I don't get blocking buy on certain stocks for "liquidity requirements". When buying on Robinhood, I need to first wire them my money. Can't they use that cash to fund my own buys?
The entire thing is best viewed as a super-short-term credit basis between all participants. At no point is the financial system in a state of absolute settlement. It is continual flux. Best you can get is scoped, relative settlement with assumptions. DTCC is the most fundamental source of truth, but this is after the fact and not very useful when one needs to make an immediate decision.
Yeah, but settlement happens EOD not on each transaction (as the orders fill). As long as we're talking about trades not on margin then Robinhood should already have the requisite assets for clearing readily available.
From what little I've read on the matter if they're offering you the ability to trade instantly when you send them money, they are allowing you to trade on margin.
That is to say that the money you've sent them won't actually settle in their account until several days later (depending on their clearing house). Therefore they're actually taking on a loan to allow you to use their services "instantly" - this is entirely transparent to the user.
Doesn't Robinhood allow you to buy stocks before the transfer finishes? So you can buy right away rather than waiting 3+ days. They call it Robinhood Instant.
They initiate a cash transfer via ACH, which takes a few days (absurd). In the meantime they honor the amount you decided to withdraw. It's a bookie floating a new gambler.
I opened an account two days ago to buy one share of GME for fun, then they blocked my ability to, but I still can't take my money out -- despite my bank notifying me that it's been withdrawn. This is because they probably process all the ACH records in a nightly job on weekdays. It'll be Monday before the money can begin its 3 day trip back to my bank.
So much of this process is unnecessary but what are you going to do? They (the entrenched financial system) have you by the throat.
Is this how people really think the markets work? If it is, it's no wonder that a lot of retail investors will be taken to the cleaners. What you just suggested is so illegal that no professional trader would have had the nerve to even mention it.
I think it might be helpful if RH had some kind of trading tutorial that maybe went through the mechanics and rules so that people joining would have a better understanding. What I've been reading the last few days betrays a massive lack of understanding about how a lot of this works.
> What you just suggested is so illegal that no professional trader would have had the nerve to even mention it.
Why is it illegal?
At least from the outside, it doesn’t make sense. If I transfer money to RH to buy stocks, I expect that money to be used to buy the stock, when I buy the stock, whatever that process might entail. So if my purchase requires collateral because settlement happens later, then I would expect for my money to be used as collateral for my purchase and then be fully paid out once settlement occurs. Why wouldn’t it be that way? (if I’m not borrowing money from anyone).
