Boiler Room: The Official Stock Market Discussion

[broller]

When you sell a stock you can't withdraw the funds until the transaction settles. It's a balance on a screen until T+2 days. When you buy that's new money and it has a deposit requirment the clearing house has to put up for T+2 days.

Think of it like the opposite of eBay. On eBay the seller pays the fees. In this case the transaction requirements are on the buyer side.

Since nobody on Robinhood could buy GME they didn't have to put up any collateral for purchasing transactions. Thus they could stay in business.

The real question that you should be asking is why the central clearing house raised the collateral requirment to 100% of the purchasing transaction amount.

With all the volatility and volume it's unreasonable for most brokers and clearing houses to front 100% of the cash for T+2 days every day on all those transactions when normally it's a fraction of that. Eventually it will suck up all their free cash sticking it in limbo until settlement.

Would it have made more sense to not allow buying AND selling?

 

[winb83]

Would it have made more sense to not allow buying AND selling?

Why would Robinhood stop you from selling the stock when somebody else's clearing house would have to deal with the buyer's settlement of funds and collateral? Nobody on Robinhood could buy the stock so it wasn't their problem. Their problem was every time somebody on Robinhood bought the stock Robinhood had to have 100% of the cash of that transaction tied up for 3 days.

 

[winb83]

If Melvin capital and the other short sellers failed it would have brought down the entire market so DTCC raised the collateral requirements to 100% to cause a domino effect and stop GME trading and let Melvin and them get out from under the pressure.

If Melvin fails they default on all their obligations.
The brokers have to step in and cover all Melvin's obligations.
The brokers can't afford that so the clearing houses have to step in for them.
The clearing houses can't afford that and at that point you sell a stock you get nada.
At that point I believe SIPC has to step in freeze everything and pay people out up to $500K of their holdings and the rest is lost because the insurance only goes that high.

So essentially the central clearing house stepped in and caused a chain reaction to save Melvin and other short sellers and thus the market. Imagine the suffrage if that didn't happen.

Like I said the government needs to insert themselves into this now. These WSB cats are playing with the detonator of a nuclear bomb.

 

[blotter]

The government already has stepped in.. they'll pay interest until they close their positions as required by law

 

[broller]

Why would Robinhood stop you from selling the stock when somebody else's clearing house would have to deal with the buyer's settlement of funds and collateral? Nobody on Robinhood could buy the stock so it wasn't their problem. Their problem was every time somebody on Robinhood bought the stock Robinhood had to have 100% of the cash of that transaction tied up for 3 days.

Oh ok. I don't fully understand all this so I was asking from a position of ignorance. Interesting

 

[The axe murderer]

 

[winb83]

Oh ok. I don't fully understand all this so I was asking from a position of ignorance. Interesting

Basically people are blaming Robinhood for something that came higher than them. This wasn't Robinhood's fault but they'll take the fall for it anyway. Even I jumped to conclusions because the optics of it didn't look good but Robinhood isn't a business meant to be scaled in the way it suddenly is being pushed. Brokers that used APEX clearing like SoFi and Webull also had to block those stocks but Robinhood is taking the brunt of the furry.

Your boroker is simply a middle man that tracks who owns what collects payments and hands things off to the clearing houses that handle the money and transactions in full. The central clearing house sets the rules and Robinhood has to abide by them. The central clearing house changed the rules in the middle of the game.

 

[broller]

Basically people are blaming Robinhood for something that came higher than them. This wasn't Robinhood's fault but they'll take the fall for it anyway. Even I jumped to conclusions because the optics of it didn't look good but Robinhood isn't a business meant to be scaled in the way it suddenly is being pushed. Brokers that used APEX clearing like SoFi and Webull also had to block those stocks but Robinhood is taking the brunt of the furry.

Your boroker is simply a middle man that tracks who owns what collects payments and hands things off to the clearing houses that handle the money and transactions in full. The central clearing house sets the rules and Robinhood has to abide by them. The central clearing house changed the rules in the middle of the game.

Reps for knowledge

 

[K-Deini]

Basically people are blaming Robinhood for something that came higher than them. This wasn't Robinhood's fault but they'll take the fall for it anyway. Even I jumped to conclusions because the optics of it didn't look good but Robinhood isn't a business meant to be scaled in the way it suddenly is being pushed. Brokers that used APEX clearing like SoFi and Webull also had to block those stocks but Robinhood is taking the brunt of the furry.

Your boroker is simply a middle man that tracks who owns what collects payments and hands things off to the clearing houses that handle the money and transactions in full. The central clearing house sets the rules and Robinhood has to abide by them. The central clearing house changed the rules in the middle of the game.

While I get your point, robinhood has no right to limit/not let people buy stocks that have absolutely nothing to do with gme. I mean Starbucks? Rolls royce? Jagx? Really? So people can't play low float stocks anymore? Its bullshyt.

The shares are priced at whatever the market says they are. Who are they to tell their clients "oh no its over valued" so we arent gonna let you buy? Technical plays are a thing, not every stock is meant to be held for 20 years so let them in on express if they wanna pay 13 a share despite the company not being worth that on paper. Someone is always gonna buy at the absolute top. It's a skill to read charts.

 

[The axe murderer]

Anyone on alibaba?

 

[DrunkenNovice]

If Melvin capital and the other short sellers failed it would have brought down the entire market so DTCC raised the collateral requirements to 100% to cause a domino effect and stop GME trading and let Melvin and them get out from under the pressure.

If Melvin fails they default on all their obligations.
The brokers have to step in and cover all Melvin's obligations.
The brokers can't afford that so the clearing houses have to step in for them.
The clearing houses can't afford that and at that point you sell a stock you get nada.
At that point I believe SIPC has to step in freeze everything and pay people out up to $500K of their holdings and the rest is lost because the insurance only goes that high.

So essentially the central clearing house stepped in and caused a chain reaction to save Melvin and other short sellers and thus the market. Imagine the suffrage if that didn't happen.

Like I said the government needs to insert themselves into this now. These WSB cats are playing with the detonator of a nuclear bomb.

I'd be less hard on RH if they were honest about what's happening.

The bottom line is that this is the HFs fault for over leveraging.

Anybody on the coli makes this trade, we take the L nobody swooping in and saving us and our family from financial ruin.

Based on what I'm reading the shorts are still over leveraged so as long as people hold the squeeze is coming.

You okay with them holding back the flood gates, by limiting buys and letting the HFs skate away?

While I get your point, robinhood has no right to limit/not let people buy stocks that have absolutely nothing to do with gme. I mean Starbucks? Rolls royce? Jagx? Really? So people can't play low float stocks anymore? Its bullshyt.

The shares are priced at whatever the market says they are. Who are they to tell their clients "oh no its over valued" so we arent gonna let you buy? Technical plays are a thing, not every stock is meant to be held for 20 years so let them in on express if they wanna pay 13 a share despite the company not being worth that on paper. Someone is always gonna buy at the absolute top. It's a skill to read charts.

My speculation is that were going to find out all of the company's who were overly short in gamestop have positions in these company's too.

If they can't cover their game losses they can't cover these either.

E]E]

 

[Rickdogg44]

Kid has paper hands his mom should ground him

 

[RickyGQ]

Basically people are blaming Robinhood for something that came higher than them. This wasn't Robinhood's fault but they'll take the fall for it anyway. Even I jumped to conclusions because the optics of it didn't look good but Robinhood isn't a business meant to be scaled in the way it suddenly is being pushed. Brokers that used APEX clearing like SoFi and Webull also had to block those stocks but Robinhood is taking the brunt of the furry.

Your boroker is simply a middle man that tracks who owns what collects payments and hands things off to the clearing houses that handle the money and transactions in full. The central clearing house sets the rules and Robinhood has to abide by them. The central clearing house changed the rules in the middle of the game.

Map out how bad things could get in your opinion. Cause this too big to fail shyt is how we constantly stay in this position economically. If the shoe was on the other foot (like in 08) the story was how irresponsible everyone was on both sides. Yet only one side got bailed out and they’ve been operating as business as usual. If the government refuses to punish these people for their greed I’m one hundred percent on board with WSB doing it.

 

[RickyGQ]

I'd be less hard on RH if they were honest about what's happening.

The bottom line is that this is the HFs fault for over leveraging.

Anybody on the coli makes this trade, we take the L nobody swooping in and saving us and our family from financial ruin.

Based on what I'm reading the shorts are still over leveraged so as long as people hold the squeeze is coming.

You okay with them holding back the flood gates, by limiting buys and letting the HFs skate away?



My speculation is that were going to find out all of the company's who were overly short in gamestop have positions in these company's too.

If they can't cover their game losses they can't cover these either.

How long could they realistically hold back the flood gates? Is there any scenario we’re they can just slowly wind the price down through laddering etc. or is that interest bill going to get too out of control?

 

[winb83]

Map out how bad things could get in your opinion. Cause this too big to fail shyt is how we constantly stay in this position economically. If the shoe was on the other foot (like in 08) the story was how irresponsible everyone was on both sides. Yet only one side got bailed out and they’ve been operating as business as usual. If the government refuses to punish these people for their greed I’m one hundred percent on board with WSB doing it.

If they bankrupt that hedge fund its likely gonna be a market collapse. The smaller brokerages these retail investors flock to will be the first to be wiped out and it will continue to trickle up. How far it goes is anyone's guess.

The ideal scenario is the retail investors take their win, cash out and punish the hedge fund but it survives. The retail investors get paid and in the post game analysis this short > float issue is fixed so it can't happen again.

I kinda wanna get in but waited too late. Don't know how much of the short vs float is still there and more importantly don't know how much more punishment the hedge fund can take before breaking. I suspect after Thursday the hedge fund is close to the edge but who knows?