The GameStop stock fiasco transparently shows you who runs things

I heard the Giuliani-like hedge fund owner guy asking us all to think of the pensioners. Yeah, right, hedge funds are managing pension funds.

I would hope, and I imagine it is so, that this sort of activity will take place every day until it doesn't for whatever reason. And that reason better be a good one!

Primo Numero Uno wrote:

The Unkle wrote:

She's taking money from Wall Street when she is not sleeping

So this interview is worth a watch. I find myself actually gaining some level of respect for Cuomo which I'm sure will soon be gone the next moment he brings his brother on. But he actually appears to know what he's talking about and doesn't let the guy off. I don't think anyone can now say Robinhood is acting in favor of individual investors and I hope people start leaving the platform in droves.

https://www.youtube.com/watch?v=Jv23DBFUUtA&ab_channel=KingBallaTV

It's really not that complicated. DTCC has margin requirements. When a stock reaches volatility like GME, the clearinghouse ups the margin requirement to 100% and forces brokers like Robinhood and Webull to cover the entire cost of the transaction. This is because these transactions are usually T+2, so they take a couple of days to settle.

So, "why can't I buy" - because Robinhood essentially experienced a reverse run on the bank. Everyone across the globe wanted in on buying GME, which was a high volatility stock that required 100% coverage by the company that processes their order flow (in this case, Apex). Robinhood didn't have enough money on hand to cover new buy orders. Even if they allowed it, Apex just straight up wouldn't have processed it.

"Why could I sell though" - Because you don't take out a fvcking loan to sell something, you out a loan to buy it.

"This is definitely market manipulation" - Not even close. There may be price fixing going on, but this is just normal business.

"But I heard hedge funds buy and sell back and forth between each other to manipulate the market!" - Yes, and lightening comes from a guy named Zeus who also likes to rape people while disguised as a goose.

You are incredibly dumb, mr. racket.

Restricting solely buy orders is de facto market manipulation, who cares the rationale. Markets need minimal barriers to entry than don't change willy-nilly at random times. Just suspend all trading if your floundering brokerage cannot deal with a surge in orders. By the way, funds definitely trade to each other to move markets all the time.

You can buy on margin. But they stopped all buying, not just those on margin. Yet as soon as Melvin capital had covered its short position you could resume purchasing. What a coincidence. And one of the biggest owners in Robin hood was part of the $3 Billion bailout of Melvin.

Also, there are reports that Robinhood sold some of its user's shares without their permission.

I don't think you need to be Alex Jones in order to think up some conspiracy theories here.

i bet any of the client's "shares sold without their permission" were margin calls, for which there are very specific and exact rules and circumstances in which they shall occur. I cannot fathom that a brokerage would sell someone's holdings otherwise. If there was, they should sue the pants off them.

So price fixing is not market manipulation...

Hmmm.. as an economist I am experiencing cognitive dissonance..

A bit like I when I read that owning shares doesn't make you a (fractional ) owner..

Might I ask at what percentage of share owning you become an owner?

50,01% 100% Never?

I must have missed something in school...

If i can explain, Racket is not saying that.

He is saying that separate from what is going on here at Robinhood, there may be price fixing happening (or they may not be), but the restricting of the shares is not market manipulation, and is normal for brokerages, especially for small brokerages like Robinhood without large cash reserves.

I know at my brokerage , there are restrictions about how much margin a client can use, and some stocks have a higher degree of margin allowable than other riskier stocks, and there are waiting periods in which trades need to clear before money is available to trade with again, especially in non-margin accounts. Stuff like that is not unusual.

Yes! Thank you. What I meant was that there might be some price fixing going and that would indeed be illegal. But restricting buy orders due to volatility is not market manipulation. It happens sometimes on futures where brokers will require immediate cash settlement when the underlying is highly volatile (happens with nat gas and oil from time to time).

These are literally DTCC rules. It takes like 5 minutes of googling if you don't believe me.

No, you can't in this case. That's the entire point. When you try to buy something legendarily volatile like GME the broker has to basically insurance it 100%. Basically Robinhood has to match each GME buy 1:1 with their own cash reserve.

What happens when everyone suddenly wants to buy GME shares? Robinhood suddenly needs a lot more cash on hand to insurance. They didn't have the cash on hand to satisfy their clearinghouse, so they couldn't fulfill buy orders.

I get that.

I totally agree that there isn't neccecarily anything illegal going in in this case.

It probably/hopefully isn't.

As Cuomo says, we shall see..

Claiming price fixing is not a form of market manipulation is a contradiction in terms though.

Price fixing might even be legal in some cases, (usually not), but by definition you are manipulating the market.

Investopedia:

Price rigging is a form of market manipulation. As a term, "price rigging" is most commonly used in British English, while "price fixing" is more common in North America.

Just as this doesn't make sense:

Correct answer:

Shareholders are the legal owners of a corporation, but that does not give them the right to be involved in the day-to-day management of the company. Shareholders have the right to vote for members of the board of directors. The board runs the company for the benefit of shareholders. If a single shareholder owns enough shares, he can control appointments to the board or even appoint himself to the board.

Sure, it's a sovereign legal entity, but cooperations very much have owners..

If the stock market were honest, any schmoe could purchase one share of any NYSE traded stock - no intermediaries needed. Robinhood is as much a scam as Fidelity, Schwab, any hedge fund , any broker, the Federal Reserve, the US Treasury, etc.

It is all set up and manipulated to F the little guy.

DanM wrote:

If the stock market were honest, any schmoe could purchase one share of any NYSE traded stock - no intermediaries needed. Robinhood is as much a scam as Fidelity, Schwab, any hedge fund , any broker, the Federal Reserve, the US Treasury, etc.

It is all set up and manipulated to F the little guy.

What you describe is perfectly doable, and even has a name. It is called a Direct Stock Purchase Plans (DSPP) and for many, but not all, publicly traded companies you can set up an account and buy shares directly without an intermediary like a broker. In the old days, it was a lot more common and perhaps you've heard of stock certificates (piece of paper proving ownership of a certain number of shares of a company) floating around (hint: check grandma's attic).

Sounds like a cool thing to do, the DSPP, and it sounds like it might be right up your ally.

You might want to get a fireproof safe while you're at it.

*alley, not ally

seattle prattle wrote:

Primo Numero Uno wrote:

You can buy on margin. But they stopped all buying, not just those on margin. Yet as soon as Melvin capital had covered its short position you could resume purchasing. What a coincidence. And one of the biggest owners in Robin hood was part of the $3 Billion bailout of Melvin.

Also, there are reports that Robinhood sold some of its user's shares without their permission.

I don't think you need to be Alex Jones in order to think up some conspiracy theories here.

i bet any of the client's "shares sold without their permission" were margin calls, for which there are very specific and exact rules and circumstances in which they shall occur. I cannot fathom that a brokerage would sell someone's holdings otherwise. If there was, they should sue the pants off them.

Whatever the case, this looks terrible for Robinhood - the public outrage is infuriating. People are leaving the platform in droves - too many places to trade commission-free now. They've got to be reconsidering the upcoming IPO.

hmmmj wrote:

seattle prattle wrote:

i bet any of the client's "shares sold without their permission" were margin calls, for which there are very specific and exact rules and circumstances in which they shall occur. I cannot fathom that a brokerage would sell someone's holdings otherwise. If there was, they should sue the pants off them.

Whatever the case, this looks terrible for Robinhood - the public outrage is infuriating. People are leaving the platform in droves - too many places to trade commission-free now. They've got to be reconsidering the upcoming IPO.

Granted, it doesn't "look" good. But stuff like this is not all that uncommon.

I've seen other brokers not allow trading in things like certain cannabis stocks, and trading in certain "penny stocks" may come with more restrictive requirements, if allowed at all. Stuff like that is expected, frankly.

From everything I've read, Robinhood had the right to do what they did. No, it looks really bad, but like a lot of things, when you dig beneath the surface, the story may not be as simple as it appears.

And these discount brokers, they're not your grandmother's town banker. You kind of get what you pay for, and sh!t like customer loyalty or user ratings are not what they might be to your full service broker with a reputation to build.

Dr. Racket wrote:

It's really not that complicated. DTCC has margin requirements. When a stock reaches volatility like GME, the clearinghouse ups the margin requirement to 100% and forces brokers like Robinhood and Webull to cover the entire cost of the transaction. This is because these transactions are usually T+2, so they take a couple of days to settle.

So, "why can't I buy" - because Robinhood essentially experienced a reverse run on the bank. Everyone across the globe wanted in on buying GME, which was a high volatility stock that required 100% coverage by the company that processes their order flow (in this case, Apex). Robinhood didn't have enough money on hand to cover new buy orders.

Who is trying to buy on the margin? I've seen RH offer a little extra "buying power" but generally I just give them cash and then tell them what to buy with it.

If I give them $400, they better not be telling me they can't buy a stock because they don't have the money! They loaned it to someone else to buy on the margin? Fine excuse that is for blocking me. Screw 'em.

Great comments by seattle prattle and a couple others who know what they're talking about. One of the reasons I keep coming back to LetsRun is that some posts are actually informative if you can manage to wade through all the trolls and mature to get to them.

Regardless of the eventual legal issues, Robinhood will not survive this without massively reinventing itself.

I opened a small Robinhood account back in March/April to see why so many young people were flooding to the company. It's more like a game than an investing platform, although it does succeed in making trading very easy, especially compared to a robust platform like TD Ameritrade's thinkorswim platform.

I also joined the Robin Hood's Stock Market Watchlist on Facebook. If you have even 15 minutes of education about stock market investing, it's hilarious. It's also sad, but hey, those people making mistakes with $20 will learn a valuable lesson that might help them invest in the future. I wish I had only lost $20... or $200... or $20,000... when I was learning how to manage my portfolio.

fisky wrote:

Great comments by seattle prattle and a couple others who know what they're talking about. One of the reasons I keep coming back to LetsRun is that some posts are actually informative if you can manage to wade through all the trolls and *mature* to get to them.

Ha! Spell check! *Mature* should be manure.