[pokot0]

They are diverting the attention from their core problem: lack of transparency. I had a RH account for years and I didn't know it was a margin account (be sure: I did not signup for their "margin" service). All RH account are margin accounts even if they feel like cash accounts (but with T+0 settlement). This is what triggered their cash problems and what drives people crazy now: a user feels they gave them 100$ to buy 100$ of stocks, while what happens is that you get a loan and they buy some form of stock in their name while committing to you for the value of one stock. Robinhood is the facebook of finance. I moved my money out of them.

[astrange]

This has nothing to do with being a margin account, it's DTCC requirements related to wanting to buy the same stock everyone else at the same broker also wants to buy.

[pokot0]

My understanding is that it does. One example (there's more like the instant deposit): when you buy a stock with money from another sale not yet settled, you are basically using margin (a loan) and thus RH have cash requirements which are a % of the cost of the trade to be settled.

If you don't allow that, and only let people trade on a cash basis after the trades have been settled, you effectively have 100% of the money you need to settle the trades you closed.

[astrange]

Robinhood isn't allowed to use your money as collateral with DTCC, they must use their own. That's why it doesn't matter what kind of account you have.

Presumably their lack of trade fees hurts them here.

[pokot0]

That does not seem right unless there is something more hidden going on:

1) I issue on order and close a trade (using a broker as intermediary) 2) i have already provided the liquidity to settle that trade which is already in the broker's control 3) why would the broker need to provide more liquidity to guarantee this trade?

I have the feeling what you say is true but only because there is some finance magic going on that nobody needs but the finance system.

I have tried to look for more information about this DTCC requeriment but couldn't find much.

[kasey_junk]

Thats true but do any brokers do that in their apps? Neither my Vanguard nor my Fidelity UI make it obvious when i’m using settled vs non-settled funds.

[pokot0]

Yes, I never used any of those but it looks like they followed suit on the RH success and implemented something similar.

I had an Interactive Brokers account for years and there the distinction is very clear. A cash account just can't use money before they are settled (not different from many bank accounts show you two balance, one available the other one including pending transactions). To upgrade to a margin account you need to go through a rather long process of documents and signatures.