The earlier thread about class action is https://news.ycombinator.com/item?id=25945447. Not sure if these are the same class action or just the same class action class.
The current thread is paginated like all the other big threads. If you want to see all the comments you'll need to click through the More links at the bottom, or like this:
https://news.ycombinator.com/item?id=25947814&p=2
https://news.ycombinator.com/item?id=25947814&p=3
(and so on)
Citadel and gang operate this casino. If they think they're losing, they change the rules so they aren't.
What it tells me is that they're getting increasingly desperate if they're willing to brazenly manipulate the market like this. Seems like they didn't close out their short position, like they claimed they had 2 days ago. It'd be interesting to see if the casino wins this game.
Is the society already working this way?
1. The problem with RobinHood's behaviour here, is that they are doing price manipulation (By only allowing sells, instead of buys.)
2. Price manipulation isn't really a crime against their customers, it's a crime against the stock market. Their customers will sue them, but probably won't get much. It's a bit hard to make a case for "You stopped me from trading, when I was planning on making a lot of money from trading, by cashing out right before a bubble popped."
3. The SEC is supposed to deal with crimes against the stock market. They may or may not sanction RobinHood, but I doubt the sanctions will be serious.
4. The SEC might look into the obvious collusion problems, where the owners of the GME shorts may have reached out to the exchanges/settlement networks, and tried to block retail traders from buying GME. This may or many not result in financial penalties. Even if sanctioned, this may be worth it for the owners of those shorts, because the alternative is bankruptcy, complete financial ruin, and the sale of their children, their grandchildren, and their great grandchildren into sixty years of bondage.
5. Your thesis is sound, but the SEC works with, and for large players in the market. Those players want a mostly-fair market. If the counterparty on the other end of these trades were not retail morons on reddit, the SEC might be a bit more heavy-handed in their enforcement. The thing is, most price rallies are not driven by retail morons on reddit... So, if your business plan consists of "Short a stock to 100%, then call up all the exchanges and settlement networks, and tell them to only allow you to buy stocks," there's going to be a lot of really wealthy counterparties to your trades, who are going to be really, really pissed, and you will probably lose all your money and go to jail.
#5 is unlikely to happen here, because the narrative around this is 'Ha, look at all the dumb retail money driving a bubble, we are just deflating it before retail traders get burnt.' And that narrative is partially true, which is why it's making the news cycles, and serious talking heads on the television repeat it with a straight face.
... Also, I would like to point out that there is nothing wrong with shorting a stock, or shorting a stock past 100%. Yes, it can trigger a short squeeze. No, I don't really think there should be rules against it, or against short squeezes. These are institutional investors, who surely must understand that short-selling a stock carries unbounded risk. If they wanted bounded risk, they should have bought puts.
This kind of blatant manipulation is the first time. And yes if they get away with it, chances are that they will do more of it.
Remember "too big to fail"?
IDK... I'm probably missing something about norms or precedents, but allowing selling and not buying is not just brazen. It's straightforward enough that the average person is incensed and understands specifically why. This isn't systemic risk and turtle stack complexity.
This is probably my info-bubble, but nihilistic rage of WSB seems to be spilling out into the world. The social media (dischord/reddit) aspects, hedge funds, markets/brokers... it all adds up to symbolic whole that has ordinary people cheering on a bunch of maniacal gamblers. The SEC is looking more like a belligerent than a regulator.
Remember that the SEC is, first and foremost, a bunch of cowards.
I think it’s the other way round - there are millions of people who feel disenfranchised, cast away, left behind. Their rage has been manifesting in events such as Brexit & the election of Trump. Currently the most visible expression is the GME saga, but the undercurrent of rage is the common factor & I expect it will be more common & more obvious over the next few years, as the elites try to pretend it’s back to business as usual.
Wait, is Citadel a big enough player as to influence the regulatory system, like on the level of JP Morgan or Goldman Sachs?
No. They barely avoided going out of business the last time around.
I think SEC greenlighted what in my view amounts to a highly illegal action by Citadel/Robinhood (as i think Citadel still has exposure, probably indirectly, on the short side). The situation in its nature does look like the CDS calls which caused the 2008 crisis. I think some "too big to fail" players wrote a humongous amount of GME/etc. uncovered calls (and similarly structured contracts) in the previous months which now threaten to take them down. I mean writing the $100-200 GME calls were practically free money back then while these days it has materialized as the tens of $B liability. Similar to CDS - the statistics practiced on Wall Street permits to have tremendously huge potential liability if it is at a very low probability. When such a low probability event happens though ... hopefully you're too big to fail and the system would then step in to save you by socializing your losses in some way.
So, before going outright bailout road which would be tough politically, i think big people decided to try to spread/socialize that "too big to fail" players' loss among the retail investors, and thus the stock buying block for retail investors (i'm voting with my dollar - have a bit of long of AMC).
People have been attempting a short squeeze all week. Short squeezes are illegal. By allowing a short squeeze to continue with no action, Robinhood would have been taking on massive legal liability for aiding and abetting illegal activity.
Evidence? The interview below (with CEO of broker Webull) claims that the clearing firms cannot (or don't want to) cover the increased cost when clearing these trades, and told many brokers that they won't open positions anymore, due to the two day settlement delay.
In other words, an entirely innocuous explanation.
I could be off here, but what I'm asking is getting at like if they are on all the sides of the transaction as market maker, participating or allow others to participate in 'betting', and clearing the trades themselves? Does a trade even need to clear if it's just moving internally changing col A owner ID from 1234 to 9999?
Sure looks like a rigged game to me.
https://www.bloomberg.com/news/articles/2021-01-29/for-robin...
it is short-sellers who need to pay up the margin calls etc. the way short selling works, it can create crazy leverage
it is definitely a lie
Best investment money can buy is after-dinner speakers fees to people who then show up at the regulators.
That's the Congress of ten years ago. Today we have both parties reeling from a populist revolt and anxious to avoid another one (even as they cynically try to get as many points in as possible). Case in point: among the usual suspects tweeting we heard from one Donald Trump Jr.
I doubt that they'll do what WSB wants (whatever that is) but I think there's a relatively good chance of some significant legislation coming out of this.
Robinhood seems to have reversed on buying GME, though, at least for now, which pretty much invalidates the lawsuit (but doesn't prove it was useless).
Also the creation of the SEC was essentially to protect retail investors from speculative investments (that typically cleaned them out). It would be less likely to see a trade halt as going "against the people" but as a consumer protection practice, so it's doubtful it will be wagging too many fingers at RH.
This is a specific broker—-one with direct financial ties to this trade, by the way—-totally shutting down the ability to enter an opening order for a specific ticker. Pretty unprecedented artificial suppression of demand.
Robinhood has no set rules, and it was impossible to predict when or if they'd halt purchasing shares. It was also not possible for Robinhood traders to know when trading of the stock would resume.
Also; Robinhood didn't halt the trading of GME, AAL, AMC, BB, and others. They just halted the purchasing of new shares. Robinhood tried limiting who could buy shares of those stocks to only the hedge funds. That would drive the stock price down, thus manipulating the stock price in the favor of Citadel / Melvin and their short positions.
This will be the end of wall street. Or at least, the end of companies like Robinhood. Faith in American systems were already at all time low after last four years and now with this kind of market manipulation at the expense of retail investors, American stock market will be bust. There is zero reason to play in this casino.
[0]: https://www.fool.com/the-ascent/research/online-brokerage-st...
[1]: https://www.brokerage-review.com/investing-firm/assets-under...
EDIT: Added concession in last line that not all in the top 5's AUM is retail, but the point still stands.
pension funds arent going to stop putting money into private equity, today will just make people less inclined to go retail
I could see a lot of money leaving wall street for emerging markets over the next 10 years but I dont think a full divestment from american markets will happen in my lifetime
There isn't, but I think one can make the case that there should be. At the very least, communication from Robinhood, from the exchanges and from regulators was piss poor. As a result, we have half the internet wrapped up in some Ken Griffin as Gordon Gecko Batman conspiracy theory.
Robinhood was criticized for marketing day trading to people who, to a large degree, didn't know better. The counterargument was people knew what they were getting into and were free to do it. Fair enough.
This adds a new wrinkle. It wasn't ever a day trading platform! A day trading platform should be able to handle high volumes. It should be able to handle increased collateral requirements. It should be able to handle some market makers going offline. What Robinhood did is contractually allowed. But it flies in the face of what they held themselves out to be.
Robinhood sold a turd doughnut, folks said "it's fine, I want a turd doughnut," and then the turd turned out to be uranium.
On top of that it turns out that the one person bidding is part of a museum that has a significant stake in the auction house.
Of course comparisons like that break quickly. But it is very obvious that market-makers (or other players behind the scenes) were extremly worried about the coming squeeze and did that to stop the stock from going higher.
Of course you might not always win. In the case of Robinhood, since people could still close their existing positions there might not be a very strong case to be able to prove damages. But to me it's still not a crazy lawsuit to attempt based on how many people were expecting to be able to use RH to buy this stock today, and that's what the legal system is there for.
Legally this is nothing at all like not serving a specific brand of alcohol at the local bar.
IANAL, and I’ve only dipped my toe into studying FINRA while doing research on decentralized exchanges, but as I understand it, FINRA regulations impose a lot of requirements on brokers, particularly around fair dealing and around preventing market manipulation.
This exact point turned up 4 hours ago in another thread:
> Rigging quotes, prices, or trades to make it look like there is more or less demand for a security than is the case.
By restricting only buying, they effectively rigged the prices to make it look like there's less demand than is the case.
(Many said they'd never fly United again, and most people wouldn't... United share price dropped a bit, then went straight back up to where it was and beyond. Well, until COVID-19.)
Edit to add: BTW, the point is not that you should always read the TOS. The point is that you should read the TOS before complaining if something unexpected happens.
And we're seeing politicians jump on the bandwagon so they can get-- so they can start trending on Twitter. But in reality, what's going on is that there is a two-day settlement between if you buy the stock today, those brokerage firms that you bought that stock on have to fund that trade with the clearing central house called DTC for two whole days. And because of the volatility of stocks, DTC has made the cost of the collateral of the two-day holding period extremely expensive.“[1] from the CEO of Webull.
[1]- https://finance.yahoo.com/video/heres-why-robinhood-restrict...
Edit: Non amp link.
More money quotes:
ANTHONY DENIER (CEO Webull): [...] our clearing firm simply cannot afford the cost to settle those trades. We cannot use customer funds to front that cost due to regulation. So the brokerages or the clearing firms have to go into their own pockets to do it. And they simply can't afford the cost of that trade clearance. That is the reason why these stocks are coming off. It has nothing to do with the decision or some sort of closed room cigar-- smoke-filled cigar room of Wall Street firms getting together to the dismay of the retail trader. This has to do with settlement mechanics of the market.
ZACK GUZMAN (interviewer): [...] We had the CEO of Robinhood on yesterday kind of talking about why they were taking a different tact [sic] and not restricting trading because, you know, they wanted to leave it to their individual retail investors to make these decisions. Didn't want to step in and fuel into the nanny state idea. But what about maybe curbing this a little bit earlier? Because the fact of the matter is, you're going to have retail investors who are now kind of on the hook, who might want to dump some of these shares, who are stuck. And it seemingly looks like some of these moves have now triggered the bubble bursting. So what do you say to that?
ANTHONY DENIER (CEO Webull): Well, that's absolutely false, actually, Zack. There is no way that a customer would not be able to sell a position they hold. We are simply stopping opening of new positions. Liquidations can happen at any time. This is general market mechanics. We have customer protections in place. We would never stop a customer from being able to get out of a position.
[...]
I think when you say the regulators stepping in, it will happen on both sides. It's going to happen on looking into should a hedge fund be allowed to get a 10 times leverage and short 140%, 150% of a company. Should that be allowed in a regular-- you know, in a healthy market.
And then, on the other side, should it also be allowed to have mob and herd mentality of rolling into stocks? And should these things be curbed? Look at the examples that happened overnight in Australia, where a mining company, GME in Australia, was up 100% overnight because people just blindly went in on anything GME without reading below the headline.
This seems unconscionable given the >300 point volatility today and the large number of brand new investors.
It’s hard to imagine how these actions didn’t benefit wallstreet at the expense of regular people.
This is a problematic statement. Because to sell your position there has to be buyers, and the only buyers who were allowed at the table suddenly were those who wanted to pay significantly less then the stock had recently been trading at.
It looked more like, what happened was you had retail investors that couldn't buy securities, but Robinhood was allowing them to sell them to make them available to customers in order to clear leveraged short positions.
Isn't this meant to be the reason for the "Chinese Wall"? In theory, Citadel as a brokerage is meant to have no insight into the operations or needs or desires of Citadel Hedge Fund. The technically correct answer here seems to be "not my problem", however... not so much.
If I'm understanding (i might not be) this is why it feels like fraud/not following fiduciary responsibility to their clearing partners.
--
Does citadel clear their own trades? I could be off here, but what I'm asking is getting at like if they are on all the sides of the transaction as market maker, participating or allow others to participate in 'betting', and clearing the trades themselves? Does a trade even need to clear if it's just moving internally changing col A owner ID from 1234 to 9999?
But still, I think that there are legitimate factors for why Robinhood stopped taking buy orders for those stocks, like ensuring liquidity through clearinghouse deposits while trades are underway.
If one is not the customer, then they are the product!
Any valid argument that would cause another clearing house to not be able to afford to handle these orders would seemingly-equally apply to Robinhood's own clearing house; no matter who owns it, the clearing house can't afford to go broke.
If someone is arguing that Robinhood should have the risk tolerance and reserves of a larger financial institution in order to service high volatility trades.... then maybe that person should use a larger financial institution to place these high volatility trades.
https://finance.yahoo.com/video/heres-why-robinhood-restrict...
If that's true (never assume something coming from Twitter is true without verifying, so it's still a rumor by now) then I don't see how "it's too risky" explanation holds. And of course selling somebody's property against their will is a fraud, at least on the face of it (IANAL).
Edit: screenshot from reddit: https://pbs.twimg.com/media/Es1pb5KWMAE19CD?format=jpg&name=...
It seems that Robinhood does its own clearing (maybe not for everything?), cf. https://robinhood.com/us/en/support/articles/whats-clearing-..., so the story is probably a bit more complicated there. Could still be a similar dynamic, of course.
That is another explanation beyond the 2 day settlement window that Webull published.
The Depository Trust & Clearing Corporation settles most listed securities transactions in America; in 2011, it did $1.7 quadrillion [1]. You've never heard of it unless you're a professional trader, but it's actually quite fascinating to read up on.
Trading looks instantaneous. But settlement takes a few days. In between are a series of credit agreements. From your broker to you. From the clearinghouse to the brokers. DTCC is the clearinghouse. Robinhood is the broker.
There are clear rules and contracts between DTCC and its members, including Robinhood [2]. Those contracts ensure that when you buy shares through your broker from a Robinhood customer, if Robinhood falls down two days later, there is collateral sufficient to make you whole. Those collateral requirements change in reference to, amongst other things, the volatility of the security. (If something goes up and down more, ceteris paribus, small mistakes are more likely to become firm-ending ones.)
Again, these are well-known formulas. Unusually, however, Robinhood didn't build this into their fee model. Given market makers, their revenue source, stopped making markets in GME on account of how volatility effects their risk profile, executing GME trades would leave Robinhood sending orders to an exchange, which may cost money, and ponying up collateral, which also costs money.
In my opinion, that's what they should have done. Most brokers have policies for these situations. Higher brokerage fees for securities on a schedule. Not making shares and cash from trades available until the trade settles, sort of like what banks do for large cheques. But I don't know if Robinhood is able to do that quickly. So instead they pulled the plug.
[1] https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...
[2] https://www.dtcclearning.com/products-and-services/settlemen...
By preventing people from buying shares, the short-sellers have less competition to buy the available shares, and will have an easier time getting them, while paying less for them. Robinhood seems to be manipulating the market to make it easier for Melvin Capital to cut their substantial losses.
Melvin announced they had cleared their position in GME days ago so is unlikely to be the driver for brokerage behavior today.
Citadel does not buy user data from Robinhood, they are one of Robinhood internalizers. They pay for the privilege of either trading against Robinhood based orders or routing them to an exchange.
Not allowing buys can happen for a wide variety of reasons from technical, business to legal to counterparty demands and isn’t necessarily signs of collusion.
That said there is certainly the appearance of a conflict of interest and I’m sure Robinhood will be addressing that in court and to investigators presently.
> "Robinhood partners with institutional investors and lets them spy on what the average joes are buying and selling. Sometimes, this is just "market intelligence" ("Hey, people like fidget spinners") but the main event is front-running."
> "If you're paying Robinhood to tell you what assets its customers are about to buy, you can go out and buy them up first and sell them for a profit to Robinhood's customers."
> "Or you can buy some of that asset up because you know its price will go up once Robinhood's customers orders are filled."
> "Citadel Securities is Robinhood's main institutional investor partner."
https://twitter.com/justinkan/status/1354853920762253315?s=2...
No, Citadel does not own Melvin Capital. Melvin Capital received an investment from Citadel (the hedge fund, not the market maker) and Point72 this week.
> Robinhood seems to be manipulating the market to make it easier for Melvin Capital to cut their substantial losses.
Melvin already cut its losses this week, as was widely reported. There is no evidence for the counter claims that they're lying, which themselves originate on reddit. In particular: all the widely cited short interest figures on reddit which purport to show this are out of date (usually by weeks), and even if they were true, they would not be proof the short positions weren't closed.
And there is no proof Melvin cut their losses. There is no way to know for sure. The shorts are still there, whether they're Melvin or anyone else.
This was widely reported, and Melvin might not be the big bag holder anymore, but the short interest hasn't subsided. It's actually grown.
The squeeze never happened. The squeeze never happened.
https://www.zerohedge.com/markets/we-have-some-bad-news-game...
https://twitter.com/justinkan/status/1354853920762253315?s=2...
https://www.reddit.com/r/wallstreetbets/comments/l747eg/cita...
This seems, at first glance, to be clear and blatant market manipulation by Citadel and Robinhood.
There was someone claiming to be a robin hood employee, that the White House got involved. Obviously I would take this with an extreme pinch of salt but with those numbers there is every motivation from the powers that be
Could it be that other trading platforms use the same clearing firm?
Jesus, it kind of shows how corrupt the US really is. We're all basically watching a bunch of people commit crimes that from my quick Google carries a max sentence of 10 years with billons of dollars on the line and we're all pretty sure they're going to get away with it.
Though, I do think if Biden makes sure the justice hammer comes down on this, it'll win over a bunch of Trump supporters.
https://twitter.com/AstralTrading/status/1354884246389874689...
The complaint is largely framed around "Robinhood prevented us from executing trades against GME, and it is contractually required to execute all trades." However, the actual contract explicitly says the opposite: Robinhood can choose to limit execution at its own discretion. So in order to win, plaintiffs basically have to get the relevant clauses of the contract to be ruled illegal. The extent to which this is possible is dependent on securities law which I am very unqualified to comment on, although I will note that the complaint does at least include some relevant allegations to what they need to do, which is better than other lawsuits I've seen (oh hi Parler).
> Upon information and belief, Robinhood’s actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial intuitions who were not Robinhood’s customers.
And even then, there aren't enough other facts in the complaint itself for me to feel comfortable justifying discovery. For example, they never mention that Robinhood allowed only sales, instead alleging that Robinhood disallowed all trades with GME.
The best route plaintiffs have to win the lawsuit is to argue Robinhood's illegality here. They don't do that effectively in the complaint, which hurts their case (though they could, and probably should, amend their complaint accordingly).
If Robinhood is doing what they claim, ie: is having issues fulfilling orders and/or is legitimately trying to protect retail investors by limiting purchases of a volatile asset, wouldn't it be worse if they prevented people from selling as well as buying? Is there some detail I'm missing that makes only limiting buy orders "blatant" proof of market manipulation and not the best possible option they had if they were acting in good faith?
Note: even if my counter argument here is correct, I don't think that necessarily means nothing fishy going on since there are a lot of other questionable factors at play and even if they were acting in good faith within the "stock market game" that doesn't mean the game as a whole isn't rigged.
My understanding is the forum members were colluding to drive up the price of particular securities? How is that not manipulation?
Although I guess I would have preferred the relevent stock markets to step in with a complete trading halt on those securities if intervention was required.
Meaning RH took it on themselves to enforce a rule that its users had no idea of, hence the outrage.
If it was well known (with clear warnings on the splash screen of RH highlighting their "special" rule) then the case might be different.
If it gets rejected at this level then almost certainly SEC will be involved. If they side with RH then it would certainly destroy the trust of the retail trading industry. We also now seem to be witnessing a political opportunity for the Biden administration (ex. AOC's tweet throwing support for WSB).
Essentially what we are seeing is a payback by the people who got outsmarted by a bunch of redditors and arguing that they cannot be allowed to fail for their own stupid trades (like shorting over 100% of the stock available), so they pulled all the tricks in the book to once again bend the market to their will like they always have.
Anybody who thinks things will go as they have before are mistaken; We are in a very different political environment and stuff like this is the perfect opportunity for the Biden administration.
Yes. And intentionally interfering with supply and demand is the textbook definition of market manipulation — it appears in SEC powerpoints and everything!
https://www.sec.gov/files/Market%20Manipulations%20and%20Cas...
1- RH, Etrade, etc are not manipulating anything. The ones who manipulated were the reddit and other chat rooms. If Costco doesn't want to stock your favorite item any more do you get to sue because you still want to buy it?
2- If the customers had no idea of the legal documents they signed when they opened their accounts, their bad, not the broker.
3- 'the trust of the retail trading industry' Certainly not retail investors (who are not the people doing this stuff). And I doubt also retail traders who are not engaged in mob trades based on what is coming out of internet chat rooms/boards. There was day trading prior to the advent of Robinhood and Covid-19, right?
4- First off, the shorts are done. That is a large part of why the price went to where it did. Second, the brokers are protecting themselves from default on margin loans as well as the headache and aggravation of closeouts when 'traders' moan about the fills.
5- Why on earth should the Biden administration go to bat for a retail trading mob? Many of whom are on record in the press as having used their stimulus and unemployment checks as capital?
6- Shorts are not only necessary for a market to function well, they are a common part of the market having nothing at all to do with a view on a company. The largest example of that are fund managers selling the stock of an aquiring company against a position they own in the company being purchased. Fund manager could mean pension fund manager, mutual fund manager, or, gasp, a hedge fund manager.
The failure on the brokers then was in not gradually raising the margin requirements the past two weeks when it became obvious that this was a volatility disaster in the making.
The failure of the regulators was, if correct, allowing shorts to be > 100% of the float. They were asleep and should have had a hammer on any dealers who were lending fictious shares.
Clearing and settlement involve counterparty risk - if a brokerage can't hand over the money come settlement, the settlement firm may be on the hook. The risk of this is proportional to volatility. Due to high volatility, DTC increased its settlement costs. This isn't usually a big deal to a clearing firm or a brokerage because retail brokers don't usually have huge exposure to a single equity.
My bet is with the entire world suddenly memed into buying GME, settlement for retail brokers suddenly became very expensive and there wasn't an existing mechanism to pass on this cost down the chain, so halting orders was the only option on short notice.
Also, I don't think any of these people crying foul consider that those who short stocks do so at constant peril of forced close outs because shares are no longer available to be borrowed. The notice involved can be minutes to hours.
This is what I couldn't understand about what the endgame of this would have to be. Because you can't really have a situation where all the shares are bought up sending the shares to infinity. At some point something breaks. Someone has to pay money for those shares.
That could be that retail investors bolt for the door just like a bubble popping and because its difficult to maintain steadiness when you're looking at huge gains that aren't realized. And that is what they thought would happen.
What would be more reasonable would be to liquidate Melvin Capital and anyone stupid enough to invest in them and the holders of GME shares would become creditors against that bankruptcy proceeding somehow. SEC would have to manage that unwinding somehow.
But the problem is that the clearinghouses like Citadel are counterparties to Melvin Capital and they've privately bailed them out, taken over their shorts and will now hugely profit by suspending trading and riding those short positions down. This now entirely makes sense to me as what was inevitable, because while WSB was trying to destroy Melvin Capital they didn't understand that the implications of that were going to be destroying the clearinghouses through counterparty risk. And they were never going to let that happen, so they shut it all down and will eat the SEC investigation.
This is a very interesting outcome just due to the moral hazard it creates with shorting.
It is also a very interesting outcome because a lot of "little guys" just learned an object lesson in what happens when it looks like you are beating the "big guys". They won't let that happen. There's going to be a lot of political rage as a result of this. We're going to have to make a decision in the next 10 years or so if we'd like to funnel that rage towards socialism or fascism, the status quo is going to continue to enrage people.
We'll see how it worked in the coming weeks.
My guess is that market makers that these brokers sell orders to said no. Brokers make a lot of money selling retail orders to someone else.
Why did they all come to the same conclusion at the same time?
[1] - https://twitter.com/joemccann/status/1354859879337320452
I wouldn't do business with Robinhood for a number of reasons that go back before this recent spat of issues, I am just not sure preventing purchasing GME is the worst aspect of this.
First, Robinhood does not make the market or fulfill the orders, so if their market-maker has no one selling a stock they have little option other than stopping people from making purchase orders. You need both sides for a liquid market.
Second, IF these are margin positions then it is not only allowed and legal but also typical for the broker lending on margin to close out the position unilaterally. IF these are cash positions it is a completely different story.
No warning from Robinhood on the current issue either or I would have pulled my sell order.
Preventing opening buys hurts everyone who is long -- including a large number of Robinhood customers -- by barring trades that would provide liquidity to sellers and thus dampen the sellers' stock impact. So essentially, Robinhood chose a course of action that disproportionately imposes losses upon its own customers.
The concept of price impact is part of the reason that stock buybacks are able to "return capital" to investors. Demand from buyers pushes prices upward.
No idea if that is a central argument of the case.
It also seems pretty scummy to not make this very clear that they can sell without asking.
To a normal person this comes off really wrong (and really it is, let's be honest).
I don’t take RH’s side but it’s hard to see a winning play for them, it’s damned-if-you-do-damned-if-you-don’t.
If this wasn't a corrupt rigging to benefit the hedge funds, they wouldn't be doing it.
Just allowing selling of a stock makes, free markets a joke.
I am seeing analogies like will apple store sell me a pixel 3a etc. This is not a product robinhood buys or sells , they make my transaction with a bigger shark (Citadel) who is in bed with the hedge fund who shorted ~112% of outstanding shares. When a group of people took advantage and created a squeeze, they block their ability to buy more to strengthen their squeeze.
Yes. Blocking opening buyers essentially means that closing short-sellers don't need to compete for supply.
[1]https://www.cnbc.com/2021/01/28/gamestop-cruz-ocasio-cortez-... [2]https://www.cnbc.com/2020/12/16/massachusetts-sec-o-commonwe...
Moreover, this narrative that people are betting with mortgages and retirements is simply unfounded - most people are in on call contacts or with their "stupid bet" funds, or a few thousand at most. Please remember with WSB, and other 4chan-diaspora communities, to seperate the memes from reality.
They are also, however, not letting people buy a selected set of stocks the regular way even if they have a large enough balance in their accounts.
They are both valid problems, and don't necessarily contradict each other. Add to that their massive conflict of interest with Citadel's involvement in this entire thing. The fact that you can still buy Bitcoin on Robinhood kinda puts the whole "we are only looking out for you" argument to bed.
Yeah I think that definitely warrants more scrutiny.
But what I heard so far was, that the fond was for high risk investment.
"Some people are absolutely going to lose their homes / retirement savings at the end of all this."
So people who will indeed loose their homes, would have lost with high risk investment. Which would be sad for them, but high risk is called high risk for a reason.
If you want to play safe, there are low risk options.
So I don't see need for regulation because of this. For other reasons, yeah, but not that one, unless I am missing something?
> So people who will indeed loose their homes
This is a rare example of spelling de-correction.
The backlash seems so severe that I'm very curious about the rationale behind backroom decisions made that led to all this.
RH requires much more SEC scrutiny really. A brokerage cannot go broke by facilitating trades, it supposes to be a risk-free business.
Robinhood has in effect cleared all its trades since 2018 as you can see based on their own page.
https://robinhood.com/us/en/support/articles/common-tax-ques...
Good, trades are not zero cost and should not be treated as such.
They should have stop trading completely on those stock instead they stopped some people / service to purchase it but you can still sell, it's insane.
AMC - AMC Entertainment Holdings Inc.
BB - BlackBerry Ltd.
EXPR - Express, Inc.
GME - GameStop Corp.
KOSS - Koss Corporation
NAKD - Naked Brand Groups Ltd
NOK - Nokia Oyj
I guess they don't want to get sued (the biggest fear of most companies)
https://cdn.robinhood.com/assets/robinhood/legal/Customer%20...
[1] https://www.latimes.com/business/story/2020-02-11/doordash-a...
"Citadel owns Robinhood" however is completely false.
https://www.courtlistener.com/recap/gov.uscourts.nysd.553175...
That said, for Robinhood's business model, you're the product, not the investor. Outside of reputational damage they DGAF about the outcomes of individual investors as long as they don't have skin in the game.
https://www.investopedia.com/articles/professionaleducation/...
I'm not alleging a conspiracy or anything, it just seems odd to me that this kind of action comes preemptively from a broker. I would have expected the brokers to do nothing until the SEC indicates something one way or another, or for nothing to change if the SEC doesn't take a position either way.
I feel like there's some part of this I'm missing.
Citadel also owns a non-controlling interest in Melvin capital, a hedge fund that is/was massively short GME. Citadel gave them $2.7 billion earlier this week.
It seems very likely that Citadel pressured RobinHood to stop all purchases so that Citadel’s investment is secure.
There are additional rumors that Citadel went short GME right before the brokers stopped allowing people to buy, only allowing them to sell.
Robinhood might be protecting their largest customer.
Edit: it's possible Citadel pays Robinhood for something else instead. And it's possible they don't fully own but only invested in Melvin. Still, there do seem to be pretty clear ties.
https://news.ycombinator.com/item?id=25943676
Next prediction: obviously Robinhood can kiss their IPO goodbye. They are hated by both sides now - bankers and investors. Frankly, I hope they will go under, get shut down but not before 20 AG and DOJ/SEC takes them to bleachers.
Its either a free trade market , or its not!
1) transactions between Robinhood and Citadel (even some % of their GME trades would have gone to Citadel) 2) The deal between hedge fund and citadel
If you can prove that its because of #1 and #2 , RobinHood arrived at this decision, its game over?
or is it?
I am currently in a country where robinh does not operate, but I'd be absolutely reluctant to use them now even if it became available.
Trading securities and/or advocating for a free & fair market in which to trade those securities =/= literal violent insurrection.
Also, considering 99.9% of people jumping on the bandwagon have absolutely no idea what they're doing, they'll probably thank RH down the road for preventing them from losing all their money.
And to add to that, a company (Citadel) that pays Robinhood a large amount of money for their data is one of those with the short positions. So Robinhood itself has a stake in this.
Disclaimer: I have no idea what I am talking about and this is only my opinion.
I'm on a cash account because I like to avoid their "pattern day trader" protection.
Edit: And I just found out my platform (Binck) doesn't accept trades anymore.
Edit: Apparently they do accept trades, but only if your limit is close to the current price. I was increasing mine because it wasn't executing at the lower price. Eventually I did get in at the lower price. We'll see where this goes.
blocking purchases of shares from accounts that have enough to cover the contract: highly sketchy and worthy of deep scrutiny
some broker did 1, some did 2, but form screenshots alone is hard to tell which did which
Likely because it has the most impacted users. I suspect other platforms will get lawsuits as well in time if this one proceeds.
On the one hand it's great that anyone who wants it has access to the financial markets. But I mean, you should probably know what you're doing before you start speculating. Are people really going to make a moral issue out of not being able to sell their bad bets to a greater fool?
It's like everyone wants access to swim with a dangerous group of man-eating sharks and then complains when they get bitten.
