People create excuses all the time for everything. "You shouldn't hate Robinhood because they were new/incompetent/unprepared." Maybe. Maybe there's 10 different sources to they could have gotten the money from and they chose not to as well. Maybe there were actions they could have taken to solve the problem and chose not to because they were more aligned with the problem not being solved.
This is why I don't like this explanation. At face value it is a good excuse, but when you do an analysis from an ethics and alignment point of view:
Citadel is in bed with Melvin.
Robinhood is in bed with citadel
Robinhood sells data to citadel (this almost certainly is at the direct cost of its users)
Robinhood does transactions through citadel (skimming some of the money off of users transactions)
*Robinhood is more aligned with citadel than retail*
The whole point of an excuse is to seem reasonable. Even if the excuse is true, the underlying relationships are very smelly. All of this from every side is speculation until discovery is done.
Counterpoint, trading firms across the board were asked to alter behavior: If "You wouldn’t believe the shit going on behind the scenes right now. 10 hedge funds have fallen, and our clearing firm emailed to block ALL trading platforms from $GME, $AMC, and the like." is true, then that is quite literally a conspiracy.
https://www.reddit.com/r/IAmA/comments/l81l3g/dan_pipitone_c...
They have the same name because they have the same owner. Many in finance know the firewall/chinese wall is only pretense, information flows pretty freely obviosly with 0 paper trail
Robinhood uses a company named Citadel Securities for some order flow, which is a spinoff of the other Citadel, but is a separate LLC and doesn't care what the other one does.
But it didn't matter even when they were the same company, because different departments of finance firms don't talk to each other by regulation ("Chinese walls").
As a skeptic, why should I believe the regulation is effective? (I am asking in good faith, not rhetorically)
Wouldn't one Citadel entity affect the other? In 2008 didn't we learn that some companies are too big to fail (and therefore also too big to effectively regulate)?
> As a skeptic, why should I believe the regulation is effective? (I am asking in good faith, not rhetorically)
It certainly isn't all the time. However, it does change over time and regulation right now is completely different from 2008 and a lot stricter. This situation where RH had to disable buys is actually caused by new regulations (some part of Dodd-Frank IIRC, and some private by DTCC but can't be arbitrarily changed) - as usual fighting the last battle causes new problems.
> Wouldn't one Citadel entity affect the other? In 2008 didn't we learn that some companies are too big to fail (and therefore also too big to effectively regulate)?
It's possible but their connection isn't that strong; we don't need to assume they'll affect each other just because they have the same name and some shared ownership. Their P&L isn't the same. Besides that, Citadel (the one loaning to Melvin) doesn't mind that Melvin lost a bunch of money, because it means they got to buy them at fire sale prices.
As for "too big to fail" it seems like a meme that prevents actual analysis of the situation. Big companies are actually easier to regulate than lots of small ones, and treat their workers better since small ones are exempt from discrimination laws and often pretty abusive. (This is Matt Bruenig theory.)
This is why I don't like this explanation. At face value it is a good excuse, but when you do an analysis from an ethics and alignment point of view:
The whole point of an excuse is to seem reasonable. Even if the excuse is true, the underlying relationships are very smelly. All of this from every side is speculation until discovery is done.Counterpoint, trading firms across the board were asked to alter behavior: If "You wouldn’t believe the shit going on behind the scenes right now. 10 hedge funds have fallen, and our clearing firm emailed to block ALL trading platforms from $GME, $AMC, and the like." is true, then that is quite literally a conspiracy. https://www.reddit.com/r/IAmA/comments/l81l3g/dan_pipitone_c...