Virtually all trading platforms have blocked users from opening positions on these symbols. Why is Robinhood being singled out?
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.
I also use DEGIRO, and it is a good broker, it doesn't do this scammy pay for order flow thing that Robinhood and Trade republic are doing, that said, I didn't buy GME and I would not recommend buying it.
It is super risky, but there's a definite path to profit here: the short-sellers sold too much stock. 140% of the shares, it appears, which means shares were borrowed, sold, and then borrowed from the buyer it was sold to and sold again. And when all those shorts run out, the short-sellers need to have bought shares back again. With share prices this high, they're going to have to pay a lot of money for them, and people holding shares could make a ton of profit.
But it's definitely risky. You could lose a lot of money. Many of the people buying are also doing it to stick it to the hedge funds and give them a taste of their own medicine.
TD Canada has prevented some forms of orders (e.g. market buy), but not limit buy - I think this isn't so bad as their clients might expect the quoted price and get screwed at open because of volatility
tastyworks went to close-only @ 11:39AM per an email, and opened it back up at 3:12PM today. They blamed Apex clearing, which is the custodian for tastyworks accounts.
Short sales do not work like that. You can have a short position indefinitely, as long as you pay the margin interest and meet the margin maintenance requirements. Options positions are another story, in-the-money calls do require delivery of the shares by the expiration date, and next such date is tomorrow.
Nobody is going to make the hedge funds burn. At this point the hedge funds are fleecing whoever was buying shares or options yesterday (who do you think they bought them from?).
Exactly, “wall st” as a whole is making bank off this volatility, as well as Blackrock and Fidelity finds. The real way to actually stick it to wall st would be if all of main st sold all their equities..
That’s the main goal. But what’s the plan afterwards? I see posts with people holding a non trivial amount of stock. Losing $100 to own hedgefunds is different than risking $10k+.
This is the "buy high sell never" part of the meme.
Imagine there are only two shares GME.
You buy two GME for $1ea. Two short sellers needs 1 GME each lest they hemorrhage money on fees. You loudly announce your plan to hold half your GME forever. The short sellers trip over each other to pay you stupid money for the one GME you are selling. You then sit on the other GME for awhile, maybe sell it in a year or two for a buck. In any case despite buying two and selling one you've made a ton of profit.
And many more shares, most of them hold by corporate and institutions (some of those institutions will be happy to lend shares as well). Also more shares can be issued.
My understanding is the long term plan is to try and bankrupt some hedge funds or drive the SEC/regulatory bodies to enforce rules against the elite class of investors; its not entirely about profit for everyone.
There's so much discussion on HackerNews today about people who are going to lose out on these stocks where I've seen a healthy amount of comments on Reddit in the last week of people buying stock merely "for the lulz". I think there's a non-insignificant amount of "investors" who have tossed paltry sums at $GME with no plans on making a return.
Honestly, I'd have done the same, but I don't do any form of stock trading so I don't have accounts on any platforms to do it. I've done the same with various crypto shitcoins and made a few bucks off throwing $50 or $100 at something I don't expect to ever see return on too.
I am curious what the average holding is for GME. $100 * 2 million WSB subscribers is $200m to make a stock go to $24b market cap. That isn’t a lot of cash. People are posting screenshots with $10k+ holdings on WSB. Monday volume indicates a massive amount of stock movement.
shirt sellers borrow stock, then sell it. when the shirt is up, they are required to buy new stock and return the borrowed shares.
if the stock price is higher when they borrow and sell, and lower when they buy and return, they make a profit equal to the difference.
they lose money if the stock price goes up. all these people buying GME and driving the price up will hold GME stock, and the shirt sellers will be forced to purchase back the stock at premium prices. even if the stock price goes down slightly, the people buying up all the GME will still profit.
but more importantly a lot of people's goal is to f over a major firm that constantly over leverages itself.
Could someone please confirm this, but as I understand they blocked buys but not sells, or the other way around? Instead of freezing the stock, it drives the price in one direction.
Correct. They blocked buys which would drive the price down, benefitting Citadel, their main source of revenue. I don’t know if that’s why they did this but that’s what the lawsuit is for: to find out. At worst, Robinhood is going to close because of this and their and Citadel’s execs might face prison for manipulating the market.
Not a lawyer, but I imagine it’s similar to how industrial accidents are treated. If there was proper due diligence and precautions, and it was truly an “act of God” sort of thing, that’s understandable. If on the other hand their processes are not up to snuff and they moved a bit too fast and broke one too many things, I imagine they wouldn’t be treated as nicely.
Robinhood is what all the people jumping on the bandwagon used. And this coincided with a sharp price drop on all of these stocks blocked. The reason was "Due to ongoing volatility", but any trader will tell you volatility is how money is made. It took all of the normal people out of the game, and tried to scare them into selling so that the ones holding the shorts are in a better position.
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.
> 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.
Many trading platforms still allow trading. And there's no real reason not to, except to protect the hedge funds that fucked up.
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.
Vanguard hasn’t. Fidelity hasn’t. TD Ameritrade hasn’t (other than not allowing margin for shorts). I disn’t check Schwab but I don’t think they blocked purchases either.
I'm not sure disallowing buying this stock is worthy of a lawsuit. However forcibly closing people's positions who already are long on GME like some are reporting on Twitter[1] certainly seems like a great reason to be sued.
Every case I've seen where they've closed out a position, it was on margin, which makes it perfectly acceptable to do. I do not agree with Robinhood's actions today, but this is a very important distinction versus closing out a position that someone took out with cash.
It’s really kind of ironic. People are knee-jerk blaming RH for closing margin positions because they didn’t fully understand how they work and the risks involved. Simultaneously, the same people are blaming RH for stepping in the way of what very certainly would have turned into a bad trade for a lot of people.
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.
>People are knee-jerk blaming RH for closing margin positions because they didn’t fully understand how they work
People are typically given a choice to sell other assets, deposit more or close in these situations rather than getting their stock sold at the brief lowest possible price driven by the very broker closing the position. Also, typically it's only a portion that gets liquidated rather than everything on margin.
The lowest possible price is also the point where the value of your portfolio is lowest and the margin call is most severe. It is completely normal for brokers to immediately close positions when you are highly leveraged and the market is moving quickly on a direction which might leave your portfolio at a negative value - they don't want to be left holding the bag if you take too long to respond. Generally your broker will only give you time to correct things when volatility is low enough that things won't change over the next few hours.
Fair enough. If it was all margin calls from accounts bellow the limit that's acceptable but if they liquidated everything on margin that would still be pretty questionable.
Not that questionable when volatility is extreme. The risk that the price is dramatically lower when the market opens tomorrow may be too large, and they would rather not be stuck with their customers' debt when that happens.
People typically get a meal on an international flight, but not if they fly RyanAir.
If you run a super discount brokerage platform, you don’t have the luxury of reaching out to all your customers to find out what course of action they want to take.
I’m not sure if RH violated their own terms here, if they did then sure, they deserve a lawsuit. I suspect they didn’t, and this is just a case of people being in over their head.
That is not always the case, certainly not in modern times. If you have a full service broker and there appears to be sufficient time to contact you, they may do so and give you a chance to pick what to close out.
However, very few people use full service brokers. Everything is now automated. The best you can hope for is that the broker provides a mechanism prior to the need to close any position to signify which should be the last one hit to pay the margin loan. As a specific example, Interactive allows their clients to pre-select one holding as the absolute last one to close.
I agree with you. In general I think poorly for RH in several major aspects, but I'm not sure if most of the complaints here understand how a margin account works, nor how a broker - order house relationship creates a liquid market. There's definitely shennigans going on here but it's not obvious they are illegal. Hate the game not the player.
I wasn't aware of that aspect and that does change things. It still can be pretty shady though depending on the total borrowed on margin versus the total value of the stock owned. If someone borrowed $1000 on margin and bought stock that is now worth $2000, I'm not sure why Robinhood would have justification to sell off everything.
I doubt 99% of their users know the account is margin by default. Also on the surface looks like they disabled the option to 'downgrade' to a cash account.
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).
All brokers are mandated to provide the legal terms of the account and margin accounts include language concerning a) the risks and b) what options the broker has available should your account fall below their required margin (which might be higher than the regulatory minimum).
Brokerage accounts, mortgages, credit cards are not click-thru agreements. There is real money involved and real risk to both parties. Not reading the terms before signing and using is an unacceptable excuse for future loss or hardship.
Does a broker have a legal obligation to allow you to purchase any stock? I am genuinely asking as IANAL. I can't go into an Apple Store and demand they sell me a Google Pixel. It seems like these places should have every right to choose what services they offer or products they sell.
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.
Are they entitled to prevent people from buying the shares you hold? If people can't buy them, this obviously causes the price to fall. They are making the price of what you hold fall...they deserve to be sued good and hard for this.
>Are they entitled to prevent people from buying the shares you hold?
So if I am long on a stock that gets delisted from an exchange, can I sue that exchange because they are making it more difficult for people to buy that stock?
That’s not how laws work. Just because you personally see a way it can be philosophically generalized or conceptually generalized does not mean laws apply the same to all generalizations. Brokers, exchanges, investment firms, banks, etc., all have specific legal obligations based on different types of fiduciary duty, different service offerings, etc. It can easily be the case that an exchange entity has a legal ability to deny access through delisting while a broker entity does not have the right to deny service in some particular scenario.
I am not saying what the case is for brokers today, but regardless, appealing to some notion of proof by contradiction because of generalizing a behavior is not a valid way to analyze the situation.
>It can easily be the case that an exchange entity has a legal ability to deny access through delisting while a broker entity does not have the right to deny service in some particular scenario.
I realize that. That previously quoted answer was in response to me asking "Does a broker have a legal obligation to allow you to purchase any stock?" Someone answered that with a broad response without referring to any laws. I'm not sure how that leaves me with a responsibility to do a full legal breakdown of the issue.
If your over-arching point is the legal system won't side with the RH users, I'm fine with that premise because I think "laws" are a meme, and the same powerful institutions screwing over the traders who went against them are the same ones who not only influence how laws are written but also enforced.
I thought you were saying in principle their was no basis for users to feel wronged by RH. But this is silly, because you and I both know without a shadow of a doubt that RH shut down buys to protect the underwater hedge funds. It's obvious to anyone with a brain. And I'm confident it's obvious to you. And would be obvious to any judge, jury or lawyer. But does it matter that its true? No. Is there some legal basis that would encompass "you can't shut down trading to protect some hedge fund that you are connected with". I'm certain there is, but it probably won't matter. Because "the law" and "rule of law" is a meme. Power is what matters. And the sovereign power decides what the law is... average joe traders don't have the power and hedge funds and finance in this case do.
I wouldn't have used that exact phrasing, but yeah that is my general premise. "It is obvious" is an argument that might work on Reddit, Discord, Twitter, or HN, but there needs to be some bigger connection for the law to act rather than they did something shady that benefitted someone they have a connection with and that shouldn't be allowed.
It is similar to a lot of the complaints in the wake of 2008. You can't just lock people up for seemingly unethical behavior. You need to find evidence that specific laws were broken. If no laws were broke we need to move on and create new laws to prevent it the next time.
"Does a broker have a legal obligation to allow you to purchase any stock?"
No, I have seen all sorts of seemingly arbitrary restrictions since I started investing (back in college), on everything from mutual funds to ETPs to penny stocks.
Framed another way, can a broker prevent the purchase or sale of stock to bias the asset's movement in a particular direction to benefit themselves or a friendly third party?
Of course not. This is any number of SEC violations
They're allowing the stock to sell, they only disabled purchases. This will clearly make the stock go back down, benefiting Robinhood's investors over their users.
let's try and keep this in perspective and avoid jumping to wild conclusions based on someone tweeting a screen shot.
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.
If their market makers are preventing people from selling a stock surely they must prevent customers from selling stocks, right? But you can freely sell the stock.
This is what's pissing me off. I had a tiny "fuck it" position on BB with a stop-loss that kicked in. Now I can't get back in at the lower price and the one way ban is likely why the stock fell under my sell price.
No warning from Robinhood on the current issue either or I would have pulled my sell order.
Of course it is because that directly affects current holders of the shares. They're closing off the market from people buying the asset these people hold. Sure you can sell, but what does that have to do with the fact they are causing your asset to fall in value due to direct manipulation?
If this wasn't a corrupt rigging to benefit the hedge funds, they wouldn't be doing it.
Forcibly closing under-margined securities positions is totally normal. In a cash account, it would certainly be suspect.
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.
Also if Robinhood wins this, theoretically they can do the same to $AAPL, $MSFT, $AMZN , now how does the uber rich , fund managers, union funds, 401k etc etc would react? where does this stop.
Its either a free trade market , or its not!
Does anyone know why Robinhood would block the symbols? If the SEC determines some manipulation happened, does Robinhood bear some liability?
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.
As I understand it, Robinhood has VC investors and uses third parties to execute trades (that pay Robinhood for it) which stand to lose on GME. The talk being that they pressured Robinhood into this action so they wouldn't lose as much money.
From what I understand, Citadel, the mother company of Melvin Capital, one of the largest short-sellers that got in trouble, is responsible for 60% of Robinhood's revenue, buying user data from them.
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.
Citadel is RobinHood’s biggest customer - they pay RH for order flow from “unsophisticated” investors.
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.
Can someone, who has expertise in this field, explain what the hell happened? How on earth is it possible that all brokers at the same time disallowed to buy certain stocks? Who is responsible for this? The SEC, the FED, the White House, or..? Who gave the call? Who has that much power?
In all likelihood the internal teams responsible for risk management and compliance all determined that this was likely criminal activity, and recommended trading restrictions until the SEC weighs in. Brokerages are typically over-cautious about this sort of thing because they do not want to invite additional scrutiny from the powers that be. The brokerages probably did not communicate these decisions to each other, they just all use similar logic and all arrived at similar conclusions. Those that did not make this decision probably did not observe suspicious trading patterns from their customers.
There is zero chance they all independently came to the same conclusion at the exact same time. There has to be a bare minimum amount of coordination involved, which is likely illegal. Either that or they got an order from the SEC/White House.
It’s also not a clear conclusion even remotely at all. There’s nothing remotely illegal about retail investors coordinating together to profit from a short squeeze opportunity.
Financial companies all use the same logic to make these sorts of decisions, so yes, there is a very good chance that they independently came to the same conclusion at the same time.
They blocked the opening of new positions. You can still buy if it results in a short position being closed. Pretty typical move, almost certainly done to protect themselves from scrutiny by the SEC and CFPB.
It's blatant protection for short positions. These brokers are hamming up the "we need to protect retail from volatility" narrative when they're clearly trying their best to stop their business partners from going bust.
More like they wanted to preempt possible sanctions from the SEC for failing to take action when they observed suspicious behavior by their customers.
Let's be clear about a few things. Brokerages do not care about protecting retail investors, they only protect their customers when forced to do so by regulators. What brokerages do is protect themselves from liability, financial losses, and scrutiny. They have no problem screwing over their customers when it suits them. They will raise margin requirements and force customers to take a loss as soon as their risk models say that they should do so. They will restrict trading whenever it looks like there is a scam, simply because it wards off possible investigations into their business.
What they can get in trouble for, and RH did get a slap on the wrists for already, is working against their customers' interests for the benefit of their business partners. One brokerage I could believe, but I doubt that half a dozen would all do it at the same time and with the same securities.
I want other examples where it's appropriate for some brokers to restrict _buying_ but not selling, especially in the context of a short squeeze, with potential conflicts of interest.
I understand that brokers can restrict trade on risky items as yes, it impacts their risk model. I'm failing to find justification for RH and others to restrict buying but not selling of GME.
Your first link is for penny stocks, and the restrictions revolve around the usual pump-and-dump. You're allowed to go long, and can trade between days.
Your second link is for OTC, and I fail to see how this is relevant to GME. GME is traded on formal exchanges, and brokers that haven't arbitrarily restricted buying aren't having any liquidity issues.
It's anecdotal but ETrade, TD, Ally Financial all started blocking buy orders at seemingly the same time - yesterday morning shortly after market open. The reason I know this is because I was on the phone with a friend at 9am Central and neither him nor I were able to purchase $GME, $BB or $GMC (he's on Ally and I'm on Etrade). Around the same time I started seeing messages on social media that TD was also blocking traders. I think you're right that the order likely came from MMs and everyone followed through.
Most of the zero-commission brokerages sell their order flow to market makers. Those companies just decided they didn’t like what the retail investors were doing and stopped accepting buy orders on those stocks.
The problem is that if big short sellers like Melvin Capital go under that their counterparties are the brokers that will be ultimately holding most of the bag.
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.
There's three phases of a trade: execution (handled by a broker), clearing (sometimes handled by the broker, otherwise handled by clearing firms like apex clearing or jp morgan clearing among others) and settlement (almost always DTC for US equities).
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.
I said on another comment, brokers should have been raising margin reqs on these stocks the past few weeks as it became obvious this was a volatility nightmare in the making. That would have given them increased protection and dampened the enthusiasm.
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.
Who was actually buying the shares once retail buys were halted? Was it the short hedge funds? If so, then was this not a conspiracy to allow them to cover their shorts and initiate new ones knowing the price was going to be artificially forced to lower?
Due to the selling frenzy, GME is more volatile than ever but Robinhood is now allowing buys, so what has changed between this morning and now? It seems like the counterparty risk would be even higher than this morning?
My take is that the stock was basically being manipulated by an angry mob. While I completely applaud their efforts and stand against the unfair advantage that institutional investors have, I can also see where their approach could trigger broader market instability. Let's assume it was a broad coalition that assessed the risk and decided extraordinary measures were in the public's interest.
"Manipulated by an angry mob" is one way to look at it, but "unsophisticated investors attempting to short squeeze billion dollar hedge funds" is another.
From what I understand Melvin Capital, one of the biggest short-sellers that got in trouble, is owned by Citadel, which is also Robinhood's largest customer (buying user data, of all things) and maybe partial owner. I'm no lawyer, but to me it sounds like that might be a conflict of interests.
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.
I'm with Ally bank and right now they're telling people that it's their clearing firm (Apex Clearing Corp) that's blocking buys of GME and some other stocks.
Could it be that other trading platforms use the same clearing firm?
Interestingly, I bank with HSBC and I could buy and sell GME and AMC the whole time outside of when it was halted. I called them to ask why and they said they clear their own trades. Not sure how exactly that is possible though (if anyone can explain...)
Typically when you buy/sell a stock, it's not moving anywhere. Robinhood would try to sell the stock to someone on Robinhood buying the stock first. The big banks and brokerages have enough people buying/selling within its platform that it has enough supply to trade within itself.
For a small brokerage, they would have to work with other brokerages to help them trade, as they wouldn't have enough shares they already hold to trade them within their users. So Robinhood asks Apex for more shares, and Apex has to ask HSBC/Fidelity/JPMC/Goldman if Apex doesn't have any. At some point, all the other institutions also don't want to give up their shares because they need to satisfy demand from their own users. Trading with other firms tends to be really slow too.
It's a short squeeze too, by definition there's not enough stocks available for everyone who wants to buy. So some firms ran out and couldn't get more.
Defeats the purpose of using a broker/clearing house, there are products that let you trade on the exchange directly. RH probably figured there's no point in integrating all the way to the end if no one would normally use it.
Same with doing your own clearing, there's complexity involved with clearing and maybe you don't want to implement it all yourself when someone does it better for cheaper.
It's like asking why we don't all program in assembly all the time, or even have the option to mix assembly into our high level code. It's just nice having layers of abstraction that handle the annoying stuff for you, even if there's a minor cost. Why have complexity you don't expect to need?
Robinhood uses Apex behind the scenes too. Apex is probably having trouble clearing these trades (given how one sided it is) and just decided to not trade them, resulting in the butterfly effect of multiple brokerages not trading these stock.
>Apex is probably having trouble clearing these trades (given how one sided it is)
That's... not how stock markets work. For every buy there must be a seller. If there are too many buyers but not enough sellers the price simply goes up.
Sure, that's what would happen if buys and sells could reasonably be paired up. Robinhood/Apex could've just kept these buy orders open until it found a seller at any price and closed unfilled orders at the end of the day. That would probably be less preferable to all involved as I doubt these people were placing limit orders.
Cartels... It's got Anti-Trust written all over it. Not sure the US will do much though.
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.
It was a strong anti trump sentiment that united the democrats but it’s easy to forget that Biden is still met with some caution in his own party as being the establishment candidate, not necessarily a corporate stooge but no Bernie either, it would do more to dispel that within his own party.
Ẃhy would his own party be pissed that he made sure the justice department properly investigated bankers manipulating the market? Honestly, I think this is one of those issues that will unify everyone to a common cause, god damn rich people screwing the little guy.
This. It's been an incredibly eye opening week. From news trumpeting that Melvin Capital closed their short position [1] -- which is questionable at best -- to all major US brokerages preventing retail traders from participating in securities that they shorted. This is so surreal that it almost seems like a conspiracy, but i think in reality it just shows how corrupt the market really is and how much power these hedge funds hold. I'm eager to see the fallout from all of this and if SEC will take action. I didn't know that hedge funds aren't obligated to disclose their short positions on 13f. Maybe, for starters, the SEC could prevent them from hiding their shorts.
> Though, I do think if Biden makes sure the justice hammer comes down on this, it'll win over a bunch of Trump supporters.
I'm not sure anyone who still can be considered a “Trump supporter” is swayable; on the other hand, if Biden is seen as politicizing prosecutorial decisiones it’ll lose a bunch of Biden supporters.
It's also questionable how much influences Biden’s preferences have at Justice since his AG nominee hasn't been confirmed and everyone at levels requiring Senate confirmation there is a Trump carryover (though, to be fair, the Acting AG was appointed from within by Biden and wasn't out of order of seniority, IIRC, so he has exert what influence he can to select leadership given the constraints he faces.)
Reuters are claiming short sellers have lost 70billion usd, when they are the sums involved, anything is possible.
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
They all used the same logic to make this decision, that's how. They all saw suspicious patterns of trading by retail customers and made the typically overly cautious decision to restrict trading until they receive guidance from the powers that be.
You're going to have to source that claim, friend. There is nothing more fundamental than supply and demand. The action to allow people to sell but not buy is not overly cautious, it's obviously advantageous to the short interest.
Right. I was able to buy/sell Nokia (NOK) and Build A Bear (BBW) today with no trouble. However, a colleague showed me they blocked BBW sales later (screenshot).
> From what I understand Melvin Capital, one of the biggest short-sellers that got in trouble, is owned by Citadel
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.
As was reported, the capital raise Melvin received wasn't 30% of their total AUM even after the GME losses. And even if it were, it was also reported that Citadel and Point72 received non-controlling revenue share.
I'm having trouble finding specific numbers, do you have a source?
As far as I can tell they started the year with ~12.5B AUM, and have lost ~30% on the year and received a 2.75B cash infusion from Citadel et al, which I assume was at a discount given their position. So my rough estimate is around ~25-35%, given the uncertainty around those numbers.
Alternatively, did Wisconsin public retirement funds make an enormous investment in AAPL right when it was about to become insolvent and had no other real options for raising money? That is, you can assume anyone investing in that circumstance (like Citadel into Melvin) would demand a huge stake in return.
I didn't say anything about what you're supposed to think. You can definitely believe it's shady.
As for the proof about cutting losses - no, there's no proof. You can question every single fact you read about this story in the media if you want. The reasons most people have given for why they would lie about it instead of just do it kind of strain credulity for me. There are a lot of conspiracies being spread around with much regard for whether or not they are true instead of whether they could be true.
Logic says they are lying or trying to leave an impression as if they cut their losses, since if they truly already cut their losses why were they so adamant about telling their story and trying to get people out of the market. If they cut their losses they would have no incentive to tell people about it, they would just not comment and go on to new ventures.
Citadel invested in Melvin this week at a steep discount, they do not own the majority of Melvin (at least that hasn’t been publicly announced).
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."
What did you expect? When it is free you are the product. Robinhood uses pay for order flow, a system invented by Bernie Madoof to generate revenue. It is really time to leave this broker.
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).
Market manipulation is still manipulation whether you've written it in your Terms of Service (which isn't the law btw like Craigslist do-not-scrape "law"). The basic spirit of the contract between a trade executor and the client does not allow for interference barring regulatory or SEC enforcement.
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.
>> Market manipulation is still manipulation whether you've written it in your Terms of Service (which isn't the law btw like Craigslist do-not-scrape "law").
Yes. And intentionally interfering with supply and demand is the textbook definition of market manipulation — it appears in SEC powerpoints and everything!
I'm sure this will all be downvoted because it will hurt peoples feelings.
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.
I don't know how you could possibly argue that when RH is preventing the purchase of a stock, but not the selling (Which pushes the stock price down), and trying to use the argument of "we're trying to protect you from volatility!"
> If Costco doesn't want to stock your favorite item any more do you get to sue because you still want to buy it?
This is such an apples-to-oranges comparison here that I really don't feel you're arguing in good faith.
> 2- If the customers had no idea of the legal documents they signed when they opened their accounts, their bad, not the broker.
As others have said, EULA doesn't trump the law.
> 3- Certainly not retail investors (who are not the people doing this stuff).
Either I'm misunderstanding what you're saying here, or you are 100% incorrect. It is absolutely the retail investors that are buying the GME stock and doing this.
> 4- First off, the shorts are done
We don't know this yet.
> 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.
Defaulting on margin loans is prevented by issuing a margin call. Some traders are moaning about their GME being liquidated because they bought on margin while going all-in on GME, but even on WSB, most traders understand that's how margin works.
> 5- Why on earth should the Biden administration go to bat for a retail trading mob?
For the same reason Ted Cruz is. RH is impeding the free market. It's pretty crazy right now. Ted Cruz, AOC, Ben Shapiro, and Donald Trump Jr are all upset with RH right now, though for different reasons. The leftists are upset that the hedge fund managers are pissed that the poors are beating them at their game, while the right is upset that RH is interfering with the free market.
> 6- Shorts are not only necessary for a market to function well
If it was merely a matter of investors being able to say "I think this company is going to fail, so I'm going to short it", then yes. But then that quickly creates extremely perverse incentives. Now, it becomes "I have invested my money into the failure of this company, so I'm going to short it even more and publish articles about how this company has no future."
GameStop got a new CEO and had a path to recovery, and the hedge funds didn't like that since they were already shorting, so they doubled-down on the shorting. The funds are using their money to kill a company. While this is technically legal, I think it's incredibly immoral and unethical.
What is alleged is that Citadel took on more short position after disabling RH.
If this isn't market manipulation then I don't know what the hell is the point of having SEC and regulatory enforcement.
The whole system is in existential crisis. This is now a spin zone: If the Biden administration shows leniency towards Wall Street, his popular base will revolt, especially after AOC has sent out that tweet.
> I don't know how you could possibly argue that when RH is preventing the purchase of a stock, but not the selling (Which pushes the stock price down), and trying to use the argument of "we're trying to protect you from volatility!"
I'm not really savvy on the complete details, but there have been a smattering of comments pointing out that the actual financial details of what goes on when you buy something could be putting Robinhood in substantial counterparty risk that doesn't happen when you sell something.
> The funds are using their money to kill a company. While this is technically legal, I think it's incredibly immoral and unethical.
And, quite frankly, the short squeezers are trying to do the same thing to the hedge funds. I don't think you can condone one and criticize the other; to me, everyone involved in this fiasco have some ethical shortcomings they should look at.
1- RH is one of hundreds of brokers, not all of whom stopped taking trades for opening positions in GME. Is your point then that RH traders are the only buyers? Is it a ponzi scheme then?
2- It is NOT an EULA. Your agreement with a brokerage is not a software license. It is exactly like a mortgage or credit card agreement. Good luck in court trying to claim your were damaged and want to walk from one of those because you did not bother to read the terms.
3- An "investor" is not a pattern day trader. An investor does not take positions with a time horizon of minutes and hours. The kindest would be to call those involved in GME speculators. If these individuals bought GME because they really believed in the recovery story they would have a long time horizon and would not care about a temporary halt in new purchases at a handful of brokers.
4- The biggest short is in the press saying they are out.
4a- Ex: Margin call is triggered on account at GME price of $290. The first bid that RH can hit is at $265. Who is eating the difference? Suppose not all is filled and balance is at even lower price? This is not an orderly liquid market. Try to recall trading in index futures during March. Moves that would typically take weeks happened in moments.
5-Politicians latch onto anything that will get themselves in front of a camera. RH is not impeding the free market. You are free to DTC your entire account to another broker at any time.
6-Are you out front with the same critique when Joe Hedge fund is on Squawk box saying how great the new iWhatever is and how we should all buy Apple even at record highs? Even though he is long and has an interest in it going higher? But it is bad when a short seller publishes why they think a company may eventually fail because of mismanagement or other trends? And the nerve of them to suggest others should sell before it does fail.
6a-Unless GME needed to raise funds by an equity sale, the price of their stock is irrelevant to day to day operations. Do you look at the price of Pepsi shares before buying Doritos? If the new CEO of GME has a legitimate and convincing recovery plan he should be able to persuaade banks to lend... unless the debt load is already so high that even a recovery makes it dubious that they can service their debt.
Personally, in hindsight, I think the better course of action would have been to raise the margin requirement on those holdings to 100%. However, I imagine the SEC requires notice of more than overnight on such action which is probably why they have simply stopped trading those issues.
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.
You're not a lawyer, which is why you don't understand that ToS writing never protects you from actual criminality, which in this case appears to be a clear case of market manipulation (restricting trades to only sales and not buys? how much more blatant can you get).
Which is why the complaint spends all of (checks document) 1 sentence alleging market manipulation:
> 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).
Surely its a response to market manipulation? Which, almost by definition is going to require some level of intervention.
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.
Your understanding is a bit oversimplified. What the members of WSB are trying to execute is a forced short squeeze to take advantage of naked short positions, which are themselves of questionable morality. However, this is not market manipulation, nor is it a pump and dump. If you read the rhetoric carefully, they are "holding because they like the stock." If this qualifies as market manipulation, the argument is that virtually any strategy employed by any hedge fund or investment firm anywhere would classify as "market manipulation," probably to an even greater degree.
So I generally agree with you and feel like there's some amount of market manipulation and wall street types taking advantage of normal retail investor folks going on here. That said, I'd like to challenge some of my axioms and strengthen my own beliefs so raising one question I don't have a good answer for.
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.
For any contract with vague or difficult language, one has to read in a degree of reasonableness. The intention of that language was most likely to protect Robinhood if it took emergency actions, such as the circuit breakers on stock exchanges that will halt trading if it looks like the computers are doing something crazy (e.g. irrational sub-second runs/crashes of listed stocks). A court could reasonably say that what is happening with Gamestop today is similar to such situations, that Robinhood can protect itself and investors by not executing trades for the period of the crisis. What Robinhood definitely could not do under that language is, for example, halt all trading except on Gamestop. That would definitely not be a reasonable emergency action.
Allowing a stock to become sell only will trigger a sell off and this WILL help the short sellers cover ( may be with reduced loss)..
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.
I'm very much with the WSB folks, but I have a theory about the trading halt that may be more innocent. RH's exposure to margin ensures that when GME inevitably plummets, they aren't on the hook for giant liability. They may behave the same way for any stock that broke circuit breakers that fast, and some of it legit is to protect the interests of their retail investors.
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.
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:
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.
Also if Robinhood wins this, theoretically they can do the same to $AAPL, $MSFT, $AMZN , now how does the uber rich , fund managers, union funds, 401k etc etc would react? where does this stop.
Citadel is not a Robinhood customer like retail investors are customers; they're a) an execution partner who executes Robinhood's trades and b) a source of revenue because they actually pay Robinhood for the privilege of doing this. It's worth it to Citadel because they can use the information in the order flow to front-run the retail market.
Robinhood is a customer of Citadel to execute trades. Citadel lent $2.5 billion to the fund that shorted Gamestop. If that fund goes bust, Citadel won’t get its money back. It’s possible they pressure Robinhood to disallow buying Gamestop shares so the price doesn’t increase and the fund won’t suffer a fatal blow. It’s also possible Citadel simply doesn’t accept Buy orders anymore and Robinhood reacted to that by disabling the Buy button for Gamestop shares.
Melvin capital exited the short position two days ago, the loss is realized.
Edit: It was a company announcement material to the fund's prospects, if they lied it would be grounds for a securities fraud suit from their investors.
Sometimes the world is not a big conspiracy out to get you.
All 3 Citadel companies belong to Ken Griffin/are related and are unlikely to have meaningful short positions..
The company that is Robinhood's customer and pays for order flow is Citadel Securities, which is the market maker and is definitely not short GME.
Citadel (hedge fund), is not short GME as they generally sell boring complicated solutions to rich people (fixed income, insurance, hedges etc). They do invest into other funds (like Melvin Capital), which may give them indirect exposure to the shorts.
Sort of. Delta neutrality is a target, not a given. Gamma is what forces MMs to hedge. They have been absolutely steamrolled by gamma which would leave them massively net short when you’re facing 100-200% gaps.
I'm not saying they aren't shorted, I'm just saying it isn't Melvin. There are lots of people shorting GME when it's priced a large multiple of it's long term value. How this gets resolved given the giant short squeeze is another question. Certainly I wouldn't be brave enough to be on either side of the trade.
The reason is if they can make more money by lying. If still make a net profit even after any penalties for lying, then why wouldn't they lie? It's not like wall street has shown itself to be upstanding actors.
Because they know this will be investigated throughly given the optics and they would be caught in fraud.
The simpler explanation is that the current price point is clearly unsustainable and thus shorting GME is a crowded trade. As one fund exits another fund enters. If GME goes to $1000 people would still be shorting because, again, this price is unsustainable. It would be new people shorting though as most of the funds shorting at $300 would exit by the time it goes to $1000 (hypothetically).
At the same time there is no world in which GME is worth more than $100 in 3 months, so the question now is who will be the greater fool holding the bag when it goes down. Whatever money shorts will lose now they will regain on the way down (although the short sellers losing money and making money might be different funds as some exit and some enter positions). Of course, the real money makers here are MMs that will be collecting a huge bid-ask spread on both directions.
I don't think there is much good news for the retail investors though. As with all bubbles the people who got in early and had the acumen to sell before it pops will make boatloads, but the vast majority will lose.
You're not addressing the point, which is even if they get investigated and get penalties, those penalties are likely to be peanuts compared to what they stand to gain by lying.
When was the last time the SEC sent anyone from these hedge funds to jail? When was the last time they imposed penalties that actually hurt?
How convenient to let out a public statement that they exited the short… Gives them plausible deniability on claims of collusion with Robinhood by way of Citadel!
No! But the hedge fund that is Robinhood's largest customer does have very large investments in a different hedge fund that had a large short position that they have since existed. But that exit (and corresponding loss) happened before the buy prevention. There is a bunch of FUD going on.
It's...complicated. Citadel (a fund) loaned a bunch of money to Melvin Capital which has a huge short position in GME. Citadel Securities, a separate entity, pays Robinhood a lot of money for data about its orders and helps execute these orders, while simultaneously using the data to make favorable trades for themselves. Citadel (the fund) and Citadel Securities are both owned by Citadel LLC, but supposedly operate completely independently with no collusion.
"Citadel owns Robinhood" however is completely false.
I am not a lawyer and I haven’t fully parsed the complaint but the class might be defined as anyone who owned GME and suffered damages or something like that, so not necessarily robinhood customers.
I had the same thought because DoorDash was once pummeled with arbitration fees by angry drivers, and it looks like Robinhood doesn't specify who pays the fee. I'm assuming that leaves the burden on the consumer, but maybe their arbitrator (FINRA) has some rule I'm missing.
Very simple. In a lawsuit they will claim market manipulation and SEC rules violations that are not covered by the binding arbitration. I hope we are not in the situation when a mafia guy shakes you down and makes you sign a contract to settle any grievances that you have with their mafia boss.
DoorDash had an arbitration clause that said they would pay the filing fee. Robinhood doesn't have that in their arbitration clause. As far as I can tell, they don't specify who pays but it's possible the arbitration agency (FINRA) has some law governing that I guess.
If not, it's probably safe to assume the consumer has to pay the fee.
Remember when Robinhood tried opening checking accounts the first time and made a bunch of claims about SIPC insured and what not, and then the SIPC was all like "We told Robinhood we don't insure checking accounts", and then the FDIC was all like "Robinhood never talked to us about opening, or insuring, any checking accounts"...
Seems like something any financial lawyer would have checked the box on prior to making a HUGE announcement, so it's pretty plausible that Robinhood has no ideas about FINRA's laws about arbitration...
If they rule it doesn’t get around binding arbitration then there is no method for Robinhood to aggregate cases and they might face the costs of having 25,000+ cases to deal with.
January 28th, 2021: we witnessed the most corrupt financial act of our lifetime as a one-sided stock purchasing restriction was placed on MILLIONS of people across the United States in the most critical time of “financial battle”.
This lawsuit will go nowhere. At best a tiny settlement after years of litigation. Congress will have a few hearings for show, so reps can get face time and claim to be "for the people". SEC will wag their finger, might even levy a few hundred thousand in fines.
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.
> This lawsuit will go nowhere. At best a tiny settlement after years of litigation. Congress will have a few hearings for show, so reps can get face time and claim to be "for the people". SEC will wag their finger, might even levy a few hundred thousand in fines.
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.
I feel like the people who say this have never been to a casino, they're pretty fun. I would wager most people going know they will lose money. Gambling addiction is a real problem, though.
I've only been once. Even knowing I would lose money, I still found the loss/fun ratio really awful, and when I walked out of there I knew I'd never go back. For that kind of money I can buy toys I actually get to keep, or buy an experience worth remembering.
Gambling socially, I enjoy. Playing poker with the guys, typically. But the stakes are absolutely tiny, so we really are just playing for fun.
I knew some gaming addicts. Each and everyone of them was living with feverish hope to win big one day.
However, I believe that everyone has a sacred right to destroy themselves in any way they like. If they choose to ignore conscience and indulge in gambling, it is on them.
Preface: I'm totally in favor of people going to casinos if they want to.
People say this and chuckle about how witty they are but it's the only "tax" that we let billionaires extract from the poor and act like we're okay with it.
Wallstreet feeds off of 401ks and municipal pension accounts. Retail investors can't influence the market broadly. Americans aren't going to stop putting money into 401ks and 401k administrators aren't going to stop shoveling money into their friend's 'funds.'
or the media steps in and runs damage control
all they have to do is lie for a few months and people will completely forget
hell, even if they have to lie for a few years, they already did that with ebil organge man and it only made the public trust them even more
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
Where else are you supposed to put your money? Bonds? Real estate? A bank savings account? Good luck. People will not be able to live with their own failures. And where will that bring them? Back to stocks.
At the root it’s nation state currency being manipulated.
Like in 2008. Privatize the gains and socialize the losses.
The entire ledger needs a wipe. It’s pure emotional bias to suggest the future is obliged to carry the debt of the past. There’s nothing in science suggesting such a truth exists.
Robinhood could shut their doors tonight and it would have little impact on Wall St. or the American stock market. Robinhood isn't even in the top 5 for online brokers in terms of assets under management (AUM). Vanguard, Schwab, BAML, Fidelity, and Ameritrade are literally handling trillions of dollars (that's trillions with a T) [0], while Robinhood is estimated to be managing ~$20 Billion. [1] Sure, you could argue that's not all "retail investment", but they are not even in the same ballpark.
It's not about RH at this point, it's about faith in the market. It's like you were winning at the casino and a cop came in, put you in handcuffs, then gave all your chips back to the dealer.
+1, fully agreed. There are definitely people making stupid bets and losing (like they should, IMO), but the notion that markets are this black box beyond human comprehension is laughable. That's especially true when you filter out the noise and find companies with solid fundamentals.
Again, I think you're overestimating the negative sentiment about the market being driven by the madness that is GME, BB, KOSS, and EXP over the last few weeks. Most retail investors are watching from the sidelines and scarfing down popcorn, not actively participating. You're hearing about a very small portion of the market and extrapolating that out to everyone, but that's simply not the case.
Market manipulation is not new, and it's not impacting most retail investment strategies, which are much longer term. This is exposing inequities in the market that have existed for a long time, but I would be shocked if it has a significant impact on the assets of retail investors. As others have said, what other options are there? The game is imperfect, but that doesn't mean everyone stops playing all the sudden.
It's all over the news. You don't think a story where a company halts buys so an investor can recoup their loss at the expense of the retail investors won't affect faith in the market?
Will it impact faith in the market? No. It will absolutely cause people to think twice about Robinhood as a brokerage, but that is a small portion of the market.
I was able to trade GME all day on E Trade without a single issue.
A great metaphor I heard was that it's like you're playing blackjack, and have just placed a huge bet. You're cards are dealt. The pit boss walks up and says "this is a baccarat table now", but you have to keep playing with your blackjack hand.
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).
Please keep in mind that by continuing to allow trades, Robinhood was taking on major legal risks.
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.
I don't know enough about this subject to form an opinion on the legality and morality of what's hapenning right now but if the only rub is whether the squeeze is intentional or not I recommend that you have a peek at the wallstreetbets subreddit right now. It's very much intentional and out in the open.
Thank you, I’ve been reading about this all day but this is the first time I see this referenced.
I guess the billion dollar question is, legally: does buying stocks in anticipation of a short squeeze, and communicating the same to others, count as manipulation?
very interesting link, thank you. The exact language is
> Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.
Indeed. It was all done out in the open. Someone said "if enough people buy and hold, there will be a short squeeze. For this reason, I'm long GME", which probably doesn't represent a scheme or manipulation, it's just simple facts.
> a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.
The question I think would rotate around whether this is 'a scheme to manipulate', or simply identifying an opportunity to capitalise on Melvin's greedy position.
Oh please. As if whoever has their thumb on the social media scale isn't greedy. Greed runs the street in longs and shorts. You can invest modestly by diversifying and avoid all that.
Of course. But the point I'm making is that in my opinion, the demand is being generated by Melvin themselves by having a position with so much risk, it's not artificial demand.
This is true. But if you read Reddit and Twitter this week, everyone is making the case to buy and hold to put pressure on short positions. This is an illegal short squeeze.
Shorting in and of itself has a builtin risk/reward scenario. You're betting on the company's future performance. What's happening here is that people saw that some investors went overboard with shorting, so they started pumping the stock in order to extract money from said investors. Nobody actually cares about Gamestop's actual worth as a company, it's just a metagame effectively. Once the play is over the stock will collapse back.
I don't know if it is or should be illegal but I can see why it raises some questions.
> Shorting in and of itself has a builtin risk/reward scenario. You're betting on the company's future performance.
No, you're betting on the stock's future performance, not the company's future performance. There's an ocean of difference between the two.
If the company does poorly, but the stock price rises, or stays the same (Say, because we're in the middle of a COVID recession, and the printing presses are working overtime), you're going to lose a lot of money.
> Nobody actually cares about Gamestop's actual worth as a company, it's just a metagame effectively.
How do you know that everyone who bought it actually doesn't care about Gamestop's worth? There isn't really any way to prove that every single person (or even a majority of people, or really even a good portion of the people) don't care about GameStop's success and are solely doing it as a metagame.
Well there's the rub, we do need proof and that takes investigation. It's obvious what's going on but we will need to wait for whoever is conning this to leave a trail. It's just a matter of time.
Sure, there's threads on WSB about this, but there's no real way to tie that to actual transactions, and not everyone who has bought stock even contributes to that subreddit, let alone the specific threads about this.
Furthermore, all it really takes is someone saying "I bought stock because I believe in the company". We don't have thought police; unless someone explicitly posts "I, RH account XXX, bought the stock in a concerted effort to short it" there's no real way to prove intent.
I've no idea if any proof can be found in this case. I just know that if someone has won big off this they're likely to continue doing it until caught.
Wait, this is a pretty gigantic claim that needs some backing. There are examples of the SEC instituting temporary bans on short-selling, but this is the closest thing I can find to your claim.
> Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.
It says market manipulation is illegal. It is not particularly clear whether a message board getting excited about a short squeeze does not count as something that "may occur naturally".
You are continuing to comment, directly or negligently, misinformation without sources.
Please source the following comment:
> by continuing to allow trades, Robinhood was taking on major legal risks
There is no one else sharing this talking point that I can see.
I will continue to call you a shill. Please see my comment history to understand that this user is quite interested in spreading misinformation, and given their previous topics, looks to be being compensated for doing so.
They did it because they can't meet their collateral requirements. The fact that they're in bed with Citadel, which owns Melvin Cap., just makes it that much worse.
You're right, but I'd not make that argument here. I made a similar argument when this recalcitrant doctor was pulled of a United plane a few years back, justified in my view, and in line with the conditions of carriage. But, yeah, HN crowd wasn't pleased.
(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.
Considering that ToS are intentionally opaque / full of legalese the average person doesn't understand, and that companies can change their ToS pretty much without warning and with minimal notification to the end user ("here's an email resembling spam saying our terms of service have changed in some way"), I don't consider this to be a legitimate defense. With Schwab you sign a contract that can't trivially be changed. I don't remember doing any such thing with Robinhood.
Why would you ever agree to something you can't even read? Your argument is such a cop out. If you can't read the ToS, take some English classes until you can.
This is getting too dumb for me. Anyone can write incomprehensible sentences if they want to. They can also hide all the important details behind a lot of rambling.
There is also the problem that reading every ToS is a denial of service attack on customers.
> they're willing to brazenly manipulate the market like this
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.
> if hedge funds were long, it would have happened?
Yes. DTCC changes collateral requirements on securities all the time [1]. The collateral requirements they put on GME aren't even that egregious. Robinhood just didn't want to pay up.
[1] Literally, every day. But the haircuts they apply to the last day's market prices are also quite variable.
What does DTCC collateral requirements have to do with retail investors trying to buy shares in a cash account?
Stopping margin trading, absolutely. Stopping short selling, of course. But we’re not talking about either of those things. We’re talking about cash-funded limit Buy orders on a duly listed publicly traded stock.
> What does DTCC collateral requirements have to do with retail investors trying to buy shares in a cash account?
See [1].
Long story short: Robinhood lets you buy and sell a share instantly. In the real world, those trades take days to settle and clear. To bridge the gap, Robinhood loans you the difference. And Robinhood, in turn, is "loaned" [2] some of that difference by the DTCC.
So when the cost of that loan goes up, their costs go up, and they responded to that cost pressure by turning off trading. (There are other options.)
[2] In quotes because it's technically a collateral requirement. If you sell $100 of stock, DTCC may tell Robinhood it only needs to put up $2 of stock as collateral while Robinhood gets the rest from wherever it's getting it from so it can pass it along to the next person. The $98 is "loaned," as in it's owed to DTCC. If Robinhood fell down, DTCC would sell that collateral and buy the rest of the shares in the market. In this case, DTCC said "these shares are super risky, and may lose all their value in a heartbeat, I need you to hand me 100% of the shares you say you are selling when you sell them." And Robinhood said no. Because that's expensive.
[a] DTCC says put up $100 per share because DTCC is not a lender either! It has lines of credit with various banks. And the banks bear the risk of the loan defaulting. So they're setting their rates and then DTCC draws from the cheapest line.
Thank you for discussing this and bringing your perspective.
Question, why are we operating near-real-time settlement systems for securities if it doesn't eliminate such risks? I don't understand why these transactions aren't being netted and conducted as close to real-time as possible.
This aspect of the economy seems like a significant vulnerability.
There is no real-time-settlement for securities, AFAIK. They're settled two biz days later. RH, of course, seemingly settles things immediately vis-a-vis its retail clients. That creates the whole web (well, not a web, really, but a snow flake with a central counterpart which branch off again) of credit and collateral, which generally works extremely well, but comes to its limits with irrational price action such as this.
I don't see the lack of real-time-settlement as a vulnerability so much, but more the mismatch. But I'd suggest fixing it not by increasing the frequency of settlement, but by decreasing the frequency of trading (Tobin tax (which, funnily enough, is also called Robin Hood tax [1]); replace continuous trading with a couple of auctions a day; ???).
Quick note, settlement risk is indeed serious and I've covered it somewhere else.
Side note, I am against the Tobin Tax. I think public markets are more important than most folks believe.
I do believe that frequent trading is a good thing, as is retail participation in markets. One of the amplifiers of income inequality, I suspect, in the past few decades has been the fact that high-growth companies that normally would have gone public sooner have stayed private for longer, denying participation from the public market.
For example, a well chosen index of Dot Com stocks that included Amazon, Google, E-Bay etc. picked in 1998 would have, provided there was continuous investment and a long-hold, injected a large amount of capital back into the public and retirement systems, which would have helped lift all boats so to speak.
AMZN was originally at around $4/share (adjusted for splits, provided this data source is correct, https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-... ), if you had bought 1k stocks of the company in pre-2000, and held until now. Your originally $4k position would be worth 3.2M.
That's quite crazy. And it's retirement money for a lot of people.
Amazon's growth has occurred in the public, giving retail investors the ability to tap into the formation of new wealth. SpaceX's, AirBNB's, DropBox's etc hasn't. They're playthings of the well heeled. Not the gumshoes.
We need to re-orient public markets in such a way that everyone gets to participate in wealth creation. Not restrict it even further.
> I do believe that frequent trading is a good thing, as is retail participation in markets.
On the frequent trading, let's agree to disagree.
On retail participation, agreed. But I don't think that the Tobin Tax would inhibit it, but rather HFT and maybe day trading.
Fully agree that this new thing of companies staying private longer and longer is a bad development, with the best deals available only to the few connected and wealthy.
> why are we operating near-real-time settlement systems for securities if it doesn't eliminate such risks?
The firms that provided instantaneous-seeming settlement got the orders. And settlement failures were rare and correlated enough that avoiding them wasn't a differentiator. Then we got centralized clearinghouses and deposit insurance and the risk fell so far into the background that it's entirely novel to many market participants today.
> why these transactions aren't being netted and conducted as close to real-time as possible
It is technically difficult. It provides less room for correcting errors. And because real-time payment rails are fundamentally more expensive than batched rails, and if your payments aren't in sync with your settlement you've got a credit component somewhere.
> seems like a significant vulnerability
It does, but I don't think it is. Clearinghouses spread risk across a lot of people. They also help early identify daisy-chains, e.g. a single broker sold ten shares to ten brokers who then sold it to ten more fifty times and that single broker hasn't settled yet, and loops, e.g. I owe you and you owe Larry and Larry owes Bob and Bob owes me, of settlement risk. That's why Dodd-Frank moved many derivatives onto centralized clearinghouses.
That said, we've only had these since the 1970s. Counterfactual: we didn't have the technology to do this until the 1970s.
A part of the reason why the Automated Clearing House system was setup was the collapse of Herstatt, which was a settlement failure that led to the global push for RTGSes.
It is not that difficult to imagine another such storm. A heavily shorted stock, where retail traders "rally" to stick to the man and buy + hold on to the majority of the stock in circulation. And then the shares left in pools + the open market aren't enough to cover everyone's position. Creating a cascading failure.
Curious when the dollar running the world will begin to change. The US dollar and CN Yuan are the only countries keeping us with positive, basically zero, interest rates globally (See IMF SDR) https://www.imf.org/external/np/fin/data/sdr_ir.aspx
Lastly, Power to the Players! Still looking for more short squeeze on the GME shorts, would like to see them get pushed down to a reasonable level of the float (5-20%?). I’m holding.
If you buy and sell shares within the same day three times in 5 business days, you will be flagged as a “Pattern Day Trader” and you’ll need to post at least $25,000 of collateral.
I don’t think the problem here was with too many trades. Very few Robinhood accounts overall have over $25k balance.
I guess I can’t see where the risk is. Shares are moving electronically between different ledgers as orders are fulfilled. Shares aren’t being created or destroyed, nor is money.
I can definitely see how you could end up with large net cash flows that need to settled over the next 48 hours, if Robinhood accounts are collectively gaining or losing huge percentages of their value from one day to the next. But I don’t see, absent allowing margin or naked options, how they could ever end up owing more than they actually have on hand in their custodial accounts.
I would possibly believe that Robinhood didn’t have the technical controls the fix the problem that they were having the “right” way, and had to resort to their “least worst option”.
For example they should have the technical controls to flag specific sales to prevent those funds from being reinvested until the particular sale settles. By free and clear settled cash should be able to buy any publicly listed share it wants.
> Shares are moving electronically between different ledgers as orders are fulfilled
Ah, this is the disconnect.
They're not. Shares and payment for them move within two business days [1]. In the meantime, both sides must post collateral as a guard against their failing to deliver.
You're a broker. Suzy has $20 in her account. Suzy sells a share for $10. She buys another share for $10. With the first trade, you have to post--today--collateral against that $10 for two days. With the second trade, you have to post--again, by close of business today--collateral against that $10 for two days. To keep things simple, let's assume Suzy did not use the proceeds from the first sale to finance the second. That leaves you with $20 of liabilities and $20 of cash.
Next day, Suzy sells all her shares for $40. Now you're putting up collateral against that $40 for two days. The $20 from yesterday still hasn't arrived from JPMorgan--they have until tomorrow. You now have collateral against $60 of liabilities. At the end of the day, Suzy makes a withdrawal request because she's a little shit. So now you have $80 of liabilities from someone who deposited $20 in her account and never had more than $40 of assets.
Clearinghouses use the last day's closing price to determine how much collateral you need to post. They then multiply that by some value that ranges between 2% and 100%, depending on what their line-of-credit lenders offer them. That is leverage. To manage that risk, the clearinghouse adjusts that multiplier. Going from 20% to 100% in the above example would mean going from $16 of collateral required to $80. That's $64 of cash you need to come up with before the end of the day or you're out of business.
If Robinhood operated with zero clearing leverage, they would not be able to offer the instant-trading experience their competitors have offered since the 1990s.
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?
> “It’s not really Robinhood doing nefarious stuff,” said Bloomberg Intelligence analyst Larry Tabb. “It’s the DTCC saying ‘This stuff is just too risky. We don’t trust that these guys have the cash to be able to withstand settling these things two days from now, because in two days, who knows what the price could be, it could be zero.’”
I don't think JPMorgan needed any government intervention. Goldman didn't directly, but if AIG had gone under so would they. (To be fair, so would the entire financial system.) But in the end, both of them got help.
Citadel didn't. It wasn't in that club. It is not now. If Citadel failed tomorrow, it would make headlines for a week, and then we'd move on.
That's what you might think, but since the Volcker rule, a lot of the kind of 'liquidity provision' (aka trading) done in the banks has now been forced into funds like Citadel.
Meaning 'too big to fail' applies to hedge funds now just like investment banks. Ala LTCM
> Meaning 'too big to fail' applies to hedge funds now just like investment banks
LTCM wasn't making markets and it was done in by leveraged bets on Russian bonds.
The term you are looking for is systemically important financial institution (SIFI) [1]. BlackRock, with $9 trillion under management, is a SIFI. Citadel, with under $40 billion, is not.
Goldman received $10B in CPP funds on October 28, 2008 and repaid it on June 9, 2009.
JPM received $25B in CPP funds on October 28, 2008 and repaid it on June 9, 2009.
Aside from CPP, any bank that had assets affected by TARP purchases -- or by the potential that follow-on programs could affect those assets -- had its balance sheet ballasted in one way or another by government intervention.
All of the banks that survived will say they didn't "need" government intervention, for the same reason that they don't like to borrow from the discount window: it looks desperate to take help from the government. But technically both of those banks received an injection of liquidity via TARP.
Wait, I thought Goldman came out ahead from the crisis.
They had the, "we didn't avoid the mortgage mess, we just made more money on shorts than we lost" and "we are very well positioned" emails that became evidence in the Senate investigation into the GFC. The ones are the namesake for the book/movie The Big Short.
As soon as they had a big enough short position and unloaded their long is when the spiral happened. They were the ones setting the swaps prices since they were the biggest market maker for mortgage backed securities.
The issue isn’t citadel it’s all these hidden connections in the secondary market where they get the money to leverage up. I bet we will find out in the end the reason they are panicking is the repo market where they likely got the money to leverage.
What are they even alleging RH did wrong? Any broker is free to decide what the let their customers trade. They could restrict buying AAPL if they wanted to. This is like trying to sue a bar for having stopped serving your favourite beer. There is absolutely no case here.
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.
Anyone who has a bit of experience trading the markets saw this (or something like this) coming for days. Just because these people don't know the first thing about market regulation doesn't mean they have a case.
What they did was effectively form a public stock pool for the purpose of disrupting the orderly function of the market, and drive up the price beyond all reason. This kind of thing used to happen regularly a century ago until regulation was enacted in order to stem that kind of abuse. If the SEC weren't in what appears to be a coma, they should have enforced those rules days ago by completely halting trading in the stock. But it seems that falls on private companies now for some reason.
don't know why this is downvoted. they literally enabled the short holders to engage in a ladder attack with a fraction of the volume it would have required otherwise.
What are you basing these statements on? Are you a legal expert in FINRA?
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.
The only manipulation anyone is engaging in are the WSB people, and they should be prosecuted to the full extent of the law, and should be made to forfeit any and all profits made from this criminal scheme plus penalties and a permanent ban from trading securities.
That makes no sense. If you set that precedent then hedge funds will short more than 100% of every company on the stock market and make a lot of money of that.
Do you know what short selling more than 100% of the available stock does? It's the same as if every single stock owner collectively decided to sell their shares. Worse 140% of the float was shorted which means the amount of people that sold their shares was bigger than the entire market. That's an extreme example of market manipulation and that is what happened to GME. It was trading at $4 per share when its fundamentals would value it at $20.
You're also forgetting that this started with the Chewy CEO buying a 13% share in the market because he wanted to turn Gamestop into a growing company. That was the day when short sellers should have started sweating but they kept shorting more and more. They could have made a lot of money by closing their positions. If they had done so they could have shorted Gamestop again once its digital business turns out to be a dud and short it again with almost no risk. Why on earth did they not do the responsible thing? Come on. It's extremely crazy what they did and it can only be explained by greed. When you short a stock from $20 or more to $4 the only upside left is that the stock literally goes to $0. That's a measly $4 when you already have safe $16 gains per share.
Unfortunately they failed to close their shorts and become rich. I don't know exactly how much Melvin Capital had in shorts but they probably could have made $3-6 billion off reasonably safe shorts. If they started at $3 billion they would have basically trippled their starting capital. That's a bitcoin bubble level of return with a fraction of the risk. It was almost guaranteed money.
Now enter greed. They never exited their shorts until recently and they probably didn't exit all of them. Other hedgefunds still keep shorting the stock even though it is going up astronomically.
How does wall street bets enter the picture? Wallstreet bets is just a place where your average retail investor posts some memes about how much money they have lost. They've grown thick skin and are willing to trade $300 or $600 with the full expectation of losing the entire investment.
They absolutely love household brands. They shill Nokia, Blackberry and also Gamestop. Here is the thing. They know that short sellers are holding the bag and completely "overshorted" the market and put themselves into a really bad position of their own making. They started buying the stock because it fits with the WSB theme. They value the stock like a beanie baby. The stock itself is what they care about, not how much it costs and that means they will not sell their precious stock. It's like any other consumer good. They are basically decorating their broker trading apps with stocks and the accompanying losses. It's purely about fun.
Okay now lets go back to what you said.
> The only manipulation anyone is engaging in are the WSB people,
As I said they basically buy shares and hold them. What I haven't said is that WSB is a tiny fraction of the buyers of GME. There are lots of large institutional traders investing into GME. The only difference is that WSB types tend to be slow and just end up holding the stock way too long. Either by accident or intentionally. This idiotic slowness is actually very bad for short sellers because they bank on desperate people selling their shares in a panic. It's a situation in which the disadvantaged retail trader somehow does not suffer from his weaknesses.
>and they should be prosecuted to the full extent of the law,
They aren't breaking any laws. The short sellers are potentially doing illegal naked shorts. We don't know but considering that more than the 60 million shares are shorted its not impossible that 5 million of them are naked.
>and should be made to forfeit any and all profits made from this criminal scheme
Well, you clearly don't understand how any of this works if you seriously think that having more than 100% of the float sold short is somehow indicative of market manipulation.
It's pretty simple really: If you want to sell short a stock, you need to borrow it first. You can only borrow it from someone who owns the stock. But each short sale also creates a new corresponding long position that can again be lent out for more short selling.
Example: Let there be a stock with a float of 100 shares that you own. You are a long-term investor L1 who loans out these stocks (for a fee) to a short seller S1. S1 borrows the stock, and sells it to another long-term investor L2. There is now a short interest of 100 shares, or 100% of the float. But L2 can again lend out those shares to another short seller S2 who sells the shares to yet another investors L3. Now you have a short interest of 200 shares, or 200% of the stocks float. But absolutely nothing illegal like naked short selling has happened, because the sum of all short and long positions still equals the float of +100. That's simply who this works.
But now we have a bunch of ignorant amateurs spreading conspiracy theories while pumping up a largely worthless company to a ridiculous valuation. And that is market manipulation, because there is no fundamental reason why this stock should be this expensive. What's more, transacting in a security for the sole purpose of raising or depressing its price in an attempt to induce others to buy or sell that security is a violation of 15 U.S. Code § 78i. As hundreds or even thousands of posts on reddit and other sites will confirm, that is exactly what these people are doing. They are publicly admitting to the crime.
Regulators cannot let this stand, because otherwise you are encouraging more of this kind of market manipulation and abuse. An example needs to be made out of those who are responsible.
There is a case because of the reasons behind it. Say an auction house auctions off a picture. But right during the auction they announce, point to their TOS, that out of all the present bidders, only 1 person is allowed to bid. This one person then buys the picture at a fraction of the price that would have been expected if all people were allowed to bid.
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.
From what I've read in the complaint, the reason they're alleging is "no reason," although one claim does list "market manipulation" as a reason with no other facts to support that (which strikes me as something to be stricken as a conclusatory allegation, not a factual allegation, but I'm not a lawyer here).
Especially for something as complicated as security law, I'd expect to see an entire section on market manipulation laying out what the precedent says they need to allege to substantiate their claims and then detailing enough facts (or beliefs to be made good on in discovery) to make that claim credible. Without it, the complaint comes across less as "Robinhood clearly broke the law" and more as "I'm whining because I don't like the contract I signed with Robinhood."
A bar is purely for entertainment though, and that is what everyone expects. A stock brokerage is a service people count on to be able to execute their trades, some people even make a living from it. So it's more like if the electric company just decided to shut off power to your factory one day, or the bank just decided not to open one day that they were supposed to be open and you were unable to withdraw money that you needed. These are things you might reasonably try to sue over if they caused you tangible damages. And even more so if the other party might have a vested interest in stopping you.
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.
Various trading halts occur fairly regularly. If it's possible to win a suit against an exchange halting trades, institutional investors would be suing exchanges on a regular basis.
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.
"halting trades" is not the same as "halting buys only while allowing people to sell in an attempt to crash the price so our biggest customer doesn't lose money"
It is. Halting trades always produces winners/losers.
Retail investors are RH's biggest customers. They're diminishing their risk of suits they'd likely lose/regulatory scrutiny by halting buys. The SEC will more likely hit you for allowing pumps rather than preventing them.
Exchanges are able to decide what to halt (obviously since that's what they did). The SEC/class action suits are free to argue the issue, but the likelihood the suit will succeed is low and SEC intervention (beyond an opinion statement) is also low. In the investment space, retail investors are generally treated like children who need to be protected (that's what the SEC is mostly tasked with). RH will make the argument that it was protecting the children from hurting themselves and the SEC will likely go along with it (that's their assumption anyway). Fairness isn't something you generally see in trading.
This is nothing like the relatively common trading halts imposed by the exchanges under various circumstances—-which halt all trading, not just buying.
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.
No this actually happens and it's not the first time (see retail investors vs dot com bubble for more). RH likely has lawyers that referenced past instances of SEC action and decided to take the path of least resistance.
Several did it. I heard WeBull did the same. I know I got a TastyWorks notification when they did it (and a little while ago when they turned it back on).
The more I hear, the less convinced I am that RH in particular did something nefarious.
Exchanges have very clearly defined rules for when they will halt trading. With clearly defined rules, you always know why a stock was halted, and when it will resume.
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.
If that's the case, then the cost of violating rules for them is trivial enough that they can simply just keep doing this: 1) pump a stock price by allowing buy but restricting sell, 2) then they short this stock to 100%+, 3) they allow sell but restricting buy to collapse the price.
I expect a larger cost from violating the trust of their customers. They'll lose many and if they do grow, grow more slowly. It's an advantage to their competitors.
What is actually interesting to me is that it would be shocking of Robinhood didn't anticipate getting sued over this. It smells and looks like halting trading because their owners didn't like the result.
Maybe the lawsuit will fail, but they will obviously take a giant reputational hit and it is fascinating to me that they chose to do that. What is the upside? The only thing that makes sense to me is that the owners of Robinhood have too much conflict of interest with the hedge funds that were losing money (and so are acting against the best interests of Robinhood itself in favor of their funders).
Alternatively, maybe they're being honest about it and what's going on at this point has nothing to do with hedge funds and everything to do with what appears to be a scheme to pump up the price and the people that are controlling the narrative sell first.
It's unclear what hedge fund is getting it stuck to them at this point, didn't they say they covered their position already?
If that is true, then it really does start to look like what started as an interesting way to penalize hedge funds doing this has turned into a bitcoin-style bubble. Which can also be a useful point to make, but a point that is completely disconnected from the desire to screw over hedge funds.
You must not be familiar with several exchanges including Coinbase doing this exact thing a few years ago. Cryptocurrencies still have to go through an exchange, usually.
I think Robinhood was faced with either doing this and getting sued or losing a huge amount of revenue from Citadel, which paid them to front run their users.
Lesson: don’t have an evil business model because it will catch up to you.
So, my non-lawyer, worked-in-finance-software-but-not-actually-trading layman's understanding of the situation is that:
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.
Robinhood sent this email not long ago to me, but this also seems to be inline with what analysts on TV were saying, basically they very likely had to halt trading because the company may not have been able pay its obligations if it didn't temporary suspend these volatile trades and possibly become insolvent.
> As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
> To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
> Robinhood sent this email not long ago to me, but this is also what analysts on TV were saying, basically they likley had to halt trading because the company may not have been able to exist and pay its obligations if it didn't temporary suspend these volatile trades.
I smell bullshit. These are long positions, these aren't options, or trades on margin. Robinhood, and its settlement network (As well as other exchanges, who have stopped retail traders from buying GME) carries effectively no risk for settling buys and sells in them.
Basically so many shorts were sold, way more than what exists when trying to cover them, the cover would fail, the clearinghouse would raise the margin rates of Robinhood so much if this kept happening that it would cause them to go out of business.
I'm not entirely sure if I'm the idiot, or if the talking lady on television is, but what she is saying sounds like complete nonsense.
It sounds like nonsense, because what she's describing is not Robinhood's problem. The shorts are predominantly being done by hedge funds (with only a few retail investors here and there). Hedge funds aren't trading on retail platforms, like Robinhood. It's not Robinhood's problem that the hedge funds are being eaten alive on margins, or if the hedge funds are having problems with the clearing houses.
If margins, and the Robinhood/clearing house relationship were the problem, then Robinhood would stop people from opening new margin positions on GME. But that's not the case, here. They are preventing people from entering non-margin long positions.
Do you have a different take on this?
Edit: https://news.ycombinator.com/item?id=25951475 seems to be a different take on this. One that makes a lot more sense then the lady on television. The tl;dr of it is that even for a simple, non-margin stock trade, RobinHood needs to put dollars up as collateral... And they ran out of dollars.
Wall street tries be subtle most of the time, but in reality this is what they do everyday. Think about it: the big companies (Morgan Stanley, GS, BofA, Ameritrade) are selling stock to retail customers, and they know for a fact what companies people are selling/buying in volume each day, so they can make trades confident that they will make money. Nobody outside this group has direct information about the sell/buy levels of each stock, so this is a rigged game for them.
>> This lawsuit will go nowhere... increasingly desperate if they're willing to brazenly manipulate the market like this.
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.
“nihilistic rage of WSB seems to be spilling out into the world”
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.
> manifesting in events such as Brexit & the election of Trump
I want to agree with you, but I have to say that some of the most rabid Trump supporters I know are fellow software engineers earning at least $150K a year, and sometimes much more. What do they feel disenfranchised about, cast away, or left behind?
I agree that it's part of the explanation, but it seems to me like there's far more than that going on.
I don't think all Trump supporters (or all Brexit voters) feel disenfranchised. My point is there are a large number of people who do feel discarded by the "system", and when given the opportunity to metaphorically throw a brick through the window of the establishment (or even the appearance of such opportunity), they will do so.
>Congress will have a few hearings for show, so reps can get face time and claim to be "for the people".
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).
I am less cynical or more optimistic. What they did is one of the most egregious acts of malfeasance I’ve ever seen in the markets. If there was ever a case for punishing a company, this is it. If the powers that be fail to do so, then get out the pitchforks and guillotines because this society is beyond fixing.
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[ 3.7 ms ] story [ 325 ms ] threadAlso, 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.
But it's definitely risky. You could lose a lot of money. Many of the people buying are also doing it to stick it to the hedge funds and give them a taste of their own medicine.
Can you be more specific? Robinhood & Webull are the only two that I'm aware of.
That's my understanding. What happens afterwards? No ideas. Some people want to see hedge funds burn, I would not mind that either.
Nobody is going to make the hedge funds burn. At this point the hedge funds are fleecing whoever was buying shares or options yesterday (who do you think they bought them from?).
See: http://www.isthesqueezesquoze.com/
Imagine there are only two shares GME.
You buy two GME for $1ea. Two short sellers needs 1 GME each lest they hemorrhage money on fees. You loudly announce your plan to hold half your GME forever. The short sellers trip over each other to pay you stupid money for the one GME you are selling. You then sit on the other GME for awhile, maybe sell it in a year or two for a buck. In any case despite buying two and selling one you've made a ton of profit.
Now scale this up to several million people.
And many more shares, most of them hold by corporate and institutions (some of those institutions will be happy to lend shares as well). Also more shares can be issued.
There's so much discussion on HackerNews today about people who are going to lose out on these stocks where I've seen a healthy amount of comments on Reddit in the last week of people buying stock merely "for the lulz". I think there's a non-insignificant amount of "investors" who have tossed paltry sums at $GME with no plans on making a return.
Honestly, I'd have done the same, but I don't do any form of stock trading so I don't have accounts on any platforms to do it. I've done the same with various crypto shitcoins and made a few bucks off throwing $50 or $100 at something I don't expect to ever see return on too.
if the stock price is higher when they borrow and sell, and lower when they buy and return, they make a profit equal to the difference. they lose money if the stock price goes up. all these people buying GME and driving the price up will hold GME stock, and the shirt sellers will be forced to purchase back the stock at premium prices. even if the stock price goes down slightly, the people buying up all the GME will still profit.
but more importantly a lot of people's goal is to f over a major firm that constantly over leverages itself.
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.
That’s quite a claim. Got a source on that?
https://www.equities.com/news/robinhood-is-said-to-get-40-re...
https://twitter.com/justinkan/status/1354853920762253315
I'm no market expert, but I know that when cash is flowing between two companies, they generally have shared interests.
Likely because it has the most impacted users. I suspect other platforms will get lawsuits as well in time if this one proceeds.
I'm on a cash account because I like to avoid their "pattern day trader" protection.
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
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.
[1] - https://twitter.com/joemccann/status/1354859879337320452
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.
People are typically given a choice to sell other assets, deposit more or close in these situations rather than getting their stock sold at the brief lowest possible price driven by the very broker closing the position. Also, typically it's only a portion that gets liquidated rather than everything on margin.
If you run a super discount brokerage platform, you don’t have the luxury of reaching out to all your customers to find out what course of action they want to take.
I’m not sure if RH violated their own terms here, if they did then sure, they deserve a lawsuit. I suspect they didn’t, and this is just a case of people being in over their head.
However, very few people use full service brokers. Everything is now automated. The best you can hope for is that the broker provides a mechanism prior to the need to close any position to signify which should be the last one hit to pay the margin loan. As a specific example, Interactive allows their clients to pre-select one holding as the absolute last one to close.
(edit spelling)
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).
Brokerage accounts, mortgages, credit cards are not click-thru agreements. There is real money involved and real risk to both parties. Not reading the terms before signing and using is an unacceptable excuse for future loss or hardship.
Just because something is in the fine print doesn't make it okay, especially if its marketing completely differently.
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.
So if I am long on a stock that gets delisted from an exchange, can I sue that exchange because they are making it more difficult for people to buy that stock?
>They are making the price of what you hold fall...they deserve to be sued good and hard for this.
That logic applies to a number of entities and not just brokers. If I can sue a broker for this reason, can I sue anyone for that reason?
I am not saying what the case is for brokers today, but regardless, appealing to some notion of proof by contradiction because of generalizing a behavior is not a valid way to analyze the situation.
I realize that. That previously quoted answer was in response to me asking "Does a broker have a legal obligation to allow you to purchase any stock?" Someone answered that with a broad response without referring to any laws. I'm not sure how that leaves me with a responsibility to do a full legal breakdown of the issue.
I thought you were saying in principle their was no basis for users to feel wronged by RH. But this is silly, because you and I both know without a shadow of a doubt that RH shut down buys to protect the underwater hedge funds. It's obvious to anyone with a brain. And I'm confident it's obvious to you. And would be obvious to any judge, jury or lawyer. But does it matter that its true? No. Is there some legal basis that would encompass "you can't shut down trading to protect some hedge fund that you are connected with". I'm certain there is, but it probably won't matter. Because "the law" and "rule of law" is a meme. Power is what matters. And the sovereign power decides what the law is... average joe traders don't have the power and hedge funds and finance in this case do.
It is similar to a lot of the complaints in the wake of 2008. You can't just lock people up for seemingly unethical behavior. You need to find evidence that specific laws were broken. If no laws were broke we need to move on and create new laws to prevent it the next time.
No, I have seen all sorts of seemingly arbitrary restrictions since I started investing (back in college), on everything from mutual funds to ETPs to penny stocks.
Of course not. This is any number of SEC violations
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.
If this wasn't a corrupt rigging to benefit the hedge funds, they wouldn't be doing it.
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.
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.
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.
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.
Why did they all come to the same conclusion at the same time?
It's blatant protection for short positions. These brokers are hamming up the "we need to protect retail from volatility" narrative when they're clearly trying their best to stop their business partners from going bust.
It's sickening.
Let's be clear about a few things. Brokerages do not care about protecting retail investors, they only protect their customers when forced to do so by regulators. What brokerages do is protect themselves from liability, financial losses, and scrutiny. They have no problem screwing over their customers when it suits them. They will raise margin requirements and force customers to take a loss as soon as their risk models say that they should do so. They will restrict trading whenever it looks like there is a scam, simply because it wards off possible investigations into their business.
What they can get in trouble for, and RH did get a slap on the wrists for already, is working against their customers' interests for the benefit of their business partners. One brokerage I could believe, but I doubt that half a dozen would all do it at the same time and with the same securities.
I can see the nice narrative of allowing retailers to sell ("capture gains"), but it's indefensible to only allow selling.
That's _blatant_ market manipulation.
I'm not talking about edge cases with margin calls.
https://us.etrade.com/l/f/disclosure-library/otc
Would you like more?
I want other examples where it's appropriate for some brokers to restrict _buying_ but not selling, especially in the context of a short squeeze, with potential conflicts of interest.
I understand that brokers can restrict trade on risky items as yes, it impacts their risk model. I'm failing to find justification for RH and others to restrict buying but not selling of GME.
Your first link is for penny stocks, and the restrictions revolve around the usual pump-and-dump. You're allowed to go long, and can trade between days.
Your second link is for OTC, and I fail to see how this is relevant to GME. GME is traded on formal exchanges, and brokers that haven't arbitrarily restricted buying aren't having any liquidity issues.
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.
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.
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.
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.
Could it be that other trading platforms use the same clearing firm?
For a small brokerage, they would have to work with other brokerages to help them trade, as they wouldn't have enough shares they already hold to trade them within their users. So Robinhood asks Apex for more shares, and Apex has to ask HSBC/Fidelity/JPMC/Goldman if Apex doesn't have any. At some point, all the other institutions also don't want to give up their shares because they need to satisfy demand from their own users. Trading with other firms tends to be really slow too.
It's a short squeeze too, by definition there's not enough stocks available for everyone who wants to buy. So some firms ran out and couldn't get more.
Same with doing your own clearing, there's complexity involved with clearing and maybe you don't want to implement it all yourself when someone does it better for cheaper.
It's like asking why we don't all program in assembly all the time, or even have the option to mix assembly into our high level code. It's just nice having layers of abstraction that handle the annoying stuff for you, even if there's a minor cost. Why have complexity you don't expect to need?
That's... not how stock markets work. For every buy there must be a seller. If there are too many buyers but not enough sellers the price simply goes up.
https://blog.robinhood.com/news/2018/10/9/introducing-cleari...
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.
[1] https://www.reuters.com/article/us-gamestop-melvin-idUSKBN29...
I'm not sure anyone who still can be considered a “Trump supporter” is swayable; on the other hand, if Biden is seen as politicizing prosecutorial decisiones it’ll lose a bunch of Biden supporters.
It's also questionable how much influences Biden’s preferences have at Justice since his AG nominee hasn't been confirmed and everyone at levels requiring Senate confirmation there is a Trump carryover (though, to be fair, the Acting AG was appointed from within by Biden and wasn't out of order of seniority, IIRC, so he has exert what influence he can to select leadership given the constraints he faces.)
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
https://twitter.com/AstralTrading/status/1354884246389874689...
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.
As far as I can tell they started the year with ~12.5B AUM, and have lost ~30% on the year and received a 2.75B cash infusion from Citadel et al, which I assume was at a discount given their position. So my rough estimate is around ~25-35%, given the uncertainty around those numbers.
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...
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.
As for the proof about cutting losses - no, there's no proof. You can question every single fact you read about this story in the media if you want. The reasons most people have given for why they would lie about it instead of just do it kind of strain credulity for me. There are a lot of conspiracies being spread around with much regard for whether or not they are true instead of whether they could be true.
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."
Internalizers do not go out and buy the things they’ve peaked at during the internalization process.
https://twitter.com/justinkan/status/1354853920762253315?s=2...
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.
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).
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.
I don't know how you could possibly argue that when RH is preventing the purchase of a stock, but not the selling (Which pushes the stock price down), and trying to use the argument of "we're trying to protect you from volatility!"
> If Costco doesn't want to stock your favorite item any more do you get to sue because you still want to buy it?
This is such an apples-to-oranges comparison here that I really don't feel you're arguing in good faith.
> 2- If the customers had no idea of the legal documents they signed when they opened their accounts, their bad, not the broker.
As others have said, EULA doesn't trump the law.
> 3- Certainly not retail investors (who are not the people doing this stuff).
Either I'm misunderstanding what you're saying here, or you are 100% incorrect. It is absolutely the retail investors that are buying the GME stock and doing this.
> 4- First off, the shorts are done
We don't know this yet.
> 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.
Defaulting on margin loans is prevented by issuing a margin call. Some traders are moaning about their GME being liquidated because they bought on margin while going all-in on GME, but even on WSB, most traders understand that's how margin works.
> 5- Why on earth should the Biden administration go to bat for a retail trading mob?
For the same reason Ted Cruz is. RH is impeding the free market. It's pretty crazy right now. Ted Cruz, AOC, Ben Shapiro, and Donald Trump Jr are all upset with RH right now, though for different reasons. The leftists are upset that the hedge fund managers are pissed that the poors are beating them at their game, while the right is upset that RH is interfering with the free market.
> 6- Shorts are not only necessary for a market to function well
If it was merely a matter of investors being able to say "I think this company is going to fail, so I'm going to short it", then yes. But then that quickly creates extremely perverse incentives. Now, it becomes "I have invested my money into the failure of this company, so I'm going to short it even more and publish articles about how this company has no future."
GameStop got a new CEO and had a path to recovery, and the hedge funds didn't like that since they were already shorting, so they doubled-down on the shorting. The funds are using their money to kill a company. While this is technically legal, I think it's incredibly immoral and unethical.
If this isn't market manipulation then I don't know what the hell is the point of having SEC and regulatory enforcement.
The whole system is in existential crisis. This is now a spin zone: If the Biden administration shows leniency towards Wall Street, his popular base will revolt, especially after AOC has sent out that tweet.
I'm not really savvy on the complete details, but there have been a smattering of comments pointing out that the actual financial details of what goes on when you buy something could be putting Robinhood in substantial counterparty risk that doesn't happen when you sell something.
> The funds are using their money to kill a company. While this is technically legal, I think it's incredibly immoral and unethical.
And, quite frankly, the short squeezers are trying to do the same thing to the hedge funds. I don't think you can condone one and criticize the other; to me, everyone involved in this fiasco have some ethical shortcomings they should look at.
2- It is NOT an EULA. Your agreement with a brokerage is not a software license. It is exactly like a mortgage or credit card agreement. Good luck in court trying to claim your were damaged and want to walk from one of those because you did not bother to read the terms.
3- An "investor" is not a pattern day trader. An investor does not take positions with a time horizon of minutes and hours. The kindest would be to call those involved in GME speculators. If these individuals bought GME because they really believed in the recovery story they would have a long time horizon and would not care about a temporary halt in new purchases at a handful of brokers.
4- The biggest short is in the press saying they are out.
4a- Ex: Margin call is triggered on account at GME price of $290. The first bid that RH can hit is at $265. Who is eating the difference? Suppose not all is filled and balance is at even lower price? This is not an orderly liquid market. Try to recall trading in index futures during March. Moves that would typically take weeks happened in moments.
5-Politicians latch onto anything that will get themselves in front of a camera. RH is not impeding the free market. You are free to DTC your entire account to another broker at any time.
6-Are you out front with the same critique when Joe Hedge fund is on Squawk box saying how great the new iWhatever is and how we should all buy Apple even at record highs? Even though he is long and has an interest in it going higher? But it is bad when a short seller publishes why they think a company may eventually fail because of mismanagement or other trends? And the nerve of them to suggest others should sell before it does fail.
6a-Unless GME needed to raise funds by an equity sale, the price of their stock is irrelevant to day to day operations. Do you look at the price of Pepsi shares before buying Doritos? If the new CEO of GME has a legitimate and convincing recovery plan he should be able to persuaade banks to lend... unless the debt load is already so high that even a recovery makes it dubious that they can service their debt.
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.
> 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).
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.
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.
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.
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.
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)
https://imgur.com/a/iHqwEyv
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.
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?
Its either a free trade market , or its not!
Edit: It was a company announcement material to the fund's prospects, if they lied it would be grounds for a securities fraud suit from their investors.
Sometimes the world is not a big conspiracy out to get you.
The company that is Robinhood's customer and pays for order flow is Citadel Securities, which is the market maker and is definitely not short GME.
Citadel (hedge fund), is not short GME as they generally sell boring complicated solutions to rich people (fixed income, insurance, hedges etc). They do invest into other funds (like Melvin Capital), which may give them indirect exposure to the shorts.
Citadel technologies, sells their tech.
The simpler explanation is that the current price point is clearly unsustainable and thus shorting GME is a crowded trade. As one fund exits another fund enters. If GME goes to $1000 people would still be shorting because, again, this price is unsustainable. It would be new people shorting though as most of the funds shorting at $300 would exit by the time it goes to $1000 (hypothetically).
At the same time there is no world in which GME is worth more than $100 in 3 months, so the question now is who will be the greater fool holding the bag when it goes down. Whatever money shorts will lose now they will regain on the way down (although the short sellers losing money and making money might be different funds as some exit and some enter positions). Of course, the real money makers here are MMs that will be collecting a huge bid-ask spread on both directions.
I don't think there is much good news for the retail investors though. As with all bubbles the people who got in early and had the acumen to sell before it pops will make boatloads, but the vast majority will lose.
When was the last time the SEC sent anyone from these hedge funds to jail? When was the last time they imposed penalties that actually hurt?
"Citadel owns Robinhood" however is completely false.
ROFL
https://cdn.robinhood.com/assets/robinhood/legal/Customer%20...
Customers: "We want to sue you."
Company: "Sorry you can't do a class-action, we have a binding arbitration clause."
Law firm representing customers: "Ok, here is the paperwork for 1500 arbitrations, have fun with that. We can do this all day."
[1] https://www.latimes.com/business/story/2020-02-11/doordash-a...
If not, it's probably safe to assume the consumer has to pay the fee.
Seems like something any financial lawyer would have checked the box on prior to making a HUGE announcement, so it's pretty plausible that Robinhood has no ideas about FINRA's laws about arbitration...
[1] https://www.forbes.com/sites/ronshevlin/2019/01/02/the-robin...
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)
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.
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.
Gambling socially, I enjoy. Playing poker with the guys, typically. But the stakes are absolutely tiny, so we really are just playing for fun.
However, I believe that everyone has a sacred right to destroy themselves in any way they like. If they choose to ignore conscience and indulge in gambling, it is on them.
People say this and chuckle about how witty they are but it's the only "tax" that we let billionaires extract from the poor and act like we're okay with it.
If you got a bunch of spare money, enjoy the stock market.
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
At the root it’s nation state currency being manipulated.
Like in 2008. Privatize the gains and socialize the losses.
The entire ledger needs a wipe. It’s pure emotional bias to suggest the future is obliged to carry the debt of the past. There’s nothing in science suggesting such a truth exists.
[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.
Personally, not a fan of the casino metaphor.
Market manipulation is not new, and it's not impacting most retail investment strategies, which are much longer term. This is exposing inequities in the market that have existed for a long time, but I would be shocked if it has a significant impact on the assets of retail investors. As others have said, what other options are there? The game is imperfect, but that doesn't mean everyone stops playing all the sudden.
I was able to trade GME all day on E Trade without a single issue.
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.
Shorts got greedy and got caught out. Should short sellers not have any downside to their trades?
I guess the billion dollar question is, legally: does buying stocks in anticipation of a short squeeze, and communicating the same to others, count as manipulation?
> Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.
Also, can you use Clojure to cause a short squeeze, or... [ducks]
The question I think would rotate around whether this is 'a scheme to manipulate', or simply identifying an opportunity to capitalise on Melvin's greedy position.
Oh please. As if whoever has their thumb on the social media scale isn't greedy. Greed runs the street in longs and shorts. You can invest modestly by diversifying and avoid all that.
I heard (from a non-authoritative source) that the coordination on reddit, etc. is not manipulation.
Also: If a big hedge fund shorts a stock, expecting to drive its price down, that's cool. (Search "big short drives down stock price")
But if regular people buy a stock expecting to drive its price up, that's terrible.
Sorry, this position just isn't credible.
I don't know if it is or should be illegal but I can see why it raises some questions.
No, you're betting on the stock's future performance, not the company's future performance. There's an ocean of difference between the two.
If the company does poorly, but the stock price rises, or stays the same (Say, because we're in the middle of a COVID recession, and the printing presses are working overtime), you're going to lose a lot of money.
How do you know that everyone who bought it actually doesn't care about Gamestop's worth? There isn't really any way to prove that every single person (or even a majority of people, or really even a good portion of the people) don't care about GameStop's success and are solely doing it as a metagame.
Sure, there's threads on WSB about this, but there's no real way to tie that to actual transactions, and not everyone who has bought stock even contributes to that subreddit, let alone the specific threads about this.
Furthermore, all it really takes is someone saying "I bought stock because I believe in the company". We don't have thought police; unless someone explicitly posts "I, RH account XXX, bought the stock in a concerted effort to short it" there's no real way to prove intent.
It says market manipulation is illegal. It is not particularly clear whether a message board getting excited about a short squeeze does not count as something that "may occur naturally".
Please source the following comment:
> by continuing to allow trades, Robinhood was taking on major legal risks
There is no one else sharing this talking point that I can see.
I will continue to call you a shill. Please see my comment history to understand that this user is quite interested in spreading misinformation, and given their previous topics, looks to be being compensated for doing so.
Obviously not the reason, since they posted a blog saying they did it to protect consumers from volatile stock.
(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.
There is also the problem that reading every ToS is a denial of service attack on customers.
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.
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
Yes. DTCC changes collateral requirements on securities all the time [1]. The collateral requirements they put on GME aren't even that egregious. Robinhood just didn't want to pay up.
[1] Literally, every day. But the haircuts they apply to the last day's market prices are also quite variable.
Stopping margin trading, absolutely. Stopping short selling, of course. But we’re not talking about either of those things. We’re talking about cash-funded limit Buy orders on a duly listed publicly traded stock.
See [1].
Long story short: Robinhood lets you buy and sell a share instantly. In the real world, those trades take days to settle and clear. To bridge the gap, Robinhood loans you the difference. And Robinhood, in turn, is "loaned" [2] some of that difference by the DTCC.
So when the cost of that loan goes up, their costs go up, and they responded to that cost pressure by turning off trading. (There are other options.)
[1] https://news.ycombinator.com/item?id=25950361
[2] In quotes because it's technically a collateral requirement. If you sell $100 of stock, DTCC may tell Robinhood it only needs to put up $2 of stock as collateral while Robinhood gets the rest from wherever it's getting it from so it can pass it along to the next person. The $98 is "loaned," as in it's owed to DTCC. If Robinhood fell down, DTCC would sell that collateral and buy the rest of the shares in the market. In this case, DTCC said "these shares are super risky, and may lose all their value in a heartbeat, I need you to hand me 100% of the shares you say you are selling when you sell them." And Robinhood said no. Because that's expensive.
[a] DTCC says put up $100 per share because DTCC is not a lender either! It has lines of credit with various banks. And the banks bear the risk of the loan defaulting. So they're setting their rates and then DTCC draws from the cheapest line.
Question, why are we operating near-real-time settlement systems for securities if it doesn't eliminate such risks? I don't understand why these transactions aren't being netted and conducted as close to real-time as possible.
This aspect of the economy seems like a significant vulnerability.
I don't see the lack of real-time-settlement as a vulnerability so much, but more the mismatch. But I'd suggest fixing it not by increasing the frequency of settlement, but by decreasing the frequency of trading (Tobin tax (which, funnily enough, is also called Robin Hood tax [1]); replace continuous trading with a couple of auctions a day; ???).
[1] https://en.wikipedia.org/wiki/Tobin_tax
Side note, I am against the Tobin Tax. I think public markets are more important than most folks believe.
I do believe that frequent trading is a good thing, as is retail participation in markets. One of the amplifiers of income inequality, I suspect, in the past few decades has been the fact that high-growth companies that normally would have gone public sooner have stayed private for longer, denying participation from the public market.
For example, a well chosen index of Dot Com stocks that included Amazon, Google, E-Bay etc. picked in 1998 would have, provided there was continuous investment and a long-hold, injected a large amount of capital back into the public and retirement systems, which would have helped lift all boats so to speak.
AMZN was originally at around $4/share (adjusted for splits, provided this data source is correct, https://www.macrotrends.net/stocks/charts/AMZN/amazon/stock-... ), if you had bought 1k stocks of the company in pre-2000, and held until now. Your originally $4k position would be worth 3.2M.
That's quite crazy. And it's retirement money for a lot of people.
Amazon's growth has occurred in the public, giving retail investors the ability to tap into the formation of new wealth. SpaceX's, AirBNB's, DropBox's etc hasn't. They're playthings of the well heeled. Not the gumshoes.
We need to re-orient public markets in such a way that everyone gets to participate in wealth creation. Not restrict it even further.
On the frequent trading, let's agree to disagree.
On retail participation, agreed. But I don't think that the Tobin Tax would inhibit it, but rather HFT and maybe day trading.
Fully agree that this new thing of companies staying private longer and longer is a bad development, with the best deals available only to the few connected and wealthy.
The firms that provided instantaneous-seeming settlement got the orders. And settlement failures were rare and correlated enough that avoiding them wasn't a differentiator. Then we got centralized clearinghouses and deposit insurance and the risk fell so far into the background that it's entirely novel to many market participants today.
> why these transactions aren't being netted and conducted as close to real-time as possible
It is technically difficult. It provides less room for correcting errors. And because real-time payment rails are fundamentally more expensive than batched rails, and if your payments aren't in sync with your settlement you've got a credit component somewhere.
> seems like a significant vulnerability
It does, but I don't think it is. Clearinghouses spread risk across a lot of people. They also help early identify daisy-chains, e.g. a single broker sold ten shares to ten brokers who then sold it to ten more fifty times and that single broker hasn't settled yet, and loops, e.g. I owe you and you owe Larry and Larry owes Bob and Bob owes me, of settlement risk. That's why Dodd-Frank moved many derivatives onto centralized clearinghouses.
That said, we've only had these since the 1970s. Counterfactual: we didn't have the technology to do this until the 1970s.
A part of the reason why the Automated Clearing House system was setup was the collapse of Herstatt, which was a settlement failure that led to the global push for RTGSes.
It is not that difficult to imagine another such storm. A heavily shorted stock, where retail traders "rally" to stick to the man and buy + hold on to the majority of the stock in circulation. And then the shares left in pools + the open market aren't enough to cover everyone's position. Creating a cascading failure.
I’ve been looking at settlement also and am particularly interested in overnight Interest rates. https://en.m.wikipedia.org/wiki/Overnight_indexed_swap
This past years changes at the Fed for Central Bank Interest Rate Swap Lines and 9 new banks, which included Sweden and others. https://www.federalreserve.gov/newsevents/pressreleases/mone...
The dollar is running the world right now. Lots of demand even as, or maybe why, the value has been weakening. https://www.marketwatch.com/investing/index/dxy
Curious when the dollar running the world will begin to change. The US dollar and CN Yuan are the only countries keeping us with positive, basically zero, interest rates globally (See IMF SDR) https://www.imf.org/external/np/fin/data/sdr_ir.aspx
Lastly, Power to the Players! Still looking for more short squeeze on the GME shorts, would like to see them get pushed down to a reasonable level of the float (5-20%?). I’m holding.
I don’t think the problem here was with too many trades. Very few Robinhood accounts overall have over $25k balance.
I guess I can’t see where the risk is. Shares are moving electronically between different ledgers as orders are fulfilled. Shares aren’t being created or destroyed, nor is money.
I can definitely see how you could end up with large net cash flows that need to settled over the next 48 hours, if Robinhood accounts are collectively gaining or losing huge percentages of their value from one day to the next. But I don’t see, absent allowing margin or naked options, how they could ever end up owing more than they actually have on hand in their custodial accounts.
I would possibly believe that Robinhood didn’t have the technical controls the fix the problem that they were having the “right” way, and had to resort to their “least worst option”.
For example they should have the technical controls to flag specific sales to prevent those funds from being reinvested until the particular sale settles. By free and clear settled cash should be able to buy any publicly listed share it wants.
Ah, this is the disconnect.
They're not. Shares and payment for them move within two business days [1]. In the meantime, both sides must post collateral as a guard against their failing to deliver.
You're a broker. Suzy has $20 in her account. Suzy sells a share for $10. She buys another share for $10. With the first trade, you have to post--today--collateral against that $10 for two days. With the second trade, you have to post--again, by close of business today--collateral against that $10 for two days. To keep things simple, let's assume Suzy did not use the proceeds from the first sale to finance the second. That leaves you with $20 of liabilities and $20 of cash.
Next day, Suzy sells all her shares for $40. Now you're putting up collateral against that $40 for two days. The $20 from yesterday still hasn't arrived from JPMorgan--they have until tomorrow. You now have collateral against $60 of liabilities. At the end of the day, Suzy makes a withdrawal request because she's a little shit. So now you have $80 of liabilities from someone who deposited $20 in her account and never had more than $40 of assets.
Clearinghouses use the last day's closing price to determine how much collateral you need to post. They then multiply that by some value that ranges between 2% and 100%, depending on what their line-of-credit lenders offer them. That is leverage. To manage that risk, the clearinghouse adjusts that multiplier. Going from 20% to 100% in the above example would mean going from $16 of collateral required to $80. That's $64 of cash you need to come up with before the end of the day or you're out of business.
If Robinhood operated with zero clearing leverage, they would not be able to offer the instant-trading experience their competitors have offered since the 1990s.
[1] https://www.investor.gov/introduction-investing/investing-ba...
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...
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 don't think JPMorgan needed any government intervention. Goldman didn't directly, but if AIG had gone under so would they. (To be fair, so would the entire financial system.) But in the end, both of them got help.
Citadel didn't. It wasn't in that club. It is not now. If Citadel failed tomorrow, it would make headlines for a week, and then we'd move on.
Meaning 'too big to fail' applies to hedge funds now just like investment banks. Ala LTCM
https://en.wikipedia.org/wiki/When_Genius_Failed
LTCM wasn't making markets and it was done in by leveraged bets on Russian bonds.
The term you are looking for is systemically important financial institution (SIFI) [1]. BlackRock, with $9 trillion under management, is a SIFI. Citadel, with under $40 billion, is not.
[1] https://en.wikipedia.org/wiki/Systemically_important_financi...
JPM received $25B in CPP funds on October 28, 2008 and repaid it on June 9, 2009.
Aside from CPP, any bank that had assets affected by TARP purchases -- or by the potential that follow-on programs could affect those assets -- had its balance sheet ballasted in one way or another by government intervention.
All of the banks that survived will say they didn't "need" government intervention, for the same reason that they don't like to borrow from the discount window: it looks desperate to take help from the government. But technically both of those banks received an injection of liquidity via TARP.
They had the, "we didn't avoid the mortgage mess, we just made more money on shorts than we lost" and "we are very well positioned" emails that became evidence in the Senate investigation into the GFC. The ones are the namesake for the book/movie The Big Short.
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.
What they did was effectively form a public stock pool for the purpose of disrupting the orderly function of the market, and drive up the price beyond all reason. This kind of thing used to happen regularly a century ago until regulation was enacted in order to stem that kind of abuse. If the SEC weren't in what appears to be a coma, they should have enforced those rules days ago by completely halting trading in the stock. But it seems that falls on private companies now for some reason.
> 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.
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.
Do you know what short selling more than 100% of the available stock does? It's the same as if every single stock owner collectively decided to sell their shares. Worse 140% of the float was shorted which means the amount of people that sold their shares was bigger than the entire market. That's an extreme example of market manipulation and that is what happened to GME. It was trading at $4 per share when its fundamentals would value it at $20.
You're also forgetting that this started with the Chewy CEO buying a 13% share in the market because he wanted to turn Gamestop into a growing company. That was the day when short sellers should have started sweating but they kept shorting more and more. They could have made a lot of money by closing their positions. If they had done so they could have shorted Gamestop again once its digital business turns out to be a dud and short it again with almost no risk. Why on earth did they not do the responsible thing? Come on. It's extremely crazy what they did and it can only be explained by greed. When you short a stock from $20 or more to $4 the only upside left is that the stock literally goes to $0. That's a measly $4 when you already have safe $16 gains per share.
Unfortunately they failed to close their shorts and become rich. I don't know exactly how much Melvin Capital had in shorts but they probably could have made $3-6 billion off reasonably safe shorts. If they started at $3 billion they would have basically trippled their starting capital. That's a bitcoin bubble level of return with a fraction of the risk. It was almost guaranteed money.
Now enter greed. They never exited their shorts until recently and they probably didn't exit all of them. Other hedgefunds still keep shorting the stock even though it is going up astronomically.
How does wall street bets enter the picture? Wallstreet bets is just a place where your average retail investor posts some memes about how much money they have lost. They've grown thick skin and are willing to trade $300 or $600 with the full expectation of losing the entire investment. They absolutely love household brands. They shill Nokia, Blackberry and also Gamestop. Here is the thing. They know that short sellers are holding the bag and completely "overshorted" the market and put themselves into a really bad position of their own making. They started buying the stock because it fits with the WSB theme. They value the stock like a beanie baby. The stock itself is what they care about, not how much it costs and that means they will not sell their precious stock. It's like any other consumer good. They are basically decorating their broker trading apps with stocks and the accompanying losses. It's purely about fun.
Okay now lets go back to what you said.
> The only manipulation anyone is engaging in are the WSB people,
As I said they basically buy shares and hold them. What I haven't said is that WSB is a tiny fraction of the buyers of GME. There are lots of large institutional traders investing into GME. The only difference is that WSB types tend to be slow and just end up holding the stock way too long. Either by accident or intentionally. This idiotic slowness is actually very bad for short sellers because they bank on desperate people selling their shares in a panic. It's a situation in which the disadvantaged retail trader somehow does not suffer from his weaknesses.
>and they should be prosecuted to the full extent of the law,
They aren't breaking any laws. The short sellers are potentially doing illegal naked shorts. We don't know but considering that more than the 60 million shares are shorted its not impossible that 5 million of them are naked.
>and should be made to forfeit any and all profits made from this criminal scheme
What about the act of selling all s...
It's pretty simple really: If you want to sell short a stock, you need to borrow it first. You can only borrow it from someone who owns the stock. But each short sale also creates a new corresponding long position that can again be lent out for more short selling.
Example: Let there be a stock with a float of 100 shares that you own. You are a long-term investor L1 who loans out these stocks (for a fee) to a short seller S1. S1 borrows the stock, and sells it to another long-term investor L2. There is now a short interest of 100 shares, or 100% of the float. But L2 can again lend out those shares to another short seller S2 who sells the shares to yet another investors L3. Now you have a short interest of 200 shares, or 200% of the stocks float. But absolutely nothing illegal like naked short selling has happened, because the sum of all short and long positions still equals the float of +100. That's simply who this works.
But now we have a bunch of ignorant amateurs spreading conspiracy theories while pumping up a largely worthless company to a ridiculous valuation. And that is market manipulation, because there is no fundamental reason why this stock should be this expensive. What's more, transacting in a security for the sole purpose of raising or depressing its price in an attempt to induce others to buy or sell that security is a violation of 15 U.S. Code § 78i. As hundreds or even thousands of posts on reddit and other sites will confirm, that is exactly what these people are doing. They are publicly admitting to the crime.
Regulators cannot let this stand, because otherwise you are encouraging more of this kind of market manipulation and abuse. An example needs to be made out of those who are responsible.
https://www.finra.org/rules-guidance/key-topics/suitability
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.
Especially for something as complicated as security law, I'd expect to see an entire section on market manipulation laying out what the precedent says they need to allege to substantiate their claims and then detailing enough facts (or beliefs to be made good on in discovery) to make that claim credible. Without it, the complaint comes across less as "Robinhood clearly broke the law" and more as "I'm whining because I don't like the contract I signed with Robinhood."
[1]https://cdn.robinhood.com/assets/robinhood/legal/Customer%20...
This exact point turned up 4 hours ago in another thread:
https://news.ycombinator.com/item?id=25946004
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.
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.
Retail investors are RH's biggest customers. They're diminishing their risk of suits they'd likely lose/regulatory scrutiny by halting buys. The SEC will more likely hit you for allowing pumps rather than preventing them.
Trading halts are at the exchange level and stop _all_ buys and sells
What happened here is some brokers/clearing houses prevented _retail traders_ from buying, but not from selling
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.
Several did it. I heard WeBull did the same. I know I got a TastyWorks notification when they did it (and a little while ago when they turned it back on).
The more I hear, the less convinced I am that RH in particular did something nefarious.
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.
Best investment money can buy is after-dinner speakers fees to people who then show up at the regulators.
Is the society already working this way?
Maybe the lawsuit will fail, but they will obviously take a giant reputational hit and it is fascinating to me that they chose to do that. What is the upside? The only thing that makes sense to me is that the owners of Robinhood have too much conflict of interest with the hedge funds that were losing money (and so are acting against the best interests of Robinhood itself in favor of their funders).
Alternatively, maybe they're being honest about it and what's going on at this point has nothing to do with hedge funds and everything to do with what appears to be a scheme to pump up the price and the people that are controlling the narrative sell first.
It's unclear what hedge fund is getting it stuck to them at this point, didn't they say they covered their position already?
If that is true, then it really does start to look like what started as an interesting way to penalize hedge funds doing this has turned into a bitcoin-style bubble. Which can also be a useful point to make, but a point that is completely disconnected from the desire to screw over hedge funds.
I personally am going to switch away from them to some other brokerage. Their app is very well made though so I hope the competition catches up
Lesson: don’t have an evil business model because it will catch up to you.
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.
They identify (possible) crimes, the Justice Department deals with them.
The SEC only “deals with” civil wrongs, not crimes.
There, fixed that for you.
> As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
> To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
I smell bullshit. These are long positions, these aren't options, or trades on margin. Robinhood, and its settlement network (As well as other exchanges, who have stopped retail traders from buying GME) carries effectively no risk for settling buys and sells in them.
Basically so many shorts were sold, way more than what exists when trying to cover them, the cover would fail, the clearinghouse would raise the margin rates of Robinhood so much if this kept happening that it would cause them to go out of business.
It sounds like nonsense, because what she's describing is not Robinhood's problem. The shorts are predominantly being done by hedge funds (with only a few retail investors here and there). Hedge funds aren't trading on retail platforms, like Robinhood. It's not Robinhood's problem that the hedge funds are being eaten alive on margins, or if the hedge funds are having problems with the clearing houses.
If margins, and the Robinhood/clearing house relationship were the problem, then Robinhood would stop people from opening new margin positions on GME. But that's not the case, here. They are preventing people from entering non-margin long positions.
Do you have a different take on this?
Edit: https://news.ycombinator.com/item?id=25951475 seems to be a different take on this. One that makes a lot more sense then the lady on television. The tl;dr of it is that even for a simple, non-margin stock trade, RobinHood needs to put dollars up as collateral... And they ran out of dollars.
Order books have been nationally integrated since 2005 [1]. This is how independent HFT firms got their start.
[1] https://en.wikipedia.org/wiki/Regulation_NMS
this would be illegal. Any evidence this happens?
Remember "too big to fail"?
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.
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.
I want to agree with you, but I have to say that some of the most rabid Trump supporters I know are fellow software engineers earning at least $150K a year, and sometimes much more. What do they feel disenfranchised about, cast away, or left behind?
I agree that it's part of the explanation, but it seems to me like there's far more than that going on.
Not all BLM supporters are black.
https://news.ycombinator.com/item?id=25950306
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).