Retail Investors Are Making Up 20% of Stock Market Activity Right Now


Retail investors account for 20 percent of stock market activity and almost 25 percent on high volume days.

On Thursday, Joe Mecane, head of execution services at Citadel Securities, said retail investors account for 20 percent of stock market activity and almost 25 percent on high volume days, according to Markets Insider.

Retail investors made up 10 percent of the market's trades in 2019. As brokerages such as E*Trade, TDAmeritrade, and Charles Schwab eliminated their commission fees, retail investor activity shot up to 15 percent.

Now, with volatility at levels not seen in over a decade, the percentage of market activity from retail investors is continuing to climb. The Federal Reserve's announcement on March 23 opened the flood gates for profit-hungry retail investors. Even with the market rally weaning off, the new activity from retail investors is "becoming a more significant liquidity source in the marketplace," Mecane said.

Derivatives encompass a majority of the activity from retail investors, specifically options contracts. "We do see expansion of their participation in different option instruments. Historically its been more of a single leg focus on products," he said. "We've seen them get more into index products. We've seen them expand into more complex order types."

Wall Street hasn't been happy with this new influx of traders and many have condemned this strategy stating that it muddies the market that valued discipline over speculation. However, retail investors aren't moving the entire market and still make up a relatively small amount of market activity.

"Certainly retail investors have a different investment horizon and a different profile to their orders, but ultimately the market is going to price in all the information that it has at that point in time," Mecane said. "Retail is clearly a significant force but they're not going to be the ones that are solely able to drive valuation or market levels."

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Economics, Finance and Investing