AOC and Dave Portnoy from BarStool are idiots and TOTALLY WRONG!

AOC and Dave Portnoy from BarStool are flat out wrong and uninformed about RobinHood.   

All the broker accounts at RobinHood are MARGIN accounts.  These people have NO IDEA what that means.  When you open a margin account at these brokers, you sign a margin agreement.   Most people probably never read theirs before signing...that's not RobinHood's fault.   IDIOTS

Brokers have regulatory capital requirements...and RobinHood was under capitalized and over leveraged.   When GME volatility increased with corresponding volume in that name on the RH platform, RH found itself short of regulatory capital, because of GME and a few other stocks.  RobinHood needed to post ITS OWN CASH (not customers) with DTCC immediately, and they didn't have it.  Instead, RobinHood has a credit line with banks that it can tap in times like this...but it takes a few hours to tap a Billion $ credit line...and in the meantime, RobinHood was afoul of regulatory capital rules...so they either needed to post a Billion $ more cash immediately (which they didn't have for a few hours) or they needed to reduce their customers ownership in the stocks that created the regulatory problem.


After they got the cash from their credit line (took a few hours) they removed / reduced the stock ban.

DTCC has said to bloomberg they raised broker collateral requirement for GME and a few other volatile stocks for the retail brokers (think of it like a margin call for a broker platform)...total was $7 billion among the retail brokers (RH, TD, CS, ect..)...so about $1.5-2 billion was just for Robinhood...and RH didn't have the cash...so that is why they did what they did.

RobinHood accounts are margin accounts...DTCC has no idea if a trade is backed by cash or margin..and with T+2 settle for equity trades, DTCC is not willing to take the credit risk from the retail brokers.

This is why RobinHood sucks as a broker, but they did nothing illegal..they followed the rules....they are unorganized and undercapitalized (just like Lehman and MF Global..slightly different stories, but same outcome, overleveraged and undercapitalized).


If you want to trade a squeeze stock, then you should trade with a well capitalized broker, like JPM (which is also free).  JPM never restricted trading in any of these stocks or options...because JPM is properly capitalized.

https://www.chase.com/personal/investments/you-invest/trade

 

If they can’t fulfill buy orders, they should have stopped all trading, not just prohibited buying. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Yeah they should have done just about anything else but idk if they had a choice. If they need to reduce exposure fast, the best way to do that is to 1) stop buying the shares and 2) allow people to continue selling the shares (to reduce the exposure). Is that fair / ethical? I certainly don’t think so. I also doubt it’s illegal, but it’s a good reason to use a better capitalized broker. 

 

faceslappingcompilation

its not that they "couldn't" fulfill buy orders...its that they NEEDED to reduce long exposure

Doesn’t this seem like it favors the shorts though?

Also, I’ve heard some shorts may have known RH was about to do this and they threw in more shorts as the price tanked the other day.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Well Vlad acutally contradicted himself in the interview. He initially said net capital requirements by the SEC due to the volatility is what caused them to restrict buying. But then he goes on to say liquidity issues had nothing to do with the decision. It’s not just that he was trying to cover it up, which I think is what you’re implying. Also why restrict only buying instead of all orders?

 

I completely agree and think that these are just the basic facts here. That said, they did a piss poor job communicating it until way after the fact (if even then). Also, while the plumbing seems pretty straightforward to you and people in the industry, you can’t expect the average person to understand this. As a result, it’s a lot easier to lash out and envision a nefarious conspiracy that confirms your priors and furthers this “us vs. them” sort of class warfare dynamic that’s playing out. Politicians and media personalities should be more responsible with how they’re responding to the situation but holy shit did that ship set sail years ago. 
 

I don’t see how this ends well for anybody. It was a pump and dump from the start and will inevitably implode. Only now, once it does, everybody is going to be blaming the institutions for the whole mess and this entire populist / “David vs Goliath” narrative is gonna get worse. Exciting times. 

 

Boats and LBHoes

I don't see how this ends well for anybody. It was a pump and dump from the start and will inevitably implode. 

I think there is a chance that Game stop gets through this with their value intact. They probably need to switch to a more online platform selling and renting games and drop the brick and mortar. 
 

$400/share seems inflated though, can’t deny that.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

There will be many many News alerted FOMO bagholders, and it will a bigger bloodshed than the 2018 bitcoin bubble pop

quite a few suicides i predict due to the high unemployment rate

Right now its WSB sharks vs FOMO "normies" who read the news and put their life savings in, Robinhood now has a right to make sure people dont end up blowing up their livelihood money

 

Institutional investors like hedge funds have much more to lose. That's why CNBC (and that clown Jim Cramer) are saying "sell, sell, sell". 

Many people like myself may lose $150,000 (2/3 is profit) or less. Since we can't lose more than our original investment, we'll live. May sting a little, but its about more than $$$ at this point. I'm in finance on Wall Street, but it's well known how risky short selling can be. No one predicted in 2019 that there would be a once in a lifetime/century global pandemic. 

Short sellers on the other hand? Their losses are already exponential. Give me a break that Melvin and others already covered. When? At what price point? With options for January coming due next week, expect more pain for short sellers. And people are leaving Robinhood in droves to switch to platforms that will allow unlimited cash buying.

The Reddit crowd won't give up until at least some hedge funds implode, a real possibility (unless they play dirty, which will set off political/social storm). And when the stock price does collapse, hopefully no one bet the house. Personally know several white collar professional friends who are quite smart at investing and are buying considerable amounts of Reddit stock just for shits and giggles. If they lose it all, then so be it. We've saved a lot of money these past 12 months with casinos being closed. 

 

Everyone once in a while I come across a comment so stupid that I have to say something.

You can do math ya? How much do you think Melvin had in GME before the run up? They've been in this for a long time. 1%, 2%? If They didn't cover any on the way up with 1% allocation when stock was four bucks, they would've lost 100% and would've been liquidated because stock has been up more than 100x from its lows. Do you really think Cohen and Citadel were morons and said hey let me give you $2.75 B so you can ride out this short and we'll be happy to lose all the money if this single stock ticks up another 50%.

Another thing, don't so righteous. It's not about the money? Why are you wasting your life putting numbers on tiny little cells on the screen? In fact, you are praying for some other clueless chump to dump his life savings and bail you out, that sounds pretty fucked up to me. Or what, do you think if GME goes to $99999999999 everyone will get out at that price and we solve world hunger?

Get real.

 
Controversial

If I wanted to make a quick $100K, I could have sold my entire position at 4 PM EST on Friday. I purposely didn't, knowing full well that come Monday morning, it may be worth $0. I think many, if not most Reddit speculators are playing with money they can afford to lose.

What's most impressive is that people are literally sitting on 7-figure gains (obviously not you), but they're still not selling. Goes to show this is about MORE THAN MONEY. Otherwise, most pumps don't last this long and strong if people weren't holding, especially when an artificial 50% sell off was engineered via market manipulation last week. Robinhood is still allowing people to buy ONLY 1 share of GME. That's purely factual. Robinhood is left for dead while people switch to other platforms (shout-out to JPM!) where they can buy as much stock as they want (for cash) in a "free market". If hedge funds were making as much money as the Reddit crowd, no one would bat an eye. As a matter of fact, such exorbitant returns would be applauded and chalked up to "skill, shrewdness, and savviness".  

You wanna talk about math skills? Melvin is down by at least 30% in 3 weeks, mostly due to the GME melt up, as confirmed by Bloomberg. This is based on GME stock price of $250 or so. What do you think will happen if the stock price remains elevated and goes back to $500? Do you think margin on billions of dollars is free? Fuck outta here. 

If no big deal, why did the puppets on CNBC FALSELY claim that Melvin and others already covered their shorts when they obviously haven't? Hence the $2.75B from Citadel and Point72. Point72 was just trying to save its original investment in Melvin. Citadel thought it was a good distressed opportunity. Both may have underestimated the strength of this thing.  CNBC has been playing it's part as a puppet for Wall Street, by literally begging retail traders to start selling (*cough cough* Jim Cramer). LOL!

If you believe hedge funds are SO smart, how the fuck did they fuck up this badly!? Point72, Melvin, D1, Citadel, etc. Note these managers are all close friends, so it seems like they colluded to short GME and put pressure on the stock. 

Maybe you work for one of the loser hedge funds or are short GME, but here's a math lesson for you: with short selling, there's no limit to the potential losses. 1% short exposure can lead to #REF losses. Reddit traders have capitalized on the options market as well. 

The amount of short interest from before has barely budged, probably because short sellers are hoping, PRAYING this bloodbath will lose steam soon. Don't bet on it. Hedge funds and brokers have much, MUCH more to lose than long retail investors (who people like you are greatly underestimating. I guarantee I'm not the only IB-VP in GME and AMC). 

Another way to look at this event is that it's made the market a hell of a lot more efficient. Soon gone will be the days where hedge funds and others could just coast.

Can't wait for next week. Good luck. 

 

This is the dumbest thing I've ever read and I doubt you actually believe anything you wrote. This whole narrative is just to convince the general population of financially illiterate FOMOers to hold the bag.

 

Appreciate the rundown on this, Jamie. Will also look into JPM, thx

 
Most Helpful

For the 1000th time, it wasn't that RH wasn't having legitimate issues, it's that their behavior included shutting down purchase orders only, which just so happen to be to the benefit of its top client, Citadel, which had recently bailed out Melvin Capital from its disastrous short position. In addition, RH, within its rights, forced sales of those who had bought on leverage, but it did so at some of the worst prices of the day (in some cases, at the very nadir of the market).

It's very possible that this was all just a terrible coincidence, but it's one of those things where every single thing RH did was to the benefit of Citadel and to the detriment of those with long positions. That at the very least requires an investigation to ensure that this was just a terrible coincidence and that they weren't operating against their clients' best interests. 

Given that the CEO directly contradicted the OP's assertions (which is the regurgitated assertion of RH), no rational actor should take RH at their word. And why would you take them at their word unless you were operating in bad faith (ideological, personal interests, etc.)?

Array
 

I'm not sure why you're getting MS on this. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Can you just post how you disagree? This isn't helping thanks. haha ok

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

I agree, I'm not sure why this is being MS'd. Robinhood, unfortunately for the user, in its T&Cs says that it has the ability to limit the buying and selling of securities when they themselves deem it prudent. Now that is obviously massively subjective as to when it is prudent to do so but it is 100% possible they did what they did to benefit their top client. I'm not even saying whether this is right or wrong (pretty easy to see which side it sways to from the consumer POV) but yeah, they were well within their rights to do what they did.

 

Yeah admittedly I don't have much understanding/knowledge of how trading orders are processed on the exchange, but why did Robinhood only restrict buy orders? I would understand it more if they'd frozen both and blamed it on their capital requirements. Also their original posturing on their site/app that this restriction was to "protect investors' risk" was a terrible idea (IMHO whoever in their communications team who wrote that deserves to be fired).

If they had come out at the start and said "yeah we're actually still a small little shop and don't have the capital to fund these trades" and suspended both buy and sell orders, I would have some amount of sympathy with them. Instead they at first postured this was to "protect" the little investors, and then later backtracked and said it was due to capital requirements. Even if this is true, then 2 problems I have with it are:

a) Why did they only restrict buy orders? Maybe there is some reason for this related to the trading exchanges, but agree the optics of this look atrocious.

b) Even if it was cap requirements and not related to Citadel etc, it shows Robinhood's arrogance that they were so desperate to preserve their cutting-edge/cool image that they thought they could get away with bluffing that this was all about protecting the little guy. And also it puts into question the credibility of everything they say going forward.

 

Thank you.

This is the kind of educated explanation this forum is capable of. 

A vice president, in sales and trading, letting us know how this works.

It is way more fun to assume big bad HFs ruined the day and colluded with Robinhood but looks like there is a legitimate business reason for the temporary buy closure. 

 

You poor, naive sheep. 

Robinhood depends on Citadel. Citadel does not rely on Robinhood for survival. Citadel is short GME. Citadel bailed out Melvin (which is obviously short GME). Griffin, owner of Citadel, is besties with Steve Cohen, who also owns part of Melvin (Melvin was started by a Steve Cohen/SAC disciple). 

The majority of Robinhood users have or want exposure to Reddit stocks. Other trading platforms don't rely on Citadel and are not easily swayed. 

Maybe Robinhood has other logistical/mechanical challenges (not the first time), but goes to show how SHITTY the platform is to be handling people's money. Robinhood is all beauty and no brains.

 

LOL @ the fact u think griffin is besties with cohen. most insane thing i've heard today. shows how much you are speaking from 0 knowledge, check out from an ib vp

 

You mean to tell me that a waitress turned congresswoman who's a self-declared "democratic socialist" and the day-trading founder of Barstool Sports have no idea what the they're talking about when it comes to the intricacies of how financial entities interact? No. Really? I'm shocked. This is harrowing.

"The obedient always think of themselves as virtuous rather than cowardly" - Robert A. Wilson | "If you don't have any enemies in life you have never stood up for anything" - Winston Churchill | "It's a testament to the sheer belligerence of the profession that people would rather argue about the 'risk-adjusted returns' of using inferior tooth cleaning methods." - kellycriterion
 

The biggest mistake people continue to make is thinking loud people are smart.

"The obedient always think of themselves as virtuous rather than cowardly" - Robert A. Wilson | "If you don't have any enemies in life you have never stood up for anything" - Winston Churchill | "It's a testament to the sheer belligerence of the profession that people would rather argue about the 'risk-adjusted returns' of using inferior tooth cleaning methods." - kellycriterion
 

DTCC has said to bloomberg they raised broker collateral requirement for GME and a few other volatile stocks for the retail brokers (think of it like a margin call for a broker platform)...total was $7 billion among the retail brokers (RH, TD, CS, ect..)...so about $1.5-2 billion was just for Robinhood...and RH didn't have the cash...so that is why they did what they did.

RobinHood accounts are margin accounts...DTCC has no idea if a trade is backed by cash or margin..and with T+2 settle for equity trades, DTCC is not willing to take the credit risk from the retail brokers.

just google it...you're welcome
 

exactly - all an investigation from AOC etc will bring up is that this is mostly a product of the financial plumbing regulations passed after 2008 (Dodd-frank) mean collateral is held for t+2 and the DTCC can raise margin requirements.

Given that, RH broke the news in the absolute worst way “protexting our company and our customers”....

 

Do you realise that even interactive brokers is not letting people trade, even in cash accounts. I settle my own stocks and options by not using the capital from those transactions.

 

RobinHood was operating within the limits set by rules and regulations...but DTCC and NSCC (the central clearing corps) raised margin requirements on certain stocks (a margin call on the broker platforms) and the brokers all needed to raise cash to meet the margin call immediately. 

Some other brokers restricted those securities (such as GME) to "position closing trades only in securities under margin call" which is what RobinHood should have done (rather than "only allowed to sell") even if the net-effect would have been the same.   I suspect their technology didn't have that "switch" as an easy option....as dumb as that sounds.

just google it...you're welcome
 

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The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee WSO is not your personal search function.
 

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