Aug-Sep 2020

At Tradier, across our 200 plus platforms, we get a keen view of active investor behavior. Sometimes, it isn't easy to rationalize the data, so I have the unique opportunity to speak to our client platform CEO's firsthand. 

           I asked them a seemingly simple question. Is retail investing behavior changing? How do they rationalize almost 200% growth in daily trade volumes? What are you doing about it? For example, eight of our biggest clients saw August 28th, 2020, as their highest trading volume day ever and the first week of September as one of their highest trading volume weeks. This volume follows months of a substantial increase in account acquisition and record trading volumes starting March 2020. The following notes detail some of their thoughts. I hope this will help over the 50 plus new clients who are launching on the Tradier API. This wave of volume seen in the markets presents a tremendous opportunity for innovators.

1. A new breed of active retail investors:  The pandemic will eventually pass; however, it has permanently created a new kind of investor for decades to come. The 24/7 news coverage about the virus and the market's reaction to it has eclipsed analysts' recommendations. This new breed of traders has learned to react in volatile markets. It's been a crash course for many of them on managing volatility and market fundamentals.
2.  Moved up the rank: Over the last three years, investing and trading apps with zero commission offerings and low-cost Robo-advisors have attracted many new millennial investors. A sizeable portion of that crowd has now upgraded themselves by seeking more comprehensive active investing functionality that the basic and simple apps lack. Options trading strategies are being employed more widely by these new investors. New investors that got engaged in the Wave 1.0 of zero commission apps are now moving to new more robust offerings(2.0). The Robo-Advice market is seeing a similar 2.0 wave.  
3. Usage vs. Number of Accounts: The metric of the number of accounts is overblown. The reality is that 80% of online investors have more than one brokerage account. 50% have more than two brokerage accounts. All of them use multiple platforms, websites, research, and analysis platforms. So usage is essential. It's important to measure usage, engagement, and trade volume per user. This metric represents a better picture of growth and success. Traders are willing to pay a higher subscription fee for a better product that gives them an edge. This reality has prompted a number of our clients to launch such features.  
4. Content Hungry:  Due to the pandemic, most investors work from home and are connected to their market sources. Anything that gives them an edge in the market like education, collaboration, signals, and trading communities attracts active investors. Content triggered trading volume has increased substantially. Some of our most active platforms are content-rich.
5. The abandoned Active Trader: Most active traders historically paid very low or no equity commissions for a decade. They now seek a better platform. The hype around free stock trading over the last two years has confused active traders. The market's focus on free trading apps and the consecutive merger and derailment of a few large brokers have orphaned active traders. Active Traders need functionality, features, and quality real-time data over anything else. We see that some of the fastest-growing platforms cater to active traders by providing advanced features and combine that with free trading.