FINRA Orders Record Financial Penalties Against Robinhood(finra.org)
finra.org
FINRA Orders Record Financial Penalties Against Robinhood
https://www.finra.org/media-center/newsreleases/2021/finra-orders-record-financial-penalties-against-robinhood-financial
127 comments
The customer who took his own life over the margin bug had repeatedly tried to call Robinhood's customer support, for several days, but nobody ever picked up the phone.
Deplorable.
If you are a photo sharing site using an ad supported business model, your ‘support’ can be some silly chat not.
If you are taking people’s money for banking or investment, you provide 24/7 phone support. Period.
If you are a photo sharing site using an ad supported business model, your ‘support’ can be some silly chat not.
If you are taking people’s money for banking or investment, you provide 24/7 phone support. Period.
> If you are taking people’s money for banking or investment, you provide 24/7 phone support. Period.
So much this. I have been working in Fintech for 8 years now, and the lack of seriousness I've seen in different aspects of startups in this fields is appalling. When you are mingling with other's people money, you don't get the advantage to "move fast, break things". You don't get to "whoops" when someone hacks you and steals funds, you don't get to say you are sorry when a bug makes you lose millions to fraud.
But still my experience has been that the majority of product and business people in startups don't take it seriously. They keep pushing Engineering teams to move fast and release yet-another-half-assed-feature instead of listening to the clamours of the developers for bug fixing and security improvements.
So much this. I have been working in Fintech for 8 years now, and the lack of seriousness I've seen in different aspects of startups in this fields is appalling. When you are mingling with other's people money, you don't get the advantage to "move fast, break things". You don't get to "whoops" when someone hacks you and steals funds, you don't get to say you are sorry when a bug makes you lose millions to fraud.
But still my experience has been that the majority of product and business people in startups don't take it seriously. They keep pushing Engineering teams to move fast and release yet-another-half-assed-feature instead of listening to the clamours of the developers for bug fixing and security improvements.
I worked on a reimbursement platform for a couple of years. It was an added layer of stress in my life that I frankly could do without... and it was just reimbursing company expenses.
Can’t imagine doing investments or raw banking.
Not surprised the ‘startup motto’ lives strong regardless of sector... but disappointing for sure.
Can’t imagine doing investments or raw banking.
Not surprised the ‘startup motto’ lives strong regardless of sector... but disappointing for sure.
My broker is one of the biggest banks in Canada and the US (TD) and it doesn’t have 24/7 support anymore. Monday-Friday 7am-6pm. I’d usually call outside of market hours when I could to avoid market-hour demand/wait times, but not anymore. And they charge me $10 for trades!
https://www.td.com/ca/en/investing/direct-investing/services...
https://www.td.com/ca/en/investing/direct-investing/services...
They likely have a considerable amount of your net worth. You might want to reconsider that.
Schwab provides this and they don’t charge for trades. I am sure they have warts, but I can always talk with someone.
https://www.schwab.com/contact-us
Schwab provides this and they don’t charge for trades. I am sure they have warts, but I can always talk with someone.
https://www.schwab.com/contact-us
I’m not in US.
If you are taking people’s money for banking or investment, you provide 24/7 phone support. Period.
This seems excessive. Even my own, regular bank, only has phone support between working hours.
I understand the sentiment, but this whole "everyone can trade options" is not solely Robin Hoods fault. It was, and still is, hyped and promoted on Reddits' WSB.
This seems excessive. Even my own, regular bank, only has phone support between working hours.
I understand the sentiment, but this whole "everyone can trade options" is not solely Robin Hoods fault. It was, and still is, hyped and promoted on Reddits' WSB.
Afaik they don’t charge any brokerage fees. From what I gather, they use PFOF (payment for order flow) to get revenue, instead. This essentially means that they sell the information on the just placed customer orders to 3rd parties, so that those 3rd parties can front-run the trades and skim the profit off of RH customers.
That's not how it works. With PFOF, the market maker (e.g. Citadel) takes the other side of the trade with Robinhood's retail client, instead of that retail order being sent to the actual market.
Front-running is illegal and is not why firms pay for order flow.
I can't believe you've managed to fit so many wrong things into a short post. Do you often make comments about things you have no clue about with such confidence?
At least this will be a good litmus test for community moderation.
At least this will be a good litmus test for community moderation.
This is one of the things that bug me about modern tech companies. They often “disrupt” a market by not offering any meaningful customer support and can save a lot of money that way. It’s all smooth sailing when things go well but if you encounter a bug you are basically out of luck. See all the stories of people having their PayPal, Google or Amazon accounts shut down for unknown reason and there is nothing they can do to clear things up other than having friends in the company or having a large Twitter audience.
They often disrupt by either deliberately ignoring or just not being aware of the industry's edge cases.
AirBnb style rentals and ride-sharing are both slowly rediscovering exactly why the taxi and hotel industry operate the way they do.
Every single stupid rule has a story attached to it.
AirBnb style rentals and ride-sharing are both slowly rediscovering exactly why the taxi and hotel industry operate the way they do.
Every single stupid rule has a story attached to it.
It's a gambling company. Their S1 claims they are a "safety first" company. It's laughable that this even needs to be said. They've gamified trading at the expense of the little guy and the benefit of wall street. They claim they've returned $1.7bn in price improvement over less than 2 years but this masks the real effect that HFT is probably making multiples of this on their flow.
I myself have filed a FINRA complaint against them 3 years ago for sending an order that was supposed to trade at the open but instead traded in the pre market session. In their attempt to make trading "easy" they removed basic long standing assumptions around how you trade. I lost money because my order was executed early. FINRA requested the complaint be addressed by RH. Guess what... They never responded. Great way to treat your customers...
I myself have filed a FINRA complaint against them 3 years ago for sending an order that was supposed to trade at the open but instead traded in the pre market session. In their attempt to make trading "easy" they removed basic long standing assumptions around how you trade. I lost money because my order was executed early. FINRA requested the complaint be addressed by RH. Guess what... They never responded. Great way to treat your customers...
Robinhood recently closed out an options position "automatically", selling it for 1/5th the amount I was seeking. They deemed it was "risky" yet the position was moving in my favor the whole week.
I don't know how common that is on other platforms, but I'm feeling these fines probably are justified.
I don't know how common that is on other platforms, but I'm feeling these fines probably are justified.
It is common to do such things. Remember that you are not the only one who takes on risk; your brokerage is also on the hook if you pile up losses that you cannot cover. Brokerages would rather piss off their customers by forcing them to close positions that, according to the brokerage's analysis, are too risky. Last year a bunch of brokerages raised their margin maintenance requirements on various symbols that were deemed risky in some way (low liquidity, wide bid/ask spreads, etc.), which likely worsened the market crash as even more selling pressure was applied.
Where does this amount go? Back to Finra members?
70 doesn't sound much for a financial institution.
"Compliance with these rules is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,”
Good, finally some of these crooks are getting busted, and in this particular instance busted for having hacked-up things. Can't do that in a professional business, or else one gets busted, as one should.
Good, finally some of these crooks are getting busted, and in this particular instance busted for having hacked-up things. Can't do that in a professional business, or else one gets busted, as one should.
This is terrible. A fine this small incentivizes this behavior.
tldr: total $70M. Nobody ever goes to jail in these stories.
People don’t go to jail to make people feel good. You can’t deprive people of their liberty without having a specific person, specific actions and a specific law being broken, and allow them to mount a defense of the charges.
On the other hand it’s it’s easy to fine a firm for patterns of behavior.
On the other hand it’s it’s easy to fine a firm for patterns of behavior.
If their customers are being refunded, it's better than expected.
> tldr: total $70M. Nobody ever goes to jail in these stories.
FINRA isn't government.
FINRA isn't government.
Maybe the SEC needs to be more proactive?
I thought we had too many people in jail already. You want to add more?
Sometimes I wonder if there's secretly a FINRA fine high score amongst fintechs. Sure seems like all that it's good for at times.
[deleted]
Robinhood is expected to go public (IPO) soon. What does everyone think of the company now? I was going to invest but now I'm having second thoughts on it. Seems like the brand has been permanently tarnished by this situation overall.
So these new /r/wallstreetbets and related manaics are obviously going to burn piles of money going to war with the IPO.
Do you think the size of those piles of money is priced in? The size of the fear of the size of those piles of money?
The PR related stuff seems easier to figure out.
It's either a great idea or a terrible idea, and I can't tell.
Do you think the size of those piles of money is priced in? The size of the fear of the size of those piles of money?
The PR related stuff seems easier to figure out.
It's either a great idea or a terrible idea, and I can't tell.
I’m planning on selling put spreads to wallstreetbets once the options chain opens up
I guess this is timed to get it out of the way before the IPO.
I don't know whether Robinhood as a stock would be worth investing in (probably, but that's your decision to make).
As far as adverse press and reputation are concerned, these sorts of things only have a negative effect if they represent some kind of underlying/fundamental issue with the company.
Unless if you think that Robinhood will repeatedly be hit by regulatory fines, and that the fines or other actions are large enough to strongly impact their bottom line, the FINRA action probably isn't much of a factor.
I don't know whether Robinhood as a stock would be worth investing in (probably, but that's your decision to make).
As far as adverse press and reputation are concerned, these sorts of things only have a negative effect if they represent some kind of underlying/fundamental issue with the company.
Unless if you think that Robinhood will repeatedly be hit by regulatory fines, and that the fines or other actions are large enough to strongly impact their bottom line, the FINRA action probably isn't much of a factor.
Nothing about robinhood disabling the buyside players but not the sellside?
I maintain that that was the right thing to do, given the situation they were in (and not excusing them for not avoiding getting into that situation)
The way I see it, if I own a stock and want to sell it, my broker’s duty in that situation should be exclusively to me. Even if they don’t have the ability to let other customers enter a position, they shouldn’t block the exit gates for me in a naive attempt to maintain balance of buy and sell orders.
If it could be shown that they did this intentionally to manipulate the market, of course they should be fined for it. But if the truth is in line with the official statement at the time, I don’t see wrongdoing.
The way I see it, if I own a stock and want to sell it, my broker’s duty in that situation should be exclusively to me. Even if they don’t have the ability to let other customers enter a position, they shouldn’t block the exit gates for me in a naive attempt to maintain balance of buy and sell orders.
If it could be shown that they did this intentionally to manipulate the market, of course they should be fined for it. But if the truth is in line with the official statement at the time, I don’t see wrongdoing.
it was absolutely the right thing to do, they would've been massively over-exposed, somehow it's painted as villainous and underhanded.
If they had lots of deposits and went under surely people would've been less than impressed and asking why they didn't take action sooner.
If they had lots of deposits and went under surely people would've been less than impressed and asking why they didn't take action sooner.
it was the right thing to do on the moment, but what was wrong was:
a) cutting corners and ending up in that position
b) not being completely transparent about what was happening
a) cutting corners and ending up in that position
b) not being completely transparent about what was happening
c) changing story multiple times in an attempt to save face.
The CEO claimed they had no liquidity issues at all, then claimed they didn’t have enough money to meet margin requirements. Since then, we have found out that the DTCC that asked for more collateral recanted prior to market open but RH still discontinued retail buying anyway.
Like an IT outages reflects poorly on a tech company, not being able to manage your books reflects poorly on a financial company.
The CEO claimed they had no liquidity issues at all, then claimed they didn’t have enough money to meet margin requirements. Since then, we have found out that the DTCC that asked for more collateral recanted prior to market open but RH still discontinued retail buying anyway.
Like an IT outages reflects poorly on a tech company, not being able to manage your books reflects poorly on a financial company.
>a) cutting corners and ending up in that position
What corners were cut? That they didn't prepare for a unprecedented buy wave in meme stocks along with a massive increase in deposit requirements?
What corners were cut? That they didn't prepare for a unprecedented buy wave in meme stocks along with a massive increase in deposit requirements?
Opening (and pushing) call options to a broad userbase without first ensuring they had the capital reserves and the access to additional funding to top-up those reserves
it's a bit easy for robinhood to say "fuck the old banks, we don't need to be part of their network, and we're going to open complex derivative trading to everyone", and then as soon as everyone starts buying massive amounts of call options, suddenly realising that they need massive collateral and they don't have any partners to rely on
it's a bit easy for robinhood to say "fuck the old banks, we don't need to be part of their network, and we're going to open complex derivative trading to everyone", and then as soon as everyone starts buying massive amounts of call options, suddenly realising that they need massive collateral and they don't have any partners to rely on
> Opening (and pushing) call options to a broad userbase without first ensuring they had the capital reserves and the access to additional funding to top-up those reserves
Them opening/pushing options to their userbase was a long term move, but GME blowing up and deposit requirements spiking up was a short term event. Therefore those events aren't really contradictory.
>fuck the old banks, we don't need to be part of their network
That was part of their messaging? I haven't been keeping up with their blog posts, but AFAIK their messaging is closer to "democratizing finance" rather than "fuck the old banks".
Them opening/pushing options to their userbase was a long term move, but GME blowing up and deposit requirements spiking up was a short term event. Therefore those events aren't really contradictory.
>fuck the old banks, we don't need to be part of their network
That was part of their messaging? I haven't been keeping up with their blog posts, but AFAIK their messaging is closer to "democratizing finance" rather than "fuck the old banks".
Well, if I gave my kid five bucks and sent them to the store to buy a gallon milk, there wouldn't be any 'credit' or 'exposure' or 'risk' or 'volatility' involved.
Are we to believe these cutting edge financial institutions with their sub-millisecond high frequency trading, specialists in order execution, eight-figure salaries and dedicated high-speed microwave links are somehow unable trade cash for goods like every store does hundreds of times a day?
Are we to believe these cutting edge financial institutions with their sub-millisecond high frequency trading, specialists in order execution, eight-figure salaries and dedicated high-speed microwave links are somehow unable trade cash for goods like every store does hundreds of times a day?
Not to defend Robinhood, but the GME debacle was not like you sending your kid for milk; it was like everyone panicking and sending their kids to the same store, to buy a whole cart of milk each. As the early months of 2020 demonstrated, brick&mortar stores don't handle deviations from regular buying pattern well either, and having cash in hand doesn't change anything.
That's not how brokers should work though, speaking in code, they are a wrapper around the market to make an interface that regular people can use.
Price discovery means that buy/ask spread changes based on supply and demand, were this the case, and there was no collusion, then there would have been no need to shut down trading.
The problem is the supply was inflated due to naked shorts, and Robin Hood's clearing house/business partner (Citadel) was caught with their pants down facilitating this naked shorting.
Under normal market mechanics, there would be no panic. The price would have increased, early adopters would have gotten profit, late adopters would have missed out and lost as the correct price was found.
The January blocking of trades was a desperate 'Hail Mary' to prevent an actual squeeze, and it *worked*.
Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand.
https://www.reddit.com/r/Superstonk/comments/oc4f79/well_the...
Yes, this is conjecture, but the author is well respected, and if you can disprove any of it, reddit is very happy to help you strengthen/disprove it's case.
It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.
Price discovery means that buy/ask spread changes based on supply and demand, were this the case, and there was no collusion, then there would have been no need to shut down trading.
The problem is the supply was inflated due to naked shorts, and Robin Hood's clearing house/business partner (Citadel) was caught with their pants down facilitating this naked shorting.
Under normal market mechanics, there would be no panic. The price would have increased, early adopters would have gotten profit, late adopters would have missed out and lost as the correct price was found.
The January blocking of trades was a desperate 'Hail Mary' to prevent an actual squeeze, and it *worked*.
Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand.
https://www.reddit.com/r/Superstonk/comments/oc4f79/well_the...
Yes, this is conjecture, but the author is well respected, and if you can disprove any of it, reddit is very happy to help you strengthen/disprove it's case.
It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.
>Price discovery means that buy/ask spread changes based on supply and demand, were this the case, and there was no collusion, then there would have been no need to shut down trading.
1. they didn't shut down trading, only forced positions to go into close-only
2. they absolutely needed to do that, given that they were at risk of not being able to meet deposit requirements, which would mean they would have to suspend trading for all stocks
>Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand.
1. shorts in excess of 100% doesn't indicate anything nefarious, due to synthetic longs created by shorts
2. I'm very skeptical of these "calculations", when official numbers put short interest at far lower than that, eg https://fintel.io/ss/us/gme.
>Yes, this is conjecture, but the author is well respected,
Is he? Respected by whom? The superstonk community? The financial community? If it's just the latter it doesn't mean much.
>It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.
“But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.”
-- Carl Sagan
1. they didn't shut down trading, only forced positions to go into close-only
2. they absolutely needed to do that, given that they were at risk of not being able to meet deposit requirements, which would mean they would have to suspend trading for all stocks
>Calculations based on married put/calls shows that 190% of GME has, and still is shorted. There is no way to close the short position without increasing demand.
1. shorts in excess of 100% doesn't indicate anything nefarious, due to synthetic longs created by shorts
2. I'm very skeptical of these "calculations", when official numbers put short interest at far lower than that, eg https://fintel.io/ss/us/gme.
>Yes, this is conjecture, but the author is well respected,
Is he? Respected by whom? The superstonk community? The financial community? If it's just the latter it doesn't mean much.
>It's all seems quite cultish over in superstonk, but no-one believed Michael Burry back in 2008.
“But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.”
-- Carl Sagan
1. They shut it down enough to prevent retail from FOMOing in more. At that point, the rules of the game were changed, and the price dropped.
2. I'm skeptical too, but there is no way the reported figures are accurate. Finra itself lists RC Ventures/Blackrock twice, and adds up to more than 100% for institutional investors. Information on Bloomberg terminals is completely wrong, and information on short positions is self reported.
I'm tempted to believe criand's latest DD, as it's yet to be disproven. Older DD has not stood the test of time so well.
In regards to qualifications, yes, the superstonk members are self policing, but also they don't accept that credentials mean you are automatically right, and people who are wrong are called out almost immediately.
There's not going to be a place where it says 'This stock is owned 290%', but then again, that's the nature of Russell's teapot. Given what I've seen with news coverage, the promotion of AMC as an alternative, and the passing of so many SEC rule changes, it's hard to imagine zero fuckery behind the scenes.
2. I'm skeptical too, but there is no way the reported figures are accurate. Finra itself lists RC Ventures/Blackrock twice, and adds up to more than 100% for institutional investors. Information on Bloomberg terminals is completely wrong, and information on short positions is self reported.
I'm tempted to believe criand's latest DD, as it's yet to be disproven. Older DD has not stood the test of time so well.
In regards to qualifications, yes, the superstonk members are self policing, but also they don't accept that credentials mean you are automatically right, and people who are wrong are called out almost immediately.
There's not going to be a place where it says 'This stock is owned 290%', but then again, that's the nature of Russell's teapot. Given what I've seen with news coverage, the promotion of AMC as an alternative, and the passing of so many SEC rule changes, it's hard to imagine zero fuckery behind the scenes.
>1. They shut it down enough to prevent retail from FOMOing in more
Source? The only thing we know for sure is that they restricted trading. Their official explanation was due to volatility/deposit requirements. What's the evidence that they did it to "prevent retail from FOMOing in more"?
>2. I'm skeptical too, but there is no way the reported figures are accurate
They may not be 100% accurate. I'll entertain the possibility that they're a few percentage points off, but are they more than 10x off as the DD suggests?
>Finra itself lists RC Ventures/Blackrock twice, and adds up to more than 100% for institutional investors
Can you link the Finra report? I can't locate it directly, so I'm just going off whatever's reported by other sites
>as it's yet to be disproven. Older DD has not stood the test of time so well.
This should tell you all you need to know. The general problem with debunking conspiracies is that it takes more effort to debunk than it is to make it up.
>Given what I've seen with news coverage, the promotion of AMC as an alternative
The alternative explanation to the "even the media is in on it!" conspiracy is that GME was months ago, and AMC is far more recent so is therefore getting more attention. Another problem is that: what about the hedge funds shorting AMC? Don't they stand to lose if AMC blows up? Where's their conspiracy? Do the GME shorters have better conspiracy people than the people shorting AMC?
Source? The only thing we know for sure is that they restricted trading. Their official explanation was due to volatility/deposit requirements. What's the evidence that they did it to "prevent retail from FOMOing in more"?
>2. I'm skeptical too, but there is no way the reported figures are accurate
They may not be 100% accurate. I'll entertain the possibility that they're a few percentage points off, but are they more than 10x off as the DD suggests?
>Finra itself lists RC Ventures/Blackrock twice, and adds up to more than 100% for institutional investors
Can you link the Finra report? I can't locate it directly, so I'm just going off whatever's reported by other sites
>as it's yet to be disproven. Older DD has not stood the test of time so well.
This should tell you all you need to know. The general problem with debunking conspiracies is that it takes more effort to debunk than it is to make it up.
>Given what I've seen with news coverage, the promotion of AMC as an alternative
The alternative explanation to the "even the media is in on it!" conspiracy is that GME was months ago, and AMC is far more recent so is therefore getting more attention. Another problem is that: what about the hedge funds shorting AMC? Don't they stand to lose if AMC blows up? Where's their conspiracy? Do the GME shorters have better conspiracy people than the people shorting AMC?
> The problem is the supply was inflated due to naked shorts, and Robin Hood's clearing house/business partner (Citadel) was caught with their pants down facilitating this naked shorting.
What is the “caught with their pants down” referring to? I’ve seen dubious speculation but this is the first I’ve heard of them being caught on anything.
What is the “caught with their pants down” referring to? I’ve seen dubious speculation but this is the first I’ve heard of them being caught on anything.
They had a naked short position, one that could not be covered, and when the price rose too high, they would be margin called.
When all the shares on the market are synthetic (fake), and retail and investors own more shares than are issued, then there is a serious problem that can either be brushed under the rug, or untangled by force (liquidation)
Citadel itself is a hedge fund AND a market maker, it has two arms both ran by Ken Griffin.
The path they were going down pre January was to short Gamestop into bankruptcy with no means to raise capital, much like Toys R us was. When Gamestop got a new CEO, and changed direction, they had already gone 'all-in' with their shorting with no way out.
Main thing about shorting, it's an infinite risk position, but hedgefunds have historically been able to short into oblivion.
When all the shares on the market are synthetic (fake), and retail and investors own more shares than are issued, then there is a serious problem that can either be brushed under the rug, or untangled by force (liquidation)
Citadel itself is a hedge fund AND a market maker, it has two arms both ran by Ken Griffin.
The path they were going down pre January was to short Gamestop into bankruptcy with no means to raise capital, much like Toys R us was. When Gamestop got a new CEO, and changed direction, they had already gone 'all-in' with their shorting with no way out.
Main thing about shorting, it's an infinite risk position, but hedgefunds have historically been able to short into oblivion.
That’s aligned with what I’ve heard speculated, but what’s the part where they were caught? The reddit post doesn’t point to a Citadel link, unless I’m missing something.
Not literally caught, they are stuck in a position of covering and liquidating or seeing how far they can kick the can down the road.
You should be able to sell it, yes. But who are you selling it to, if Robinhood is preventing you (and your peers) from buying?
People who use less-crappy brokers, via exchanges. Or market makers, if they are willing to beat the best current offer on the exchanges.
So a smaller pool of people than those people + people on robinhood. So nice convenient price pressure is applied.
Which I think is the OPs point.
Which I think is the OPs point.
Convenient for whom? If the implication is that they were trying to manipulate the market, I agree they should be in trouble, I just don’t think that’s the case.
I’d note that the other choice they could have made — blocking selling when it was not necessary — would also have the appearance of market manipulation (in the other direction).
I’d note that the other choice they could have made — blocking selling when it was not necessary — would also have the appearance of market manipulation (in the other direction).
People who aren't on Robinhood.
If you're getting margin calls on your exposure to a certain stock, it makes sense to allow people to sell (thus reducing your exposure) rather than buy
Didn't a bunch of brokers do that?
A bunch did, a bunch didn't. T212 did in the UK and they have been closed to new accounts since the incident.
https://www.reddit.com/r/Superstonk/comments/mowzjk/the_brok... has a list of brokers, who restricted trades and their clearing houses.
https://www.reddit.com/r/Superstonk/comments/mowzjk/the_brok... has a list of brokers, who restricted trades and their clearing houses.
I think that's a separate complaint that's being looked in to
It's important to note that Finra is not a government regulator — it's a self-regulating organization (SRO). JP Morgan, Goldman Sach etc are part of Finra. [1]
By handing out the biggest fine in Finra history, they are telling the government that government regulation isn't needed — they can regulate themselves.
[1] https://youtu.be/hNImocKCMvE?t=1879
By handing out the biggest fine in Finra history, they are telling the government that government regulation isn't needed — they can regulate themselves.
[1] https://youtu.be/hNImocKCMvE?t=1879
> they are telling the government that government regulation isn't needed — they can regulate themselves
Quite a "trustworthy" regulation entity, which helped brokers remove evidence of financial misconducts and blocked public scrutiny into that matter.[0][1]
I have close to zero confidence in the finance industry being able to regulate itself.
[0] https://www.reuters.com/investigates/special-report/usa-finr... [1] https://www.sciencedirect.com/science/article/abs/pii/S03044...
Quite a "trustworthy" regulation entity, which helped brokers remove evidence of financial misconducts and blocked public scrutiny into that matter.[0][1]
I have close to zero confidence in the finance industry being able to regulate itself.
[0] https://www.reuters.com/investigates/special-report/usa-finr... [1] https://www.sciencedirect.com/science/article/abs/pii/S03044...
They are indeed not a government regulator but, in practice, Federal law does require membership in FINRA for broker-dealers.
See for instance: https://www.law.cornell.edu/cfr/text/17/240.15b7-1
FINRA is the only national securities association.
See for instance: https://www.law.cornell.edu/cfr/text/17/240.15b7-1
FINRA is the only national securities association.
But if it’s not government, why would anyone ever pay fines to them then?
Quite simple. The government legislates that membership in a non-government entity is required to do business in a sector.
If you’re fined and don’t pay the fine to the entity, they revoke the membership and you are now breaking the law.
If you’re fined and don’t pay the fine to the entity, they revoke the membership and you are now breaking the law.
Which begs the question; why can't you just ignore the fine, rebrand under a new name (including changing leadership) and then apply for new membership?
What is keeping FINRA's interest in following up with punishments of members?
What is keeping FINRA's interest in following up with punishments of members?
What's stopping you is they wouldn't give you membership when you reapply.
You can have your ability to deal in the financial markets removed for a bunch of things but in particular any sort of official sanction for dishonesty or fraud. There was a senior portfolio manager at Blackrock who was banned from the securities industry for ticket fraud on his daily commute (albeit over a number of years). https://www.theguardian.com/business/2014/dec/15/ca-ban-4300...
You can have your ability to deal in the financial markets removed for a bunch of things but in particular any sort of official sanction for dishonesty or fraud. There was a senior portfolio manager at Blackrock who was banned from the securities industry for ticket fraud on his daily commute (albeit over a number of years). https://www.theguardian.com/business/2014/dec/15/ca-ban-4300...
This is why I asked the second question. If FINRA has no obligation to enforce its punishments, but doesn't want to deal with the fallout of the same company with the same name and leadership reapplying for membership, then how do they get around that? Force the company to change name, change executives and reapply in 6 months. it all blows over, FINRA gets their membership fees and everybody is none the wiser.
But yes, in an ideal world it wouldn't work this way. who watches the watchmen? If FINRA isn't regulated, then they can do what they like.
But yes, in an ideal world it wouldn't work this way. who watches the watchmen? If FINRA isn't regulated, then they can do what they like.
Why would you think FINRA has no interest in enforcing it's punishments? If they didn't enforce their punishments then they wouldn't have any authority over their members, so I expect they want to have opportunities to enforce punishments.
The whole point is everybody involved plays fair and follows the rules so they dont have a government agency come in and regulate them.
Every "self-regulatory organization" exists with the implicit threat that the government can and will impose external regulations if the organization doesn't do a good job. FINRA is authorized by law because lawmakers believe it does a good job of regulation, and that law continues to exist only because lawmakers continue to believe that. The SEC watches what FINRA does, and the government could easily choose to stop authorizing FINRA and assign its duties to the SEC.
In fact, FINRA itself was only established in 2007; the previous self-regulatory organization was the National Association of Securities Dealers, NASD - you may have heard of their Automated Quotation service, NASDAQ. FINRA was created after a long period of the SEC criticizing NASD for prioritizing the good of its business over effective self-regulation (see e.g. https://www.washingtonpost.com/archive/business/1994/11/15/s... and https://apnews.com/article/2d710b55afae651b8ad0737477ba2d79).
In fact, FINRA itself was only established in 2007; the previous self-regulatory organization was the National Association of Securities Dealers, NASD - you may have heard of their Automated Quotation service, NASDAQ. FINRA was created after a long period of the SEC criticizing NASD for prioritizing the good of its business over effective self-regulation (see e.g. https://www.washingtonpost.com/archive/business/1994/11/15/s... and https://apnews.com/article/2d710b55afae651b8ad0737477ba2d79).
What's stopping you from declaring bankruptcy to invalidate all of your outstanding debt?
Depends on the type of debt and whether you're actually bancrupt.
Is this real or are you joking?
It's definitely a thing: https://en.wikipedia.org/wiki/Quango
It's the same with many things. Lawyers, doctors, etc.
This comes from a long line of trade houses, literally spanning back 1000s of years. Trades have regulated themselves since before governments existed.
This comes from a long line of trade houses, literally spanning back 1000s of years. Trades have regulated themselves since before governments existed.
> Trades have regulated themselves since before governments existed.
Not even remotely. Guilds followed states, and were usually under the purview of and regulated by cities.
Not even remotely. Guilds followed states, and were usually under the purview of and regulated by cities.
The guilds were the power brokers that defined the cities, at least in Europe guilds defined city policy not the other way around.
That guilds were powerful and could corrupt city leadership has nothing to do with my comments.
And artisan guilds predate medieval europe by thousands of years.
And artisan guilds predate medieval europe by thousands of years.
The guilds and later trading families were the city leadership.
In the city I was born which was founded around 2000 years ago and got it's first major in the 14th century, most of the majors back then there were guild masters (the city only later become a trading point).
The city I currently live in got it's first major in the 13th century who was also a guild master.
In the city I was born which was founded around 2000 years ago and got it's first major in the 14th century, most of the majors back then there were guild masters (the city only later become a trading point).
The city I currently live in got it's first major in the 13th century who was also a guild master.
The first trade to regulate itself did not use a guild. For example, have you heard of the Hippocratic oath? It’s still required in the USA and includes quite a few interesting tidbits that wouldn’t get past a modern ethicist.
I swear by Apollo Healer, by Asclepius, by Hygieia, by Panacea, and by all the gods and goddesses, making them my witnesses, that I will carry out, according to my ability and judgment, this oath and this indenture.
To hold my teacher in this art equal to my own parents; to make him partner in my livelihood; when he is in need of money to share mine with him; to consider his family as my own brothers, and to teach them this art, if they want to learn it, without fee or indenture; to impart precept, oral instruction, and all other instruction to my own sons, the sons of my teacher, and to indentured pupils who have taken the Healer’s oath, but to nobody else.
I will use those dietary regimens which will benefit my patients according to my greatest ability and judgment, and I will do no harm or injustice to them.[7] Neither will I administer a poison to anybody when asked to do so, nor will I suggest such a course. Similarly I will not give to a woman a pessary to cause abortion. But I will keep pure and holy both my life and my art. I will not use the knife, not even, verily, on sufferers from stone, but I will give place to such as are craftsmen therein.
Into whatsoever houses I enter, I will enter to help the sick, and I will abstain from all intentional wrong-doing and harm, especially from abusing the bodies of man or woman, bond or free. And whatsoever I shall see or hear in the course of my profession, as well as outside my profession in my intercourse with men, if it be what should not be published abroad, I will never divulge, holding such things to be holy secrets.
Now if I carry out this oath, and break it not, may I gain for ever reputation among all men for my life and for my art; but if I break it and forswear myself, may the opposite befall me.[6] – Translation by W.H.S. Jones.
I swear by Apollo Healer, by Asclepius, by Hygieia, by Panacea, and by all the gods and goddesses, making them my witnesses, that I will carry out, according to my ability and judgment, this oath and this indenture.
To hold my teacher in this art equal to my own parents; to make him partner in my livelihood; when he is in need of money to share mine with him; to consider his family as my own brothers, and to teach them this art, if they want to learn it, without fee or indenture; to impart precept, oral instruction, and all other instruction to my own sons, the sons of my teacher, and to indentured pupils who have taken the Healer’s oath, but to nobody else.
I will use those dietary regimens which will benefit my patients according to my greatest ability and judgment, and I will do no harm or injustice to them.[7] Neither will I administer a poison to anybody when asked to do so, nor will I suggest such a course. Similarly I will not give to a woman a pessary to cause abortion. But I will keep pure and holy both my life and my art. I will not use the knife, not even, verily, on sufferers from stone, but I will give place to such as are craftsmen therein.
Into whatsoever houses I enter, I will enter to help the sick, and I will abstain from all intentional wrong-doing and harm, especially from abusing the bodies of man or woman, bond or free. And whatsoever I shall see or hear in the course of my profession, as well as outside my profession in my intercourse with men, if it be what should not be published abroad, I will never divulge, holding such things to be holy secrets.
Now if I carry out this oath, and break it not, may I gain for ever reputation among all men for my life and for my art; but if I break it and forswear myself, may the opposite befall me.[6] – Translation by W.H.S. Jones.
The Hippocratic oath is not required in the US, and many schools that do use it have significantly modified it. Eg:
> In a 2000 survey of US medical schools, all of the then extant medical schools administered some type of profession oath. Among schools of modern medicine, sixty-two of 122 used the Hippocratic Oath, or a modified version of it. The other sixty schools used the original or modified Declaration of Geneva, Oath of Maimonides, or an oath authored by students and or faculty. All nineteen osteopathic schools used the Osteopathic Oath.
https://en.m.wikipedia.org/wiki/Hippocratic_Oath
> In a 2000 survey of US medical schools, all of the then extant medical schools administered some type of profession oath. Among schools of modern medicine, sixty-two of 122 used the Hippocratic Oath, or a modified version of it. The other sixty schools used the original or modified Declaration of Geneva, Oath of Maimonides, or an oath authored by students and or faculty. All nineteen osteopathic schools used the Osteopathic Oath.
https://en.m.wikipedia.org/wiki/Hippocratic_Oath
Some schools still use a modified version, but I could’ve been way more clear about that. You’re right.
The point I was trying to make was that guilds were not the first form of trades self regulating.
The point I was trying to make was that guilds were not the first form of trades self regulating.
> The first trade to regulate itself did not use a guild. For example, have you heard of the Hippocratic oath?
1. How is that of any relevance to my comment?
2. Are you somehow ahistorically asserting that medecine was the first trade to regulate itself?
1. How is that of any relevance to my comment?
2. Are you somehow ahistorically asserting that medecine was the first trade to regulate itself?
No, I was just making the point that guilds were not the first form of trades self regulating.
I this the idea of regylation was very different back then, after all we could build towers with woodn fire escaoes as recently as 1850's
Not sure why you are downvoted. It's not quite the same, but the American Medical Association has direct input into how much doctors are paid by Medicare, how many residency positions there are, etc. Those are all government programs.
Assassin's Guide, Theives Guild, etc
I'm quite niave in the ways and make up of financial instituations. But from what I can tell - many of the US regulatory bodies seems to be private (but not ostensibly for profit) companies.
Infact the US Federal Reserve is not a government entity - its a private (and public somehow).
https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
This contrasts (as far as I can tell) with Australia, where the central bank is 100% state-owned.
Infact the US Federal Reserve is not a government entity - its a private (and public somehow).
https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...
This contrasts (as far as I can tell) with Australia, where the central bank is 100% state-owned.
Because these JPMorgans of the world don't want the Govt to step in to the market and regulate it. This is group of brokerages and they want to be free.
These fines are to calm down govt and fk robin hood same time.
These fines are to calm down govt and fk robin hood same time.
I also recommend Robinhood's full 123-page Letter of Acceptance, Waiver and Consent. Very readable, and it's quite the catalogue of, at absolute best, less than competent behaviour. https://www.finra.org/sites/default/files/2021-06/robinhood-...
This is extremely good content, thanks for the link.
Just the first few pages are enough to convince me that Robinhood is a very poorly run organisation. As a financial technologist with a couple of decades' experience, basic things such as only having a 'physical inaccessibility' BCP plan is appalling.
I wouldn't touch this company with a penny of my money, whether as a customer or an investor.
Just the first few pages are enough to convince me that Robinhood is a very poorly run organisation. As a financial technologist with a couple of decades' experience, basic things such as only having a 'physical inaccessibility' BCP plan is appalling.
I wouldn't touch this company with a penny of my money, whether as a customer or an investor.
Unfortunately thanks to the S&P 500, we’ll have no choice but to invest in them and support running a business poorly.
HOOD won’t be part of the S&P 500 index. Not sure what you mean?
> Robinhood’s BCP [Business Continuity Plan] was limited to events that physically prevented employees from working from the firm’s premises. As such, the firm did not consider applying its BCP to technology-related business disruptions, including the March 2-3 outage, which Robinhood considered an “existential” threat to its business
They're a FinTech firm and they didn't plan for technology outages but did for stuff like weather events? That's just crazy and noob-level planning.
They're a FinTech firm and they didn't plan for technology outages but did for stuff like weather events? That's just crazy and noob-level planning.
Robin Hood takes the fall while the big players laugh all the way to their banks.
This is my sense too. Disrupting the legacy financial industry took moxie. And no doubt ruffled quite a few feathers. The big guys would love if HOOD failed miserably as a public company, so I’m cautious to invest. But the economics of the service are brilliant. HOOD is a money printing machine run by psychopaths—sounds like a win to me.
Slap on the wrist.
Robinhood will be identified as a way to milk common folks money by the big players.
So the big players will invest anyway, then it'll have enough influence in FINRA to avoid any consequential punishment when they'll fuck up the public finances.
'Common folk' engaging in day trading are signing themselves up to be milked, regardless of which exchange they use. If you're one of those common folk, my best advice for you is to stop.
If you want to invest, buy an index fund. If you want to gamble, go to a casino.
If you want to gamble, while fooling yourself that you're investing, day-trade options, preferably in a meme stock.
If you want to invest, buy an index fund. If you want to gamble, go to a casino.
If you want to gamble, while fooling yourself that you're investing, day-trade options, preferably in a meme stock.
I see posts like yours so often. They're ubiquitous.
It's like saying 'you don't need anything more than Windows Home. Just leave everything on default, let Microsoft work for you! Everything else is worthless overcomplicated crap.'
Meanwhile, the reality is that finance (much like any other industry) is filled to the brim with mediocrity, and even spending a cursory amount of time doing research would net a significant positive income flow. But people don't do it. They get discouraged when they find out the markets aren't 'fair', everyone has an 'edge', and they resign themselves into thinking that the best way to make money is to just give it away to one of the big players that made it all so unfair in the first place.
They milk your money for all its worth and give you a pittance, but you remain content with yourself because this month you made 6% return on your 'investments'. The S&P went up, after all, and you, the intelligent market participant, were there to reap the benefits :^)
Meanwhile, the 'intelligent' money that outwits you throws it all in Chinese Starbucks competitors that cook the books[1], speculative electric car companies that roll parts kits downhill[2], or leverages billion dollar funds 5:1 resulting in a magnificent $10bn implosion.
[1]https://en.wikipedia.org/wiki/Luckin_Coffee
[2]https://arstechnica.com/cars/2020/09/nikola-admits-prototype...
[3]https://www.cnbc.com/2021/04/27/ubs-nomura-push-global-banks...
It's like saying 'you don't need anything more than Windows Home. Just leave everything on default, let Microsoft work for you! Everything else is worthless overcomplicated crap.'
Meanwhile, the reality is that finance (much like any other industry) is filled to the brim with mediocrity, and even spending a cursory amount of time doing research would net a significant positive income flow. But people don't do it. They get discouraged when they find out the markets aren't 'fair', everyone has an 'edge', and they resign themselves into thinking that the best way to make money is to just give it away to one of the big players that made it all so unfair in the first place.
They milk your money for all its worth and give you a pittance, but you remain content with yourself because this month you made 6% return on your 'investments'. The S&P went up, after all, and you, the intelligent market participant, were there to reap the benefits :^)
Meanwhile, the 'intelligent' money that outwits you throws it all in Chinese Starbucks competitors that cook the books[1], speculative electric car companies that roll parts kits downhill[2], or leverages billion dollar funds 5:1 resulting in a magnificent $10bn implosion.
[1]https://en.wikipedia.org/wiki/Luckin_Coffee
[2]https://arstechnica.com/cars/2020/09/nikola-admits-prototype...
[3]https://www.cnbc.com/2021/04/27/ubs-nomura-push-global-banks...
> or leverages billion dollar funds 5:1 resulting in a magnificent $10bn implosion.
You left out the best part: The $50B was used to bet on 90 Day Fiancé and Star Trek. Bill Hwang is a true degenerate gambler.
You left out the best part: The $50B was used to bet on 90 Day Fiancé and Star Trek. Bill Hwang is a true degenerate gambler.
" If you want to gamble, go to a casino."
Yeah, I wouldnt go that far, daytrading reputable shares is still better than casino
Yeah, I wouldnt go that far, daytrading reputable shares is still better than casino
I put day trading in the same category as betting on horse races.
There's punters who make good money on the horses, just like there's investors who make good money day trading, but most casual punts are little better than random guesswork.
There's punters who make good money on the horses, just like there's investors who make good money day trading, but most casual punts are little better than random guesswork.
Just to expand on why horse racing is a little different: https://en.wikipedia.org/wiki/Parimutuel_betting
[deleted]
It really isn't.
A single gamble in a liquid stock has an expected cost of 0.2%-1.0% of the notional value, due to crossing the bid-ask spread twice, which is smaller than casino margins.
So it is better in terms of expected costs if we're comparing 1 daytrade gamble with 1 casino gamble.
So it is better in terms of expected costs if we're comparing 1 daytrade gamble with 1 casino gamble.
The casino has negative expected returns (the house always wins). The market has positive expected returns, by and large. Better gamble there.
On the index, yes, but active picking should expect to lose to the market.
You can lose relative to the market but still come out positive, maybe even beating inflation. There’s still a lot more room there than the net negative expectation of a casino wager.
Mostly retail investors don't have the time to spend on following the markets. But I think they are missing out and only missing the right tools. FOMO is a problem for a lot of retail investors.
The big players won't invest in or buy Robinhood as the name is now tainted. They'll set up their own app-based retail broker [0] and market it to the same customer base.
[0] Which ought to be super easy - pay some devs to write a new app front-end to their existing trading systems, but without a lot of complexity to it so it's easy to use by novices.
[0] Which ought to be super easy - pay some devs to write a new app front-end to their existing trading systems, but without a lot of complexity to it so it's easy to use by novices.
> the name is now tainted
Robinhood’s user growth is surging. To the target market, brokerage customers who respond to good UI more than trading needs, it’s apparently not a problem. That target market is demonstrably unusually profitable.
Robinhood’s user growth is surging. To the target market, brokerage customers who respond to good UI more than trading needs, it’s apparently not a problem. That target market is demonstrably unusually profitable.
It's not even a slap on the wrist, and sends the message that what RH did here was fine.
> Robinhood neither admitted nor denied the charges
this standard phrase is used so often it should be a meme. almost like having a defense attorney make a public statement to the news media, which is 100% of the time "my client is innocent, charges are frivolous, lawsuit is a witch hunt"
this standard phrase is used so often it should be a meme. almost like having a defense attorney make a public statement to the news media, which is 100% of the time "my client is innocent, charges are frivolous, lawsuit is a witch hunt"
While both statements are true, the defense attorney one has merit. In the US we are supposed to be presumed innocent until proven guilty. Unfortunately, these days it's more guilty until proven innocent.
> these days it's more guilty until proven innocent.
And not even that. Being proven innocent can protect you from legal problems, but social-wise not much happens, because the amount of people badmouthing you, who don't know - or pretend to not know - that you were found innocent, is too great.
And not even that. Being proven innocent can protect you from legal problems, but social-wise not much happens, because the amount of people badmouthing you, who don't know - or pretend to not know - that you were found innocent, is too great.
Summary: "break things and fix them later" does not work in finance.
- No attention to the quality of core infrastructure.
- misleading information about customer ability to trade on margin ,cash in customers accounts, risk, and margin calls.
- failed to exercise due diligence before approving customers to place options trades.
- policy to not report certain failures and complaints to to FINRA.
- several other issues like bad customer identification.
Robinhood is designed to be cheap, easy and addictive. It's all that. The cost is quality.
- No attention to the quality of core infrastructure.
- misleading information about customer ability to trade on margin ,cash in customers accounts, risk, and margin calls.
- failed to exercise due diligence before approving customers to place options trades.
- policy to not report certain failures and complaints to to FINRA.
- several other issues like bad customer identification.
Robinhood is designed to be cheap, easy and addictive. It's all that. The cost is quality.
Also with Robin Hood, much like Facebook and other free products, you are the product. They get trade information of general customer sentiment, and that data is worth more money than anything they could make on commission. This was the heart of the congress hearings... Payment for Order Flow, where Robin Hood took this information, gave the customer worse execution and benefited.
"Designed" is taking it too far.
wow