Retail Participation In Stock Trading Has Collapsed

A little over a month ago, we first pointed out something troubling for the bulls: after leading the market in terms of both sentiment and volume, retail participation had collapsed. This was most obvious when looking at OCC option data, where SpotGamma noted "a sense of decay or attrition happening on the call side."

Bloomberg also picked up on this, warning of call fatigue as call option volumes - the preferred investment instrument of millions of young traders - had fallen off a cliff.

Now, it's JPMorgan's turn to report what we discussed previously, namely that the latest data reveals that US retail investors' participation in equity trading declined sharply in March after a strong couple of months and a record high share of 28% in December.

As JPM notes, the share of retail activity in US equity trading is shown in Figure 1 and Figure 2. The data reveals a peak in the share of retail investors in US equity trading in December, a pretty strong January and February, "but a significant drop in March to the lowest share since last September."

How to read the above two charts? Retail brokers (Source in Figure 1) typically route their trades into the OTC market through third-party OTC market venues (Destination in Figure 2). There are six main OTC market venues used by retail brokers: Virtu, Citadel, G1 execution services, Two Sigma Securities, Wolverine, and UBS Securities. T

ransactions between retail brokers and third-party market OTC venues are disclosed every quarter under SEC Rule 606. Figure 1 shows the aggregate share of OTC transactions routed by different retail brokers (ETrade, Charles Schwab, TD Ameritrade, & Robinhood) as a percentage of total (off- and on-exchange) US equity market volume. 

Robinhood's share was very high during December, January, and March, but it fell sharply in March to levels last seen in September/October 2020. ETrade's also fell sharply in March. Figure 2 shows the aggregate share to OTC transaction routed to different market venues (destination flow) by retail brokers, again as percentage of total US equity market volume. G1 and Virtu both saw the biggest drop in March.

1 2 3
View single page >> |

Disclosure: Copyright ©2009-2021 Media, LTD; All Rights Reserved. Zero Hedge is intended for Mature Audiences. Familiarize yourself with our legal and use policies ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.