[BigBubbleButt]

> The GME situation got into a "sold out" situation. Much like how a toy-store runs out of Furbies back in the 90s, Robinhood ran out of GME-stock to sell to its customers.

This is a poor analogy. So long as there is a large enough float, which is a requirement to be listed on some exchanges, there should always be stock to buy and sell.

Don't compare it to something else that's commonplace and misleading. I am aware of the margin requirements and what happened with DTCC and am purposefully avoiding that more complicated subject only to point out how much I dislike your analogy.

[dragontamer]

> This is a poor analogy. So long as there is a large enough float, which is a requirement to be listed on some exchanges, there should always be stock to buy and sell.

Robinhood didn't have the money / collateral to obtain any more shares.

As far as Robinhood is concerned, GME was sold out for that time period. It really is actually that simple. No shares for Robinhood meaning no new shares for Robinhood customers.

In 2 days time, Robinhood T+2 settlements occurred and everything cleared up. Except the meme-stock buyers already lost interest because they had the attention span of gnats.

> how much I dislike your analogy.

Care to explain why its a bad analogy? The only meaningful difference I can think of is the whole T+2 settlement thing (but that's very much like "The next delivery of Furbies is in 2 days", yall can buy Furbies then). Perhaps this is stretching the analogy too far now but... the fundamental situation seems to be solid.

[kodah]

Y'all are actually arguing two different things. You're saying it's unavoidable and understandable for a company of Robinhoods size. Let's also avoid calling retail stock buyers "meme-stock buyers", now a year removed from that whole event it's plain to see that many of those people were acting altruistically.

The other poster is saying outcomes matter more and that the perception and promises you make to users matter.

Both valid points, but Robinhood losing their ass to perception, their direct fault or being the victim of a crappy system, is just the way the cookie crumbles. There is a play here which Robinhood hasn't considered: own up to it and build a plan to be reliable to retail investors and use realistic messaging while doing so. Their CEO is apologized but they've failed to unveil how they intend to be an ally to retail investors in the future: https://news.yahoo.com/robinhood-ceo-apologizes-restricting-...

[BigBubbleButt]

I am aware of that, and that is Robinhood being unable to manage their collateral requirements in order to continue trading GME. There were other brokers that managed to do it just fine. Robinhood messed up here. Really I think the DTCC is who messed up, but that's a much larger discussion.

The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell. Retail traders don't think of trying different brokers for availability like you might trying different toy stores. The point of having a large enough float is so that you can continue trading the stock. Market makers exist to provide liquidity. It's supposed to keep trading, and only some brokers like Robinhood were unable to manage this.

[dragontamer]

Personally speaking, I blame the customers.

They are paying for $0 trades to a very, very small trading firm with well-known trade-execution problems months / years before the GME instance. No serious trader actually trusted Robinhood, and nobody was surprised when Robinhood's trading ability was shown to be so weak in that timeframe.

There were many respectable banks with much stronger finances who were able to support the GME-rush. It was just the small guys without much $$$$ who failed, like Robinhood.

--------

If you did a bit of research, you would have found Interactive Brokers (for instance). I'm not a customer of IB, but they have plenty of online material for what exactly you're paying for.

And that is, trade execution. It matters, especially in times of trouble / times of risk. The stronger the bank, the better their ability to continue operations during weird times.

> The reason I dislike the analogy is because brokers aren't (typically) supposed to run out of shares to buy and sell.

Except they do. All the time when bubbles pop and other crisis form. Good luck selling stocks during the crash of (whatever). When the stock market is crashing, there's no buyers, so the price keeps dropping and dropping.

Without any buyers, you will never be matched and you'll never be able to sell until its too late. Understanding these mechanics is very important to any market participant.

"Flash crashes" with stop-loss orders are particularly lulzy. Your stock is automatically put up for a sale on a flash-crash. There's no buyers, so you sell the stock at a grossly lower price than expected (when some savvy buyer finally decides the price is low enough). That's when you're matched up. By the time you look at the stock, the "flash crash" is over, your stock is randomly sold and at a bad price.

Etc. etc. Its annoying, but these sorts of events happen all the time, and its important to remember the mechanics of buying/selling stocks at all times when trading.

[chrismcb]

Wait... What? You are blaming customers for being... customers? You have repeated multiple times that Robinhood essentially ran out of money. But then finally you mentioned why people are leaving... Because they don't trust Robinhood. It doesn't matter why they stopped trading, it simply matters that they did.

[jjeaff]

The customers aren't to blame, but it's a little unfair to blame Robin Hood for what amounted to a black swan event. One of the main reasons they ran out of capital in this case was not because of the volume of trading, it was because of the one sidedness of the trades (lots of buys) and all being on one stock. RH's margin requirements skyrocketed because so much of their liability was concentrated in one stock. Risk (and this margin requirements) go up the more the risk is focused into a single point of failure.

[dragontamer]

They shouldn't have trusted Robinhood to begin with.

https://www.sec.gov/news/press-release/2020-321

Robinhood was all kinds of shady long before the GME events.

[BigBubbleButt]

> Except they do. All the time when bubbles pop and other crisis form.

Market halts are completely different from what we are discussing. And one of the purposes of market makers is to provide liquidity in extreme cases as you are describing (I'm not saying it works perfectly, but it's one of their reasons for existing).

Anyway, I feel like we aren't quite getting our points across to each other. Not blaming you just saying let's agree to disagree.

[dragontamer]

> Market halts are completely different from what we are discussing

I'm not talking about market halts. I'm saying when all the buy-orders vanish from the marketplace, it results in a "flash crash". Hitting the "sell" button will do really weird things at these times.

After all, a "sell" can only mechanically happen if the market pairs you up with a "buy". That's just how the stock market works. If there's no buyers, you can't sell, even if you're hitting the "sell" button.

[BigBubbleButt]

Then what you're saying makes even less sense. Because what happened with Robinhood is they turned off the buy button, but still people could sell (which means there were buyers from other brokers or outside retail).

I realize every buy needs a sell. I also said "typically" and considering there obviously were buyers since you could still sell, everything you're saying is irrelevant to the discussion we had about GME in 2021.

Anyway, we're not getting anywhere. You can respond but I'm not responding anymore.

[Denvercoder9]

IB might not be the best example, as they also restricted GME option trading to liquidation only.

[dragontamer]

> option trading

Options are extremely different than the underlying stock.

Options is everything we discussed except with way less volume and way more margin requirements.

It doesn't seem like IB restricted GME-stock, only options-on-GME-stock, which is a very, very different instrument.

------

That being said, if I were a paying customer to IB and was hoping for good options-trades during that time, I guess I would have been pissed off. Still though, its a far more understandable issue to have a derivative-trade fall through rather than the underlying stock-trade fall through.

[Denvercoder9]

Yes, but the end result was still the same: customers couldn't trade what they wanted to, because the broker couldn't or didn't satisfy their collateral requirements.

[MrMan]

I think many brokers had these restrictions, so what is the point of this discussion

[jallen_dot_dev]

> There were other brokers that managed to do it just fine.

If Robinhood is taking a net inflow of shares, then logically other brokers must have a net outflow. So of course there would be other brokers with shares to buy.

One reason you could go to some other broker and buy GME is because that broker had many other customers looking to offload an overhyped stock. You couldn't buy on Robinhood because their customer base was mostly retail traders looking only to buy.

[Denvercoder9]

It's not that bad of an analogy. When a toy store runs out of Furbies, that doesn't mean there's no Furbies available on the world market anymore. It just means that at that specific toy store you can't get any Furbies anymore. When they get resupplied (posted additional collateral, in the case of Robin Hood), you can buy from them again.

[bredren]

Unrelated, but when Furbies came out, my brother and I waited in line for some and we both got one.

I had a furry white one and it was awesome.