As investors “continue to pay attention to other things”, the trading frenzy of the day eased in the United States

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As the US authorities lifted social restrictions and amateur investors spend more time outside, the trading capital of the day that swept Wall Street in early 2021 has drastically cooled.

An army of mature traders with free trading apps Advance In the first few months of this year, the “meme” stock reached a high level. This was a powerful move that prompted Congress to investigate core market issues such as trade settlement and the link between brokers and market makers.

But as much of the U.S. economy begins to reopen, the data has begun to show that people’s interest in the same type of intense trading is waning, which has triggered volatility in many stocks in January and February.

Steve Sosnick, chief strategist at Interactive Brokers, said: “The increase is amazing, but the decline is equally amazing.” “Any investor, or an investor who confuses gambling with investment, they have turned to other areas. Read more Of people are returning to the office… Frankly speaking, investors have other things related to their money.”

In the US options market, traders sometimes make risky bets on the trend of stocks and other assets. Compared with the total trading volume, retail investor-related transactions fell from nearly 20% in early May to 15.5% in early May. Month low. January. According to Piper Sandler’s analysis, in April, the total transaction volume of the retail brokerage industry fell by 26% compared to March.

At the same time, despite the new round of stimulus funding hitting the Bank of America, the largest retail broker’s ratio of trading market makers compared with the overall trading volume of the U.S. stock market fell by 10 percentage points between December and March to 18. %. It is accounted for in the second half of the period.

The slowdown in DIY trading marks a shift from earlier this year, when stocks like GameStop were hotly debated on Reddit and other forums and joked on social media. These stocks were favored by domestic investors.These moves are so powerful that they Cause heavy losses The shares of hedge fund Melvin Capital are run by the disciples of well-known manager Steve Cohen. Congress held multiple hearings in this episode.

According to CryptoCompare data compiled by The Block Crypto, the cooling of stock trading coincides with a sharp increase in cryptocurrency activity, with trading volume on major exchanges soaring to a record $1.7tn last month. However, analysts said that the lack of detailed data on crypto transactions makes it difficult to determine the extent to which users of traditional retail trading platforms have moved to digital assets.

The price line chart of Goldman Sachs’ basket of 50 most popular retail stocks is falling, which shows that popular stocks are beginning to fall after experiencing a dramatic rebound.

In recent weeks, stocks favored by retail traders have lost their appeal. Goldman Sachs’ basket of popular retail select stocks, including Tesla, Apple and Zoom, has fallen more than 12% from its peak in March.

Since the peak in February, speculative trading of high-risk penny stocks has been traded outside of most national stock exchanges and is the leader in retail day trading activity. Data from the Financial Industry Regulatory Authority shows that in April, the over-the-counter market’s trading volume halved to 928 billion shares, down from the February high.

Brian Nick, chief investment strategist at Nuveen, said that after the severe market turmoil in early 2020, the stock market has been on a steady path, “this is often a period for you to generate more retail interest.”

Runaway market

The British “Financial Times” explored the beginning of a booming global financial market in 2021 in a series of articles

However, the stock market was turbulent this week, and the Nasdaq Composite is a retail investor, favored by large technology stocks and retail investors. The index fell 2.6% on Monday and 2.7% on Wednesday. These two days are the worst days of this year’s benchmark.

The Nasdaq is currently down about 6% from the record high set on April 29, while the broader S&P 500 index is down about 2% from its peak on May 7. Randy Frederick, Charles Schwab’s vice president of trading, said that if these losses accelerate growth further, investors may begin to be hit by margin calls that use leverage to amplify transactions. The broker requires customers to provide more collateral to support the transaction and keep the transaction open. However, as investors sell other assets to meet broker requirements, the sudden influx of calls can sometimes exacerbate market declines.

Margin debt level of the brokerage account Almost doubled According to Finra’s data, from March last year to this year, this number hit a record high. The data does not distinguish between amateur investors and professional investors, but “retail traders”. . . Frederick said, “They may overextend themselves.”

A bar chart comparing the trading share of brokerage firms to total U.S. equity (%), showing that the power of transactions booked by retail brokers is weakening

Analysts said that despite the easing of frenzied activity, in the long run, transaction volume will continue to grow, partly because of innovation in the retail brokerage industry. A key factor is the move by most US brokers to reduce their commissions at the end of 2019, which is believed to help drive increased activity during the pandemic.

“As we saw during the pandemic, [retail investors] It may be a powerful force. “Katie Koch, co-head of basic equities at Goldman Sachs Asset Management, said. After the pandemic, amateur trading “may not be at the same level of overactivity.” But I hope that the activity will continue to maintain a high level. “

Other reports by Eric Platt

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