They are perfectly happy selling other even more risky assets and at great profits. With the current attention from huge institutional investors it’s not a conspiracy to assume they got pressured either internally or externally to stop the pressure. It’s Occams razor.
So are they taking responsibility for all my trades? Or just the ones where I stand to make money? They won't stop you from losing thousands on other terrible positions.
Are you talking about brokers or money makers? If it's brokers they usually make money from trading activity (traders, deposits,withdraws,holding money in they accounts).
If it's money makers then they can't "stop taking new positions", as they are not working directly with retail investors.
I think it would be totally fair for Robinhood etc to up margin requirements or even drop leveraged instruments. But If the client has $X in their account and they want to buy $X worth of GME or whatever, I don't see how that's a risk to their broker?
Not to the broker, but to the market maker. When a robinhood user buys a call, a market maker is selling it to them. If the stock runs up or down too much before they can balance their book to be delta neutral, they'll lose a lot of money.
Rather than risk losing a ton of money, market makers have told the discount brokers that they won't be opening any new orders. You can't force someone to make a market for you.
My question is specifically about the equities trading.
Unless I'm mistaken...
* The market continues to operate irrespective of whether there is a market maker. If the exchange decides to close trading then its halted. But they don't halt just because a market maker fails to make market, and if they did, they'd halt it for everyone not just discount brokers. No market maker would just mean you just have to cross with whoever is on the other side. That would be a bigger issue in low volume markets, but GME etc is pretty busy right now :)
* RobinHood wouldn't care or know anyway. Why would they care that a market maker is having a bad day? Why inconvenience their clients while other brokers keep serving theirs? For all they know, the market maker is too far long and would really appreciate offloading some inventory.
* Market makers don't get to pick and choose who they trade with. They can't make market for the big boys but not for the discount brokers.
Sorry if I've missed some crucial point here. Can you enlighten me?
> RobinHood wouldn't care or know anyway. Why would they care that a market maker is having a bad day? Why inconvenience their clients while other brokers keep serving theirs? For all they know, the market maker is too far long and would really appreciate offloading some inventory.
RobinHood's business model appears to be getting kickbacks directly from the market maker (Citadel Securities apparently), so of course they care if the market maker is unhappy because that's their own profits they are eating. The fact that the discount broker and the market maker are so buddy buddy is the extremely shady but currently very legal problem.
(Supposedly Citadel Securities at this point is the same market maker putting the same pressure on at least TD Ameritrade in this specific list.)
I think it's dodgy as fuck that Robinhood are pulling\baring orders.
That said, I think we're conflating 2 different ideas here.
The first is that market makers in general are unhappy, as claimed in the original comment. That may or may not be the case, but as I said market makers can withdraw from the market but they don't have a legal right to order some brokers to stop trading. And there are a lot of market makers so if one withdrew it would not stop the others. And if they all withdrew, there would likely still be at least some sellers.
The second idea here is that Citadel ordered Robinhood to do it because they're Robinhood's biggest customer ("if you're not paying you're the product" etc).
I am sympathetic to that idea, no one pisses off their number 1 customer. But there are 2 issues with it IMHO. The first is that it doesn't make much sense to me that it's for Citadel the market maker. Citadel the market maker don't have any real position in GME, they're a market marker. Big trading volumes are good for them and they make their money by keeping any positions as close to zero as possible.
That just leaves the rest of Citadel Inc (LLC actually). Maybe the non-market-making parts are unhappy. But again, there is an issue: if they lent on the Market-Maker team to lean on Robinhood, that would be massively illegal.
There are really strict rules on the divide between market making and investment banking parts of businesses. 1 phone call (and they're all recorded), 1 email, 1 fax, 1 note-via-carrier pigeon from Citadel (market maker or other divisions) to Robinhood and everyone in both teams is looking at serious jail time. And given the enormous amount of attention GME is getting and the (predictable) blowback on Robinhood for refusing orders, that would be found.
So this is either a many-person, very obvious, easily proven, deliberate fraud, or something else is going on. I don't see people taking such a huge risk or being so blatant myself.
Tell me which platform allows me to make my own decision without any restriction ...
Also, restricting trades I do not think is good for the market. Eventually all will stabilize. With less trades this is less volume in the market (overall) and I'm what would come of this.
> In the article: "Individual investors are being stripped of their ability to trade on [the Robinhood app]. Meanwhile, hedge funds and institutional investors can continue to trade as normal."
w.t.f?
So like the 2009 crash, let's see how to screw again the retail investors?
18 comments
[ 3.5 ms ] story [ 51.7 ms ] threadGME did
I think it would be totally fair for Robinhood etc to up margin requirements or even drop leveraged instruments. But If the client has $X in their account and they want to buy $X worth of GME or whatever, I don't see how that's a risk to their broker?
Rather than risk losing a ton of money, market makers have told the discount brokers that they won't be opening any new orders. You can't force someone to make a market for you.
Unless I'm mistaken...
* The market continues to operate irrespective of whether there is a market maker. If the exchange decides to close trading then its halted. But they don't halt just because a market maker fails to make market, and if they did, they'd halt it for everyone not just discount brokers. No market maker would just mean you just have to cross with whoever is on the other side. That would be a bigger issue in low volume markets, but GME etc is pretty busy right now :)
* RobinHood wouldn't care or know anyway. Why would they care that a market maker is having a bad day? Why inconvenience their clients while other brokers keep serving theirs? For all they know, the market maker is too far long and would really appreciate offloading some inventory.
* Market makers don't get to pick and choose who they trade with. They can't make market for the big boys but not for the discount brokers.
Sorry if I've missed some crucial point here. Can you enlighten me?
RobinHood's business model appears to be getting kickbacks directly from the market maker (Citadel Securities apparently), so of course they care if the market maker is unhappy because that's their own profits they are eating. The fact that the discount broker and the market maker are so buddy buddy is the extremely shady but currently very legal problem.
(Supposedly Citadel Securities at this point is the same market maker putting the same pressure on at least TD Ameritrade in this specific list.)
That said, I think we're conflating 2 different ideas here.
The first is that market makers in general are unhappy, as claimed in the original comment. That may or may not be the case, but as I said market makers can withdraw from the market but they don't have a legal right to order some brokers to stop trading. And there are a lot of market makers so if one withdrew it would not stop the others. And if they all withdrew, there would likely still be at least some sellers.
The second idea here is that Citadel ordered Robinhood to do it because they're Robinhood's biggest customer ("if you're not paying you're the product" etc).
I am sympathetic to that idea, no one pisses off their number 1 customer. But there are 2 issues with it IMHO. The first is that it doesn't make much sense to me that it's for Citadel the market maker. Citadel the market maker don't have any real position in GME, they're a market marker. Big trading volumes are good for them and they make their money by keeping any positions as close to zero as possible.
That just leaves the rest of Citadel Inc (LLC actually). Maybe the non-market-making parts are unhappy. But again, there is an issue: if they lent on the Market-Maker team to lean on Robinhood, that would be massively illegal.
There are really strict rules on the divide between market making and investment banking parts of businesses. 1 phone call (and they're all recorded), 1 email, 1 fax, 1 note-via-carrier pigeon from Citadel (market maker or other divisions) to Robinhood and everyone in both teams is looking at serious jail time. And given the enormous amount of attention GME is getting and the (predictable) blowback on Robinhood for refusing orders, that would be found.
So this is either a many-person, very obvious, easily proven, deliberate fraud, or something else is going on. I don't see people taking such a huge risk or being so blatant myself.
Also, restricting trades I do not think is good for the market. Eventually all will stabilize. With less trades this is less volume in the market (overall) and I'm what would come of this.
w.t.f?
So like the 2009 crash, let's see how to screw again the retail investors?