Bro cashed out way too much

[u/be_you_tiful-]

A man working from his parents' house in West London made tens of millions of dollars trading futures from a bedroom filled with stuffed toys. His name is Navinder Singh Sarao, and he's on the autism spectrum.

There was no Wall Street trading floor. Sarao worked out of the family home in Hounslow, using a customized trading program on an ordinary desktop computer, and by most accounts he lived a pretty quiet life.

Then came May 6, 2010. In a matter of minutes, US stock markets plunged, and nearly $1 trillion in value briefly vanished before prices bounced back. It became known as the Flash Crash.

Years later, US authorities said Sarao's spoofing helped make it worse. Prosecutors said he placed large sell orders he never intended to fill, then canceled them, which pushed prices down so he could profit from the swings. They said his strategy was running on the day of the crash, and that he made more than $40 million from this kind of trading over several years.

Sarao fought extradition from the UK for years. He eventually pleaded guilty to wire fraud and spoofing in the US. His lawyers pointed to his autism, and the judge sentenced him to time served followed by home confinement rather than more prison time, citing his cooperation with prosecutors.

[u/Gizogin]

Because you could still buy that stock through other means? RobinHood just wouldn't let you borrow their money to do it anymore, because they ran out.

And yes, that was RobinHood's business model. That's what "instant deposit" was: you put money into your account, but it takes three or four business days to actually go through. RobinHood lets you borrow their money in the meantime to make your purchases faster, then they reimburse themselves when your deposit actually lands. But there was such a frenzy around GME (from brand-new accounts with no actual deposits processed yet) that RobinHood was at risk of running out of money.

[u/Brewermcbrewface → u/Gizogin]

Anything running through the Apex clearing house had its buy button disabled. The fishy part was the DTCC threw them a life line and they didn’t have to make PCO GME

[u/green_apple_trees → u/Gizogin]

Then the solution is to suspend temporarily the “instant deposit” model and tell platform users they have to wait 3 days for funds to clear before buying any stock. Removing the buy button on a stock is shady as fuck and just plain market manipulation.

[u/Gizogin → u/green_apple_trees]

I wouldn't be surprised if that was just not possible with their backend, at least not fast enough to make a difference. Saying "you can't buy this stock right now" is almost certainly an easier "panic button" to push - and less disruptive to the majority of their users, most of whom were not buying GME in a frenzy - than changing their entire payment processing system for everyone.

[u/green_apple_trees → u/Gizogin]

If it wasn’t possible with their backend then it meant their IT was dogshit and they should have invested more in having a robust and flexible IT system from the start instead of being Scrooge McDuck. Also they should have capitalised themselves way better from the start. If you want to provide short term stock loans with instant access to people then you better be extremely well capitalised. They were running their balance sheet undercapitalised from the start.

Stop simping for low IQ management. They did huge reputational damage to themselves which took them years to recover from.

I hate how in the modern world everyone loves to hold individuals to a high level of accountability but nobody wants to hold corporations or governments to the same level of accountability.

[u/Huppelkutje → u/green_apple_trees]

Robin Hood being a shit company is not market manipulation.

Explaining why Robin Hood had to shut down is not "simping for low IQ management".

Do you know why all the GME bagholders used Robinhood Hood? 

It's because with more legitimate brokerages, the ones that had zero issues trading GME during this shit storm, you need to wait for your deposit to clear before you can buy stock.

[u/SilverHeart4053 → u/green_apple_trees]

Fucking scabs out here defending companies like Robinhood be doing too much

[u/Bluehorsesho3 → u/Gizogin]

Wasn’t just Robinhood, same thing happened on E*trade and Charles Schwab, that whole week radicalized me pretty much for life. Those brokerages aren’t a free market, they are digital gatekeepers.

[u/Gizogin → u/Bluehorsesho3]

But, like, RobinHood and the other app-based brokers weren’t the only ways to trade stocks. They switched off the buy button on Jan 28. That day, GME closed at just under $200. The next two business days, it closed at a higher price; around $325 on Jan 29, and around $220 on Feb 1. So those app-based brokers didn’t kill the “squeeze” at all.

[u/Bluehorsesho3 → u/Gizogin]

It squeezed in the pre-market to $500 because there are no halts pre market open. If you think taking away the buy button doesn’t cause a wave of selling, you’re either a bad faith actor or just oblivious.

[u/DblockR → u/Bluehorsesho3]

I’m just reading and trying to educate myself on this. Can you elaborate and maybe dumb this down for me plz?

[u/LackWooden392 → u/DblockR]

Translation:

The value of the stock reached $500 in premarket trading, which only some platforms give you access to, and has lower volume, but occurs before 9 am, as a result of the ongoing short squeeze, because the buy button had not yet been disabled.

If you think disabling the buy button didn't result in an artificially inflated net supply of stock available to buy, and thus apply a downward pressure on the stock's price, you're either a bad faith actor or just oblivious.

He's saying that Robinhood disabling the buy button severely mitigated the short squeeze, and saved hedge fund's necks by letting them close their shorts at $200 instead of $500.

And he's right.

Hope that helps!