Think of it like a pyramid: the clearinghouse sits at the top, the brokers are in the middle, and the rest of us dirty peasants sit at the bottom where we belong.
The clearinghouse covers 95% of trades on Wall Street. So the clearinghouse issued a decree: "we are no longer able to support opening positions for GME, AMC, and KOSS."
Since most brokers use this clearinghouse, that means almost all brokers were forced to prevent customers from buying GME.
Everyone: pikachu face
The brokers have no choice. https://youtu.be/4RS4JIEVyXM?t=96
This sounds like nonsense to me. After all the job of the Clearing House is to make sure the cash is balanced correctly after the transactions. Or realistically speaking a never ending chain of transactions, thus correctly moving the cash behind back and forth in time. It's the secret of the clearing house why they have no problems that their institutional customers have single digit equity ratios (speaking about Basel II/III/...) all the time while most individuals deal with 100% equity ratio. Maybe the more reasonable explanation is that they were overwhelmed by so many small transactions.
That’s a perfect storm for nonpayment issues.
Well, if that's what people want. At that point in time it's about buying, not selling.
> and being bought in a large part by brand new retail
> investors who had just opened accounts.
> That’s a perfect storm for nonpayment issues.
Ok but they need to go through some sort of payment processing that checks the credit rating. Even if the credit card is close to the limit, we are probably talking about amounts smaller than 1000 $. Anyone able to visit the Reddit homepage and installing the Robinhood app should have that amount of cash in hardware. FWIW, normal eCommerce payment processors deal with nonpayment issues in the sub percent range.
So the DTCC has to worry about Robinhood, and Robinhood has to worry about their clients.
What is the relationship between the NYSE and DTC?