Here it is, after spending three days piecing through the game, stopped report, which is 138 pages long. It's uh, it's got grueling intricate insane details. I finally completed it and i'd like to share the findings with you guys as to save you approximately 12 to 14 hours of uh deep reading and note-taking uh. This is a story about how the market nearly collapsed, and i wish that this was clickbait.

I wish that this is a joke, but it really isn't uh. The market was dangerously close to collapse more so uh than was ever let on and even probably more so than people realized within our own community uh brokers, the dtcc, the nscc, the dtcc being the depository trust clearing corporation uh nsccp, the national security clearing corporation, the Dtc uh broker dealers market makers who manage orders as they route through different systems. Everybody within this was complacent. Everybody within this served the role everybody in this nearly caused the collapse of the entire stock market and we're going to go over the details here today.

I, like your department by saying that i'm not a firefighter, not a friend of mine people, say they're going to salt. This is going to be a long video, but if you really want to know the story, man, i promise you it's going to be worth it, because this is some insane stuff. So, to give you a preface to give you a beginning, back in january of 2021 uh the buy button was stolen on a name, a list of different meme stocks. You can think of amc, gamestop bed, bed bath beyond blackberry, nokia express uh sundial.

The list goes on, the buy button, uh was stolen. This is something called pco position, close only meaning that you can only sell an order and pco is going to be at tournaments used later. So, just remember that, as we continue forward uh, what this did and the implications of it was that lots of retail investors lost millions and millions of dollars at the expense of pco, because stocks went from very green to very red, pretty much immediately right. Well, lots of people had theories as to how this happened and uh.

Some of these were spot on the money. Some of them were maybe a little off, and some of them were just drastically off uh and now we're going to be able to really dig into what happened in that day and the days leading up to it. I think what you're going to find, along with what i found is there, was a lot of complacency, a lot of conscious decision, making that led to millions of people getting absolutely out of their money, so to start retail, fueled, uh or maybe back up retail. The big boys, and what i mean by this is retail investors, had actually accomplished something that seems to be impossible them solely buying stocks that they liked happened to put the top fat cats.

The one percent at the top of the pyramid, in a position where they were screwed margin, calls didn't have money to clear, didn't, have money to execute trades and they had no idea. What to do. The meme stock market event really revealed how rapid growth and innovation retail trading presents novel issues for market stability and order newness that neither the industry nor regulators have satisfactorily anticipated or addressed. There's a couple key findings: we're gon na go through each of these in great detail and they go as such.

Keep finding number one robinhood exhibited trouble, uh troubling business practices, inadequate risk management and a culture that prioritized growth above stability during the mean stock market event. We'll go into detail about this broker. Dealers facing the greatest operational liquidity concerns took the most expensive expansive trading restrictions. Although multiple broker dealers introduced trading restrictions for a variety of risk management reasons during the mean stock market event number three most of the firms the committee spoke to do not have explicit plans to change their policies.

Obviously problematic we'll talk about it. Number four, the depository trust and clearing corporation dtcc waved 9.7 billion dollars of collateral deposit requirements on january 28, 2021. Now the title says as such: uh: this is the story of how the market nearly collapsed and that there was a 9.7 billion dollar bailout and the reason for it is because the dtcc stepped in recognizing that the market would have been an absolute show had it. Not done so so, let's go over how this happened and, furthermore, could it happen again.

Well, according to apex clearing corporation ceo bill, cabuzzi uh, by the way apex is sort of a villain with along the storyline they uh. They were very complacent alongside robin hood. Alongside another clearing corporation, we'll explain to you how this is actually valid as this continues, but he quoted this and i want to talk about it uh, and so, if the question is, do i think it's going to happen again? The answer is yes for sure. No doubt about it, how it's going to manifest itself, i'm not sure, but for sure it's going to happen again.

This man was the audience watching brokers, collapse and what i mean by that is apex being a clearing corporation deals with brokers, one-on-one very intimately right when there's extreme periods of volatility. These guys and brokers are going back and forth and back and forth and back and forth on emails. And if this guy is saying hey, we don't know how or when or what is going to cause this. But it will happen again without a shadow of a doubt.

This is speaking to the magnitude of the problem itself, the fragility of the market and how much damage retail investors have done and can do uh. What does this tell us? Markets are fragile, as i just mentioned right, if just a whole bunch of retail traders can say you know what i like this stock. I like that stock, this hedge fund and that's going to collapse the market which i'm not kidding it nearly did. You've got a problem markets are fragile.

Markets should not be able to be brought down by 10 20 different stocks. Okay, that's obviously problematic. We continue on the meme stock market event demonstrates the need for modernization of certain key aspects of the self-regulatory framework for retail, facing super brokers right. What is this areas of brokers? The areas of weakness is it's everywhere.

I mentioned the beginning. There's a lot of villains here, the nscc, the dtcc brokers, market makers, even finra who's supposed to regulate the entirety of the stock market. That's really the job of finra is to make sure people are following rules and regulations and uh allowing markets to run smoothly efficiently. Right, national security, clearing corporation the depository and trust clearing corporation uh market makers broker spinner everybody.

This is all week and i'm explaining to you why, right as we continue through the game, stopped report, you're gon na see this outlined based on the committee's investigation. Finra could more adequately respond to current market dynamics with a modernized liquidity rule? What does this mean? It means that there isn't one that presently really exists right. There's a lack of enforcement you're going to find this, as we continue on to the findings which brings us to this. The nscc national security clearing corporation, which sets and enforces rules for clearing equities, essentially making sure that money is up when there are transactions taking place on both sides of a trade, engage an insufficient monitoring of its membership and has regularly waived certain clearing fund obligations.

Prior to the meme stock market event, what does this mean they've conducted bailouts before they've bailed out people before they will likely do it again? This ties into some nscc negligence. Furthermore, the committee's investigation revealed how the nscc has regularly waived certain clearing fund requirements in the two years before the meme stock market event. Robin hood is a prime suspect of this and has been provably uh, a part of the nscc negligence, and what this has done is taught brokers that hey. We can bend the rules because we know we can get bailed out if we push the limits.

If we even draw the line, we go past the line, we know we're going to continue on because quote we're too big to fail and that's the way that the stock market has operated for a long time right. What's more worrisome is the cause and effect of this uh according to nscc, certain broker dealers that are familiar with excess capital premium charges, which is something that gets waived quite frequently. This is the bailout that i speak of. Uh are familiar with excess capital.

Premium charters have decided to remain thinly, capitalized and consciously risk attracting these charge on a regular basis. Given that the nscc often waves these charges, these firms may feel, like they're, unlikely to be seriously penalized for such risky behavior, which, as i just mentioned before this, isn't the game stopped report. Well, this is the most worrisome thing. The committee's investigation discovered evidence of multiple broker dealers, third-party clearing operations, market makers, public stock exchanges and other suffering technology outages during the mean stock market event.

Editors are particularly concerning among market makers, who are by many accounts lightly regulated and play an increasingly significant role in executing retail trades. Had the market makers, robin hood, routinely routed orders and able unable to accept its order flow. The company would have been unable to execute trades for its customers whole, so not only were brokers underwater, but market makers were brokers and market makers. Citadel vertu wolverine, some of the biggest market makers in the united states stock market being underwater how's that possible right uh.

We're gon na dig into this we're gon na talk about it, because this is some scary, stuff and uh we're gon na we're gon na dive into sort of what the big pieces are. These are the recommendations we're gon na talk about these, as we come to the end of the report, we're gon na start off here with key finding number one. This is sort of a preface. This is sort of uh all the key players that i find to be important.

The nscc, the dtcc brokers, market makers and finra were all a part of the market nearly collapsing. Why lack of regulation, uh, lack of obvious funds and liquidity and a lack of coordination? These guys aren't following the same principles: the same rules there's no standard being set uh on the stage. So let's keep finding number one is robin hood. I went over this in a short video yesterday two days ago, and it says this robin hood: exhibited troubling business practices, inadequate risk management and a culture that prioritized growth above stability during the meme stock market event.

What does this mean? These guys were looking at uh at their business and they said you know what uh we don't look too good, but we got to find a way to make this a a marketing event: huh uh weeble's kind of catching up to us. So how can we say you know what you weeble? We might be on the verge of collapse, but hey. We got nice green colors on our lines and people, people clicked on our app two or three more times and executed a trade two or three more times for a slight uh, slight loss, blah blah blah uh prior to the meme stock market event. Robin hood denied updated stress tests used to predict collateral obligations to clearing agencies after finra made an observation robin hood securities chief financial officer that the company may want to take a more conservative, best practices approach to conducting stress tests.

What does this all mean? Fancy talk for hey finra's, knocked on the door, said: guess what guys you got to update your it's a little scary. Looking if something happened, if you got volatile sort of conditions, since you clear your own funds, may i add that's how you can get instant buying power through robinhood. You got to make sure that you've got liquidity. You've got funds.

You've got collateral uh to clear with different parties uh, and this is obviously problematic if they're not following these recommendations, who had previously was strongly suggested, improve stress, test liquidity management by finra in 2019, two years prior, two years prior to the incident, their response. Instead, they cooked the books. Why did this happen in the first place? Well, they probably thought the nscc uh would sort of bend once again and give them a bailout and hey as a little spoiler to the story. They did.

So i guess in the end that they weren't that wrong. But the response was to cook the books. Robin had conducted a quarterly stress test exercise in mid-january 2021 prior to the meme stock market event, using its collateral charges from the prior quarter and end rather than the peak collateral charges, as finra staff had suggested now uh. I mentioned this before it's a great example.

If you'd like to know what cooking the books means, i recommend watching uh the ozark. It's a story about a man and his wife, uh husband and wife, and their kids, who get caught up in sort of uh the drug cartel in mexico and what his job was was to launder money and to launder money. You have to find a way to hide money which is to cook the books right. It's to favorably uh, make your papers look uh a certain sort of way and that's what robin hood really did.

Is they conducted methodology being really important? They came to a conclusion. They're able to say, hey, look we're good, let's wipe our hands clean, but it's because of the way that they conducted their research. They cooked the books. They were only looking for a certain answer and they were able to present it in that sort of light, which means that robin hood negligently didn't keep their books right, unmodelable, black swan event.

These were all things that robin hood spoke of when in reality, they weren't even trying to prepare for it in the first place, and what you're going to find. As we read through some of robin hood's text, messages is uh. They actually knew it was coming four days prior and it said uh decided to just watch the ship sink uh, anticipating what i would assume to be a bailout worse yet they're on a high surveillance list and nobody caught it huh, that's kind of strange, because if An nscc member from defaults on its obligations they get placed on a high surveillance list. What does this mean? It means this party is high risk high risk, meaning hey these guys have had some problems in the past.

Maybe we should keep an eye on them and make sure that nothing bad goes on. Well, they were on this list and apparently nobody was paying attention. What was this sort of uh monitored by the nscc huh? Well, it's strange since these guys sort of encourage them to bank on bailouts and bank on not having to pay up their collateral in situations of high volatility and high trading volume. Interesting, moreover, robinhood's incomplete liquidity planning practices were neither detected by the clearinghouse nor remedy.

Despite the company being subject to enhanced surveillance, the result robin hood got with 3.7 billion collateral charge on january 28th of 2021. This is the infamous day the robin hood said time to go. We got ta, get rid of the the buying button uh. It is time for pc, oh position close only and robinhood, knowing this had a choice to make.

Do we want to handle this ourselves, or do we want to pan this on our uh, our users of the application? You already know what the answer that is, they decided to pin it on everyday average people like you and me the americans right so on sunday, uh before uh, everything happened on january 24th of 2021, robin hood leadership hesitated to model volatility before the start of the Trading week - and this brings us into the texts - the texts are insane. These texts detail every little intricate thing about where robin hood really up where they knew. This was going to happen where they saw the ship was sinking where they knew they didn't have the money and they decided hey. Let's focus on what we mentioned before, which is growth, which is growth over stability.

So here is the beginning of the text. Messages we're going to bring you through these and just sort of tell you the story. This is the worry and the onset. Now you can see on january 24th, and these texts are chronological.

I had to sort of piece these together in that way from the report. Uh blank sorry post, if you think we should front run the model, i think that's jim's call from a negative press standpoint, which is mainly what i'm focused on and regulators. Rhf is good with the current requirements. I think triggers that can make us react would be inbound from any regulators.

This is the onset. These guys are saying hey four days before it happens. This could be problematic right. So when gamestop was really starting to heat up, recognition of the problem came the next day fyi.

We have also been asked to discuss at all hands anything where we can talk about handling scale uh face with rolling eyes, but might be a great time to highlight all the things. A cats and treasury have been doing to keep the lights on uh. They obviously were struggling with money. I was going to discuss tomorrow on rhs management.

Keep me posted, he goes on to say, uh, recognition of unsustainability, guys ton of issues today with the lag we are looking at. Eight cats will probably not be able to process it. All before batch, we are hoping to start today. Today's work at 8 pm.

We missed the ach file being fully submitted. Llpr, occ and others are going to be cutting it very close to cut off. We cannot sustain any increases in volume if it is going to create longer delays and processing every day. My suspicion, my opinion.

My speculation is at this point. These guys were already thinking in the back of their brains, we're going to have to really make a decision here on whether we're going to take care of ourselves or we're going to take care of uh. Our our users of the application right. The people who are trying to buy and sell things like their job is, they found themselves in a helpless situation.

We don't handle scale well, that is probably the biggest understatement of the day. Helplessness continues, dealing with occ file delay right now, it's going to cause liquidity issues thanks uh, and this is actually quite interesting because if you guys remember correctly, black denim at one point said hey: we never had a liquidity problem. He said this on live television. This was actually talked about in the congressional report or congressional hearing, so perjury, i guess, is worthless.

I mean this is this is as useful and as valuable as i would ever imagine. This is a picture-perfect example of him lying. I continue on rationalization, slash acceptance. The requirement would be something in the 1.6 to 1.9.

Billion range ended up being drastically more, since we have never been in that situation. The occ knows that we only allow spreads. There could be something that could be done, but you can be confident there will be a full regulatory investigation and shall it have been the biggest concern now is? Can we handle our scale? The answer was: no. If we fail to live or something like this due to us not being able to handle our own volume, it would not bode well with occ or the regulators growth versus customer care.

We could probably interact with this movement to promote robinhood growth. This is what i mentioned before. This is what the the the writers of this report were worried about: growth versus stability, but thinking we should stay as far away from this as uh as possible. Oh blank mentioned that gamestop was one of the stocks we gave out to referral users.

We should remind the users who have this lying around, that this is a 200 stock. Now my thinking was that we don't want to call out game. Stop at all, i'm trying to imagine the right way to tell customers that we gave them a meme stock before it was a meme. This is all to say, they were extremely focused on the wrong things right lying about liquidity problems, uh lying about what was going on.

They were focused on growing and trying to find a way to market themselves to to stay ahead of the of the of the pack ahead of weeble, ahead of uh, think or swim ahead of mumu ahead of all these different brokers and at the end of the Day uh, they got for it and you got for it which brings us into this lunacy. Let's make sure liquidity stays green, we'll be fine on it. Vlad sang himself the exact opposite of what he said on national television uh, which was that we never had a liquidity problem. In reality, it was very obvious he was worried about it.

After all, us pcl, which is position close, only will trigger a crash. I am certain this guy was right at the end of the day, checks out it's a bad look. We're supposed to support the retail guy had half a brain, but at the end of the day they decided to stick to exactly that game plan, and this is exactly where we know robin hood made some really bad decisions. Apparently, don't have enough money to pay nscc fees always great.

When people start dropping f-bombs who knew about nfcc fees, nfcc fees, they charge risk fees, interesting uh. This is scary as hell, because these guys, obviously don't even know how the market works, and these guys make billions of dollars and handle billions of dollars and are asking themselves in group chats about how how fees work, how the nfcc works. You work with these guys. Every day, but i don't know what do i know? Maybe these are just kids playing at the at the goddang's uh jumping the the the monkey bars.

You know it's like. We are reliving march 2020.. This is relevant because robinhood had faced problems in the past and it's why they were on this high surveillance list, because they had had problems paying out uh nscc fees in the past, because they just cooked the books they knew they were gon na get bailed out. They said who cares we're just gon na keep doing what we do ten thousand percent, but with bigger volumes.

It's funny, though, because public perception is fine like no one knows there are issues they knew. There were problems, they knew people didn't know there were problems, they continued on to watch the ship sink and before the collapse. Concerns of growth continued on conflict brewing have to keep the growth flywheel running weebles right on our tail. Haha yeah.

Don't worry, we need to survive first, i know i'm firmly in the growth camp. Nothing else needs to be said. This is all said and done. This is all good to go over right, but what did this actually do? Believe it or not? This all strained, guess who citadel and we're gon na get into the story behind this, as we continue on with robin hood, but robin hood's payment for order, flow and rebate problem and rebate situation and fee problem uh this this all sort of began because of a Couple key factors: in my opinion, this is my opinion.

This is speculation right number one. They were their own clearing firm, so to speak, right, you're, able to get overnight uh instant sort of settling buying power on uh a couple different uh, a couple thousand dollars right, because robin hood allows that to happen and number two robinhood makes the most really out Of payment for overflow rebates - and this is because they model themselves in a different manner than most brokers, who use p5 or payment for order flow. Do payment for order flow? Is the process of a market maker who handles transactions, paying a kickback to brokers for sending uh the broker's orders to the market maker here to draw this out? This is a broker. This is a market maker.

Pfoff is, as such, broker sends over an order. Market maker sends over money bam they get paid for sending an order to a specific entity. Citadel was the entity at the end of the day that ended up helping these guys out uh, but it did put a strain on them and many other names such as vertu and wolverine, and we're going to get into that as we continue on robinhood's disproportionately high Order flow and unique formula for calculating p5 rebates, strained several market makers and introduced risk to the stock market. What would have happened if market makers were unable to process all these transactions everywhere everywhere? If all of a sudden people are panicking because panic would ensue, fear would ensue immediately if orders were not being processed.

Everybody would just be slapping that cell button they'd be saying. Get me the out of this market. Now i'm going to goddang china, i i want nothing to do with this, bring me to chiang mai and then get out right. This is problematic if you restraining market makers who, by the way, pay your bills, uh, there's.

Obviously, a key problem here: hood q1 2020 had 9x e trades volume and 40x charles schwab's volume, there's a reason for it: they incentivize high rebates and paying uh getting paid a lot of money by market makers. This tells you a lot. This tells you a lot about what hood's priorities are robbing shit's priorities are and we're going to continue on vertu, told committee, and virtue is a market maker staffed that during the week of the meme stock market event, the order volume it received from robin hood increased Six times from the prior week in gamestop, amc, blackberry costs, bed bath and beyond and nokia citadel securities employees owed robinhood for gamestop the week of january 28, 2021 uh 60 times greater than the week before for simply gamestop rebates. What does this tell? You tells you that hood made a lot of money on bid, ask spreads.

This is where they tried to make their money. This is where they tried to milk, their p5 rebates and we're going to get into that as we continue on uh, they made a lot of money and incentivized this, and this is where the growth over stability came into the picture. The way they set up their platform and the way they try to run things allowed for that to happen in the first place. Why robinhood wanted this at any cost of those? Only robinhood calculated its payment for order flow rebate rates using a formula based upon the bid ask spread of each stock.

Analysts speculate that robinhood relies on a spread-based formula to maximize the revenue it generates from the p5 rebates. So, even if it meant they couldn't find shares, they did what they had to do, and this is going to blow your mind. Another significant factor affecting robin hood during the mean stock market event was the limitation on its ability to access the shares needed to fulfill the purchase orders of its customers. So what the was happening, if you couldn't locate, shares how was their buying or selling happening before everything took place? There's two options: synthetic shares were created or pco position, close only no more buy button, maybe both probably both scary, robin hood, couldn't fill on lit exchange.

Now this sounds crazy right how the and, if you don't know what a lit exchange is, let me paint it out in a really simple way. Really fast lit exchange is on exchange trading. This is your standard market as compared to off exchange, which consists of a dark pools which are considered to be uh. Discreet, uh, lack of discretionary advice, places for institutions to fill large block trades huge chunks of shares right, that's the institutional side.

Retail side is wholesaling. That's also off exchange. That means that that robin hood was going towards both of these, and primarily i would add, wholesaling because they don't really deal with with uh institutions, all that much so mainly otc or wholesalers, which is the retail side of things. Now they were not filling on the lid exchange, which means everything was getting routed directly to market makers such as citadel such as vertu such as wolverine.

Why is this problematic? It doesn't allow for true price discovery if all orders uh, let's just say that you've got one person who manages all the transactions of bikes, you're, trying to sell a bike, you're trying to buy a bike and there's one guy, one middle man, who's scraping pennies off The top, what do you think he's gon na do he's gon na try and make a couple more pennies, every single time he scrapes these pennies he's, maybe not gon na try and find the best price for both of you sure he's handling the transaction you're. Getting your buy or getting your cell, but how much is he scraping off the top and over time, how much more is he scraping off the top? How much more right, we'll check this out robin was unable to route trades directly to any public exchange and had fewer options than others. Similarly, situated broker dealers for executing trades for their customers wow. They were only filling things through wholesalers through market makers.

Why? They don't really make money online strange, almost like these guys suck well, they chose to avoid it right. Having a public exchange connection is not a regulatory requirement. There are arguments to this right. The committee staff sort of inquired about robin hood's business decisions their model.

Why do you only go to wholesalers? Why don't you go to the lit exchange? They said it's not a requirement. Why should we right here's the line we want to be? We want our dick square on that line. We want that thing square on that line, not a hair off of it right, we're going to ride that and make as much money as we can growth over stability right. It shows you really how much of a villain they were and, honestly more so than i really thought in my opinion.

I thought this was more so of a market maker uh dtcc clearing all this stuff. I thought it was more on these guys, but there were brokers that were bad here and robin hood is the main villain. Well, this backfired and it's actually kind of funny. This is gon na make you chuckle uh the way this plays out, because you're gon na see how lit exchanges and on exchange trading was.

Actually it could have helped this situation, so you didn't: have the the pco position closed? Only the buy button being stolen. This backfired during january 28th by the markets uh because the markets were volatile, volatile equals liquid. So, in my opinion, speculation speaking the buy button, removal or pco position to close only could have been avoided if robinhood, routed, lit or liquidity was, let's sort of walk you through this right. Why do i think that to be the case right, many institutions prefer route trades to public exchanges during periods of acute volatility and erratic price fluctuations in the market.

Why? Because volatility equals liquidity, you're never going to have a problem, finding yourself a share if the market is liquid, but sometimes if market makers get overwhelmed, they may not be liquid. They are, after all, only handling a portion of the market, not the entirety of the market versus lit exchange, which is literally hey. If i want to buy it, i will buy it. If i want to sell it, i will sell it.

Everything goes to that. Goddang exchange, but they wanted p5 money. Speaking of robin hood right at any cost, both morally and financially, and the effect of this was retail orders destroyed robin hood, citadel virtue and other market makers. I'm not joking when i say this retail concretely without a shadow of a doubt.

Nearly broke the market that month of january 2021, retail nearly collapsed citadel virtue, wolverine robin hood: lots of other brokers, apex clearing lots of clearinghouses every system, every piece of the market, nearly disintegrated, thanos snapped into into essentially a a a margin call across the market where Everyone's pointing like the the freaking spider-man meme saying you owe me money. You owe me money. You owe me money, you owe me money and it would have been a show, but we all know how the story ended, we'll get into that throughout january 27th and 28th of 2021, several of the market makers, robin hood, routinely routed orders to struggled with operational constraints. The market nearly died, this forced market makers to restrict please route away all stocks in the letter, a range and this excluded apple amd and amazon.

We continue on to see on january 27th, the robin hood securities temporarily stopped routing certain equity orders to two stigma: a two sigma and vert 2 and temporarily stop routing certain option: orders to morgan stanley and colt. This is when robin hood started thinking of themselves right robin was thinking to themselves huh we're in a situation. Now we want to keep making money these uh, these market makers can't keep up. So what the heck do we got to do? Well, we say suck my dick and they decided to go to somebody else, so robin hood's trying to find any way that they can maximize their profit and keep the boat afloat.

Because they're on the verge of a margin, call they're on the verge of not being able to meet collateral, so they're thinking, i just got to keep pumping these rebates man. We got to find these fields. We got to find these phil, so we can keep up on our it's like a pyramid scheme, so to speak, you're trying to make take money from someone else to pay someone else to take money from someone else to pay. Someone else and ron hood kept going through this.

This sort of circle well brought you to this. If robin hood can't route through virtue, well, then, where employees of robinhood and wolverine continue to communicate through the week. Regarding the acute volatility and at one point, wolverine community communicated robin hood that consider robin hood to be a regulatory and financial risk to their business. They tried someone else: wolverine wolverine's, another market maker they're, one of the top three biggest market makers uh alongside vertu who's in second in citadel, who was in first well problematic wolverine, doesn't want to deal with you, regulatory and financial risk to their business.

I wonder why? Maybe because you might not be able to meet the requirements and maybe because you might put these guys in a situation where they can't handle their transactions here, you have this, i'm reviewing the entire relationship. They are at 20 of options. We may want to completely shut them off. We need partners we can rely on.

This is robin hood speaking on wolverine. Now, at this point, what's happening, robin hood is saying all right. Virtue can't really help us. Let's go to wolverine wolverine doesn't want to help us they're, saying we're a business risk and they're saying back to them.

Some petty ass, they're, saying hey! You don't help us now we're never going to come back to you for service ever again. Well, this is what happens next. Well, cedar, always loved you, cereal, always loved you, robin hood citadel, always loved you, the boy from bulgaria, freaking, vlad, attentive, robin hood citadel securities engaged in blunt negotiations. The night before the training restrictions to lower the p5 rates.

Robinhood was charging citadel securities, but ken said they didn't talk. Well, maybe not ken vlad right. It might not have been like that. I mean, surely surely they wouldn't commit uh perjury really wouldn't lie in court.

I don't know why anybody from wall street would ever lie that doesn't make sense just fyi that dan and i are joining jim at 5 pm on a call with citadel they reached out on, want to speak this evening. We believe they will make some demands on limiting p5 across the board. We're going to agree to anything, but i want to give you a heads up: okay, vlad tenem. Maybe this would be a good time for me to chat with ken griffin.

Maybe they did maybe they did talk. Maybe that congressional hearing didn't really mean much citadel, couldn't afford to pay robin hood beef off rates and talked about it. Remember what i said before that robin hood uh was putting constraints on the market makers because of the retail orders that were coming into robinhood, that they were not ready to process because of the rule bending that took place from the national security clearing corporation. That came from finra, not regulating the national security clearing corporation and robin hood.

Every piece of the market allowed it and we continue on, say. I know what you said about gme and amc, but all are complaining. Blank is saying they haven't decided, but think they want to limit pfoff on one or both symbols. Cereal wanted to make sure the robinhood understood that the p5 rebate rates being calculated based upon robinhood's, unique spread-based formula were untenable, especially in the context of the unprecedented volatility and volume.

Essentially citadel said we can't pay you man. This is unrealistic, everyone's dying right now and you're worried about your chick. What are you talking about? Ron hood performed the greatest show, then their own, robin hood came a bailout citadel said you wolverine said you virtue said you. Nobody could help these guys and, at this point, robin hood's, probably feeling pretty helpless flat, tentative's thinking.

This is really it man, i'm done. Unless we get a bailout, there's no way we're gon na be good, but hello and behold a knight in shining armor. The great hero came back to save them once again, and you get this robin received the waiver of the largest component of its deposit requirement from the dtcc. Without this waiver, over which robinhood had no control, the company would have defaulted on its regulatory collateral obligations, meaning these guys could have gone bankrupt.

You might have been on all your money and these guys would have been out a lot of money and would have cost people a lot of money and the stocks would have continued to tank, probably worse than they actually did so. Here's the stage robinhood couldn't meet collateral requirements. You can see this text message hypothetically, what happens if a firm can't meet their morning nscc margin settlement first offense is a fine. It is outlined on their site, i'll call them, so they have a heads up.

They give them a timeline on when you can get access to lines of credit and or cash infusion from the parent hypothetically, they will work for you case they ever had to make such a call hypothetically. There isn't enough an loc line of credit. This is only slightly concerning these guys, don't know what a freaking margin settlement works and how how how that's possible is beyond me, which brings me to this their idea. Let's throttle some new accounts and throw out the new accounts.

Eventually, you sort of push the line. You're in some gray area and once you're in the gray area, it's a little bit easier to push the next darker gray area and continued on. In addition to restricting stocks from her leadership, throttle new account creation on their platform to limit volatility and hopefully address liquidity concerns, you can read it here, right, there's a throttle on and then the ultimate meme took place why they do it. They were in your death.

This is i kid you not. This is a real conversation that took place internally within robin hood. The problem is that, right now we look like this, and here you see a truck falling off a uh, what maybe the grand canyon a mountain on the moon coming down to earth. I i don't know i mean the the moral of the story here.

Is these guys knew they were on the verge of death and they had to do whatever they could to solve this problem, and so they tried the damnedest which brought us to here. Rob had tried fundraising but failed all right, thrilling new accounts wasn't working. They they. They restricted buying that wasn't working people just kept commenting.

They still had the same problem. The pco wasn't doing enough. They couldn't raise enough money so what they tried to do, they tried raising it. Didn't work robin's chief legal officer notified senior officials at the dtc, the rob hood could not meet its collateral obligations before the market opened on january 28th, 2021 tried, fundraising, failed and that brought us to this right check it out dan gallagher from robin hood called to Say they received about a three billion dollar call for for 10? Am today they've been talking to blank, but we'd like someone to call jim stower start wart press of the clg firm to discuss a way forward.

He suggested they have 600 million, but 3 billion is problematic, meaning hey. We can't pay that we're about 80 short and then the bailout happened. Robin hook got bailed out by the dtcc. They owed nearly three billion dollars and didn't have to pay anywhere near that amount.

Here's the actual numbers at 9 11 a.m. Eastern 19 minutes before the market open roundhood securities received an updated deposit requirement notice from the nscc that outlined a total deposit requirement of approximately 1.4 billion. The reduction in the excess capital premium charge to zero dollars. Multiple billion dollar bailout, robin hood would have defaulted, they would have died, you would have lost a bunch of money, they would have lost a bunch of money.

Market makers would have lost a bunch of money, but it didn't matter because they just said i got you. I got you, we've bailed you out before we'll. Do it again, they would have died, they got lucky. Remember i read off before robin hood.

Had no control over the situation, they were helpless. What happened is hey, there's two choices. Their regulatory bodies could say you got to pay up or default or we'll bail you out and they build them out, and they do this to many more we'll go over that as we continue on without the nscc's waiver of robin hood's excess capital premium charge, the National security clearing corporation, who handles clearing right, robinhood's non-payment, would have constituted a serious rule violation uh in this default that could have been shut down. Robin hood would have gone out of business, and yet later we see that hood went public and now it makes a lot more sense.

I mean it already made sense. Let me make that clear right. It already made sense that hood's stock looks like it's absolutely dying, but it would have made it makes more sense now, knowing uh how close they were to literally collapsing all right. Rodhan leadership remained aware during the morning of january 28th that the nscc could effectively eliminate the company's ability to clear their clients, trades and liquidate liquidate the firm's holdings right.

Why is this problematic if they knew they didn't tell you the people who used their app that people had money wrapped up in their application? They didn't tell them anything. They didn't tell them how close they were, losing it all now, you're backed by the fd fdic. I think fdic insured up to a certain amount, but there are certainly those who are in robin hood with more than fdic insured money who would have just been screwed out of luck? Well, maybe robin hood wasn't that lucky. Rather, they knew money didn't matter because well they're, robin hood, so you read this: we will navigate through this nscc issue.

We are too big for them to actually shut us down now. This is a sad reality of the world too. Big to fail is a real thing, hypothetically speaking, you think it shouldn't be, but the market operates on uh dick sizes, if you got a big dick you're allowed to play in the room and uh get away with a lot got a small dick. Well, put it back on your pants, don't play, you know uh, and this is what happened with robin hood.

They had a big enough winner that they could get out of this situation. They got bailed out and they knew it and they were complacent and they were willful in this fraud and they knew they were lying, and yet they did so so you read this. We mentioned earlier that there was a congressional hearing that vladimir spoke at and he had mentioned that they had no issues with liquidity. Right.

Remember that, let's just highlight in case you missed it uh they're asking mr ten: have you explained the robin hood, restricted transactions and certain securities to meet demands coming from your clearinghouse? Isn't it true that being concerned about having enough capital to meet deposit requirements? Isn't that a liquidity problem - and you see mr tennant vlad tenef say as such, we've always felt comfortable with our liquidity and the additional capital that robin hood raised. Well, this is kind of strange when you read this. That sounds like he's concerned with, with liquidity. Might he'd be worried about it? Vlad claimed there was no clarity problem turns out, they didn't, they didn't have enough cash after their first bailout uh, the nscc said we'll wave a good chunk of your uh and apparently that wasn't enough huh.

It continues on after the nscc waived the excess capital premium charge on january 28th, which just further proves they had a clarity problem. Uh robin had continued to seek reductions to its core nscc deposit requirements, as reflected in its value at risk charge. Beyond the initial request. By gretchen howard, basically saying ah i mean this is nice, but can you lower it a little more clear, a couple hundred million more that really make a mistake uh that would that make me make a difference.

You know uh. This was not simply a mistake of operational balance sheet management, robin hood, but more of fundamental failure to adequately capitalize the firm maintain adequate liquidity arrangements relative to the firm's business model and risk profile and accurately predict and prepare for nscc deposit requirements of set forth in Public uh publicly available rules and based on customer trading activity, more so to say, uh. This was a conscious decision and a conscious effort to fail to not meet requirements to not do their homework to not know what the rules are and to purposely watch chaos ensue. Knowing the chaos would ensue, doing nothing about the chaos and suing and just letting it happen see after the close of market.

On the night of january 27th, robin hood imposed a ten thousand dollar position limit for all customers accounts on six stocks, blah blah blah blah blah blah blah blah blah go down the list. This is after the the pcl was essentially fixed. They said hey now that pco's gone. We just still have this restriction.

We got to make sure our books are good. This is the more extensive trading restrictions we only robin hood sucks, but in case you forgot, you know just remember these guys had the the longest lasting uh restrictions out of any application. We'll show you this, as we continue on by button happened. Finra commented to committee staff that they consider using pco position close only restrictions as a risk mitigation tactic to be extraordinary.

I i i anticipate and sort of interpret this to be mocking the decision. Like i don't know. If that really makes sense, this is terrifying. Finra commented saying: why would you do this and robin hood did it anyways simply put rockhold was broke, they had no choice and, furthermore, they had no standard in the military.

There's a simple thing: there's a simple rule of thumb. Everybody follows the same standard. You have the shave your face, you have to maintain a haircut. You have to dress in uniform.

Your boots have to be laced and tucked into the into the freaking uh inside right. There's all these things you have to do because it's a standard, it's standard, set, a standard. People know what to do. No standard people don't know what to do.

Robert hadn't had a standard. Now they probably knew what they were doing was wrong, but i mean, if you were cracking down on this ahead of time, maybe it wouldn't have happened, which brings me to this. Rockwood's trading restrictions are most likely a direct consequence of inadequate liquidity at robin hood. The conclusion robin hood didn't create the problem so to speak right.

They couldn't help that retail themselves were the black swan event, but they could have controlled their own black swan event right. They, the robin hood, claimed that this is an inevitable, unavoidable unimaginable, but they had so many opportunities to step up to the plate and say hey just in case huh. Just in case we have. These xyz fall fail safes.

These fallbacks, where we can take care of ourselves, they didn't avoid the train, they didn't avoid the problem and they actually managed to make it hit harder. They made the problem worse. They made the absolute worst decision out of any broker on the planet and to me they were the worst villain out of any broker within this, and, if you don't believe me now, you will, as we continue on. I would imagine at least brings me to this.

As a result, robin hood to adapt uh adopt the most stringent and longest lasting trading. Restrictions of any broker dealer during the meme stock market event had robinhood more adequately anticipated, heightened collateral deposit requirements or maintain an adequate capital cushion ahead of it ahead of time. It likely would have been able to adopt more modest restrictions, all to say robin hood was a villain in the story. They were not complacent, they were not uh blindsided, they knew what was coming.

They had conversations with, basically every market maker under the sun. They had conversations with the nscc, they had conversations with the dtcc. They had conversations with everybody, except for retail. The number two finding there's three to go: broker dealer risk: this is a smaller portion.

Robin hood took up the biggest portion, so take a breather shake out. Your hands we're getting closer broker. Dealers facing the greatest operational liquidity concerns took the most expansive trading restrictions. Although multiple broker dealers introduced trading restrictions for a variety of risk management reasons during the meme stock market event broker, dealers facing the greatest operational liquidity concerns took the most expansive trading restrictions.

What does this mean? Let me show you robinhood being a prime example, meaning the guys who are under the most risk had the highest overall restrictions. This kind of makes sense right if you're at high risk, uh you're, probably going to go out of your way to make the most restrictions to protect yourself from the risk that you may have created right at the top of the list for sort of the most Restrictions, then you can see a couple different uh people involved, interactive brokers. Apex is a clearing corporation axos is a clearing. Corporation e-trade is uh broker charles schwab, td ameritrade; a broker, no restrictions, e-trade, slight restrictions; axos no restrictions until february, 2nd apex, slight restrictions on january 28th and we're actually going to get into apex and access, as we continue on just to compare right just to compare How the clearing works for robinhood versus apex and axos and how they handle these situations and how perhaps td, ameritrade and e-trade were able to avoid some of these problems in td ameritrade all together.

Somehow, right, let's continue on so brings us to here apex directed weeble ally, invest so find hundreds of other firms that clear uh their trades through apex to prohibit purchases of certain highly volatile stocks. Apex in this instance was the villain right. You guys remember when wee bull and uh, sofi and ally, invest and a whole bunch of other firms, said hey. We got ta cut off buying for a while, and everyone lost their mind, including myself right.

We were all saying why? What are you doing? You brokers you goofy meatballs. Why is this the case? So robinhood was bad, but what about the other brokers right? If apex was the clearing corporation in this instance, since robin hood was sort of their own? Well, what really went down here? What's the story so to speak, because we all had our theories, but let's see what actually happened right on january 28th at 10 30 a.m. Eastern weibo received an emergency notice via email from apex. Apex is their clearing corporation.

This is different from robin hood, as robin hood clears their own sort of money so to speak, and then they go to the national security clearing corporation for uh, uh, collateral, right, uh, collateral transactions, that's sort of their job, but apex and uh other names, sort of Managed weeble and these other entities separate right. It's different uh. They they put out an email to weeble and other brokers and force this to happen. On the day of right, weeble put out an email saying: do the extreme volatility in the symbols? Amc gamestop and costs are clearing.

Uh firm will no longer be able to support clearance on these symbols. As a result, weeble is forced to set all transactions. These symbols liquidate only within three hours. They took that restriction off the market right apex, essentially for three hours said we kind of look tight on money right now.

We might not be able to put up collateral to the nscc uh. We got ta just kind of pco got to take. This buy thing off the market for a little while right position close only for a little bit. Is it right? No, is it drastically better than robin hood? Yes, i bring you back to what we saw here right.

Robin hood was drastically worse than everything else. No restrictions on interactive brokers after these days apex after these days, uh axos only had one day of restrictions e-trade only one day, td ameritrade charles schwab, no days of restrictions, why? Why was it so drastically different right restrictions lasted about three hours? Why was it so different? Why did apex do this uh? Why why? Why does it make sense? Well, they wanted to avoid a robin hood situation: apex instructed its broker dealer clients to restrict trading, because the company was concerned about the magnitude of a potential collateral deposit request from the nscc, as i've mentioned before right. This brings us into this robert books. Apex were the villains.

Why, right? What's the commonality clearing robert had had problems with clearing, they couldn't clear the money fast enough? They couldn't handle that drastic of a transaction. Why my opinion there's two reasons: standards methodology they didn't prepare and by the way, a little spoiler for later they're still not prepared it's gon na blow your mind, but i mean it when i say it, clearing was the problem upon receiving the 10. Am slice apex personnel felt that it would be challenging for them to meet a discretionary intraday margin, call in the vicinity of one billion dollars within the normal one-hour time frame upon receiving what appeared to be an anomalous slice data and quickly reached out to nscc uh. To and confirmed that the numbers provided on apex portal were accurate.

After this uh they expected expecting traded activity to increase throughout the day and drive the requirements even higher. They decided to impose the trading restrictions on an amc game, stop and cost three tickers. Overall, you can see the email here right, take a second to pause. If you want to read it apex nearly collapsed alongside robin hood, which would have left many brokers, they pulled the same move position close only for a period of time.

Any broker that went through apex was forced to follow those guidelines. So in this situation it's not necessarily the brokers that were the villains, but more so the clearinghouse. A clearinghouse is a very core element of the stock market, which means there has to be some sort of way that you can make sure these guys are all following the same standard and are following the same guidelines and protect themselves from risk right. You might be thinking yourself that seems pretty tough, but you'll actually see that there were those who did it successfully right.

Remember, td ameritrade we're gon na get into that as we continue on around the same time, senior apex personnel begin, considering how to inject additional capital and blah blah blah. This was really rhyming a lot with what robin had had to do. Uh - and here was sort of the response that took place peak six ultimately gave them a cash infusion. It sounds a lot like what what uh citadel did with melvin capital for literally no reason but nonetheless, given apex's expectation.

Extreme market volatility would continue for the foreseeable future. Apex confirmed that there would be no excess capital premium charge. The firm distributed an update to its introducing broker clients confirming removal of liquidation, only policy to its introducing brokers, meaning these guys messed up. They took away buying for a couple of hours, they did it for less tickers.

They were less of a villain. Overall, the robin hood was not great but better right, quick restriction, quick lift when trouble was gone. This makes at least some sense right.