Which is why they shouldn’t have restricted it at all. Volatility is the name of the game. If they can only trade equities with predictable prices they are probably in the wrong business.
And where the price is now is arguably the direct result of their actions. The price would be higher if they didn’t restrict buys while allowing hedge funds to gobble up the panicked sells from retail investors.
Judging by the sentiment on WSB it seems that this is far from over. Hedge funds have overshorted several stocks and those guys have figured out that if they simply buy up a large portion of the available stock they can name their price when the hedge funds need to buy to cover the shorts. It is of course impossible to quantify but casually looking at the posts, nobody is talking about selling GME at all, and every dip in price just means more retail investors can afford to buy into this. It’s a bubble for sure but it seems a lot of the users there are mostly interested in using it as a weapon against hedge funds more so than making money off it.
They had no choice but to restrict buys. They're subject to clearing collateral requirements based in large part on stock volatility. People keep saying RH should have just left it all alone, but if they had, they'd have been insolvent.
Ok but the idea that you can’t buy stock at a time when it is most advantageous to buy it seems like a flaw in the system. So what is the solution then?
Using brokerages that are sufficiently capitalized to clear the trades you want to make. You might have to pay fees to do that. Having other people assume credit risks on your behalf usually costs some money.
The money you put up to buy a stock is your money. SEC rules require that it be kept segregated. It is at no point available for your brokerage to post as collateral for its own risks.
DTCC protects brokerages from each other. Brokerages post collateral to insure each other in case a brokerage fails, and the customers, at other brokerages, on the other sides of the trades from the failed broker, need to be made whole. The clearinghouse isn't insuring against you the customer not being there with the $15 to buy your GME share tomorrow. It's insuring against something horrible happening at Robinhood that zeroes out all its accounts, drives it out of business, traps all its staff in a deep sea diving bell, that kind of thing.
So would instant clearing help with this? If I am able to spend my $15 and the exchange of equity for cash is atomic then this becomes less of a problem?
If you eliminate the credit risk between brokers, you lower the capital requirements for brokerages. But you create other problems. I don't have any opinions about it; I would just form my opinions by reading whatever 'JumpCrisscross says, so I refer you there.