Retail investors are in the driver’s seat. These winds of change are deciding the trajectory of every stock market – from Canada to the US to Australia.
Unabated rise of the retail investor class
JPMorgan has estimated that retail investors were the ‘dominant force’ behind the market rally in the US through the summer months of 2021. Net inflows in stocks and ETFs from this class of investors were at a record level. This was preceded by a sudden surge in GameStop and AMC Entertainment stocks, backed by investors who convened on Reddit for a coordinated effort to pump the prices up.
The actual trade number of retail investors is difficult to estimate. Virtu Financial estimates that the share of this class in overall market trade in the US was over 25 per cent in July and August last year. The percentage was just 17.1 in January 2020.
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In Australia, the Australian Securities and Investments Commission (ASIC) estimates that over 700,000 new trading accounts were opened in 2020. In Canada, TMX Group has confirmed that the share of retail investors in all trades was 45 per cent in January 2021, up ten percentage points from January 2020.
Rise of online zero commission trading
Nearly all analysts believe that retail participation in the global stock market is driven by the proliferation of online zero-commission brokerages like Robinhood in the US, Questrade in Canada and CMC Markets in Australia. The pandemic gave ample time to retail investors to open trading accounts, and the financial support from respective federal governments served as the financial backing.
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IPO Support
Robinhood and Social Finance have launched IPO investment services for their clients. Retail investors in the US can now compete with institutional investors like BlackRock to grab shares at the opening price. The brokerages are joining forces with investment banks for allocations, which retail investors can pass on.
Robinhood had reportedly acquired nearly 250,000 shares in the May NYSE listing of FIGS Inc.
Kalkine Media is a media house and an investor relations group. Participation in the stock market is an area of keen interest, and initial public offerings remain a favorable pick for many investors. Kalkine Media aims to study and analyze the subject and at the same time provide general insights on underlying risks and rewards/benefits for informational purposes only.
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