[maxerickson]

Who knows how aware they were of it, but this didn't happen just this week or just because of a meme. They built the business to operate in a certain way and then let it grow without ensuring they had the capital reserves to sustain those operations.

[swampthing]

"Sustain" is not really an accurate word here. The underlying assumptions behind Robinhood's operations changed suddenly, drastically, and unexpectedly. They were notified at 3am Thursday that they needed to put down a $3B deposit, which they have subsequently needed to raise from investors in a matter of days. So it's really not clear that all of this is because they weren't prepared to sustain their operations.

[maxerickson]

Getting the underlying assumptions wrong or at least completely out of step with day to day operations is what I am getting at. It didn't happen overnight that they had extended customers more margin than they were able to secure.

[swampthing]

As I understand it, the deposit requirements imposed on Robinhood were not because of the margin accounts.

[rokobobo]

That's correct. The DTCC requires brokers to post collateral until settlement of the trades, and even fully funded customer accounts accounts with <100% leverage can not be touched, the customer money cannot be used as collateral.

On top of that, my opinion of the DTCC (I worked at a self-clearing firm for a while, so we had to interact with them) is that they are intentionally dumb and conservative when it comes to asking for collateral. And until now, this hasn't really drawn much attention, mostly because the rest of the firms out there are a lot better capitalized than RH. My guess for why they're better capitalized is just that they're larger (in AUM), older, and operate in more markets.

I don't like RH, but I wouldn't blame them for getting blindsided by the DTCC to the amount that they did. Props to them for being able to raise the cash, I hope it wasn't all equity, since they won't need that cash in a couple of months. I saw recently that they had $12B in AUM--it doesn't make sense to run with $3B in operating capital.

[omosubi]

The founders certainly deserve criticism, but plenty of other brokers are doing the same thing, no? is this not a black swan event?

[my_usernam3]

Founders AND who ever does their communication. Their email about the volatility of stocks was so belittling. Even had a hyper link of "economics 101".

From what I understand now, them having to halt buys on $GME wasn't really their call. However, given the tone of their emails, I can only blame them for the theories that they did it on behalf of HF.

[omosubi]

yeah I agree completely on the communication front.

it just surprises me that the HN crowd preaches the gospel of growth at any cost and then when it blows up in robinhood's face everyone runs here to say that they should have known. seems like a lot of after-the-fact rationalization to me.