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In defense (kinda) of Robinhood 
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Clearing the air: Robinhood is still at fault.
I stand by what I said earlier.
Their relationship with Citadel reeks of mixed incentives.
https://twitter.com/BestInterest_JC/status/1355508633354829824?s=20
I stand by what I said earlier.
Their relationship with Citadel reeks of mixed incentives.
https://twitter.com/BestInterest_JC/status/1355508633354829824?s=20
But they also had legitimate reasons to halt trading last week.
Namely, their huge growth of users. And huge growth of users purchasing options
Which meant Robinhood had to raise margin to cover its positions.
Whatâs that mean?
Namely, their huge growth of users. And huge growth of users purchasing options
Which meant Robinhood had to raise margin to cover its positions.
Whatâs that mean?
People like us buy/sell through Robinhood,
Then Robinhood then buy/sells on our behalf âin the marketâ
You perceive your trade as instantaneous.
But in the background, itâs not instantaneous.
Pending transactions âin the marketâ take two days ("T+2") before they are final.
Then Robinhood then buy/sells on our behalf âin the marketâ
You perceive your trade as instantaneous.
But in the background, itâs not instantaneous.
Pending transactions âin the marketâ take two days ("T+2") before they are final.
These pending transactions eventually get cleared by the Depository Trust and Clearing Corporation, or DTCC
Once cleared, everybody is happy.
But thereâs a small problemâŠ
During the two before settlement, what happens if Robinhood goes out of business?
Once cleared, everybody is happy.
But thereâs a small problemâŠ
During the two before settlement, what happens if Robinhood goes out of business?
âOut of business?! Crazy!â
No. It could happen. The DTCCâs job is to make sure a brokerageâlike Robinhoodâhas enough collateral to cover all its pending transactions.
If RH went bankrupt, their customersâ accounts (thatâs you!) would get liquidated in the bankruptcy process
No. It could happen. The DTCCâs job is to make sure a brokerageâlike Robinhoodâhas enough collateral to cover all its pending transactions.
If RH went bankrupt, their customersâ accounts (thatâs you!) would get liquidated in the bankruptcy process
The DTCC wants to make sure brokeragesâ customers donât get screwed.
So the DTCC told Robinhood, âYou need to put up more collateral. Your new/crazy clients arenât covered.â
Robinhood halted trading on GME while raising capital for that purpose.
So the DTCC told Robinhood, âYou need to put up more collateral. Your new/crazy clients arenât covered.â
Robinhood halted trading on GME while raising capital for that purpose.
Robinhood has been asking for this to happen. Don't feel too bad for them.
RH auto-signs its users up for âReg Tâ accounts, meaning they can trade using margin (aka using borrowed money)
This means that Robinhood has to post extra-high collateral on their usersâ behalves
RH auto-signs its users up for âReg Tâ accounts, meaning they can trade using margin (aka using borrowed money)
This means that Robinhood has to post extra-high collateral on their usersâ behalves
