> Robinhood is small player that could never have planned for this type of event
I disagree. It wasn't that long ago that securities and cash from unsettled trades were unavailable to customers. The modern abstraction of frictionless trading is just that--an abstraction.
Adding "free" to the mix removes a balancing factor. (Less cash coming in at t=0.) Becoming a clearing broker removes another, though it adds control. There are vendors selling off-the-shelf systems to calculate clearing margin requirements and risks real time. I'm looking forward to hearing if Robinhood used one of those, or if they tried to roll their own.
Either way, it's not an excusable pain point to push to one's customers. Particularly not retail customers. Particularly not unsophisticated retail customers. These are complicated systems, far more than most professionals fully grasp. A simple back-up plan, like a fallback introducing broker arrangement, would have avoided this whole mess.
> There are vendors selling off-the-shelf systems to calculate clearing margin requirements and risks real time. I'm looking forward to hearing if Robinhood used one of those, or if they tried to roll their own.
This would be really interesting to know. If you find out, please do post it.
I disagree. It wasn't that long ago that securities and cash from unsettled trades were unavailable to customers. The modern abstraction of frictionless trading is just that--an abstraction.
Adding "free" to the mix removes a balancing factor. (Less cash coming in at t=0.) Becoming a clearing broker removes another, though it adds control. There are vendors selling off-the-shelf systems to calculate clearing margin requirements and risks real time. I'm looking forward to hearing if Robinhood used one of those, or if they tried to roll their own.
Either way, it's not an excusable pain point to push to one's customers. Particularly not retail customers. Particularly not unsophisticated retail customers. These are complicated systems, far more than most professionals fully grasp. A simple back-up plan, like a fallback introducing broker arrangement, would have avoided this whole mess.