Curriculum·R404 Execution and Trade Craft·about 33 min
Exits
By the end of this lesson you can
- →Name the three reasons to exit and match each to the entry model that produced the trade
- →Compute whether scaling out beats a single target, from your own record
- →Explain why an exit that requires your presence is conditional rather than planned
- →Estimate the probability that a venue is unavailable when you most need it
Senior · enrolled learners
This lesson opens with The Robinhood outages, 2 and 3 March 2020.
- What happened
- Robinhood's website and mobile applications went down at the market open on 2 March 2020 and stayed down for the rest of that day's trading, with further disruption on 3 March, during some of the highest volume days of the fastest bear market on record. Robinhood's founders attributed the outage to stress on infrastructure that struggled with unprecedented load, driven by volatile markets, record volume and record account sign-ups. Customers could not access their accounts, and the firm could not accept or execute their orders. FINRA found that from January 2018 to February 2021 the firm had failed to reasonably supervise the technology it relied on to accept and execute customer orders, in violation of FINRA Rules 3110 and 2010, and that although the firm had a business continuity plan at the time it did not apply it, because the plan was unreasonably limited to events affecting the firm's physical location, in violation of Rules 4370 and 2010. On 30 June 2021 Robinhood agreed to a $57M fine and approximately $12.6M in restitution plus interest, more than $5M of it to customers affected by the outages, the largest financial penalty FINRA had ever ordered.
- The decision point
- Every customer with a plan to exit that day held a plan conditional on being able to reach the venue. That condition had never been written down, because it does not look like part of the strategy. An exit that requires you to be present, connected and able to place an order is not an exit, it is an intention with a dependency, and the dependency fails on exactly the days the exit was designed for.
- Recorded loss
- $70,000,000
What you will be able to answer
- →What are the three reasons to exit?
- →When does scaling out beat a single target?
- →Why is a manual exit conditional?
- →How likely is that dependency to fail?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://mondovisione.com/media-and-resources/news/finra-orders-record-financial-penalties-against-robinhood-financial-llc-firm-o-202171/
- https://robinhood.com/us/en/newsroom/an-update-from-robinhoods-founders/
- https://techcrunch.com/2020/03/02/robinhood-suffers-prolonged-outage-on-the-day-the-dow-enjoyed-its-single-biggest-point-gain/
- https://www.cnbc.com/2021/06/30/robinhood-to-pay-70-million-for-misleading-customers-and-outages-the-largest-finra-penalty-ever.html
- https://www.investmentnews.com/fintech/robinhood-to-pay-record-70-million-in-finra-settlement/208325
- https://lowey.com/finra-hits-robinhood-with-70m-fine-and-restitution-penalty/
- https://www.sec.gov/newsroom/press-releases/2020-321
Confidence high·Volatility low·Reviewed 2026-08-07·Owner unassigned
Contested
The FINRA action covered several distinct failures including misleading communications, options approval and complaint reporting, not only the outages, and the $70M figure is the total across all of them. FINRA's release attributes more than $5M of the approximately $12.6M restitution to customers affected by the outages. This lesson uses the outage findings and does not attribute the whole penalty to them. FINRA has since taken the release down (finra.org returns 404 for it, October 2026), so the lesson cites Mondo Visione's republication of it, which is where it was read, and the rule citations (3110 and 2010 for technology supervision, 4370 and 2010 for the continuity plan) in Lowey Dannenberg's summary of the settlement.
That the 2 March outage lasted the whole trading day is TechCrunch's report ('locked users out of the service for the duration of Monday's trading'), and the 'fastest bear market' and 'highest volume' framing is CNBC's. Robinhood's own post refers to outages 'over the last two days' and does not give durations.
The conditional outage model in part three is an illustration with stated assumptions, being 99.9 percent headline uptime and outages ten times more likely on high-volatility days. Venues do not publish conditional availability and the multiplier is not measurable from outside. The conclusion, that headline uptime overstates availability when you need it, holds across any multiplier above one.
R404-05 uses the December 2020 SEC action against the same firm, which concerns execution quality and payment for order flow rather than availability. Two different failures at one firm, and the split is deliberate. Keep it.