I have two posts to present today
https://statswithsasa.blogspot.com/2021/01/why-isnt-robinhood-letting-me-trade.html
The summary of this is that Robinhood needs collateral to execute trades. And they need even more for volatile stocks.
- There’s one central securities depository called the Depository Trust Company (DTC).
- When you buy a stock on Robinhood they take the order to the DTC (usually through an intermediary called a clearinghouse). The DTC fills the order by finding a seller. The same thing happens when a hedge fund wants to buy securities, or a bank.
- But. There is associated risk with matching a buyer to a seller. To resolve this, there is something called the settlement cycle wherein there is a 2-day holding period where the buyer puts down a clearing fund deposit to collaterize the transaction. The transaction is guaranteed otherwise, though.
- After the two days, they get the deposit back.
this post is also saying that GME rocketed up to such an extent that we were close to the “squeeze”. If this happened idk if Robinhood would’ve been able to execute the trades if they lacked collateral. They’ve borrowed money today.
Also! Robinhood is taking credit from banks. Probably to handle a situation where GME goes insanely high
