US day trading is easing as investors “go for other things”

The bargaining boom it took in the Wall Street storm in early 2021 has cooled dramatically as U.S. authorities lift the social barrier and allow amateur investors to spend more time away from home.

An army of merchants equipped with free commercial applications driven When “meme” stocks reached high levels in the first few months of this year, such a strong move prompted a congressional investigation into key market issues such as trade liquidation and the links between brokers and market makers.

But as large parts of the U.S. economy begin to reopen, the hunger for the same kind of lively trading that caused volatility in many stocks in January and February began to fade.

“The rise has been impressive, but the decline has also been spectacular,” said Steve Sosnick, CEO of Interactive Brokers. “Casual investors or investors who have confused gambling with investment have moved on to other things. More people have returned to the office… And the truth is, investors have other things to do with their money.”

In U.S. options markets, where traders make risky bets on stocks and other asset movements, compared to the overall trading volume associated with retail investors, the six-month low reached a 15.5-month low in early May, close to 20 percent. January. In April, total trading volumes in the retail brokerage sector fell 26 percent from March, according to Piper Sandler’s analysis.

At the same time, the proportion of trades targeted by major retail brokers to market makers, compared to the overall volume of the U.S. capital market, fell 10 percentage points to 18 percent between December and March, despite a new round of stimulus funds hit by U.S. banks. accounts in the latter part of that period.

The slowdown in the DIY trade changed the change for the beginning of the year on RedDit and was discussed in other forums and there were jokes on social media as shares like GameStop rose as domestic investors rose. The movements were so powerful caused great losses Melvin Capital hedge fund, backed by a well-known manager Steve Cohen. The conference has held numerous hearings around the section.

The cooling in equity trading has coincided with a sharp rise in cryptocurrency activity, with major exchange volumes hitting a record $ 1.7 billion in the past month, according to CryptoCompare data collected by The Block Crypto. However, analysts say that the lack of data on crypto trading makes it difficult to determine the extent to which users of traditional retail trading platforms have switched to digital assets.

Stocks in favor of retailers have lost traction in recent weeks. Goldman Sachs ’well-known retail sales basket, which includes the likes of Tesla, Apple and Zoom, has fallen more than 12 percent since its March peak.

Speculative trading in high-risk penny stocks, which are traded outside most national stock exchanges and as agents for day-to-day retail trading activities, fell from February highs. Volumes in the over-the-counter markets fell by half to 928 billion shares traded in April compared to February highs, according to data from the Financial Industry Regulation Authority.

In the aftermath of the serious market crash in early 2020, stocks have been on a smooth path mostly, and “it’s usually time to get more retail interest,” said Brian Nick Nuveen’s investment strategy.

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However, shares have shaken up this week with Nasdaq Composite, which has a high index with technology names backed by retail investors, up 2.6 percent on Monday and another 2.7 percent on Wednesday. Both days have been among the worst benchmarks this year.

The Nasdaq fell about 6 percent from its April 29 record, while the broadest S&P 500 fell about 2 percent from its May 7 peak. If these losses accelerate significantly, investors may start to see increased trading margin calls using leverage, said Randy Frederick, vice president of trading and derivatives at Charles Schwab. Brokers urge customers to place more guarantees on trade protection and to keep them open. But sudden quick calls can bring the market down at times as investors sell other assets to meet broker demand.

The level of margin debt in brokerage accounts almost doubled between March last year and this year, the highest ever, according to Finra data. The data do not distinguish between amateur and professional investors, but “retailers. . . they will probably tend to stretch themselves too far, “they can put themselves in danger,” Frederick said.

Although frenetic activity has eased, volumes continue to rise for a longer period of time, driven in part by innovations in the retail brokerage industry, analysts said. One of the key elements was the move by most U.S. brokers to leave commissions in late 2019, which has helped drive the rise in activity during the pandemic.

“As we saw in the pandemic, [retail investors] it can be a huge force, “said Katie Koch, head of basic equity at Goldman Sachs Asset Management. The post-pandemic amateur trade” may not be at the same level of hyperactivity. But I hope activity continues to rise. “

Additional report by Eric Platt