OT: wallstreetbets vs wall street

[chicagoballer]

Watch on YouTube

[dougthonus]

Here's another CNBC article for you:https://www.cnbc.com/2021/01/30/robinhood-says-restrictions-on-gamestop-due-to-tenfold-increase-in-deposit-requirements.html

“It was not because we wanted to stop people from buying these stocks,” Robinhood said in a blog post published late Friday.

“We did this because the required amount we had to deposit with the clearinghouse was so large — with individual volatile securities accounting for hundreds of millions of dollars in deposit requirements — that we had to take steps to limit buying in those volatile securities to ensure we could comfortably meet our requirements,” it continued.

And self-clearing isn't the same thing as I'm discussing.

My bad, I was mistaking clearing house (DTCC) with a clearing firm (of which they don't have one).

It remains unclear to me why they couldn't simply disallow margin trades on GME though, those would be fully funded. I can understand why RobinHood wouldn't want to allow people to trade GME on margin with the risk that customers would lose big and RH would get caught holding the bag.

[patagonia]

The CH requires capital for all trades, not just those on margin.

[chicagoballer]

The CH requires capital for all trades, not just those on margin.

But then RH said it was not a problem about liquidity/cash on hand. So either they lied about having money on hand or they lied about having another motive? Even if clearinghouse is demanding more capital per GME, non-margin trade, RH or other brokerages would technically not lose any money on 100% backed trades. Assuming they have liquidity. correct?

[patagonia]

No financial firm admits they have a cash problem, even if they have $3 in the bank.

It can be true that they couldn't allow more buy orders and they were fine on cash because they had lines of credit to tap.

[chicagoballer]

No financial firm admits they have a cash problem, even if they have $3 in the bank.

It can be true that they couldn't allow more buy orders and they were fine on cash because they had lines of credit to tap.

Hence, the mistrust. People wont believe the explanations if you are not transparent. And RH had poor communication on top of that. And we didnt discuss the other brokerages who halted trading as well. Did they all not have enough cash? And they didnt prep for it the day before?

When you are dealing with billions of dollars and companies/hedge funds who are reputed to be shady, people will assume something fishy is going on. Because average people have been screwed by the system over and over.

I do want to say you correcting me prompted me to read more, and I learned more about how the system works.

[dougthonus]

The CH requires capital for all trades, not just those on margin.

The customer deposits should be put in escrow for all the non margin trades, no? It is only the margin trades where the escrow account requires more money than the customer has already pledged. If the customer has already pledged XYZ then that money is accounted for. RH should only be covering the part that they are loaning the customer on margin.

[superdave]

I've been following this closely. A few friends I know are pretty deep in to Reddit investment forums (not just /WSB) and have done quite well this year. Its the last stages of a 10+ long bull market paired with cheap monetary policy plus technology. Crypto confuses me b/c I studied tradition Econ (thank you U of I!!) but some friends who were early adopters in ETH have basically setup their future retirement. What is interesting here is that Redditers are essentially acting like a public hedge fund- exchanging info, amassing purchases, while fading larger pocketed institutions. Its glorious and also kinda scary at the same time. Especially as a passive investor type who mainly invests in ETF and index funds.

With 3.5T in cash sitting in US banks (at basically zero percent) and another stimulus check coming, buckle up. 2021 is going to be a wild ride for stocks