This was not about margin lending to Robinhood customers. It was about a multi-billion dollar increase in collateral required by the NSCC due to a large volume of unsettled trades in highly volatile stocks.
This is blatantly wrong. The entire problem was the standard settlement delay, which requires sufficient collateral to derisk the settlement period -- regardless if they are from instant deposits or made from cash accounts. Robinhood could not have kept operating even if instant deposits were disabled and every account had margin disabled.
The NSCC has a rule-driven model that tries to make sure that it holds an appropriate amount of collateral for each participant based on risk of default between trade and settlement.
That includes a core capital model that’s derived primarily from value-at-risk based on portfolio size, volatility and the usual things.
It also has an excess capital premium charge which varies according to the extent to which the core requirement is large vis-a-vis a participant’s excess net capital (excess over the minimum regulatory capital required by the SEC); because those are precisely the cases where default is more likely.
In the case of Robinhood, it seems like their internal risk management team had failed to take into account the excess capital premium (which is a large problem on its own), and that premium was particularly large based on how poorly capitalized Robinhood was.
You can go look up details on the NSCC model; it doesn’t care whether your clients are trading on margin.
You really are quite on the wrong side of this discussion: where are you getting your information?
No; that's really not what it was.
This was not about margin lending to Robinhood customers. It was about a multi-billion dollar increase in collateral required by the NSCC due to a large volume of unsettled trades in highly volatile stocks.
ref. https://fortune.com/2021/02/02/robinhood-gamestop-restricted...