Keeping Customers Informed Through Market Volatility
blog.robinhood.com
blog.robinhood.com
For pointers to the rest of this massive story graph, see https://news.ycombinator.com/item?id=25933543.
Although HN's guidelines call for original sources (https://news.ycombinator.com/newsguidelines.html), it's generally better to avoid corporate press releases, especially on controversial topics where they tend to use bland, obscure language and bury the lede.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
Anyway, here's how we're doing the exact opposite. Our real customers have indicated that they want the following stocks to drop in price:
> $AAL, $AMC, $BB, $BBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG
"We’re committed to helping our customers navigate this uncertainty." makes much more sense when read a different way.
It reads like they got a list of positions to halt buying on from their investers.
I am even willing to give Robinhood the benefit of the doubt here, I know it feels like a conspiracy against retail investors, maybe it is, but the stock markets are an extremely complex system and we don't know all of Robinhood's own risks and factors going into this decision.
However, to weigh in without addressing the reasoning at all and only link to resources for people to "educate themselves" is so absurdly out of touch. Maybe they should write up some nice shiny content marketing for hedge fund managers to educate themselves about risk exposure.
Apple Inc sells me on a closed up device, which is fine.
Some Apple loyalists explain to me that I don't know what I want and that Apple Inc's ideology is the one true way.
Personally I have both an iPhone and an Android. Locked-down personal device and a customizable dev phone ¯\_(ツ)_/¯
But I find it particularly egregious because the major principle of RH was that it was on the side of the everyman rather than institutions.
The "major principle" is to make billions of dollars by owning the market, as it always seems to be with these silicon valley startups
https://www.marketwatch.com/story/large-gamestop-shareholder...
The optics for this seem poor. As for the smell, more of a stench. [Edit to add: poor and smelly for the retail trading platforms, that is.]
> In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR, and $TRVG.
> We fundamentally believe that everyone should have access to financial markets.
Bullshit.
Edit: if you have a Robinhood account, you should close it today.
If Robinhood is only allowing users to sell, can they choose to sell* (route the customer's sell order) to hedge funds that need to close out their short positions? Is that a thing they can do?
*EDIT: I realize that robinhood is passing along these orders to their market maker of choice - so my question really is that can the market maker here preferably sell to hedge funds looking to close their short positions?
So, many retail users of Robinhood and other brokerages couldn't buy, could only sell, while hedge funds and other institutions could continue to do what they want.
The rules should be the same for everyone, all of the time. If Jane StockPicker can't buy a security, then nobody else should be able to. I'm honestly furious about this. I made a small amount of money on GME and cashed out a couple days ago - the shorts were in a bad spot, too bad - so seeing how other retail investors are being screwed over here makes me feel sick.
Oh, and Melvin Capital (one of the short sellers who has been most screwed by taking a bad position) was bailed out by Citadel, and guess who one of Robinhood's investors is?
I'm not exaggerating when I say that there needs to be a congressional hearing and SEC investigation. You can say what you want about retail traders exchanging ideas on WSB, a public forum, but closing down trading for retail investors cost them a lot of money early and why were hedge funds able to short a stock so heavily?
Pending investigation, this is a serious problem and I think there is likely to be ongoing corruption here.
People are accusing Robinhood of manipulating the market on behalf of short funds, when WSB had literally been systematically stopping these funds out. Pot and kettle much?
People don't seem to understand what is protective about these actions. They aren't stopping anyone from closing positions - just from opening or adding to positions in the middle of a speculative mania. However you feel about that, it's exactly what retail brokers do, and always has been. Do you really think people buying into AMC right now are anything other than bag holders? The company is teetering on bankruptcy. The stock will quite possibly be worth $0 in the next year or so. Why should Robinhood let people blow up their accounts? How would the SEC and CFTC look upon that?
People are saying this is unacceptable and that they're going to move to a different broker. What broker? Virtually all of the retail brokers did this today.
I think Robinhood is a terrible broker that encourages overtrading and frames markets as being almost purely about price action, and if you want to close your account there and move to a better broker then I think that's great. But the reasons being given here are disconnected with reality.
Please, elaborate on the last time a broker or brokers did this when the stock was >140% shorted, let alone any other time they stopped retail investors from losing money on an overpriced stock.
This stinks of market manipulation, and you're a fool if you think it's for retail investor protection.
The WSB narrative is that it’s Melvin capital holding all of those short shares, and they want to stick it to them. But we don’t really know how many shares they actually hold, surely they aren’t 100% of the short interest. It will be very interesting once all this unwinds and we see who was holding what.
Considering that RH's business model has benefited from getting people excited about gambling on volatile stocks, I highly doubt they would be motivated to protect their customers from pump & dump.
While basically true, this isn't a reasonable excuse to shift blame from RH to their users.
Simply link the user to relevant news, as they have always done.
Temporary equitable relief seems justifiable here -- not a slam dunk but not outside the realm. Especially with the circumstantial evidence that RH is acting against its customers at the benefit of some of its owners.
And surely RH wasn't so dumb to tell Citadel or anyone about this move in advance. Wouldn't that be a serious insider trading claim if they opened any short positions after learning about the move but before it became public?
Almost certainly not. Quoting from a typical motion to deny a temporary injunction:
> As courts have repeatedly emphasized, an injunction represents an “extraordinary remedy” that is never awarded as a matter of right. See Winter v. Natural Res. Def. Council, 555 U.S. 7, 22 (2008). For a preliminary injunction to issue, the moving party has the burden of demonstrating all four of the following elements: (1) that it is likely to succeed on the merits; (2) that it is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in its favor; and (4) that an injunction serves the public interest. Winter, 555 U.S. at 20.
How is there any irreparable harm here? The worst that a customer would face is that they lose money--which is the most reparable harm.
I read a comment on reddit recently that is pertinent. The prey in Africa, ie. wildebeests and buffalo, are extremely powerful. But a handful of lions make them scatter out of fear. But if the prey were more organized, they could trample every single one of those predators to the point where they could kill them off. It's the power of organization that helps the prey defeat the predators. This is the exact same thing here. As long as a handful of billionaires tell the retail investor what to do, the billionaires will keep making money off of them.
Under Settings > Account Information > Deactivate Account you're just sent to a customer service email form. They say it takes 1-3 business days to process.
As a side note, you have to close out all of your positions and transfer out all of your money before you're allowed to close the account. This seems unusual to me from experiences with other brokers.
From my understanding the average retail broker will allow you to transfer you assets out to another brokerage. You can do this as part of closing your account.
While just transferring money out separately and keeping the account open longer isn't a big deal, there's tax and other financial implications to having to close your positions instead of transfer them. You'll have to realize capital gains. You'll also have multiple banking days in which the price could move up while your money is transferred to another brokerage to re-buy the shares.
I don't mean to recommend IB as opposed to other brokerages in the current moment, I pasted their link because I transferred an account into IB in this way several months ago so I know it works.
https://robinhood.com/us/en/support/articles/transfer-stocks...
I can't find a history that shows when they added this, but it appears they at least added transfers in a few years ago:
https://www.reddit.com/r/RobinHood/comments/6tre6o/transfer_...
Obviously I'll abstain from that for the foreseeable future.