0 fvcks to Plotkin, he's a big boy. How many openings in GME caused debit balances in RH accounts last week? It's not a viable business if you can't keep you clients from blowing up en masse. How else do you make the risk worthwhile for the broker? The HTB carry is already a thing.
“$GME GO BRRR,” https://nypost.com/2021/01/30/redditors-buy-times-square-billboard-as-gamestop-stock-saga-rages/
Im thrilled what the internet has done to these few stocks. However, it's ridiculous to think RH operated outside of their rights. Read the TOS or user agreement. No house has to give you access to every investment vehicle. I actually checked with Charles Schwab & I could have purchased any of those stocks during that time. Not all things are created equal..if free is your number one reason for choosing a BD..you probably shouldn't be trading.
stocks where borrow costs go up. Stocks that exhibit a certain amount of volatility. finra will exert new restrictions that will lower leverage for all.
That is simply not true. I was monitoring AMC from TOS while all this was happening because I had bought 10k shares a few hours earlier and was expecting a rapid rise at market opening. Share price went from 8 to 16 in 15 minutes, triggering 2 breakers in that time when the newswires popped stating that RH, TD and IB had stopped the ability to buy shares. At that moment, AMC share price dropped from 16 to 7 in 45 minutes and triggered another 2 or 3 breakers. That's cause-consequence. Later, the price fluctuated back in the 10 to 13 range, because TD (my brokerage) was allowing limited purchases while setting breakers off every time the price rose by $1, effectively throttling the buy side and successfully controlling market activity, which isn't their job. I bought 10k shares on margin several hours before all this blew up, with the intention to sell at profit several hours later. A simple day trade. However, TD's sudden decision leaves me hanging on margin with a controlled share price far below my buy. Is this on me for taking risk or on TD for suddenly altering the rules of the game? And why or who pushed the brokerages to impose sudden and drastic restrictions on the buy side? You just need to follow the trail of who stands to benefit most from this.
But you have to understand - exiting a trade is exiting the use of margin. While entering is the exact opposite. If they are constrained in their ability to extend margin - because of not having the additional funds themselves, what are they to do?
Not my problem. A brokerage offers and I use their service. Their inability to fulfill their service is their problem. Clearly RH was underfunded and couldn't meet demand until their biggest customer bailed them out. But that's not the case for Schwab, or is it? Either way, it's a structural problem that needs to be addressed at the political level, and undue influence by the financiers of hedge funds, which needs to be resolved in the courts.
Brokers certainly have the right to declare at any time that a particular stock cannot be purchased on margin, or to raise the margin requirement to 200%, or 300% or more. That can result in a margin call for anyone who is long the stock on margin, and if they can't meet the margin call, the broker has the right to close the position. And the TOS usually make it clear that if they identify certain types of risk, they have the right to close a position without notifying you first, and without your consent. Brokers can declare at any time that a particular stock cannot be sold short, and they can force the immediate closure of any open short positions. But it is beyond the pale for RH to halt or severely limit new purchases that are paid for in cash with settled funds. Unless the exchanges or one of the regulators orders a trading halt, there is no reasonable explanation for this. BMK
Their right to do anything which are determined to be undue influence from their financial overlords for financial gains isn't legal, regardless what their TOS says.