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Also typical that they're auto-closing positions at the literal lowest point possible today. I am seriously struggling to understand how this can be even remotely legal. It's amazing.
But their hedge fund customers only care about them because they sell their trading book info so their algorithmic trading algorithms can make tiny amounts of profit right before those trades execute. If they have no trading book to offer those hedge funds because all the retail traders leave the app, they have no revenue stream whatsoever and their hedge fund clients will drop them like a rock.
then they would've lost their biggest customer
the real victory today was robinhood getting crushed by charybdis after dodging scylla
but your analysis is right. losing citadel is nowhere near as existential as losing your product* (ty sysgen)
I'm not sure they even care that much - they had a huge leap year bug in 2016 that resulted in an outage. 4 years later, in 2020, they had the exact same bug. 4 years to fix it and they didn't, so I'm wondering if they even expected to last this long.
Maybe they'll end up closing shop and starting a new company with a new shitty app, perhaps even with the same codebase.
Robinhood only makes money from interest and selling order streams to Citadel. They don't really make money from retail users.
retail users are their product. they don't have anything to sell citadel w/o them
True. They were between a rock and a hard place. I guess getting of Citadel might have been better long term.
Totally legal. Questionable but legal. It’s in any brokerages t&cs
Just because it's in a T&Cs agreement doesn't mean it's legal. This definitely breaks "good faith" in your brokerage and if inclined a court could still go after them. Granted this is the United States of America, and I think it's more than likely the courts do no such thing and just find it fully legal.
EDIT: Also, looks like since these weren't margin or discretionary accounts I don't know how RH will say it's legal, per here.
Oh shit? Not margin accounts? Yeah, super questionable legality in that case
It would be different if it was naked options or something
Yeah agreed. If this was all margin stuff then I get it, I'd be closing out anybody who was trading GME with my own money too. Regular retail holdings being auto-sold? lol bonk you're going to jail (except not really because we'll never jail bankers unless they're Asian)
If we assume that Robinhood only ever existed to serve the interests of hedge funds (initially, by supplying retail trade data), then killing RH to save hedge funds just makes sense. And they'll probably just rebuild it under new names later.
Yeah if they're looking down the barrel of "infinite losses", then who cares? A class action suit and a congressional scolding is literally a get out of jail free card at this point. The suit will take YEARS to settle and pay out $5 checks, meanwhile maybe they'll get a fine from the SEC and some shitty publicity.
Everyone's been wishing for some kind of divine wrath to completely nuke firms like these; to actually punish them for their disgusting behavior. Instead they'll get off with the regular punishment that everyone knows is a total farce. We were all chanting "it's 2008 all over again" and we were right. They're going to get out of this just as unscathed as last time.
Fuck Robinhood
buuuut...
They closed people's positions who had bought stocks on margin (loan). It is very standard for brokers to automatically closeout margin on accounts that can't cover the underlying debt. If I buy GME at 200 on margin and I sell at 350, I pay back the broker 200 + small interest and I profit 150 easy.
If I buy at 200 and it goes down to 150 and I sell, I have to pay them 50. What if I don't sell? They say "okay you're chill unless it goes low enough that were worried you aren't good for it" the number for how low it goes is different for each stock but generally higher for more volatile and hot stocks.
So GME crashed due to market manipulation and RH closed out positions because people spent 10k on GME, turned it into 4k and the broker says "sorry I don't trust you, I'm taking it back."
The reason stonk went up after that is because that created available shares to buy, and competing hedge funds outbid each other.
Yes RH is criminal for not allowing people to buy, yes the price was intentionally tanked so that this would happen, but this is a normal thing. WSB has been spamming for a week to not buy on margin for this exact reason.
I only spend so much time spelling it out because this is a movement and proper messaging matters. We need to have the facts straight, because it's a slam dunk case of collusion as long as we don't muck it up. Ifthe message is "they sold people's stocks" the response will be "wow you truly don't understand the market, this was your fault" and you'd say "okay I guess technically you got me there but here's X Y and Z other things they did that were totally illegal" but you won't win people over with that, they'll think it's cope and agree with the boomer.
Yep. TLDR for people:
"Margin" is when you take a loan from the stockbroker to buy stocks. So if you bought "on margin" (loaned money) they force sell your stocks it they go too low. To prevent losing their own money
whatever you do for the love of god don't short sell on margin
Ah shit I just posted a screenshot before realizing you just posted this. This is nuts.
What does this mean? I only have investment with Robinhood. Should I sell or open in a new platform?
Probably sell as soon as you feel it's right and never use retail stock platforms ever again
don't sell because you won't be able to buy back. hold your positions but move cash out and open a second account.
from lurking today I decided on fidelity. they didn't go down and people seem to like them
also opening a webull, they did go down but why not diversify, it's free
if you want to move brokerages, don't necessarily sell. just because of tax implications. you can do it of course, just assess your situation carefully. You can transfer shares over to new brokerage for a fee, and sometimes the new broker will waive it for you. I think it's usually $50-125 depending on the brokerage if they don't cover it.
