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by CydeWeys 1929 days ago
No brokerage is under any obligation to use their own funds as collateral in order to allow you to trade using unsettled funds or margin on highly volatile securities. A brokerage could be left holding a huge bag here if they put up their own funds to allow someone to buy GME, then the incoming unsettled funds from the customer bounce, and now the brokerage is left holding shares of GME worth $100 or whatever and they've incurred a huge loss.

You are NOT entitled to trading with a brokerage's funds as if they were your own.
1 comments
minsc__and__boo 1929 days ago
For margin trading, sure, but IIRC Robinhood halted all trading, even with your own money.

I think it has more to do with Robinhood giving away free trading, while the trades themselves have a non-zero variable cost to Robinhood. Since their revenue comes from selling insightful user trade data, a run on GME isn't insightful and had diminishing returns (my hypothesis anyways).

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erik_seaberg 1929 days ago
I’ve seen claims that having settled funds doesn’t matter, that the brokerage must keep collateral at the clearinghouse and they cannot use customer’s money to do it: https://news.ycombinator.com/item?id=25981493. The clearinghouse suddenly demanded a lot more collateral for that stock (because its eventual value is so uncertain) and a lot of brokers couldn’t or didn’t want to meet it.

They also didn’t want to say anything that might give an impression of being insolvent (especially when it isn’t true).

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