If they had to take this action to save themselves, they have already betrayed the trust of their customers.
> Robinhood's entire product is built on a manipulative and predatory premise that making people feel comfortable "trading stocks", whether they fully understand what is happening under the hood, is a net positive.
I think that people generally understand that when they buy stocks, those stocks may go up or down. There is no guarantee of making money. You take your chances.
What they don't understand is that the brokerage can sell what they bought at the day's low price, because the account they funded with cold hard cash was termed a margin account. What they don't understand is that their brokerage might arbitrarily decide to prevent them from trading particular issues on a given day. What they don't understand is that, due to their broker's lack of financial prudence, that their broker may need to manipulate the market to their individual disadvantage "for the greater good".
I mean, I think you're kind of proving my point. Robinhood's entire product is so predatory that they shouldn't have had their users trust in the first place. But that's not really the question here?
The things you mention are things that people should probably understand. The fact that customers en-masse did not understand these things is *definitely Robinhood's fault*.
> the account they funded with cold hard cash was termed a margin account
Until it was actually funded and settled though, it is on margin (after which it's still a margin account, it's just covered, and you can not use margin). This is again something that customers should be educated on. Robinhood could have made the user wait 2-3 days (while waiting for the funds to settle) before they could buy any stock. Robinhood prioritized user engagement. Robinhood could make users wait 2-3 days between selling a stock and buying a new one. Again, Robinhood chose to prioritize user engagement instead.
> due to the broker's lack of financial prudence
Robinhood was not even close to the only broker who was impacted by this, so can we stop pretending that they were?
> may need to manipulate the market to their individual disadvantage
Again, I disagree that Robinhood following the actual policy of the accounts the users were using, in order to be compliant with financial regulations, is "manipulating the market".
I think that the IB CEO really fucked up there by not, and I apologize if this sounds offensive, dumbing his explanation down more and being a bit more clear. As someone who spends a lot of time as an expert in a topic, it is very difficult to have a good calibration about how intracate topics in your domain will be understood by outsiders.
> the financial viability of intermediaries and the clearing house
These are not the "big players" that WSB seems to think they are screweing. IB doesn't give a shit about a couple of hedge funds (who most likely are not in the game any more anyways). They likely don't care much about any market makers who have found themselves in a bind (I doubt many of these exist though).
Intermediaries and clearing houses are the people who's job it is to ensure smooth operations in the market and make sure that trades eventually settle. Ie, if I sell you something (lets say, 1 GME) for $400, that doesn't happen instantaneously, even though we like to pretend it does. If GME goes to $20, it's possible that the person who bought the thing from me just... never shows up with that $400 (maybe their broker went insolvent, who knows, it doesn't really matter). But it's still owed to me, and now someone in the middle is on the hook. And really, this is a correlated risk. If it happens with 1 share of GME, it's much more likely to happen for millions of GME. So now your clearing house is out hundreds of millions -> billions of dollars[0], and are left holding a couple M in GME stock that they can't sell.
There is a difference between trying to protect a specific player or group of players in the game, and making an attempt to protect the infrastructure that makes the game possible.
[0] And if the clearing house can't handle this, then it falls to your broker, who also probably can't handle it[1]. So then if you don't get the money for what you sold, any sort of faith in the financial system evaporates. Which triggers a bank run. Which triggers a financial crisis way beyond anything seen in 2008 because all of the infrastructure was totally destroyed and now we have to start from scratch.
[1] This is especially true in the case of Robinhood, who I am certain (without evidence) has an extremely disproprotional and correlated exposure to specific high risk tickers (GME, AMC, BB, NAKD, etc)
> Robinhood's entire product is built on a manipulative and predatory premise that making people feel comfortable "trading stocks", whether they fully understand what is happening under the hood, is a net positive.
I think that people generally understand that when they buy stocks, those stocks may go up or down. There is no guarantee of making money. You take your chances.
What they don't understand is that the brokerage can sell what they bought at the day's low price, because the account they funded with cold hard cash was termed a margin account. What they don't understand is that their brokerage might arbitrarily decide to prevent them from trading particular issues on a given day. What they don't understand is that, due to their broker's lack of financial prudence, that their broker may need to manipulate the market to their individual disadvantage "for the greater good".