I think the situation is exacerbated by the fact that RH gives up to $5,000 to new accounts without any collateral. Depending on the speed of bank transfer, RH might be on the hook to settle trades. Now, I imagine their new account trend was more or less predictable until last week but they probably got a ton of new accounts as a result of GME.
It would have been more palatable if they had reduced margin available to new accounts, or even stopped allowing new accounts for awhile. That would have been a black eye for them but much less severe than what they did instead.
RH was the number one downloaded app just a couple of days ago. They must’ve gotten at least a couple of hundred thousand new accounts. Even at $1,000 average deposit, you’re looking at hundreds of millions to cover for a day or two. That said, I highly doubt they’re in trouble. JPMorgan/Fed likely have RH covered.
But does that explain why they didn’t just prevent trading on these names unless your cash balance is settled and nothing on margin? They already have a mechanism for that.
Imagine half of your userbase, especially almost every single new user onboarded this week, explicitly only wanted to trade on specific symbols, and you don't allow them to do so for 2-3 weeks (ACH settling period) at all.
