Retail traders - signal or noise? Zero commissions, selling order flow, alpha in "dumb money" moves скачать в хорошем качестве

Retail traders - signal or noise? Zero commissions, selling order flow, alpha in "dumb money" moves

Retail investors participation in the market has been growing rapidly driven by zero commission brokerage offerings, low interest rates and market recovery expectations. After brokers replaced their lost commission revenue with payments for order flow from market makers, they've been on a mission to attract as many new customers as possible. Brokers use gamification, fractional stocks, free shares and more. Social trading apps further promote interest to trading among individual investors. It is not a secret how zero commission brokers make money. But payments for order flow are often presented as taking advantage of retail investors. In reality, market makers can set tighter bid/ask spread when interacting with uninformed trading orders (as opposed to orders of professional informed traders who can move the market). For that reason, market makers can often provide retail investors with price improvement compared to what retail would have gotten on the exchange. Growing volume of retail trades sparked conversations on whether individual investors now represent a force that can move markets. Multiple studies of S&P500 performance in the most recent market rally show that there is not direct correlation between Robinhood clients' holdings and stock performance. If anything, stocks popular among retail traders often tend to underperform. However, a study that focused on less liquid small cap stocks from Russell3000 came to a different conclusion suggesting that in cheaper stocks retail participation play a bigger role. As brokerages further compete for new customers they'll be looking for new revenue streams. Selling retail trading flow data to hedge funds and asset managers may be a good opportunity for monetization. 00:00 Reasons why retail participation in the market grew in the last few months 02:05 Uninformed traders: why retail investors were able to get a zero commission deal 02:57 Payments for order flow is not an unfair practice 03:46 Market makers often provide retail traders with price improvement vs exchange execution 04:37 Retail traders bet on Hertz and other bankrupt companies 05:18 Studies on correlation between retail holdings and stock prices 06:48 Hedge funds are more interested in retail trading flow data than ever: Robintrack visits surge 07:19 The next step in brokers' competition is negative commissions 07:58 Selling aggregated data on retail traders' activity may become a new revenue stream for brokers