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Comment by bszupnick | Hacker News Reader

My understanding is that Robinhood didn't actually block these purchases but rather the service they use to buy/sell stocks blocked it called Citadel

So it's not Robinhood, persay, but rather Citadel.

Why did Citadel block purchasing of GME stock? Because Citadel just invested 2 billion dollars in Melvin Capital Management; one of the hedge funds that has a lot to lose as long as the GME stocks keep going up.

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That's the rumor but there's no evidence to back it up. Melvin could've closed their GME positions days ago, in which case Citadel wouldn't be on the hook for any further price changes.

I think this is possible, but do we know for a fact this is the case? Melvin claims they already got out of the GME trade. They could be lying, but they would open themselves to a lawsuit from investors if they were.

I'm not sure if Citadel can just refuse to purchase GME (RH could just go elsewhere), but maybe they said they wouldn't pay RH anymore for order flow unless they blocked it. But do we know that Citadel did this? I've only heard speculation to that effect.

RH could not just go elsewhere; moreover, they absolutely could not go elsewhere today. Handling order flow for automated transactions isn't something you can find on short notice.

I think they can go elsewhere. If Citadel can't beat national best offer, they are supposed to go with the national best offer.

https://en.wikipedia.org/wiki/National_best_bid_and_offer

They don't do this. See https://nypost.com/2020/12/17/sec-slaps-robinhood-app-with-6... .

But they can. That's why they got into legal trouble with the SEC. See page 4 on the actual SEC document on the case, the section called "Best Execution": https://www.sec.gov/litigation/admin/2020/33-10906.pdf

Melvin could have "gotten out" by selling their position to Citadel for all we know.

The number of shares short is still the same as a week ago, about 70 million.

citadel only handles like 10% of their order flow. the rest is other companies. including Apex clearing which also handles it for Webull and other platforms that halted trading

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