH is protecting investors from potential loss.
In a way, it's almost like preventing someone from investing in a Ponzi scheme. While it might piss you off, it will save you in the long run.
Of course... that's assuming RH is acting in good faith.
I see what you’re saying. But I said in another comment that Robinhood has made it super easy over the years to do all kinds of irresponsible trading and have benefited from it. Today seems like a convenient time for them to be concerned about investor risks. This and their involvement with Citadel makes it hard for me to give them the benefit of doubt.
I guess I wasn't clear... I don't necessarily think RH is acting in good faith. I was just suggesting what I feel is the only possible good faith explanation. Not that I believe that is the case.
No, I get that it was an assumption. I was just saying how even if I assume they were acting in good faith, it doesn’t make sense to me.
Better late than never?
I can understand complaining about getting thrown out of a casino for winning too much. I can't understand complaining about getting thrown out for losing too much. The people "investing" in these companies are totally clueless and the majority of them are going to lose all their money. Cutting them off is clearly in their best interest.
Whether or not that kind of paternalism is acceptable is another matter.
I can understand complaining about getting thrown out of a casino for winning too much. I can't understand complaining about getting thrown out for losing too much. The people "investing" in these companies are totally clueless and the majority of them are going to lose all their money. Cutting them off is clearly in their best interest.
Whether or not that kind of paternalism is acceptable is another matter.
So just disable the margin trading instead of blocking all Buys?
I think you're confusing options with margin. Most of the major WSB screenshots are options trading and are not on margin. Specifically they are nearly all call options being posted, which pose no risk to the brokerage.
Likely that Citadel sold lots of uncovered calls to RH users.
No you really can't. The right to refuse service gets weird with trading platforms because if you're found to be doing because you're trying to influence the market then you're in hot water.
Can you imagine a trading platform just outright refusing to process your orders because it was better for them?
Can you imagine a trading platform just outright refusing to process your orders because it was better for them?
And what about the right to refuse helping people buying a stock that is being actively manipulated by people who have made thousands of public comments delcaring their intent to manipulate the price?
Very few retail investors trade on margin as it includes the brokerage holding on to significant amounts of your assets which many small retail investors just don't have.
It requires $2000 in the case of Robinhood. Reeeeeaaaaallllyyyy onerous.
A lot of the WSB members only invested for a few shares - less than $100. They were doing it for fun not profit. Requiring $2k is a big ask for this crowd of investment
Then they stand to recover about twenty cents from a lawsuit. Good for them?
Like sama so eloquently put it, "fuck robinhood".
https://twitter.com/sama/status/1354842339336835074
https://twitter.com/sama/status/1354842339336835074
Counterpoint: virtually everyone who would have been buying GME yesterday based on the pump nonsense would have lost all that money. Consumer platforms can likewise be understood to have an obligation to protect their customers from scams, and to the extent they don't they can also be reasonably held liable.
Basically: there's a reason for these trading controls to exist. And I really think people here are getting ahead of their skis. Almost everyone screaming about sticking it to Melvin is, as I see it, a victim of a trading scam.
Melvin seems to have lost a lot of money, sure, but... so have all the WSB folks. Very, very few people are going to come out of this ahead (and realistically some of those are going to end up in jail).
Basically: there's a reason for these trading controls to exist. And I really think people here are getting ahead of their skis. Almost everyone screaming about sticking it to Melvin is, as I see it, a victim of a trading scam.
Melvin seems to have lost a lot of money, sure, but... so have all the WSB folks. Very, very few people are going to come out of this ahead (and realistically some of those are going to end up in jail).
Counterpoint: You are assuming good faith behavior in RH, where I see blatant fraud. It is outright market manipulation that they stop people from buying, but not selling. That they stopped individuals like me, who know the risk and can afford the loss, while allowing their hedge fund buddies to buy the dump and cover shorts.
As for "this would have happened anyway", well that doesn't sound very free market to force the very thing you claim to be trying to stop. RH says "oh no we don't want you to lose money, so we're going to cause a crash on the stock. Feel free to sell".
It's rotten to the core.
As for "this would have happened anyway", well that doesn't sound very free market to force the very thing you claim to be trying to stop. RH says "oh no we don't want you to lose money, so we're going to cause a crash on the stock. Feel free to sell".
It's rotten to the core.
Good thing people can still buy on RH, in order to close their short positions, because guess what? They restricted opening of new positions, meaning that if you have no position, you cannot buy or sell. It is common, it is normal, several other brokerages took similar actions, and it is commonly done when it looks like something illegal might be happening.
From what I understand, they are allowing selling shares, just restricting purchasing shares. That is what makes this market manipulation. A market freeze would block all transactions.
They are allowing people to close positions they currently hold, but not open new positions. That is not the same as only allowing people to sell shares, and it is not the same as suspending trading of the security.
> "close positions they currently hold, but not open new positions. That is not the same as only allowing people to sell shares"
Since RH doesn't allow shorting, the only way to close a position is by selling shares. So yes, it is exactly the same as only allowing people to sell shares.
Since RH doesn't allow shorting, the only way to close a position is by selling shares. So yes, it is exactly the same as only allowing people to sell shares.
If you know the risk, and can afford the loss, you can use a different platform, no?
This action is likely (at least partially) targeted to prevent new users who have never traded a stock from trying to hop on the train and follow a "How to buy GME Options to make BANK in 5 simple steps!" article from losing everything.
Do you think there would be less blow-back if Robinhood only restricted new accounts? Or maybe only people with minimum balances?
If they stopped allowing people to sell their existing positions, then a lawsuit about "Robinhood is holding my funds hostage, didn't let me sell, and now I lost money because of them" would have come in, and probably would have had a lot more merit.
This action is likely (at least partially) targeted to prevent new users who have never traded a stock from trying to hop on the train and follow a "How to buy GME Options to make BANK in 5 simple steps!" article from losing everything.
Do you think there would be less blow-back if Robinhood only restricted new accounts? Or maybe only people with minimum balances?
If they stopped allowing people to sell their existing positions, then a lawsuit about "Robinhood is holding my funds hostage, didn't let me sell, and now I lost money because of them" would have come in, and probably would have had a lot more merit.
We are working on fundamentally different assumptions. You assume they did this in good faith to "protect new users".
I believe they are committing fraud and stock manipulation.
But yes, if I used your assumption, I would say they should have restricted options for new users, or put extra warnings up.
And to your first sentence, no, you can't just move to a new platform. It takes more than a week to move funds from one brokerage to another.
I believe they are committing fraud and stock manipulation.
But yes, if I used your assumption, I would say they should have restricted options for new users, or put extra warnings up.
And to your first sentence, no, you can't just move to a new platform. It takes more than a week to move funds from one brokerage to another.
Yes, I am 100% assuming that Robinhood is acting is "good faith" (the fact that I'm defending Robinhood feels gross to me).
If Robinhood just wanted to make money, they would have let this continue. People like to complain that RH gets payment for order flow, but they just knowingly cut off that order flow.
It feels like Occam's Razor should apply here. Either:
1. Robinhood felt that it's long term prospects were better if it's users weren't able to gamble and most likely lose all of their money, thus being scared away from the stock market forever.
2. There is a secret cobal that Robinhood, who was previous the "bad guy" of the financial world, is now in and tricked it's users into buying a stock that would be worthless just so that Robinhood could shut of trading at the peak, and let their secret hedge-fund buddies make a ton of money.
I'm not inclined to believe the conspiracy theory when there is a more more reasonable option.
If Robinhood just wanted to make money, they would have let this continue. People like to complain that RH gets payment for order flow, but they just knowingly cut off that order flow.
It feels like Occam's Razor should apply here. Either:
1. Robinhood felt that it's long term prospects were better if it's users weren't able to gamble and most likely lose all of their money, thus being scared away from the stock market forever.
2. There is a secret cobal that Robinhood, who was previous the "bad guy" of the financial world, is now in and tricked it's users into buying a stock that would be worthless just so that Robinhood could shut of trading at the peak, and let their secret hedge-fund buddies make a ton of money.
I'm not inclined to believe the conspiracy theory when there is a more more reasonable option.
The same firm, Citadel, that fills much of RH's orders is the firm that propped up Melvin Capital (the group that shorted GME and needed a bailout).
Option 3: The cabal is there, it isn't secret, and they were on the hook to lose so much money that it was cheaper to essentially sacrifice the RH brand than to let the short get fucked to infinity.
Edit: They have stated on a blog post that this was a risk management move on their part - not strictly in the interest of the customer.
The market is broken.
Option 3: The cabal is there, it isn't secret, and they were on the hook to lose so much money that it was cheaper to essentially sacrifice the RH brand than to let the short get fucked to infinity.
Edit: They have stated on a blog post that this was a risk management move on their part - not strictly in the interest of the customer.
The market is broken.
> I believe they are committing fraud and stock manipulation.
The stock is already manipulated, though. No one racing to buy GME is doing so because a genuine desire to receive dividends, exercise voting power over corporate governance, etc... They're doing it because they read on wallstreetbets that a magical "short call" was coming tomorrow which would spike the stock.
That's a SCAM. It's not going to happen that way. The owners of all those early shorts have already settled their positions (and, yes, lost a lot of money in the process) and all you're seeing now is a tulip-style pump and dump.
You got scammed. You're not a hero. Robinhood might well not be acting in your best interests but they almost certainly saved you money.
The stock is already manipulated, though. No one racing to buy GME is doing so because a genuine desire to receive dividends, exercise voting power over corporate governance, etc... They're doing it because they read on wallstreetbets that a magical "short call" was coming tomorrow which would spike the stock.
That's a SCAM. It's not going to happen that way. The owners of all those early shorts have already settled their positions (and, yes, lost a lot of money in the process) and all you're seeing now is a tulip-style pump and dump.
You got scammed. You're not a hero. Robinhood might well not be acting in your best interests but they almost certainly saved you money.
You are factually incorrect.
The users on WSB used publicly available data to see that the shorting was occurring. They did what "the pros" constantly do, which is pool resources and make moves collectively. That is not "manipulation" in the legal form of the word. Not like shutting down trading, in one direction only, for retail only. Since it is individual users on a public forum winning, instead of the guild of hedge fund bros, the power player (Citadel) is forcing the shutdown.
Whether or not pumped up stocks are wise is irrelevant. The fact that something that happens constantly gets axed because the wrong people are winning is the issue.
The users on WSB used publicly available data to see that the shorting was occurring. They did what "the pros" constantly do, which is pool resources and make moves collectively. That is not "manipulation" in the legal form of the word. Not like shutting down trading, in one direction only, for retail only. Since it is individual users on a public forum winning, instead of the guild of hedge fund bros, the power player (Citadel) is forcing the shutdown.
Whether or not pumped up stocks are wise is irrelevant. The fact that something that happens constantly gets axed because the wrong people are winning is the issue.
> Basically: there's a reason for these trading controls to exist.
There is a reason for trading controls by a neutral third party. Trading controls created and manipulated by a stakeholder is market manipulation and illegal.
There is a reason for trading controls by a neutral third party. Trading controls created and manipulated by a stakeholder is market manipulation and illegal.
> virtually everyone who would have been buying GME yesterday based on the pump nonsense would have lost all that money
That's not true. Today the stock went higher than at any point yesterday.
That's not true. Today the stock went higher than at any point yesterday.
It's already below its open.
Edit: multiple responses seizing on what can only be called a conspiracy theory at this point that some how absent Robinhood's tiny trade volume this stock would somehow still be going up from a 500% increase.
Guys, YES, the system is kinda rigged. What happened here is that you all GOT SCAMMED. There is no magic short call coming tomorrow. The stock was pumped (starting originally with a short squeeze, but of course now it's just a regular bubble), and you were fooled into trying to buy it high. You are the victims here, not the heroes.
Edit: multiple responses seizing on what can only be called a conspiracy theory at this point that some how absent Robinhood's tiny trade volume this stock would somehow still be going up from a 500% increase.
Guys, YES, the system is kinda rigged. What happened here is that you all GOT SCAMMED. There is no magic short call coming tomorrow. The stock was pumped (starting originally with a short squeeze, but of course now it's just a regular bubble), and you were fooled into trying to buy it high. You are the victims here, not the heroes.
They’ll probably use that argument to justify their action. “See we saved you from yourself, look how low it got”. But who knows what would have happened if the trades weren’t stopped. The system is rigged.
Couldn't have anything to do with RH only allowing you to sell the stock, could it?
Strange how only being allowed to sell and not buy may drive a price down.
Yes, but it was higher.
That's true. Most people involved are driven by profit, not by screwing up hedge funds. Trading controls are important but it's problematic that Robinhood has this kind of power. That's usually something that exchanges control.
Legally speaking, Robinhood is a private entity with no obligations to provide users the ability to trade. Users can still sell or trade their assets out of Robinhood, they just can't open new positions with Robinhood's platform. Users are free to use another platform if they so wish.
Not saying its moral or not incredibly corrupt, but I can definitely see Robinhood having the legal equivalent of "our platform, our rules" here.
Not saying its moral or not incredibly corrupt, but I can definitely see Robinhood having the legal equivalent of "our platform, our rules" here.
> Legally speaking, Robinhood is a private entity with no obligations to provide users the ability to trade.
This is mostly false. trading platforms are regulated by a bunch of orgs like the SEC, they absolutely cannot do whatever they want, there are heavy regulations on these activities or it would be easy for a broker to scam their clients out of their money with backroom deals with this or that third party and create conflict of interests.
This is mostly false. trading platforms are regulated by a bunch of orgs like the SEC, they absolutely cannot do whatever they want, there are heavy regulations on these activities or it would be easy for a broker to scam their clients out of their money with backroom deals with this or that third party and create conflict of interests.
Those regulations still allow brokers some freedom in how they run their business, and even require brokers to take actions like this (according to some interpretations). AFAIK, there isn't an SEC regulation requiring all brokers to provide services for every stock. In fact, brokers have limited the buying and selling of stocks in the past, so there is precedent here.
The SEC is also extremely strict about market manipulation, and especially when there's a conflict of interest. RH uses Citadel which had billions of dollars invested into Melvin. RH is saving its partner billions of dollars with this action to the detriment of its actual users.
[deleted]
No they don't. All trading platforms are bound by SEC and federal regulations.
The terms "broker" and"market maker" aren't slang words. There are strict requirements for platforms who do business under these financial titles.
Nah. FINRA and the SEC eat this kind of argument for lunch. It's Robinhood's platform, but they have to follow the law just like anyone else.
"Fair, orderly, and efficient markets" doesn't mean that you take away someone's seat at the table just because he's winning. If it were Pershing Square driving the long side instead of r/WallStreetBets, there's no chance in hell that Goldman (Ackman's PB if I'm not mistaken) would block opening trades.
"Fair, orderly, and efficient markets" doesn't mean that you take away someone's seat at the table just because he's winning. If it were Pershing Square driving the long side instead of r/WallStreetBets, there's no chance in hell that Goldman (Ackman's PB if I'm not mistaken) would block opening trades.
> Legally speaking
Do you actually know the rules? Brokers are highly-regulated, and their job is to give a fair trading platform.
Do you actually know the rules? Brokers are highly-regulated, and their job is to give a fair trading platform.
> Do you actually know the rules?
Brokers have been doing this for decades; it's clearly within the bounds of what they are allowed to do [0]. Maybe this lawsuit can prove that they are conspiring with hedge funds to manipulate the market (which would be illegal), but just this act alone is not illegal.
[0] https://www.cnet.com/personal-finance/robinhood-app-td-ameri...
Brokers have been doing this for decades; it's clearly within the bounds of what they are allowed to do [0]. Maybe this lawsuit can prove that they are conspiring with hedge funds to manipulate the market (which would be illegal), but just this act alone is not illegal.
[0] https://www.cnet.com/personal-finance/robinhood-app-td-ameri...
Short squeezes happen all the time and RH does absolutely nothing about it. The only time they stepped in was when their partner (Citadel) had an investment in a firm that was losing billions of dollars. I think the burden is on them to prove this wasn't manipulation because it's otherwise so blatant.
Except that it is clearly market manipulation.
I believe there will be a big journalist investigation about how some pretty influential investors made Robinhood management do what they did.
Because someone was loosing billions because of it.
Because someone was loosing billions because of it.
Citadel, who is on the losing side of the short GME trade, is who Robinhood sells order flow to. Make of that what you will.
https://finance.yahoo.com/news/citadel-point72-back-melvin-2... (Citadel, Point72 Back Melvin With $2.75 Billion After Losses)
https://www.cnbc.com/2020/08/13/how-robinhood-makes-money-on...
https://finance.yahoo.com/news/citadel-point72-back-melvin-2... (Citadel, Point72 Back Melvin With $2.75 Billion After Losses)
https://www.cnbc.com/2020/08/13/how-robinhood-makes-money-on...
Oof. It looks like a duck, and it is starting to sound like a duck.
I wonder if it's a duck?
I wonder if it's a duck?
Citadel Securities (the market maker that buys and executes Robinhood's order flow) and Citadel (the investment group) are very different companies, and they have a ton of red tape in place to prevent risk of collusion between the two.
Considering Citadel Securities makes _significantly_ more money than Citadel would stand to lose with its short positions, the thought of the two colluding to pressure Robinhood seems a bit far fetched to me.
Considering Citadel Securities makes _significantly_ more money than Citadel would stand to lose with its short positions, the thought of the two colluding to pressure Robinhood seems a bit far fetched to me.
So all it takes for a sound false flag attack conspiracy theory is for some sweeping legislation and some insight into which specific user accounts started this whole ordeal, not too dissimilar from the Capitol invasion and what has followed so far... heck it already seems clear if something isn’t beneficial for the oligarchy the media would bury it very quickly rather than fluffing it up to high heaven!
Where have you read that Citadel has short positions? Buying a portion of Melvin Capital after they suffered big losses is absolutely not the same.
I want to believe this but by and large it seems the media is unsurprisingly siding with the hedge fund side of things. Mainstream media clearly works for the elites.
Always has.
Hard to investigate winks and nods.
I'm pretty sure that Boston Globe's "Spotlight" have heard such opinions many times
And these "influential investors" also coerced Bank of America/Merrill Edge/the other 5 brokerages into implementing the same trading restrictions?
Or, could it possibly be that these institutions implemented trading restrictions to protect their clients from the impending crash?
Or, could it possibly be that these institutions implemented trading restrictions to protect their clients from the impending crash?
Most people claiming that Citadel is pulling the strings seems to be missing the following facts:
- Robinhood was one of many brokerages to implement trading restrictions. e.g. Bank of America/Merrill Edge also shut down buy orders for GME. Citadel does not have the same relationship with these other brokerages. So, to say Robinhood made their decision based on a conflict of interest doesn't hold water.
- Just because Citadel accounts for $xx million of Robinhood revenue, doesn't mean Robinhood stands to lose $xx million if they piss off Citadel. There are plenty of other market makers willing to fulfill Robinhood's orders. Presumably these other market makers would pay slightly less than Citadel, but Robinhood would only stand to lose some small percentage of $xx million.
Putting yourself in Robinhood's shoes, it makes little financial sense to comply with Citadel's demands even if Citadel attempted to coerce them into implementing these trade restrictions.
- Robinhood was one of many brokerages to implement trading restrictions. e.g. Bank of America/Merrill Edge also shut down buy orders for GME. Citadel does not have the same relationship with these other brokerages. So, to say Robinhood made their decision based on a conflict of interest doesn't hold water.
- Just because Citadel accounts for $xx million of Robinhood revenue, doesn't mean Robinhood stands to lose $xx million if they piss off Citadel. There are plenty of other market makers willing to fulfill Robinhood's orders. Presumably these other market makers would pay slightly less than Citadel, but Robinhood would only stand to lose some small percentage of $xx million.
Putting yourself in Robinhood's shoes, it makes little financial sense to comply with Citadel's demands even if Citadel attempted to coerce them into implementing these trade restrictions.
It's always true that the assumed conversations in smokey rooms are inaccurately reported. So sure, nothing about Citadel's role in this story is actually known.
OTOH, in this case, it's genuinely hard to conceive of an alternative story that isn't a cabal story.
Also, in practical terms... most of the action was on robin hood. If other brokers/originators/banks didn't shut down buys then this entire wallstreetbets craziness would flood in their direction.
Q: Did BoM & Merrill Edge shut down trading on #wallstreetbetmadness stocks entirely, or just the buy side? One of the most damning things here is that robinhood only shut down buys. Seems like blatant market manipulation, but I don't really know the rules.
OTOH, in this case, it's genuinely hard to conceive of an alternative story that isn't a cabal story.
Also, in practical terms... most of the action was on robin hood. If other brokers/originators/banks didn't shut down buys then this entire wallstreetbets craziness would flood in their direction.
Q: Did BoM & Merrill Edge shut down trading on #wallstreetbetmadness stocks entirely, or just the buy side? One of the most damning things here is that robinhood only shut down buys. Seems like blatant market manipulation, but I don't really know the rules.
> Genuinely hard
Actually incredibly easy. $GME isn't worth anywhere near $350 or $20B market cap. These people are in a world of hurt when you have WSB spinning stories and encouraging reckless behavior, where some are throwing their last $20,000 into it, which will eventually disappear to $100 unless they passed the buck to some other chump before it all blows up. RH could genuinely believe that the sooner the GME pump stops, the less damage is done to these extremely naive retail investors, because the future naive bagholders flooding in are prevented from throwing their little savings at it.
Brokerage execution halting or not, this story has an incredibly obvious ending, and it's that some WSB pumpers will profit huge, some hedge funds will lose huge, but the majority of WSB will lose immensely.
Actually incredibly easy. $GME isn't worth anywhere near $350 or $20B market cap. These people are in a world of hurt when you have WSB spinning stories and encouraging reckless behavior, where some are throwing their last $20,000 into it, which will eventually disappear to $100 unless they passed the buck to some other chump before it all blows up. RH could genuinely believe that the sooner the GME pump stops, the less damage is done to these extremely naive retail investors, because the future naive bagholders flooding in are prevented from throwing their little savings at it.
Brokerage execution halting or not, this story has an incredibly obvious ending, and it's that some WSB pumpers will profit huge, some hedge funds will lose huge, but the majority of WSB will lose immensely.
OK, I'll play :)
Flesh this story out. Who said this to whom? How did it go from here to a decision to shut down buys (but not sells). This isn't vanguard. It's a daytrading app.
Not to mention that this is near suicidal for robinhood. That's why the Citadel story resonates with people.
The only non-cabal story I can think of (I know I said it was hard, but I thought hard... swear) is that they ran out of cash, or are hedged poorly and trying to trade their way out of a hole. Cabal still seems more likely. I wonder how reliant on Citadel Robinhood is for long tail emergency capital.
Flesh this story out. Who said this to whom? How did it go from here to a decision to shut down buys (but not sells). This isn't vanguard. It's a daytrading app.
Not to mention that this is near suicidal for robinhood. That's why the Citadel story resonates with people.
The only non-cabal story I can think of (I know I said it was hard, but I thought hard... swear) is that they ran out of cash, or are hedged poorly and trying to trade their way out of a hole. Cabal still seems more likely. I wonder how reliant on Citadel Robinhood is for long tail emergency capital.
If RH thought something was fishy, shouldn't they have completely halted GME trading instead of only disabling buys?
Backlash would be even worse. We've already seen a "class action lawsuit" from WSB to Robinhood back in March when RH couldn't execute buy or sell during a few days and people were furious about their options expiring worthless.
People will claim they had no chance to sell GME for $250, after a few days spikes it back down to $20 or so, and they'll claim Robinhood caused them to lose $50k or whatever.
People will claim they had no chance to sell GME for $250, after a few days spikes it back down to $20 or so, and they'll claim Robinhood caused them to lose $50k or whatever.
IDK about that. There's a class action regardless, and (IDK, but seems logical) a market manipulation case as well.
Honestly I don't understand how this is even a question. WTF is supposed to happen to the price of an asset if a big chunk of the owners can only sell.
Honestly I don't understand how this is even a question. WTF is supposed to happen to the price of an asset if a big chunk of the owners can only sell.
It seems obvious that the claimed damages for the class action lawsuit would be much larger if sell orders were blocked. Since we know with certainty price will crash, claimed damages would increase by the share value of shareholders at time of restriction.
Sure. Make sense. There is some precedent for determining damages, and that RH are optimizing for it.
How is this not also market manipulation? Lots/most of the trades on target stocks are trading via RH. RH is restricting the access of buyers, but not sellers. How could this decision not affect/suppress prices.
I will not pretend to guess at potential liabilities of one choice or the other, but the one they made does seem to corrupt the market most.
I guess it's cliche to ask this about a financial scandal but... how is this legal? Can a broker really decide that people can either hold or sell, but not buy a stock?
How is this not also market manipulation? Lots/most of the trades on target stocks are trading via RH. RH is restricting the access of buyers, but not sellers. How could this decision not affect/suppress prices.
I will not pretend to guess at potential liabilities of one choice or the other, but the one they made does seem to corrupt the market most.
I guess it's cliche to ask this about a financial scandal but... how is this legal? Can a broker really decide that people can either hold or sell, but not buy a stock?
> we know with certainty price will crash
I agree, and yet I seriously doubt even 5% of people saying this have opened a short position, e.g. bought puts.
I agree, and yet I seriously doubt even 5% of people saying this have opened a short position, e.g. bought puts.
Well, the far-dated PUT options for GME have almost fully priced in the impending crash at this point. The $320 Jan 2022 PUT price is at $265. I imagine there's still +10% EV at that price, but it's not as compelling as yesterday when it was $240.
1. How likely is it BofA-ML has short positions or investments in funds who do?
2. Isn't Citadel's deal with Robinhood dependent on the flow being "dumb" and not having any broad effect on the market? That's obviously no longer the case, if it ever was. Robinhood is still venture backed, so they're feeling the pressure to show growth in users and profits. Is it possible the market for their "much-less-dumb-than-previously-thought" flow has shrunk substantially?
Also, the retail traders involved and the press surrounding them have (accurately imo) painted this as a populist "sticking it to the elites" movement. What if the so-called elites really do want to disenfranchise and mitigate retail investors impact on the market? BofA, Citadel, and peers might have an interest in maintaining the status quo.
2. Isn't Citadel's deal with Robinhood dependent on the flow being "dumb" and not having any broad effect on the market? That's obviously no longer the case, if it ever was. Robinhood is still venture backed, so they're feeling the pressure to show growth in users and profits. Is it possible the market for their "much-less-dumb-than-previously-thought" flow has shrunk substantially?
Also, the retail traders involved and the press surrounding them have (accurately imo) painted this as a populist "sticking it to the elites" movement. What if the so-called elites really do want to disenfranchise and mitigate retail investors impact on the market? BofA, Citadel, and peers might have an interest in maintaining the status quo.
> Robinhood was one of many brokerages to implement trading restrictions. e.g. Bank of America/Merrill Edge also shut down buy orders for GME. Citadel does not have the same relationship with these other brokerages. So, to say Robinhood made their decision based on a conflict of interest doesn't hold water.
My issue is those brokerages said they were closing orders because of Apex clearing. Robinhood basically said that they chose to do it themselves: https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
My issue is those brokerages said they were closing orders because of Apex clearing. Robinhood basically said that they chose to do it themselves: https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
> Bank of America/Merrill Edge also shut down buy orders for GME.
I heard that Bank of America/Merrill Edge was requiring posting a 100% margin as collateral if wanting to buy GME options. I didn't hear that they shut down buy orders for GME stock.
I heard that Bank of America/Merrill Edge was requiring posting a 100% margin as collateral if wanting to buy GME options. I didn't hear that they shut down buy orders for GME stock.
[deleted]
Absolutely disgusting what Robinhood did.
PR Puff Piece by Robinhood - https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
Keeping people safe from themselves. Stocks where Retail investors are blocked from buying by TD Ameritrade, Robinhood, etc. yet hedge funds and others are free to continue...
Just yesterday Discord bans the WallStreetBets community.
Note: I held a few positions in some of these volatile stocks
PR Puff Piece by Robinhood - https://blog.robinhood.com/news/2021/1/28/keeping-customers-...
Keeping people safe from themselves. Stocks where Retail investors are blocked from buying by TD Ameritrade, Robinhood, etc. yet hedge funds and others are free to continue...
Just yesterday Discord bans the WallStreetBets community.
Note: I held a few positions in some of these volatile stocks
> Our mission at Robinhood is to democratize finance for all.
Sounds great!
> Amid significant market volatility, it’s important as ever that we help customers stay informed.
Excellent, thanks for the information.
> We fundamentally believe that everyone should have access to financial markets.
so......
> we are restricting transactions for certain securities to position closing only
:/
Sounds great!
> Amid significant market volatility, it’s important as ever that we help customers stay informed.
Excellent, thanks for the information.
> We fundamentally believe that everyone should have access to financial markets.
so......
> we are restricting transactions for certain securities to position closing only
:/
Discord has had significant investment from FirstMark Capital, Greenoaks Capital Partners, Index Ventures, IVP, Greylock Partners, Benchmark, Accel, General Catalyst, Ridge Ventures, Spark Capital, and Tencent Holdings. How much you want to bet they also involve with the hedge funds?
I can tell you with some confidence that no partner at any of those funds could care less what some public market long/short outfit thinks and vice versa. Both of these groups of people invest money and that's about where the similarity ends.
Exactly. Trading halted when it was going up. But no problem letting it plummet down to 112 earlier when most could only sell.
There is a fantastic quote in the comments:
>> The ones with laughably ironic names. “Robinhood” working for the rich to spite the poor.
I find this whole drama bizarre. I suspect there is going to be a huge pile of shattered portfolios at the end of this mess.
>> The ones with laughably ironic names. “Robinhood” working for the rich to spite the poor.
I find this whole drama bizarre. I suspect there is going to be a huge pile of shattered portfolios at the end of this mess.
One can simultaneously find this whole thing pretty popcorn-worthy while hoping not too many people end up seriously screwing up their lives over it.
Indeed. Exactly this.
There is a situation where retail investors don't get utterly screwed but that is a fine edge and on either side of it, thousands of them get screwed.
There is a situation where retail investors don't get utterly screwed but that is a fine edge and on either side of it, thousands of them get screwed.
Yup. And it’ll be a bunch of people that can’t afford to lose the money
I agree. The ultimate irony is that their mission is to democratize finance.
Robinhood's mission is to gamify day trading. Don't let the pretty mission statements obfuscate the truth.
Correct - Robinhood's _marketing_ was "we'll democratize finance".
Robinhood's _purpose_ was to sell order-flow information to the hedge funds. Retail investors were never the customer, always the product.
This is like a mouse complaining about the "irony" of a mousetrap abandoning its mission of cheese-distribution.
Robinhood's _purpose_ was to sell order-flow information to the hedge funds. Retail investors were never the customer, always the product.
This is like a mouse complaining about the "irony" of a mousetrap abandoning its mission of cheese-distribution.
Like Facebook and Google's users, Robinhood's clients are the product. They've now learned that truth the hard way.
Seems like a game to me.
A system is what it does, not a set of mission statements.
Unless you are going to win at rich people's expense
> The ultimate irony is that their mission is to demon-atize finance.
The above is what I read at first glance which seemed appropriate.
The above is what I read at first glance which seemed appropriate.
Hardly the first time in startup history, sadly.
After Melvin Capital loses billions with their naked shorts, Citadel and other hedge funds short selling take over to pulls the strings from underneath some trading apps, including Robinhood.
Will be interesting to see where this lawsuit will go, since it looks like a clear coordinated manipulation of heavily shorted stocks and blocking everyone else from buying them.
Rigged from the beginning. But we'll see what happens with this lawsuit.
I guess someone is only letting the hedge funds trade rather than their own customers. [0]
[0] https://twitter.com/RobinhoodApp/status/712708069369782272
Will be interesting to see where this lawsuit will go, since it looks like a clear coordinated manipulation of heavily shorted stocks and blocking everyone else from buying them.
Rigged from the beginning. But we'll see what happens with this lawsuit.
I guess someone is only letting the hedge funds trade rather than their own customers. [0]
[0] https://twitter.com/RobinhoodApp/status/712708069369782272
> Melvin Capital loses billions with their naked shorts, Citadel and other hedge funds short selling
Citadel has no short positions to speak of in GameStop. They bailed out Melvin, which means they made money, not Melvin's positions per se. Also, by the time that happened Melvin had already closed out its short [1].
The conspiracy hypothesis might have legs if Citadel's asset management and market making arms colluded. Absent evidence, however, it's a suspicion at best.
Robinhood is between a rock and a hard place of its own making. Market makers stopped making markets in an increasingly-volatile stock. Robinhood, having relied on market makers for execution, likely has sub-par exchange connections, so their execution quality started degrading.
They're also staring down almost-guaranteed lawsuits regardless of what they do. If they badly execute, lawsuit. When the bubble pops, lawsuit for having been induced to trade through their gameified UI. If they block, lawsuit for interfering with trading.
[1] https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddi...
Citadel has no short positions to speak of in GameStop. They bailed out Melvin, which means they made money, not Melvin's positions per se. Also, by the time that happened Melvin had already closed out its short [1].
The conspiracy hypothesis might have legs if Citadel's asset management and market making arms colluded. Absent evidence, however, it's a suspicion at best.
Robinhood is between a rock and a hard place of its own making. Market makers stopped making markets in an increasingly-volatile stock. Robinhood, having relied on market makers for execution, likely has sub-par exchange connections, so their execution quality started degrading.
They're also staring down almost-guaranteed lawsuits regardless of what they do. If they badly execute, lawsuit. When the bubble pops, lawsuit for having been induced to trade through their gameified UI. If they block, lawsuit for interfering with trading.
[1] https://www.cnbc.com/2021/01/27/hedge-fund-targeted-by-reddi...
Thank you for being a voice of reason. The speed at which the "wall street cabal is pulling strings and hurting the little guy!" conspiracies erupted was breathtaking.
It's a few short sellers who got wrecked. The rest of the institutional guys are fine and don't care about this except for how much money they're making.
It's a few short sellers who got wrecked. The rest of the institutional guys are fine and don't care about this except for how much money they're making.
> The rest of the institutional guys are fine
Yes, that must be why trades are restricted, wsb got infested with bots and banned from discord, and the media is in full shit flinging mode against wsb.
Yes, that must be why trades are restricted, wsb got infested with bots and banned from discord, and the media is in full shit flinging mode against wsb.
>>The rest of the institutional guys are fine and don't care about this except
I have been in frequent touch with my wall street friends. Many are "fine" and the general feeling is that long term this will get sorted out, but many of them took some hits and are watching this very carefully. Many firms had to move out of long positions to get capital, so this had trickle down effects elsewhere in the market.
Things that undermine the credibility of the market and bring congressional oversight hearings into the conversation aren't just being ignored.
Even they agree, it feels like "something is off" but who might be doing bad things is still unclear to everyone, even guys I know with 15+ years in the industry.
I have been in frequent touch with my wall street friends. Many are "fine" and the general feeling is that long term this will get sorted out, but many of them took some hits and are watching this very carefully. Many firms had to move out of long positions to get capital, so this had trickle down effects elsewhere in the market.
Things that undermine the credibility of the market and bring congressional oversight hearings into the conversation aren't just being ignored.
Even they agree, it feels like "something is off" but who might be doing bad things is still unclear to everyone, even guys I know with 15+ years in the industry.
No one remembers that most short positions are actually held by retail investors. I myself regularly take short positions.
The reason trading was stopped is that if a stock price suddenly gaps then the retail investors can lose more money than they have in their accounts. Then the brokerage or their clearing firm have to take the losses. They are not willing to do so, so they stop allowing trading. The brokerages are not somehow colluding to make hedge funds money, they are just trying to make sure that they do not lose money themselves.
The reason trading was stopped is that if a stock price suddenly gaps then the retail investors can lose more money than they have in their accounts. Then the brokerage or their clearing firm have to take the losses. They are not willing to do so, so they stop allowing trading. The brokerages are not somehow colluding to make hedge funds money, they are just trying to make sure that they do not lose money themselves.
But trading wasn't stopped. Avenues for non-professional investors to continue buying shares were cut off. They were still allowed to sell shares as desired.
I don't really have an opinion on whether the GME thing is a pump and dump scam, or a real opportunity to enforce a classic "The market can remain irrational longer than you can remain solvent" lesson to those shorting these stocks.
But I do have a real issue with removing just the "buy" side of the equation. Price is always a function of supply and demand, and I don't understand how anyone could justify halting just buy orders. The obvious impact of artificially reduced demand is that the price will drop.
Further - if this price drop was designed to protect these firms from possible losses (and I don't really care whether that loss was by allowing unvetted shorts by investors who don't have the capital to cover, or whether it was collusion to protect other parties) then I still don't see how you can reasonably come to a conclusion that looks good for these firms here - They're manipulating stock prices to avoid losses.
I don't really have an opinion on whether the GME thing is a pump and dump scam, or a real opportunity to enforce a classic "The market can remain irrational longer than you can remain solvent" lesson to those shorting these stocks.
But I do have a real issue with removing just the "buy" side of the equation. Price is always a function of supply and demand, and I don't understand how anyone could justify halting just buy orders. The obvious impact of artificially reduced demand is that the price will drop.
Further - if this price drop was designed to protect these firms from possible losses (and I don't really care whether that loss was by allowing unvetted shorts by investors who don't have the capital to cover, or whether it was collusion to protect other parties) then I still don't see how you can reasonably come to a conclusion that looks good for these firms here - They're manipulating stock prices to avoid losses.
Short squeezes are illegal according to the SEC. WSB shows many people clearly collaborating to create a short squeeze, example - https://www.reddit.com/r/wallstreetbets/comments/l594yg/gme_....
Robinhood would have legal liability for aiding and abetting an illegal short squeeze had they continued.
Robinhood would have legal liability for aiding and abetting an illegal short squeeze had they continued.
Short squeezes are absolutely not illegal - They're a natural property of how the investment vehicle operates when the price of shares spikes.
The illegal part is a scheme to collude and manipulate the availability or price of the stock to intentionally cause a short squeeze. I'm not entirely sure I agree with you that posts like that are "collusion" (Cornell def here is interesting as a refresher - https://www.law.cornell.edu/wex/collusion), but I can certainly concede there's plenty of shades of gray here.
The illegal part is a scheme to collude and manipulate the availability or price of the stock to intentionally cause a short squeeze. I'm not entirely sure I agree with you that posts like that are "collusion" (Cornell def here is interesting as a refresher - https://www.law.cornell.edu/wex/collusion), but I can certainly concede there's plenty of shades of gray here.
nawgz(3)
>The conspiracy hypothesis might have legs if Citadel's asset management and market making arms colluded. Absent evidence, however, it's a suspicion at best.
Yeah, uh, they do that all the fucking time. It's a Soviet fiction that they keep a firewall between those two businesses.
Yeah, uh, they do that all the fucking time. It's a Soviet fiction that they keep a firewall between those two businesses.
The thing that confuses me most here is what legal grounds does this proposed suit actually have to stand on? I've not read RH's terms of service, but I'd be surprised if whatever terms it laid out didn't basically have a fuck-you clause in it that would throw out any contract violation suit. Additionally, I'm not sure if there is actually a private cause of action to sue someone for alleged market manipulation (not that I believe the allegations here).
Financial institutions are generally very tightly regulated. A lot of things are set by law, not contract. I have no particular knowledge in this domain, but I am sure we all will learn more about when the law ends and discretion begins by following the news about this lawsuit.
How come they only had trouble executing buy GME orders? Honestly I hope RH is burned to the ground after giving up whoever coerced them into doing this.
> How come they only had trouble executing buy GME orders?
I used to be an options market maker. Different animal same game park.
If I saw a stock doing what GameStop is doing, I'd pull the plug. One, we'd have already made a ton of money on it. More importantly, with this kind of volatility (and correlation), we'd be well outside the parameters of our risk models.
Usually, cash equities don't have this problem. But there is a realistic chance that a desk will fill a bunch of sells, turn around, and within those microseconds watch the market gap down 50%.
It's unlikely. But how unlikely? We don't know. We're too correlated, and too volatile, to predict that. You do something like that, particularly after the amount of press coverage this is getting, you are going to lose your job.
> I hope RH is burned to the ground after giving up whoever coerced them into doing this
Between the gameified UI that encouraged day trading, their reliance on payment for order flow and margin-lending / options trading model, I won't say this was bound to happen. But it was an identifiable risk.
The warning signs were clear when their systems went offline under large volumes. Concerns were dismissed then. I expect this will be forgotten by much of their user base soon enough as well.
I used to be an options market maker. Different animal same game park.
If I saw a stock doing what GameStop is doing, I'd pull the plug. One, we'd have already made a ton of money on it. More importantly, with this kind of volatility (and correlation), we'd be well outside the parameters of our risk models.
Usually, cash equities don't have this problem. But there is a realistic chance that a desk will fill a bunch of sells, turn around, and within those microseconds watch the market gap down 50%.
It's unlikely. But how unlikely? We don't know. We're too correlated, and too volatile, to predict that. You do something like that, particularly after the amount of press coverage this is getting, you are going to lose your job.
> I hope RH is burned to the ground after giving up whoever coerced them into doing this
Between the gameified UI that encouraged day trading, their reliance on payment for order flow and margin-lending / options trading model, I won't say this was bound to happen. But it was an identifiable risk.
The warning signs were clear when their systems went offline under large volumes. Concerns were dismissed then. I expect this will be forgotten by much of their user base soon enough as well.
Honest question, why should market making organizations be allowed to take the upsides involved in their position but be able to avoid the downsides by just not doing the job they signed up for when they feel the risk is too high? The argument for why we allow these organizations to siphon money as a middle man is because they provide an important service and are taking on risk. But if they're allowed to bail when things actually get risky that's a lie and they're just leeching money. You made the analogy that their job is like vacuuming nickels in front of bulldozers in another thread, but if they can just leave when the bulldozers show up what they're actually doing is just vacuuming free nickels that other people dropped.
I know its pretty clear my current personal opinions on this topic lean rather hard in one direction but I am truly open to hearing the counter argument and could be convinced otherwise. Some of your posts here and in other threads have changed my view on other parts of this whole mess already so I'm asking because it seems like you're willing to discuss sanely.
I know its pretty clear my current personal opinions on this topic lean rather hard in one direction but I am truly open to hearing the counter argument and could be convinced otherwise. Some of your posts here and in other threads have changed my view on other parts of this whole mess already so I'm asking because it seems like you're willing to discuss sanely.
> why should market making organizations be allowed to take the upsides involved in their position but be able to avoid the downsides by just not doing the job they signed up for when they feel the risk is too high?
This is a great question.
Short answer: they shouldn't. When a market maker signs up to make markets on an exchange, they commit–contractually–to providing quotes in good times and bad. Payment for order flow contracts can vary, and I don't know what Robinhood's terms are, but they typically carry a similar requirement.
There are reasonable exceptions. If your systems are having issues with a stock, e.g. the intern entered a dividend wrong into the database, you can declare "self help" and stop quoting for some time. This is occasionally abused. But exchanges are decent at policing it.
In this case, though, yes--a lot of market makers made a ton of money, got scared, shrugged and then put their hands up. (Again, caveated to Robinhood's agreements.) Fortunately for them, the crowd has been distracted by this Ken Griffin called Robinhood to screw over /r/wsb story, so they won't get much more than a slap on the wrist.
This is a great question.
Short answer: they shouldn't. When a market maker signs up to make markets on an exchange, they commit–contractually–to providing quotes in good times and bad. Payment for order flow contracts can vary, and I don't know what Robinhood's terms are, but they typically carry a similar requirement.
There are reasonable exceptions. If your systems are having issues with a stock, e.g. the intern entered a dividend wrong into the database, you can declare "self help" and stop quoting for some time. This is occasionally abused. But exchanges are decent at policing it.
In this case, though, yes--a lot of market makers made a ton of money, got scared, shrugged and then put their hands up. (Again, caveated to Robinhood's agreements.) Fortunately for them, the crowd has been distracted by this Ken Griffin called Robinhood to screw over /r/wsb story, so they won't get much more than a slap on the wrist.
I take it then that you think this is nonsense:
https://twitter.com/justinkan/status/1354853920762253315
?
https://twitter.com/justinkan/status/1354853920762253315
?
Not necessarily. But it's ambiguous.
If Ken Griffin put in GME shorts before ordering his market making desks to quit in it, yes, that would be criminal.
If a fund manager bought puts a few hours before the market makers put up a white flag, I'd want a thorough investigation to rule out collusion. But by itself, suspicious--nothing more. If a long-short value fund bought puts based on an algorithm keyed in months ago before market makers fled the scene, it's almost certainly innocuous.
And if the options desk was hedging the puts they just sold by selling short while the cash equities desk called it quits on the name, that would be perfectly normal.
If Ken Griffin put in GME shorts before ordering his market making desks to quit in it, yes, that would be criminal.
If a fund manager bought puts a few hours before the market makers put up a white flag, I'd want a thorough investigation to rule out collusion. But by itself, suspicious--nothing more. If a long-short value fund bought puts based on an algorithm keyed in months ago before market makers fled the scene, it's almost certainly innocuous.
And if the options desk was hedging the puts they just sold by selling short while the cash equities desk called it quits on the name, that would be perfectly normal.
I am sorry, can you explain again why MM's would only pull out of selling GME? Because RH only stopped people from buying GME.
> why MM's would only pull out of selling GME? Because RH was still allowing buys.
Market makers typically would pull out of the name, not out of one side.
My guess is Robinhood didn't want people opening new positions--long or short--in the name. Blocking people from selling an asset you sold them raises all sorts of issues. But denying them the ability to enter into a new position through your services is on more-stable ground.
Market makers typically would pull out of the name, not out of one side.
My guess is Robinhood didn't want people opening new positions--long or short--in the name. Blocking people from selling an asset you sold them raises all sorts of issues. But denying them the ability to enter into a new position through your services is on more-stable ground.
Thanks for the clarification.
>Citadel has no short positions to speak of in GameStop. They bailed out Melvin, which means they made money, not Melvin's positions per se. Also, by the time that happened Melvin had already closed out its short.
You have made these claims dozens of times today without citing sources. Are you spreading insider information, lying, or just incredibly lazy and don't care if people believe you?
You have made these claims dozens of times today without citing sources. Are you spreading insider information, lying, or just incredibly lazy and don't care if people believe you?
Lazy and don't care if people believe me. I'm commenting on HN. I have zero horses in this race beyond entertainment.
Added source for Melvin Capital making public statements on its short position. They could be lying. But then that's securities fraud.
Added source for Melvin Capital making public statements on its short position. They could be lying. But then that's securities fraud.
Just going by the numbers, wouldn't we have seen much more volume if they had actually closed out their position?
> wouldn't we have seen much more volume if they had actually closed out their position?
More than what? GameStop was the most traded stock in the country for a few days.
More than what? GameStop was the most traded stock in the country for a few days.
The SEC fine / lawsuits for that lie are very low relative to what they'd lose on those short positions.
> SEC fine / lawsuits for that lie are very low
Intentionally making unambiguously false, material and self-serving public statements like that is well beyond fine and lawsuit territory.
Intentionally making unambiguously false, material and self-serving public statements like that is well beyond fine and lawsuit territory.
They kept it ambiguous, did they not?
Why would they bother to make such statements early in the AM if they had actually closed out their shorts?
They said before they do not comment on their positions. Why would they do so now if it wasn't a serious situation?
Why would they bother to make such statements early in the AM if they had actually closed out their shorts?
They said before they do not comment on their positions. Why would they do so now if it wasn't a serious situation?
> They kept it ambiguous, did they not?
"We have closed out our position in GME (GameStop)" isn't ambiguous.
> Why would they bother to make such statements early in the AM if they had actually closed out their shorts?
Most likely: Citadel required them to. The bailout was going to be announced. Citadel didn't want informed observers speculating on whether Citadel had just ponied up to an unhedged falling knife.
Otherwise, Melvin is a hedge fund. Its LPs are nervous, and assuring them the worst is over could sow doubt in would-be defectors. This could also be done by way of confidential notice, however, so on its own it isn't enough. The other factor is, perhaps, to get the people prank calling and such off their backs. That was a stated factor for Left at Citron.
"We have closed out our position in GME (GameStop)" isn't ambiguous.
> Why would they bother to make such statements early in the AM if they had actually closed out their shorts?
Most likely: Citadel required them to. The bailout was going to be announced. Citadel didn't want informed observers speculating on whether Citadel had just ponied up to an unhedged falling knife.
Otherwise, Melvin is a hedge fund. Its LPs are nervous, and assuring them the worst is over could sow doubt in would-be defectors. This could also be done by way of confidential notice, however, so on its own it isn't enough. The other factor is, perhaps, to get the people prank calling and such off their backs. That was a stated factor for Left at Citron.
I don’t think people really understand how Citadel’s internal structure works. It’s not just one mustache twirling villain, deciding what to do.
The market making unit is in a totally different part of the org chart, with its own PnL lines, than the hedge fund. In fact Citadel Securities is a separate company than Citadel Investments.
But most importantly there’s a legally mandated Chinese firewall between the two. Employees on one side are not allowed to discuss operations with employees on the other. This is enforced to the extent, that an employees access card won’t let them enter the other side of the division.
Citadel makes a shit ton of money as it is. Nobody there is going to risk major jail time with an easy to unravel scheme involving dozens of co-conspirators, just to make a few extra bucks on a tiny short position.
The market making unit is in a totally different part of the org chart, with its own PnL lines, than the hedge fund. In fact Citadel Securities is a separate company than Citadel Investments.
But most importantly there’s a legally mandated Chinese firewall between the two. Employees on one side are not allowed to discuss operations with employees on the other. This is enforced to the extent, that an employees access card won’t let them enter the other side of the division.
Citadel makes a shit ton of money as it is. Nobody there is going to risk major jail time with an easy to unravel scheme involving dozens of co-conspirators, just to make a few extra bucks on a tiny short position.
I don't know for sure but I don't think there needs to be a chinese firewall between the two like at banks. Banks investment banking and advisory divsiions have access to insider information by the nature of their work, which is why the chinese firewall exists between them and the sales and trading desk. Citadel is a hedge fund, however that uses only public information (presumptively, as otherwise would be illegal) so i don't think there's a reason why they would need to be firewalled off. Also Citadel does use Citadel Securities for execution.
Additionally, they're both owned (mostly) by Ken, who is know for being a bit "detailed" (to put it nicely) when it comes to his businesses. He almost certainly has live second by second pnl updates for all parts of all of his business, he almost certainly was the one who made the decision to invest 1.4+ bn into Melvin, and he almost certainly knows that retail flow (esp robhinood) is a huge part of citadel securities business.
Honestly I think reddit has some grounds for a case here, but IANAL.
Additionally, they're both owned (mostly) by Ken, who is know for being a bit "detailed" (to put it nicely) when it comes to his businesses. He almost certainly has live second by second pnl updates for all parts of all of his business, he almost certainly was the one who made the decision to invest 1.4+ bn into Melvin, and he almost certainly knows that retail flow (esp robhinood) is a huge part of citadel securities business.
Honestly I think reddit has some grounds for a case here, but IANAL.
This is weasel crap, and pretending that separation is meaningful is one of the reasons people hate legalese smoke and mirrors. All it takes is someone near the top of the org to send some messages, and you don't have to be in the same room to do it. The financial world pretends this crap works because otherwise they'd be rightfully pilloried for exactly the kind of shit that is happening right now.
Citadel, Point72 to Invest $2.75 Billion Into Melvin Capital Management - 3 days ago [0]
[0] https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...
[0] https://www.wsj.com/articles/citadel-point72-to-invest-2-75-...
With Citadel as a large market maker I would think Robinhood likely has a financial conflict of interest with them with respect to their customers, selling Citadel "dumb flow" (and now, depending on how you look at it, lobotomizing the flow).
It's a different Citadel, from here: https://www.theverge.com/22251427/reddit-gamestop-stock-shor...
At least one Wall Street firm has taken heavy losses — Melvin Capital Management, which was shorting GameStop, among other bets. It’s been bailed out by Citadel, which, confusingly, is not the same thing as Citadel Securities. (Citadel is a hedge fund, not a market maker.)
At least one Wall Street firm has taken heavy losses — Melvin Capital Management, which was shorting GameStop, among other bets. It’s been bailed out by Citadel, which, confusingly, is not the same thing as Citadel Securities. (Citadel is a hedge fund, not a market maker.)
It's a ""different"" Citadel only in the twisted sort of logic lawyers are hated for. They're operated by the same people and have the same name.
It's the same Citadel, just different legal entities.
I'm pretty sure you're wrong about this and this isn't 'naked shorting'.
I have pretty low confidence in the detailed specifics here, but I saw some discussion on Twitter that naked shorting being legal could have actually prevented the squeeze we're seeing. [0]
The reason for the extra >100% has to do with how the stock lending works (Matt Levine wrote a bit about this recently). [1] Quoted below.
--
"This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine."
--
I still think what Robinhood did here is both wrong and a stupidly short-sighted that will damage their brand, but there's so much over confident misinformation about what's happening surrounding this that it makes it harder to understand.
The NYT is no better - another dumb Taylor Lorenz article got less right than most random Twitter threads.
[0]: https://twitter.com/simoj_/status/1354664677364609026
[1]: https://www.bloomberg.com/news/newsletters/2021-01-25/money-...
I have pretty low confidence in the detailed specifics here, but I saw some discussion on Twitter that naked shorting being legal could have actually prevented the squeeze we're seeing. [0]
The reason for the extra >100% has to do with how the stock lending works (Matt Levine wrote a bit about this recently). [1] Quoted below.
--
"This does not necessarily mean a lot of people are doing evil illegal nefarious naked shorting! Really, I promise! There is no special limit on shorting at 100% of shares outstanding! Here is an explanation of how options market makers (discussed below) are allowed to short without a locate, but I want to offer an even simpler explanation. There are 100 shares. A owns 90 of them, B owns 10. A lends her 90 shares to C, who shorts them all to D. Now A owns 90 shares, B owns 10 and D owns 90—there are 100 shares outstanding, but 190 shares show up on ownership lists. (The accounts balance because C owes 90 shares to A, giving C, in a sense, negative 90 shares.) Short interest is 90 shares out of 100 outstanding. Now D lends her 90 shares to E, who shorts them all to F. Now A owns 90, B 10, D 90 and F 90, for a total of 280 shares. Short interest is 180 shares out of 100 outstanding. No problem! No big deal! You can just keep re-borrowing the shares. F can lend them to G! It's fine."
--
I still think what Robinhood did here is both wrong and a stupidly short-sighted that will damage their brand, but there's so much over confident misinformation about what's happening surrounding this that it makes it harder to understand.
The NYT is no better - another dumb Taylor Lorenz article got less right than most random Twitter threads.
[0]: https://twitter.com/simoj_/status/1354664677364609026
[1]: https://www.bloomberg.com/news/newsletters/2021-01-25/money-...
Obviously it should be illegal to lend the same shares out multiple rounds. If it's not, that's an absurd hole in the regulation.
A owns 90 shares, B owns 10. A lends 90 shares to C who sells them to D. D lends 90 shares to C who sells them to E. E lends 90 shares to C who sells them to F...
C in this hypothetical is borrowing and selling the same shares over and over again to various 3rd parties. Shorting the same shares twice is truly naked short selling.
If there's three people in a room, and only one pair of pants, what would you call it?
A owns 90 shares, B owns 10. A lends 90 shares to C who sells them to D. D lends 90 shares to C who sells them to E. E lends 90 shares to C who sells them to F...
C in this hypothetical is borrowing and selling the same shares over and over again to various 3rd parties. Shorting the same shares twice is truly naked short selling.
If there's three people in a room, and only one pair of pants, what would you call it?
There's no problem with shorting multiple times - you simply have to be trusted to pay up the time comes. It's easy to do.
Suppose there is 1 share in existence, A promises to sell it to B and to C if price reaches X. If price gets there, A is on the hook to pay up. So now A has to buy the share if not held, or have it already. A sells out to B, fulfilling the contract to B. Now A needs that share again, so has to offer B a price to buy it, and does so. Now A closes out with C.
It's vastly easier when there's lots of shares, because it's easier to find a seller each time you have to close out multiple contracts.
This is done in pretty much every part of the economy. When you put money in a bank, it can be lent. Now the bank has a debt (to you) and an asset (money owed to them by the lendee) that balance. That lendee can also lend the same money, again incurring a matching debt and asset.
None of this is voodoo back market evil. It's common sense used to allocate resources, has been done for millennia in many forms.
It's funny watching naive traders get upset over it simply because they don't understand how their own markets work. It will be funny and sad watching them learn even more about how markets work in the coming days.
Suppose there is 1 share in existence, A promises to sell it to B and to C if price reaches X. If price gets there, A is on the hook to pay up. So now A has to buy the share if not held, or have it already. A sells out to B, fulfilling the contract to B. Now A needs that share again, so has to offer B a price to buy it, and does so. Now A closes out with C.
It's vastly easier when there's lots of shares, because it's easier to find a seller each time you have to close out multiple contracts.
This is done in pretty much every part of the economy. When you put money in a bank, it can be lent. Now the bank has a debt (to you) and an asset (money owed to them by the lendee) that balance. That lendee can also lend the same money, again incurring a matching debt and asset.
None of this is voodoo back market evil. It's common sense used to allocate resources, has been done for millennia in many forms.
It's funny watching naive traders get upset over it simply because they don't understand how their own markets work. It will be funny and sad watching them learn even more about how markets work in the coming days.
Banks are legally permitted to lend (create) money with less than 100% reserves. That’s the whole intent.
Whereas in public markets, a random hedge fund should not be able to essentially issue new shares / increase the float.
My point is simply a ban on “naked shorting” is obviously useless if you allow chain lending, therefore a ban on naked shorting implies a ban on chain lending.
Whereas in public markets, a random hedge fund should not be able to essentially issue new shares / increase the float.
My point is simply a ban on “naked shorting” is obviously useless if you allow chain lending, therefore a ban on naked shorting implies a ban on chain lending.
There is no ban on what was done. You don't understand the SEC regulations on naked short selling, which specifically allow the fund activity on GME.
As you wrote, the rules were created because this activity is the whole intent.
Go carefully read the SEC rules regarding this, specifically the exemptions which are written in law.
As I posted above, there is nothing illegal, immoral, evil, or deceptive about these practices. It's only when people don't understand the rules and most importantly why the rules are what they are that those people get upset.
It's like watching natives throw rocks at the moon to scare it off.
As you wrote, the rules were created because this activity is the whole intent.
Go carefully read the SEC rules regarding this, specifically the exemptions which are written in law.
As I posted above, there is nothing illegal, immoral, evil, or deceptive about these practices. It's only when people don't understand the rules and most importantly why the rules are what they are that those people get upset.
It's like watching natives throw rocks at the moon to scare it off.
I don't think that Robinhood had any other choice here. Their partner is Citadel, which is basically a "middleman" broker. Citadels main business is this, for every incoming stock purchase, they buy stock at an amount that is just slightly lower, driving up the stock price a tiny bit, and then sell the stock to the buyer, pocketing the difference. They can do this because they have direct access to the stock market and are fully autonated. Robinhoods access to the stock market is also through Citadel. Citadel also bailed out the Melvin Capital hedge fund earlier this week.
I would imagine that Citadel can simply force one of their partners like Robinhood to do anything by threatening to cut them off from the market entirely.
I think their main goal now is to make sure that the lawsuits and fines they will be hit with will cause them to loose less than a short squeeze in this stock would eventually have.
But all of this is just speculation. I don't actually know anything about the stock market, I started reading about it two days ago. I don't want to "conspire" or anything like that, just my theory.
I would imagine that Citadel can simply force one of their partners like Robinhood to do anything by threatening to cut them off from the market entirely.
I think their main goal now is to make sure that the lawsuits and fines they will be hit with will cause them to loose less than a short squeeze in this stock would eventually have.
But all of this is just speculation. I don't actually know anything about the stock market, I started reading about it two days ago. I don't want to "conspire" or anything like that, just my theory.
I don't see how Citadel can force them into that when that will be much more clearly market manipulation.
Though at any rate, I am not convinced Citadel had much of a stake at this point - Melvin had supposedly closed its shorts and the current short sellers were very possibly different actors.
Though at any rate, I am not convinced Citadel had much of a stake at this point - Melvin had supposedly closed its shorts and the current short sellers were very possibly different actors.
Nobody needs to "force" anyone to do anything. Money works great as a motivator.
Well the RH decision may have been more reasonable than I thought (and have to do with clearing house details I didn’t understand) - just communicated terribly: https://marginalrevolution.com/marginalrevolution/2021/01/wh...
It isn't going to just damage their brand -- Robin Hood the blockbuster business is basically over. They will never recover from this.
Amusingly, them blowing up Robin Hood made me put up an order for $GME. If their position is so valuable that Citadel would destroy a business worth billions, then I am convinced this is an amazing speculative play.
Amusingly, them blowing up Robin Hood made me put up an order for $GME. If their position is so valuable that Citadel would destroy a business worth billions, then I am convinced this is an amazing speculative play.
For what is worth, people said very similar things during RH's infinite money glitch fiasco and everyone basically forgot about it by now.
I'd guess the truth is dumber here than you think.
How do I short Robinhood stock?
It's probably purely a math question -- what's cheaper impending lawsuit (we can settle) or losing our trade?
My theory is that no market makers want to buy the orders Robinhood is selling anymore.
Yeah the whole point of selling your orders is that retail traders are mostly "uninformed" and likely won't move the market. WSB basically showed that's not always the case.
Not that I agree with it, but one of the talking heads on Fox Business was blabbering on about how retails investors should not be allowed to move the market because they're are unlicensed and don't understand the implications of their actions, hah.
we only allow mindful criminals, not newbs
I think there's something to that though. Whats to stop big firms from posing as many retail investors if there's no regulation against that class of investor manipulating the market?
I don't have the answer but its something to think about.
I don't have the answer but its something to think about.
That makes no sense though. It's like arguing what if someone uses a car to commit a murder while pretending to drive it normally.
The answer is the same in both cases, law enforcement needs to investigate and catch it. If they can't, too bad, there are a lot of undetected crimes in the world, doesn't mean that we have to prohibit normal activities to stop them at any cost.
The answer is the same in both cases, law enforcement needs to investigate and catch it. If they can't, too bad, there are a lot of undetected crimes in the world, doesn't mean that we have to prohibit normal activities to stop them at any cost.
I think its more like suggesting private drivers might need a driver license as well even if most drivers plan to drive legally.
Are you suggesting the licensing and regulation does nothing? Do you think the big firms should be treated the same way as retail investors because crimes will be caught either way?
I'm in no way a proponent of big firms but I think its important to think about what kind of under regulated trades are happening.
Are you suggesting the licensing and regulation does nothing? Do you think the big firms should be treated the same way as retail investors because crimes will be caught either way?
I'm in no way a proponent of big firms but I think its important to think about what kind of under regulated trades are happening.
many small coordinated investment to hide a large movement are already illegal
I'm not sure about that. Higher end trading platforms have automated buy strategies that spread the bids across time so as not to cause the market to spike.
Yes, but the licensing makes it easier for regulators to regulate, no? Why need a license for anything if they have no regulatory advantage?
It would not be difficult, or unconstitutional, for Congress to pass a law restricting the trades that non-accredited investors are allowed to make.
They do that already. The "public" markets are the stocks that non-accredited investors are allowed to trade.
So you’re saying the house caught you catching cards? :p
I would like to think if they lost the lawsuit they would get fined by the SEC of a fine more than what they would have lost. But, it'll probably less so from a maths point of view it's best to break the law.
"If the penalty for a crime is a fine, then that law only exists for the lower class."
- Final Fantasy Tactics
- Final Fantasy Tactics
True, there needs to be an SEC investigation and jail time.
If the claims of this guy: https://twitter.com/justinkan/status/1354853920762253315 are true, I find this might be quite possible.
Jail time. I'm laughing. No one will go to prison over RH temporarily prohibiting its users from placing buy orders on a few particular stocks due to collective market manipulation through social media. There is nothing illegal about RH's actions, despite the faux outrage.
"Collective Market Manipulation" so ... that is what we are calling buying stocks now?
No... Collective market manipulation is what we are calling thousands of people reading the threads on wallstreetbets and hyping stocks with one another.
If RH signaled to its hedge fund investors that it would be making this change in advance and those funds entered into new short positions with that information, would that open both parties up to additional liability?
I believe so, and someone says that’s what happened. https://twitter.com/justinkan/status/1354853920762253315
someone says that’s what happened
Well, if someone said something on the internet, then it must be true!
Well, if someone said something on the internet, then it must be true!
https://www.warren.senate.gov/newsroom/press-releases/senato...
https://twitter.com/AOC/status/1354830697459032066
What about regulations?
https://twitter.com/AOC/status/1354830697459032066
What about regulations?
That statement calls for "the SEC and other financial regulators to wake up and do their jobs". If this were about solving the problem rather than scoring points she would have left a clue to what she thought their job was in this case. There isn't one. She can't be so oblivious as to think it's obvious.
I heard there was an existing regulation about selling > 100% of a float short?
Why are you contrasting those two things? Don't they BOTH get sued AND lose retail trade volume by restricting these tickets?
The parent company/investor/whatever has a major short position on GME. By preventing Robinhood users from buying, they are reducing pressure on the short squeeze.
Since Robinhood doesn't collect commissions there's no loss of revenue on trade volume. But driving GME's stock price down is definitely saving Citadel billions, and the class action lawsuit is unlikely to cost them billions.
Since Robinhood doesn't collect commissions there's no loss of revenue on trade volume. But driving GME's stock price down is definitely saving Citadel billions, and the class action lawsuit is unlikely to cost them billions.
I mean if you have a bunch of really really angry retail shareholders that want literal blood (which many of them sound like they do) then it's not the person being sued that gets to decide to settle.
[deleted]
I wouldn’t know where it goes legally but what I hope that it leads to the understanding that the stock market is not the economy and even is not a market.
I would love to have a free investment market where the money is made when the companies succeed, not a casino that kicks you out for counting cards.
I would love to have a free investment market where the money is made when the companies succeed, not a casino that kicks you out for counting cards.
When you divvy up shares in an investment to meaningless portions like 0.00001% of a company there's no utility in the investment period.
It then becomes the same thing as buying and selling useless paper. In order to make the system truly a market you have to restrict the size of the portions. Something like 1% is the smallest cut someone can own.
But then that would stop the huge amount of cash companies tend to receive during an IPO thereby restricting the growth of the actual business.
It then becomes the same thing as buying and selling useless paper. In order to make the system truly a market you have to restrict the size of the portions. Something like 1% is the smallest cut someone can own.
But then that would stop the huge amount of cash companies tend to receive during an IPO thereby restricting the growth of the actual business.
> Citadel and other hedge funds short selling take over to pulls the strings from underneath some trading apps, including Robinhood.
Webull's clearing firm forced their hand.
Webull's clearing firm forced their hand.
[deleted]
It's a simple math question. SEC fine will not be close to the billions they stand to lose. Nakedly illegal, and everyone knows it.
What naked shorts?
Do you have any evidence for these claims?
Do you have any evidence for these claims?
https://www.nyse.com/regulation/threshold-securities
This is a list of stocks that have been sold, but the seller failed to deliver those shares. AKA naked shorting.
GME has been on this list for a month now.
SEC call this "Reg SHO". https://www.sec.gov/investor/pubs/regsho.htm
This is a list of stocks that have been sold, but the seller failed to deliver those shares. AKA naked shorting.
GME has been on this list for a month now.
SEC call this "Reg SHO". https://www.sec.gov/investor/pubs/regsho.htm
Wow, I though it was impossible to do "naked shorts" (i.e. why "short borrow" exists) and that people screaming "naked short" were just spreading FUD, but this proves me wrong!
Of course, this list isn't indicative of the amount (i.e. coud literally be one share undelivered) but the mere existence of it is mindblowing! Someone should be paying massive penalties and/or be in jail (as I'm sure would happen to "retail investors" if they were unable to deliver...)
Of course, this list isn't indicative of the amount (i.e. coud literally be one share undelivered) but the mere existence of it is mindblowing! Someone should be paying massive penalties and/or be in jail (as I'm sure would happen to "retail investors" if they were unable to deliver...)
Caveat: I don't know anything about short selling, so I may be misinterpreting this.
That said, https://www.investor.gov/introduction-investing/investing-ba... notes you only get listed as a threshold security if a few criteria are met, one of which is that the amount failed to deliver must be:
> equal to at least 0.5% of the issuer's total shares outstanding
Based on 70M outstanding shares, that means at least 350,000 undelivered shares. We don't know _why_ there was a failure to deliver, though. Not all failures may be related to short selling - someone's system screwing up for mundane reasons could cause such a thing, with no malice required.
That said, https://www.investor.gov/introduction-investing/investing-ba... notes you only get listed as a threshold security if a few criteria are met, one of which is that the amount failed to deliver must be:
> equal to at least 0.5% of the issuer's total shares outstanding
Based on 70M outstanding shares, that means at least 350,000 undelivered shares. We don't know _why_ there was a failure to deliver, though. Not all failures may be related to short selling - someone's system screwing up for mundane reasons could cause such a thing, with no malice required.
I think the fact that Gamestop is >100% shorted suggests that there is naked short selling happening _somewhere_. Clearly there were shenanigans.
EDIT: apparently multiple lending of shares does happen and Overstock sued over this [1]
[1] https://www.courthousenews.com/overstock-com-settles-short-s...
EDIT: apparently multiple lending of shares does happen and Overstock sued over this [1]
[1] https://www.courthousenews.com/overstock-com-settles-short-s...
No, it doesn't. Imagine there is 1 share, owned by A. He lends it to B. B now (short) sells it to C. Now from C's point of view, he owns a share. So he lends it to someone. That person then short sells it.
So you have 1 share, that's shorted twice. But it's impossible for A and C to both have their loan repaid, because there's only 1 physical share.
So you have 1 share, that's shorted twice. But it's impossible for A and C to both have their loan repaid, because there's only 1 physical share.
Doesn't it unwind by just reversing the process? D buys the stock back from E and returns it to C. Then B buys the stock back from C and gives it to A.
That all sounds perfectly ordinary, as long as it doesn't happen on a deadline. If you tell D or B that they have to buy that stock right now at any price, they're going to take it in the (ahem) shorts. But if they were permitted to take their time, they'd buy it up at the market price, which would on average be pretty near the price they sold it.
It just so happens that there is a mechanism by which they can be forced to buy that stock right now, which is when F decides just on a whim to pay 100x the market price, and protection measures kick in. That's a screw-up on the part of B and D; they got sloppy and deserve to get raked over the coals for it. Everybody who wants to play that game needs to be aware of that scenario, and now they are.
But I don't think it's because there's anything impossible about having more shorts than stocks. It just takes an already risky thing and makes it super subject to manipulation.
That all sounds perfectly ordinary, as long as it doesn't happen on a deadline. If you tell D or B that they have to buy that stock right now at any price, they're going to take it in the (ahem) shorts. But if they were permitted to take their time, they'd buy it up at the market price, which would on average be pretty near the price they sold it.
It just so happens that there is a mechanism by which they can be forced to buy that stock right now, which is when F decides just on a whim to pay 100x the market price, and protection measures kick in. That's a screw-up on the part of B and D; they got sloppy and deserve to get raked over the coals for it. Everybody who wants to play that game needs to be aware of that scenario, and now they are.
But I don't think it's because there's anything impossible about having more shorts than stocks. It just takes an already risky thing and makes it super subject to manipulation.
Your link explains what actual naked shorting is, you should read it. It says nothing about re-lending.
Naked shorting is not "re-lending", it's a very specific technical thing where you sell the stock without owning or borrowing it at all. Naked shorting results in failure to deliver.
Stock trades settle a couple of days after execution, so what it means in practice is that Alice "buys" the stock from Charlie, then 2 days later when settlement should happen and the share and money are supposed to actually change hands, Charlie goes oops I don't actually have the stock. Then the trade is undone.
In effect Charlie duped Alice into a fake trade that artificially depressed the market price.
It's an egregious market manipulation tactic and has nothing in common with the practice of lending or re-lending shares, in fact there is not a single share involved at all.
If you fail-to-deliver enough you'll get booted by other market participants and/or the SEC.
Naked shorting is not "re-lending", it's a very specific technical thing where you sell the stock without owning or borrowing it at all. Naked shorting results in failure to deliver.
Stock trades settle a couple of days after execution, so what it means in practice is that Alice "buys" the stock from Charlie, then 2 days later when settlement should happen and the share and money are supposed to actually change hands, Charlie goes oops I don't actually have the stock. Then the trade is undone.
In effect Charlie duped Alice into a fake trade that artificially depressed the market price.
It's an egregious market manipulation tactic and has nothing in common with the practice of lending or re-lending shares, in fact there is not a single share involved at all.
If you fail-to-deliver enough you'll get booted by other market participants and/or the SEC.
No, it doesn't mean that. The same share can be borrowed more than once. If A borrows a share from B, who borrowed it from C, the same share is shorted twice without naked shorting.
[deleted, misunderstood how this works]
No. Re-lending and naked shorting are nothing alike.
Actually my example kinda sucked. What's more likely to happen is that B borrows the stock from A, then sells it to C.
C then lends the share to D.
C doesn't know or care that the share was already borrowed once, and the only way to prevent re-lending it that way would be to make shares non-fungible, which would break more-or-less everything (then again maybe that's your goal).
Actually my example kinda sucked. What's more likely to happen is that B borrows the stock from A, then sells it to C.
C then lends the share to D.
C doesn't know or care that the share was already borrowed once, and the only way to prevent re-lending it that way would be to make shares non-fungible, which would break more-or-less everything (then again maybe that's your goal).
You can recall the shares you lent anytime. So if A borrows shares to short, and lends them out to B so B can short, if A wants to close their position they can tell B to give back the share. Not naked even though A has reloaned the share.
How do you short ? You short by borrowing a stock, and selling it. Why would lending it instead of selling it be a naked short ?
No. Person A has 100 stocks. Person B wants to short the stock. So Person B, borrows 50 stocks from person A and sells it to person C. The float is now > 100%.
[deleted]
I'm highly skeptical of the whole Gamestop saga and populist fever surrounding it.
Having said all that...
I don't think a trading platform allowing you to buy / sell stocks should be able to arbitrary decide when you can buy and sell without some reasonable reason that applies to everyone.
Having said all that...
I don't think a trading platform allowing you to buy / sell stocks should be able to arbitrary decide when you can buy and sell without some reasonable reason that applies to everyone.
I clicked the link, but I see no evidence of an actual lawsuit being filed?
Instead I see a meme forum that glorifies poor decision making, with a post saying "My friend is a lawyer and she says we have a good case?"
Don't get me wrong, I've got my popcorn ready to go on this. But I thought from the title this would be a mod-post with actual details for a real lawsuit, not just some guy saying what people want to hear.
Instead I see a meme forum that glorifies poor decision making, with a post saying "My friend is a lawyer and she says we have a good case?"
Don't get me wrong, I've got my popcorn ready to go on this. But I thought from the title this would be a mod-post with actual details for a real lawsuit, not just some guy saying what people want to hear.
Do they realistically stand a chance given that what Robinhood did is technically covered by their TOS? Are we finally going to get answers on how legally binding TOSses are?
I think the problem for Robinhood here is that their decision has effectively dampened the upward mobility of the stock, which hurts option holders (because IV goes down) and long holders (because the stock can't go up as much).
So in a way, Robinhood is hurting all the people with existing long-delta and long-vega positions. Many of those people are Robinhood's own customers.
I guess Robinhood would have to demonstrate that the position isn't suitable for its customers, or that they couldn't guarantee orderly execution under the stress of a continued barrage of orders and new customer sign-ups.
This limitation definitely has an impact on GME stock, which is not good for RH because their own customers are largely the people who lose.
You can put whatever you want in your TOS, but if you lose money for your own customers and one of your investors (Ken Griffin) is on the other side of the trade, then you have a huge problem on your hands.
So in a way, Robinhood is hurting all the people with existing long-delta and long-vega positions. Many of those people are Robinhood's own customers.
I guess Robinhood would have to demonstrate that the position isn't suitable for its customers, or that they couldn't guarantee orderly execution under the stress of a continued barrage of orders and new customer sign-ups.
This limitation definitely has an impact on GME stock, which is not good for RH because their own customers are largely the people who lose.
You can put whatever you want in your TOS, but if you lose money for your own customers and one of your investors (Ken Griffin) is on the other side of the trade, then you have a huge problem on your hands.
Good points. Jesus, this is such a mess.
Their customers are hedge funds, not retail.
"Customer" in the legal and regulatory sense, not in terms of who actually pays for the flow.
A TOS doesn't write law
Correct. My very remedial understanding of law is that two parties can't enter into a legal agreement that violates existing laws or statutes.
A TOS doesn't stand up to law but also it goes beyond that. Even if you don't use Robinhood but you were holding GME you are affected by this move. It's securities fraud and market manipulation at its finest.
After eviscerating their most fervent users they are all but ruined either way. Retail is quickly learning the true cost of "commission-free" investing.
> Retail is quickly learning the true cost of "commission-free" investing.
But what is the alternative? Other brokers (eg TD) have done the same as Robinhood. So what is retail to do? It seems like anywhere people would attempt to do something like what’s been going on with GME, would respond in the same way as RH to the pressure of the powers that be.
But what is the alternative? Other brokers (eg TD) have done the same as Robinhood. So what is retail to do? It seems like anywhere people would attempt to do something like what’s been going on with GME, would respond in the same way as RH to the pressure of the powers that be.
fidelity and a few others are commission free, and are not placing limits on trades, and have better uptime.
like the saying: If the product is free, YOU are the product.
Robinhood is a brokerage.
Brokerages can't manipulate markets.
It's illegal.
Brokerages can't manipulate markets.
It's illegal.
And the commenters in the thread are claiming that RH is cancelling orders and trying to pretend that the cancellations were user-initiated which I think opens up a whole other bag of worms.
You can’t overrule laws with TOS’s.
A TOS (or any contract, agreement, etc) cannot impose something that goes against the law.
There is no the answer, but we sure might get an answer.
No and no. They have no case. What Robinhood did is pretty normal. Ignore the ambulance chasers.
At least one lawsuit has already been filed[0] with most likely more coming. I really don't see how Robin Hood can spin this in their favor, or recover from this from a PR standpoint.
[0] https://www.courtlistener.com/recap/gov.uscourts.nysd.553175...
[0] https://www.courtlistener.com/recap/gov.uscourts.nysd.553175...
I was just sort of following the whole circus without any interest (maybe a slight short interest even) and even I'm really angry at how this has been done.
Absolutely disgusting, people need to go to jail for this, you can't get away with punitive fines that are less than what the hedge funds would've lost on the trade itself.
I hope regulators step in and preserve all correspondence + records on why this decision was made. But somehow, I don't think this will happen. They will lose documents, texts and chats mysteriously and that will be that.
Only hope is whistleblowers leaking stuff to the media.
Absolutely disgusting, people need to go to jail for this, you can't get away with punitive fines that are less than what the hedge funds would've lost on the trade itself.
I hope regulators step in and preserve all correspondence + records on why this decision was made. But somehow, I don't think this will happen. They will lose documents, texts and chats mysteriously and that will be that.
Only hope is whistleblowers leaking stuff to the media.
Robinhood is easily the worst "broker" app I've ever seen. This is just the most public screwup in their long history of anti-user behavior. Why anyone continues to use RH I have no idea.
The only other brokers where I've seen restrictions were against margin trading (which I think is fair and makes sense - gamble with your own money if you want, but not with ours).
Maybe there are some other brokers behaving just as badly, but if the net consequence of this is that RH goes away, I don't think much of value was lost.
The only other brokers where I've seen restrictions were against margin trading (which I think is fair and makes sense - gamble with your own money if you want, but not with ours).
Maybe there are some other brokers behaving just as badly, but if the net consequence of this is that RH goes away, I don't think much of value was lost.
Robinhood is automatically selling users shares
https://twitter.com/555Sunny/status/1354854993946406917?s=20
My only question is how this will be viable since the RH user agreement states:
>>"I understand that Robinhood may at any time, at its sole discretion and without prior notice to Me: (i)prohibit or restrict My access to the use of the App or the Website or related services and My ability to trade, (ii) refuse to accept any of My transactions, (iii) refuse to execute any of My transactions, or (iv)terminate My Account. "
[0]: https://cdn.robinhood.com/assets/robinhood/legal/RHF-RHS%20U...
>>"I understand that Robinhood may at any time, at its sole discretion and without prior notice to Me: (i)prohibit or restrict My access to the use of the App or the Website or related services and My ability to trade, (ii) refuse to accept any of My transactions, (iii) refuse to execute any of My transactions, or (iv)terminate My Account. "
[0]: https://cdn.robinhood.com/assets/robinhood/legal/RHF-RHS%20U...
My understanding is Terms of Service have little significance in courts: whatever a company writes in its ToS, it must still comply with the laws.
Facebook banning you due to some vague ToS? No problem, your access to Facebook isn't protected by law. An app which can affect your investments and finances? I don't know if I'm this case it's legal or no, but that's a whole different level.
Facebook banning you due to some vague ToS? No problem, your access to Facebook isn't protected by law. An app which can affect your investments and finances? I don't know if I'm this case it's legal or no, but that's a whole different level.
Those sections seem to deal with actions taken against an individual user, not actions that affect a stock's price. In theory if Robinhood's actions are illegal (don't know) and if they caused losses to holders of GME (don't know, but likely) then plaintiffs could include people who don't even have Robinhood accounts and never agreed to that.
I think more to the point would be the arbitration agreement in section 38. Not condoning the behavior but it seems that kind of agreement might limit a class action suit.
Is there a complete list of all brokers which stopped offering GME?
I see reports all over the place but it's hard to track whether some just blocked options or on the margin, which reports are true etc.
Edit: Best Ive found so far https://www.reddit.com/r/wallstreetbets/comments/l72tfu/robi...
I see reports all over the place but it's hard to track whether some just blocked options or on the margin, which reports are true etc.
Edit: Best Ive found so far https://www.reddit.com/r/wallstreetbets/comments/l72tfu/robi...
It'll be all brokers who use Citadel for liquidity - I'm blocked on several major brand-name brokerages. I don't have a position in GME, but i can only route "closing" orders - no opens.
Can anyone explain why Robinhood don’t appear to have an anti class action clause in their terms?
E.g. like this one https://about.ads.microsoft.com/en-us/resources/policies/cla...
E.g. like this one https://about.ads.microsoft.com/en-us/resources/policies/cla...
The policy you're quoting is between Microsoft and a business wishing to advertise on it's platform. It is understood that business do read the TOS and contracts of the platforms they sign up with. Users do not. It is still a legal grey area, but more than likely a "no class action lawsuit" clause would be as useful as a paper shield in court.
I just chose a random big user facing site and it has similar anti class action terms
https://www.uber.com/legal/en/document/?name=general-terms-o...
https://www.uber.com/legal/en/document/?name=general-terms-o...
Yes i would love to get on board with this lawsuit for restricting my purchase of 1,500.00 woth of AMC at my order time of the opening bell 26th was 4.83 closing Friday at 13.33 would of had 310.55 shares at a difference of 8.50 @ share comes to lose of profit of 2,640.00 $ plus i tried to put an order in for 1k after they refused my 1,500.00 order and they are trying to say I""I"" cancelled that order that is false!! Contact info 765 586 3156 or walleyejimbo1966@ gmail.com thank you for ur time any kind of response would be great thank you and God bless James M.Legere
There is one I've seen in twitter, might join that one ?
https://twitter.com/redditinvestors/status/13548442017211965...
https://twitter.com/redditinvestors/status/13548442017211965...
Google, Facebook, Twitter, Amazon, PayPal, etc can fully close your account for “reasons” and people get outraged but there ends up being no consequences. Unfortunately I see the same happening here. It is sad but true.
Hard for me to think of a time when one of those services stopped all of their users from taking an action fundamental to the service. Particularly an action regulated by securities law.
> I'm friends with a lawyer who says we have a good case for a class action lawsuit.
There's a huge chasm between "I'm friends with a lawyer" and "we are preparing a class action suit."
There's a huge chasm between "I'm friends with a lawyer" and "we are preparing a class action suit."
How do I join? I was not a robinhood client but their clear manipulation of the stock prices caused my positions to be obliterated.
As a long term shareholder of one of the restricted trade companies, my opinion is that all shareholders of these companies, including the companies themselves, were financially harmed by restricting trade by a subset of investors. As soon as trading was restricted, the prices dropped, denying me the right to sell my shares at a fair market value.
Robinhood customers are a small percentage of the shareholders truly harmed by these actions.
Robinhood customers are a small percentage of the shareholders truly harmed by these actions.
Robinhood is holding almost 1,000$ hostage right now.. since the whole GameStop and dogecoin thing I made a decent amount on dogecoin and not only did the site not let me sell off my doge when it peaked not until I crashed to about 6cent was I able to sell but since then they have disabled my account from making withdrawals and haven’t responded to any of my emails. For almost a week I haven’t had access to my funds and been restricted from making trades.. I just want my money back so I can pay my bills and I’ll never use that app again.. horrible company
> Don't call yourself Robin Hood if you are going to turn your back on the folks in Sherwood forest after one phone call from the Sheriff of Nottingham
https://mobile.twitter.com/cvpayne/status/135482042821721293...
https://mobile.twitter.com/cvpayne/status/135482042821721293...
I don't think it's only Robinhood, I see other brokers blocking those stocks [0], not sure if it's fair to pile on just Robinhood.
[0] https://twitter.com/convalytics/status/1354859301924438021
[0] https://twitter.com/convalytics/status/1354859301924438021
Countless times I've seen users on Hacker News mock DeFi and crypto for recreating the same financial instruments that we already have. I hope today has shown people just how much we need to recreate these instruments (and more) in a decentralized open manner.
That's be great. But unfortunately being decentralized and open will not stop the government regulating it. And the government will (unfairly, as shown by the current situation) regulate it if it gets big enough.
They can make their ruling, now let them enforce it.
I don't mean that as some pithy throwaway, I mean that they lack the resource and ability. It is quite possible (and quite easy) to buy and sell crypto without ever getting involved with a KYC privacy invasion. A crypto transaction involves sending a few hundred bytes of data onto a distributed network, and good luck shutting that down.
Keep in mind that governments historically have a poor record of preventing people from sending and receiving data they'd prefer you didn't.
I don't mean that as some pithy throwaway, I mean that they lack the resource and ability. It is quite possible (and quite easy) to buy and sell crypto without ever getting involved with a KYC privacy invasion. A crypto transaction involves sending a few hundred bytes of data onto a distributed network, and good luck shutting that down.
Keep in mind that governments historically have a poor record of preventing people from sending and receiving data they'd prefer you didn't.
> It is quite possible (and quite easy) to buy and sell crypto without ever getting involved with a KYC privacy invasion.
And it used to be the same way for bank accounts. Now it isn't, because the government decided that it didn't like that.
At some point the crypto needs to be converted into USD - either so you can pay someone who doesn't accept crypto, or so the business who accepted crypto can deposit safe nonvolatile USD into their bank account. And the government will regulate it there at the transfer point.
The other option is that a cryptocurrency replaces USD, becoming the new de-facto currency. The government and the people/corporations who are in control of the economy won't allow that to happen. I don't think that last claim needs to be backed up with any more facts/arguments, it is very obviously true.
And it used to be the same way for bank accounts. Now it isn't, because the government decided that it didn't like that.
At some point the crypto needs to be converted into USD - either so you can pay someone who doesn't accept crypto, or so the business who accepted crypto can deposit safe nonvolatile USD into their bank account. And the government will regulate it there at the transfer point.
The other option is that a cryptocurrency replaces USD, becoming the new de-facto currency. The government and the people/corporations who are in control of the economy won't allow that to happen. I don't think that last claim needs to be backed up with any more facts/arguments, it is very obviously true.
>At some point the crypto needs to be converted into USD
It is not a truism that "at some point the crypto needs to be converted".
A stablecoin like DAI obviates the "stability" reason for converting back to fiat and getting further involved with the financial system, and as more people accept crypto for goods and services, there exist fewer reasons to convert out.
I'm not some BTC maximalist who thinks you'll be buying your groceries in crypto anytime soon, but for anything that can be transacted online, or between friends?
We already exist in the timeline where if I want to buy a thing, I can send (with some care) mostly anonymous value to someone to pay for the thing, and there's nothing any government or other person can do to stop it. This isn't some future goal, this is right here, right now.
It is not a truism that "at some point the crypto needs to be converted".
A stablecoin like DAI obviates the "stability" reason for converting back to fiat and getting further involved with the financial system, and as more people accept crypto for goods and services, there exist fewer reasons to convert out.
I'm not some BTC maximalist who thinks you'll be buying your groceries in crypto anytime soon, but for anything that can be transacted online, or between friends?
We already exist in the timeline where if I want to buy a thing, I can send (with some care) mostly anonymous value to someone to pay for the thing, and there's nothing any government or other person can do to stop it. This isn't some future goal, this is right here, right now.
> as more people accept crypto for goods and services
This is not happening. It's been more than a decade now. I could also argue that the reason the few cases where you can actually spend cryptocurrencies have remained is simply that the volume is too small for the authorities to care, especially since they can just start regulating once it matters.
You're not addressing OP's point that in the end, you want to spend the currency within the legal system if you want to buy something other than cryptokitties. Or to go back to the main topic, you have to go back into the legal system if you want to buy shares. If the authorities declares that you have to buy your shares with USD, then you have to buy your shares with USD.
This is not happening. It's been more than a decade now. I could also argue that the reason the few cases where you can actually spend cryptocurrencies have remained is simply that the volume is too small for the authorities to care, especially since they can just start regulating once it matters.
You're not addressing OP's point that in the end, you want to spend the currency within the legal system if you want to buy something other than cryptokitties. Or to go back to the main topic, you have to go back into the legal system if you want to buy shares. If the authorities declares that you have to buy your shares with USD, then you have to buy your shares with USD.
But which kind of token are you buying / selling? Anything that represents a real company in the US won't be able to do so outside of the legal framework.
There's also "Put your hands where I can see them, you are under arrest for committing illegal financial acts". At the end of the day, the government has sovereignty over your physical body.
In addition, at some point your virtual money has to be turned into something physical or else what's the point? And those physical goods can be monitored and irregularities can prompt questions.
In addition, at some point your virtual money has to be turned into something physical or else what's the point? And those physical goods can be monitored and irregularities can prompt questions.
Actual shares, no. A crypto bucket shop will show up in the short term, I can guarantee it.
Governments do have a terrible record at preventing the spread of data. They do, however, have an excellent record at confiscating money.
Government tells Coinbase to freeze all assets and activity. Welp, there goes crypto being the savior. Yes, I know there's offshore trading platforms, but some like Binance ban US customers for this very reason: government interference.
Meanwhile, decentralized platforms exist and sites like localbtc exist where I can just buy and sell from private parties.
They've been trying to take down dark net markets for 10 years, spending tons of resources and with limited success.
I'd call that a success for cryptocurrencies. If a portion of that success can be achieved in normal, everyday transactions, then we would be in a much better world than we are today.
I'd call that a success for cryptocurrencies. If a portion of that success can be achieved in normal, everyday transactions, then we would be in a much better world than we are today.
They're going to have a much harder time.
Are you saying that there's some blockchain solution to this problem? Because I don't see it. You will not get shares listed on a decentralized system without some entity vouching for them, which remains legally liable.
Have you looked at Uniswap?
What prevents it (or its users) from being regulated to death if the authorities wish to do so?
For instance how do you ensure that a token representing something in the real world will still represent it when the authorities start looking at it and decide to shut down the entities guaranteeing that you can reclaim an actual share in exchange of an ERC20 token?
Or to summarize: which problem does it solve?
For instance how do you ensure that a token representing something in the real world will still represent it when the authorities start looking at it and decide to shut down the entities guaranteeing that you can reclaim an actual share in exchange of an ERC20 token?
Or to summarize: which problem does it solve?
Exactly. Defi couldn't ask for a better case study than wsb.
Good luck with that, I'm sure the courts will be sympathetic when you come in with the "we were trying to manipulate the price of the stock, but then this brokerage, and a half dozen others, stopped us and we lost money!" argument.
If we pull from RH they cannot cover that while also covering the naked shorts they lentto these funds.
Then we sue Citadel & anyone else who was buying in bulk while we could ONLY sell. That is the crime.
Then we sue Citadel & anyone else who was buying in bulk while we could ONLY sell. That is the crime.
We need to get everyone to pull funds (minus GME etc) from RH
They won’t have enough $ to cover that & cover the naked shorts they have lent out. Then we sue Citadel who we didn’t sign any contract w
They won’t have enough $ to cover that & cover the naked shorts they have lent out. Then we sue Citadel who we didn’t sign any contract w
Like Sama so eloquently put it, "fuck robinhood".
https://twitter.com/sama/status/1354842339336835074
https://twitter.com/sama/status/1354842339336835074
Seems like one was filed already:
https://mobile.twitter.com/LJMoynihan/status/135483683016900...
https://mobile.twitter.com/LJMoynihan/status/135483683016900...
[deleted]
[deleted]
As a Robinhood customer, please leave Robinhood. Please. I am so tired of dealing with r/wsb complaining about RH. They give you zero commish options. What more do you want?
Hey i had 1k buy order on amc and game stop.
I did not authorize a cancel order.
I am not associated with any formal organization and i am an independent investor
I did not authorize a cancel order.
I am not associated with any formal organization and i am an independent investor
Many things affect the price. Like Elon musk tweeting. Or good sales numbers.
An app called Robinhood, named after the archetype of a man who took from the rich and gave to the poor, now blocking people from taking from the rich. I hope the irony is not lost on the general public. Robinhood needs to rebrand and/or fix their internal mission statement.
Robinhood has always taken from the poor to give to the rich, they just hid it well. Take a closer look at how they are making money when they don't charge any commissions (the "shadow exchange" where HFT operations get to make money on orders placed by Robinhood's customers),
This is amusing but to be clear the "poor" they were trying to help was always themselves.
Is this right? Most of these people pumping up and holding aren't going to get paid, they are going to lose their money when the stock finally deflates. That would be the same whether they halted trading or not.
I imagine wsb people expect the stock to rise, when shorters have to buy the overinflated stock to satisfy their obligations.
Wsb people knew this and exploited it, just like a hedge fund could do. However they don't have the political power of a hedge found so are now getting screwed by only being given the ability to sell not buy.
People on wsb knew exactly what they were doing. But we're stopped because some big institutional investors don't like it.
Institutional investors exploit retail investors all the time. They don't like it when it's the other way around.
Wsb people knew this and exploited it, just like a hedge fund could do. However they don't have the political power of a hedge found so are now getting screwed by only being given the ability to sell not buy.
People on wsb knew exactly what they were doing. But we're stopped because some big institutional investors don't like it.
Institutional investors exploit retail investors all the time. They don't like it when it's the other way around.
RH caused a huge price drop in a stock that a lot of their users held. At least some of them would've sold while the price was higher and in the best case for them if the squeeze worked it would've been the short sellers who would've made the losses who are mostly not on RH. This move near-guaranteed it's their users who took the bigger losses, including those that might've sold today anyway.
It was a bit more nuanced than taking from the rich to give to the poor. Robin Hood took from the tax collectors and gave the money back to those from whom the tax collectors stole.
I wonder what all of this means to Robinhood's planned IPO.
If I had to guess, I'd say it's a net positive. Robinhood is now all over the press at the cost of a lawsuit from a bunch of Redditors who allege Robinhood can manipulate the stock market.
Not sure I agree. The attention their shady business model is getting now is not something they would've liked. I'm also not sure what it means to their user growth. One one hand they are getting a lot of press which can help them gain more users. On the other hand, the press they are getting is not positive and their app ratings are going down (Google/Apple would likely give them some protection but they cannot block negative ratings forever). If many traders start migrating to other trading solutions it can have a snowball effect.
They'll be like: "Technical issue..."
Exchanges have breaks in place and can halt trading for certain stocks. I think it made sense to halt trading given what happened yesterday. But it's not Robinhood's job.
That's a very bad analogy. Exchanges can halt trading. They can say: hey, some crazy stuff is going on here, everyone take a 15 minute time out to think about it before you continue.
Robinhood prevented buying. That is very, very different than stopping trading. While Robinhood's action might not legally be 'market manipulation', it certainly does result in the market being manipulated. People who were not using Robinhood would have their PnL significantly affected since a lot of pressure on the stock price was coming from buyers on RH.
Robinhood prevented buying. That is very, very different than stopping trading. While Robinhood's action might not legally be 'market manipulation', it certainly does result in the market being manipulated. People who were not using Robinhood would have their PnL significantly affected since a lot of pressure on the stock price was coming from buyers on RH.
This is _very_ different. They halted _only_ buying, and if I wanted to buy via another brokerage I would need to wait 5 days for funds to clear in Robinhood before I could even withdraw. So they effectively shut off demand but kept supply the same, and there is absolutely no other result that can occur other than the price tanking.
To be clear, Robinhood did not "halt trading" on these stocks, they disabled buying while allowing users to still sell shares. This effectively encourages users to sell.
That's right. Yet I just listened to CNBC report Robinhood stopped trading on Gamestop to prevent people from selling. An honest mistake I'm sure.
They halted the buying not the selling. That's a clear case of market manipulation.
what happened to all the people who supported banning trump?
“they’re a private company they can do whatever they want”
but now they want protection of users rights
“they’re a private company they can do whatever they want”
but now they want protection of users rights
these people are cruising for a rude awakening in electronic trading risk agreements (or similarly worded agreements at signup)
I want in the lawsuit for blocking the ability to purchase stock. This is not fair to small investors that may want a long position.
Oh I hope they win!
cool
It's not just Robinhood, I'm on Schwab and they blocked the GME stock from teading this morning (probably sell is till open)
Schwab, TDA, and others restricted trading on margin. A company saying "we won't loan you money to speculate on this volatile stock" is way different than saying "we won't let you trade this stock with your money", IMO.
Trading 212 in the UK has disabled purchases of GME stock. Ironically Trading 212's tagline also includes "democratising" trading.
I think so too, but as someone not in any sort of GME position, but on TDA (which is being acquired by Schwab anyway), this is a good reason for me to accelerate my search to move off the platform to a more retail friendly brokerage.
I heard this about another brokerage, too... Maybe not such great news for that lawsuit?
Not sure about either way. One thing did look interesting to me: the messages when trying to buy/ short the stock on Schwab looked strange. This might be indicative that they did not have a suitable system in place to interfere with the trading so drastically?
Initially it would say the stock ticket is wrong then after trying a few minutes later I trying short selling it would say the margins are not met (however I had more than 1000% margins) and finally it said the trading is restricted because of high volatility.
Initially it would say the stock ticket is wrong then after trying a few minutes later I trying short selling it would say the margins are not met (however I had more than 1000% margins) and finally it said the trading is restricted because of high volatility.
That's pretty weird. It sounds like something that had to be improvised on their end.
It does seem like there was some outside intervention:
- Multiple brokerages making these types of decisions, not just one
- Brokerages appearing to improvise (i.e. looking strange, maybe not tested out much beforehand) technical ways to send this new message
- Brokerage messaging and decision-making policy appearing to be volatile by itself (!)
- Claims (nothing substantiated) that e.g. government heads were involved in making the call
These factors seem to add up, so it's interesting to watch this unfold.
It does seem like there was some outside intervention:
- Multiple brokerages making these types of decisions, not just one
- Brokerages appearing to improvise (i.e. looking strange, maybe not tested out much beforehand) technical ways to send this new message
- Brokerage messaging and decision-making policy appearing to be volatile by itself (!)
- Claims (nothing substantiated) that e.g. government heads were involved in making the call
These factors seem to add up, so it's interesting to watch this unfold.
It might help the defense but ultimately the percentage of GameStop’s stock that is traded/held on RobinHood is very high (it is most of the market) and restricting trades on the platform is likely to cause serious losses to their customers. All the ingredients of a securities fraud case are present and the company stands to lose its entire business over the lawsuit.
According to reddit there were issues and people couldn't buy for a while or on the first try but after waiting and multiple attempts were able to.
https://www.reddit.com/r/wallstreetbets/comments/l6wrig/you_...
https://www.reddit.com/r/wallstreetbets/comments/l6wrig/you_...
Me too. Couldn’t make any trades, nor sell off my position as trading continued elsewhere and was dropping precipitously. I ended up selling off at $132 and lost 7k from a 10k investment just before the end of trading last night.
We detached this subthread from https://news.ycombinator.com/item?id=25945839.
It looks like everything is still available on Fidelity.
I put up a small limit order on ETrade this morning for schnitzengiggles and it accepted it and then executed it.
I just tried on Schwab and it doesn’t look like I’m blocked.
M1 blocking now too.
mistersquid(1)
[deleted]
I want in the lawsuit. Why can they restrict buy orders for one class of investors while others are not.
Just walk away from Robinhood, if you are not happy, close the account and move the money away, this will really heart them...
It’s not just them. Trading 212 have pulled the same shenanigans.
Robinhood’s user experience is so nice on mobile that I don’t even feel like switching.
A nice user interface is of no use if you can't use said user interface to do any actual trades (the whole reason you are with them).
Which makes he hope that RH figures this out and weathers this. That app and user experience is so painless that it would be a shame to let it go to waste.
Do I have this right?:
1. Robinhood's TOS explicitly gives them the right to do this. 2. Robinhood is free. 3. Any alleged harm could be mitigated by using another service.
And attorneys wonder why we're held in lower regard than used car salesman.
And attorneys wonder why we're held in lower regard than used car salesman.
A TOS isn't law. What Robinhood did altered the market price of several major stocks including AMC and BB. They will almost certainly be getting yet another SEC investigation.
Being free doesn't allow you to commit crimes.
Being free doesn't allow you to commit crimes.
Is a TOS a contract once agreed to?
Contracts still don't allow you to brake laws including anti-marked manipulation regulations.
But besides that in many countries (idk. about the US) TOS are quite more limited in what they can contain then "normal" contracts. E.g. if you write in that the user agreeing to it must allow the company to buy their house (if they have one) for marked value anytime the company wants would be not legal, but could be legal in a contract. (And could also be non-legal in a contract under some circumstances).
Anyway it's widespread and common for TOS to contain non-legal clauses which due to the way a TOS is made are as if they are not written in there (i.e. they just invalidate themself not the whole contract).
So in the end the question is:
- Is it directly against a law/regulation, in which case TOS doesn't help at all.
- Or if it's not against law per-see is it still not legal because it's in the TOS and due to <enter TOS related laws> not legal binding (I wouldn't put hope into this in the US, but I don't know US law wrt. this aspect).
But besides that in many countries (idk. about the US) TOS are quite more limited in what they can contain then "normal" contracts. E.g. if you write in that the user agreeing to it must allow the company to buy their house (if they have one) for marked value anytime the company wants would be not legal, but could be legal in a contract. (And could also be non-legal in a contract under some circumstances).
Anyway it's widespread and common for TOS to contain non-legal clauses which due to the way a TOS is made are as if they are not written in there (i.e. they just invalidate themself not the whole contract).
So in the end the question is:
- Is it directly against a law/regulation, in which case TOS doesn't help at all.
- Or if it's not against law per-see is it still not legal because it's in the TOS and due to <enter TOS related laws> not legal binding (I wouldn't put hope into this in the US, but I don't know US law wrt. this aspect).
> Is a TOS a contract once agreed to?
A contract is only valid if its clauses are legal. TOS are regularly deemed invalid by regulators/courts and contracts made void. Ask the EU and their huge fines on FAANGS...
A contract is only valid if its clauses are legal. TOS are regularly deemed invalid by regulators/courts and contracts made void. Ask the EU and their huge fines on FAANGS...
ToS terms can't permit you to break the law, in either case. Same as contracts.
WSB altered the market price far more than RH did.
WSB isn't a single, regulated ( brokers are), entity, it's just a bunch of people getting together.
The entities that altered the price were notably - the shorting hedge funds and the broker that failed to do its job ( broker trades) in a blatant conflict of interest.
The entities that altered the price were notably - the shorting hedge funds and the broker that failed to do its job ( broker trades) in a blatant conflict of interest.
WSB is not an entity though
WSB isn't a brokerage; it's an investment forum.
But sure, sue Reddit too if you want.
You'd still have the RH manipulation.
But sure, sue Reddit too if you want.
You'd still have the RH manipulation.
By participating in the market
According to Reddit, several other trading services are also closing access to these stocks. It seems to be a concerted effort.
It is, citadel appears to be blocking trading with fidelity/robinhood while they are artificially tanking the stock with low volume trading.
Trader212 in the UK has also suspended AMC and GME stocks.
Try to use another service: you have to sign up, upload documents, autenticate your identity and wait for your account to be activated. I lost 4 days for this. 4 days in the trading is a tons of time and Game Stop can go from 400 to 200 in the whiletime. This is unfair.
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1 is right. Read section 16.
https://cdn.robinhood.com/assets/robinhood/legal/Robinhood%2...
https://cdn.robinhood.com/assets/robinhood/legal/Robinhood%2...
If a Mall is rushed with 25 000 people in a day, you can be assured they will want to close the doors until the mob dissipates.
The store owners, generally in favour of large crowds, are likely to agree because they don't want to be mobbed either.
None of the companies involved here want their stocks to go on crazy volatile ride, it benefits almost nobody.
People are conspiratorial about evil bankers pulling strings to stop this when basically everyone wants it to stop.
Why do these people stampeding through the market thing that they are helping? It's very likely that the companies on the receiving end of this volatility want nothing to do with it.
The store owners, generally in favour of large crowds, are likely to agree because they don't want to be mobbed either.
None of the companies involved here want their stocks to go on crazy volatile ride, it benefits almost nobody.
People are conspiratorial about evil bankers pulling strings to stop this when basically everyone wants it to stop.
Why do these people stampeding through the market thing that they are helping? It's very likely that the companies on the receiving end of this volatility want nothing to do with it.
Let me see if I understood it correctly:
(1) If you're buying GME today, there's good (~50%?) chance you'll lose most of your money in two weeks. (Of course there's also a decent chance that you'll make out like a bandit, but I'm not worried about that.)
(2) Moreover, if you're buying GME today, there's a very good chance that you're utterly convinced that you'll make a lot of money.
(3) So, in two weeks, with high probability, these people will flood Robinhood's customer support, and something tells me that they won't take "What do you mean? You made your trade entirely on your own, and nobody can guarantee future prices!" as an answer. (Supporting evidence: see today's talk of lawsuit.)
So, given all this, Robinhood is just limiting the amount of headache it'll face when the shit eventually hits the fan. Sound like good business decision to me.
(1) If you're buying GME today, there's good (~50%?) chance you'll lose most of your money in two weeks. (Of course there's also a decent chance that you'll make out like a bandit, but I'm not worried about that.)
(2) Moreover, if you're buying GME today, there's a very good chance that you're utterly convinced that you'll make a lot of money.
(3) So, in two weeks, with high probability, these people will flood Robinhood's customer support, and something tells me that they won't take "What do you mean? You made your trade entirely on your own, and nobody can guarantee future prices!" as an answer. (Supporting evidence: see today's talk of lawsuit.)
So, given all this, Robinhood is just limiting the amount of headache it'll face when the shit eventually hits the fan. Sound like good business decision to me.
You seem to be making a lot of flawed assumptions here.
Even IF you are to assume this is a simply speculative "greater fool" scenario Robinhood just ensured through their interference that the last buyers are less likely to profit.
Robinhood's job is not to police transactions it is to process them. That they would do this for a few million $ in potential customer support time is so naïve.
Letting them off the hook for illegal manipulation because "it is a headache" is one of the stupidest arguments I have heard.
Even IF you are to assume this is a simply speculative "greater fool" scenario Robinhood just ensured through their interference that the last buyers are less likely to profit.
Robinhood's job is not to police transactions it is to process them. That they would do this for a few million $ in potential customer support time is so naïve.
Letting them off the hook for illegal manipulation because "it is a headache" is one of the stupidest arguments I have heard.
This is the "regular people are too dumb to play with the big-boy risk" approach to market access.
It seems classist and doesn't really line up with my concept of the free market.
It seems classist and doesn't really line up with my concept of the free market.
Regular people are too dumb to play with big risk, including you and me. There's a reason why most countries have a very tight control of gambling places, and that's not because they're classists. When gambling is allowed, the whole society suffers, because there will be a few lucky winners and many who just lost their life savings, and they still have to eat (and their families have to eat) so someone's tax payment is going to pay for them.
I agree that it's a problem when "too big to fail" players get away with their shenanigans, but that's a separate problem, and you don't solve that problem by encouraging common folks to gamble away their wealth.
I agree that it's a problem when "too big to fail" players get away with their shenanigans, but that's a separate problem, and you don't solve that problem by encouraging common folks to gamble away their wealth.
I've managed my fair share of big-boy risk. I personally believe myself to be qualified.
People should be permitted to buy publicly traded corporate assets. Your gambling analogy doesn't apply here. Robinhood saw fit to approve these people for brokerage accounts (and in many cases options trading). They were allowed to walk into the exchange so to speak, up until the point that they found a favorable position that they wanted to keep trading despite elevated volatility.
It's not the government's job to tell one class of people that they cannot participate in asset markets, while repeatedly bailing out a totally different class of people that blunders its role in the very same markets.
People should be permitted to buy publicly traded corporate assets. Your gambling analogy doesn't apply here. Robinhood saw fit to approve these people for brokerage accounts (and in many cases options trading). They were allowed to walk into the exchange so to speak, up until the point that they found a favorable position that they wanted to keep trading despite elevated volatility.
It's not the government's job to tell one class of people that they cannot participate in asset markets, while repeatedly bailing out a totally different class of people that blunders its role in the very same markets.
> So, in two weeks, with high probability, these people will flood Robinhood's customer support
Robin Hood is a brokerage. It is totally normal for them to have clients which (unwillingly or, in this case, willingly) have lost money - their customer support should handle this just fine. A lawsuit for allowing normal trading is going to be laughed out of court; this, on the other hand, will not be good for them, no matter how the lawsuit turns out. Not to mention that the SEC will take a nice long look at what happened here.
If customer support overhead would be their actual worry, they could've simply implemented a large checkbox saying "THIS STOCK IS HIGHLY VOLATILE. YOU _WILL_ MOST LIKELY LOOSE YOUR MONEY. Continue at your VERY OWN risk" and be done with it (you might argue this is still somewhat manipulation, but that could've easily been done in good faith).
Robin Hood is a brokerage. It is totally normal for them to have clients which (unwillingly or, in this case, willingly) have lost money - their customer support should handle this just fine. A lawsuit for allowing normal trading is going to be laughed out of court; this, on the other hand, will not be good for them, no matter how the lawsuit turns out. Not to mention that the SEC will take a nice long look at what happened here.
If customer support overhead would be their actual worry, they could've simply implemented a large checkbox saying "THIS STOCK IS HIGHLY VOLATILE. YOU _WILL_ MOST LIKELY LOOSE YOUR MONEY. Continue at your VERY OWN risk" and be done with it (you might argue this is still somewhat manipulation, but that could've easily been done in good faith).
It seems like a fair chuck of the WSB folks know they are possibly going to lose money here, but they don’t care as long as they can help screw the hedge funds.
https://www.reddit.com/r/wallstreetbets/comments/l6omry/an_o...
https://www.reddit.com/r/wallstreetbets/comments/l6omry/an_o...
As for this thread, it's got hundreds of comments. If you want to see them all you'll need to click through the More links at the bottom, or like this:
https://news.ycombinator.com/item?id=25945447&p=2
https://news.ycombinator.com/item?id=25945447&p=3