>5) RH then "margin calls" all of the people who had money transfers pending at the time of GME purchase.
Is there any evidence of this? The article seems to only say that some people got margin called, but didn't say whether those people were using "real" margin or was using the "instant deposit" margin.
Exactly! Maybe 15 years ago I had the same confusion with fidelity—-why are my trades on margin when there is ample cash to support them? It’s all about the speed of settlement—margin unlocks the opportunity to transact in real-time. At the time, I remember having an option to opt-out of margin based transactions, but don’t remember seeing that anytime recently.
For people playing the gme lotto (no wrong making—-actually wish I had time to join the party), settling any way other than margin is effectively Russian roulette!
Right, there's probably no way to margin call people who have already initiated the transfer of the money. RH has to float it a few days for the ACH to complete.
Why in the world does ACH take so damn long to complete? Do the electrons move slower in the ACH network? I make a request to purchase, the funds availability in my account are verified, the withdrawl is requested, then, waiting, waiting, waiting. Why? This is the area I would love to see "distrupted". Force the banks to honor the requests in order they are received (not in the order they choose that is most lucrative to the bank). If a transfer request comes in for a value greater than my account has, decline the transfer.
This is the most spot on post ever. The amount of stuff in the world that relies on old, tried and true "a file appears in a directory somewhere overnight and is processed the next morning on 'the other side'" method is probably staggering. But most people nowadays don't know or understand this at all, as they've never been exposed to this. And why would they ever be. And all the fixed column width stuff as well and delimiter based import/exports.
Heck I've had to fix one of these things where it suddenly started failing the overnight transfers and when I went to check why it was because a fricking musician had named their song to include the delimiter used in one of those...
Yes, it's a complex problem. Yes, mythical man month, etc. But US banks over the last several years have averaged a quarter trillion dollars per year in profit.
They just have very little incentive to change things. In the meantime, they're earning interest on funds.
It's largely artificial and controlled by the Fed; it can't really be disrupted since you can't replace the Fed (PayPal and Zelle haven't replaced ACH), but they have shaved off a day in recent years and plan to add actual realtime settlement in the next few years. In the meantime, the computers still work business hours and take off weekends for some reason.
> Force the banks to honor the requests in order they are received (not in the order they choose that is most lucrative to the bank).
I always just assume it so they earn interest on the money they have withdrawn immediately from the payer's account, yet refuse to deposit into the receiver's account for 3-5 biz days. I don't think I'm being cynical about it. It's the only logical explanation. Computers only working banker's hours is not a logical excuse (while fun to joke about). A phone support person tried to tell me that a human still approves the transactions. Whatever that means, but it's not logical either.
Interest rates have been effectively 0% since the 90s.
> A phone support person tried to tell me that a human still approves the transactions.
This is true in some cases. They do at least have to audit some of them manually and possibly close your account, file SARs, etc, if they don't like you enough.
ACH settlement is getting faster. There's been a big push in the last few years, which will finish March 19, 2021 with three same day ACH settlement windows, and from what I can tell most (all?) ACH transactions under $100,000 eligible for same day settlement, with the remainder settling the at 8:30 AM Eastern the next business day (or future day if future dated).
What services banks and brokerages offer on top of that, can be more limited of course, but that's the state of the system.
I have seen a snail move through my garden at a faster pace. If it were 1992, and all we had were 9600kbps, then I could understand the burst all transactions after hours and then do the settle up over night. Suggesting that they are going to have 3 windows each day for settlement windows is a 1999 solution. That also sounds counter intuitive in that at each of those windows their systems will get slammed with orders to process. If they just let each one settle as they come in, then they would spread the load.
I'm really dumbfounded at how either I'm an idiot and just cannot understand the issue, or at how the rest of the world has been snowed over into believing it is terribly complex and takes decades to make incremental changes.
Not the rest of the world. Canada has fixed it. Interac settlement is 30 minutes max, with a $5000 limit, and interbank transfers are end-of-same-day. This is even assuming you have to change banks: there are only five banks, and they're regionally divided. Settlement in the same bank (and their investment arms!) is 30 minutes, even if the money is going to a different person. I paid for my house with this, and the payment was received before we walked out of the room!
It's only America's payment system that's woefully behind.
Is there any evidence of this? The article seems to only say that some people got margin called, but didn't say whether those people were using "real" margin or was using the "instant deposit" margin.