> Again, the clearinghouse did exactly what they were supposed to do; step in and prevent RH from ending up in a position where it could default on its obligations. That's not the clearinghouse doing something "out of the blue" that is literally them doing their jobs. I find it absolutely baffling that people are upset at the clearinghouse for doing their job, especially since I'm certain that had the crash been bigger everyone would be furious at them for not having done something.

I'm not sure who else you're referring to, but I'm certainly not upset at the clearinghouse. I just don't think it's fair to blame Robinhood for not having the cash on hand to meet the unforeseen increase in deposits required.

> > In this particular case, I think you can look to the fact that IB, TD Ameritrade, Charles Schwab, etc. also had to restrict trading.

> They did exactly what I think RH should have done; tighten or restrict margin trading on GME and put option trading on GME into liquidation only. When volatility starts to grow out of control, it's the brokerage's responsibility to start restricting customer leverage in these instruments, if nothing else for the broker's own protection.

I don't disagree with you on that. It's not obvious to me that Robinhood over-leveraged itself though. If you are seeing some reporting on this that says otherwise, I would love to see it.

> > I am not sure why you think this is attributable to margin trading, other than the fact that Robinhood offers margin trading.

> Because margin trading is literally designed to allow traders to take larger positions than they could otherwise afford. This both increases the total net position that RH customers have and it reduces the total cash that RH has on hand compared to the number of trades, since part of the money is literally loaned to the trader by RH. This isn't a big deal when the positions net out close to zero, but it can be disastrously bad when all your customers start trading in one direction.
Example. Without margin if I were to buy $2,000 worth of GME, I have to actually hand $2,000 over to RH. The worst case deposit requirement that the clearinghouse can ask from my position is $2,000, and thankfully I've given that amount of money over to RH. But RH would also let me buy $4,000 of GME on margin. Not only has their worst case deposit requirement gone up to $4,000, but I have only given them enough cash to cover half of it. Part of the responsibility of a broker is to keep an eye on what trades are done on margin to avoid too large of a net position from building up for this exact reason, and to do things like adjust margin requirements to prevent this kind of thing from happening to them.

Right, I know what margin trading is, but that is a good summary. I'm just not sure how you can be so confident that the proportion of margin trading to non-margin trading was high enough that we can attribute most of the problem to the margin trading.

> > If it was in fact margin trading that was causing the problem, why would Robinhood limit buys in general, as opposed to just limiting use of margin?

> They limited buys because they literally couldn't afford the deposit with their clearinghouse. Sells don't require a deposit, naturally. I believe if they'd taken steps earlier in the cycle to limit margin trading RH would have had more cash on hand to meet their deposits and allow customers to keep buying GME, but not on margin.
You'll note that other brokerages did limit margin trades of GME specifically, as well as putting GME options (another way to increase leverage) into liquidation only mode. This clearly signals that the other brokerages thought that decreasing leverage in GME was a good idea. Maybe RH should've done the same earlier?

That's exactly my point. If the margin trading was the primary source of problems, it seems like RH would have just limited margin trading instead of limiting all buys (whether on margin or not). Doesn't the fact that they didn't make this distinction suggest that the margin trading wasn't a disproportionate factor?

> > I think the likely explanation for why other brokerages did not have to raise additional funds is because they have a much smaller percentage of customers purchasing meme stocks.

> That is certainly part of it, sure. This goes back to "Gamifying stock market trading is a bad idea". But you also can't ignore that the other brokerages seem to have universally taken steps specifically to unwind the amount of leverage their customers had in GME, all steps that RH didn't seem to do until their clearinghouse forced them. If TD Ameritrade and similar were moving in to stop the GME bubble when they didn't even have the majority of the meme traders, doesn't that imply that RH should have done something far earlier?

I've admittedly read up far less on the other brokerages than I have on Robinhood with respect to the Gamestop stuff. Has it been reported that the other brokerages did not restrict trading due to the same increased DTC deposit requirements? I had just assumed it was due to that, but it sounds like you are pretty sure it wasn't.