Fortunately, there are rules that Robinhood must abide by. Perhaps in the near future, the SEC might find that Robinhood violated those rules by preventing people from buying more than one GME share.
(I get that the clearinghouse was the reason, because they upped their collateral requirement from 3% to 100%, so Robinhood just couldn't cover the trades. Nor could anyone else. But that doesn't change the reality of what happened. I wonder if it's too much to hope that the SEC will aim at the clearinghouse, or congress enact legislation to prevent the clearinghouse from shutting down specific segments of the market by suddenly requiring 33.33x more collateral for certain stocks.)
Isn’t the reality that the DTCC was forced to increase collateral requirements?
You understand that if GME drops to $80 today, a large number of GME trades from last week are going to refuse to settle. What is Congress going to do? Force the DTCC to eat the losses?
A simple solution would be to turn the 3-day settlement period into 1-day, or 0-day. But of course, DTCC has all the incentive in the world not to go along with that.
The trouble is that the 3-day period is a "leaky abstraction." It's the sole reason any of this became an issue. It's not a law of nature that "DTCC must insure 3 days of risk."
A simple solution would be to turn the 3-day settlement period into 1-day, or 0-day.
Unless you cut the settlement to 0 the issue will remain. The fundamental issue is that 1) deposit is required, 2) there's a spike in demand/deposit requirements, 3) current reserves can't pay for deposits. Going to 1 day settlement will just cause brokers to reduce their overall reserves in response (no need keeping all that money around!), so the next time a spike occurs the same issue will occur.
Comments
Fortunately, there are rules that Robinhood must abide by. Perhaps in the near future, the SEC might find that Robinhood violated those rules by preventing people from buying more than one GME share.
(I get that the clearinghouse was the reason, because they upped their collateral requirement from 3% to 100%, so Robinhood just couldn't cover the trades. Nor could anyone else. But that doesn't change the reality of what happened. I wonder if it's too much to hope that the SEC will aim at the clearinghouse, or congress enact legislation to prevent the clearinghouse from shutting down specific segments of the market by suddenly requiring 33.33x more collateral for certain stocks.)
Isn’t the reality that the DTCC was forced to increase collateral requirements?
You understand that if GME drops to $80 today, a large number of GME trades from last week are going to refuse to settle. What is Congress going to do? Force the DTCC to eat the losses?
A simple solution would be to turn the 3-day settlement period into 1-day, or 0-day. But of course, DTCC has all the incentive in the world not to go along with that.
The trouble is that the 3-day period is a "leaky abstraction." It's the sole reason any of this became an issue. It's not a law of nature that "DTCC must insure 3 days of risk."
Unless you cut the settlement to 0 the issue will remain. The fundamental issue is that 1) deposit is required, 2) there's a spike in demand/deposit requirements, 3) current reserves can't pay for deposits. Going to 1 day settlement will just cause brokers to reduce their overall reserves in response (no need keeping all that money around!), so the next time a spike occurs the same issue will occur.