Feb 24, 2020 - Economy & Business

Mom and pop investors splurge on stocks

The New York Stock Exchange on Jan. 21. Photo: Spencer Platt/Getty Images

Trading volume at online and discount brokers like TD Ameritrade and the recently acquired E*Trade has exploded over the past year, Bloomberg reports, with TD Ameritrade alone having seen million-trade days multiplying at a "record pace."

What's happening: So-called mom and pop retail investors are chasing the U.S. bull market via online brokerages, thanks largely to top brokerage firms cutting trading fees to zero.

Driving the news: "[D]aily average revenue trades ... have almost doubled to an all-time high since last September, data compiled by Sundial Research showed," per Bloomberg.

  • "The latest leg of [retail trader] emergence times closely with October, when E*Trade, Charles Schwab and TD Ameritrade slashed commission fees to zero."

Details: At TD Ameritrade, there were 38 days when the number of trades topped 1 million during the fiscal first quarter that ended Dec. 31, Steve Boyle, TD's interim president and CEO, told Bloomberg. That compares to 23 such days in all of fiscal year 2019.

  • E*Trade's daily average revenue trades have increased 74%.

Go deeper

Investors splurge at the free online stock trading buffet

Illustration: Sarah Grillo/Axios

When you give something away, people are likely to consume far too much of it. That's true of food, it's true of drink, and it's true of options trades.

Why it matters: The best thing that an investor can do is nothing. People who actively trade the market are effectively trying to time it — to buy low and sell high. Voluminous literature has shown that it just doesn't work, and that doing nothing is superior to doing something a significant majority of the time.

Another fiasco for Robinhood

Illustration: Sarah Grillo/Axios

Millions of stock and options traders were effectively shut out of the market for all of Monday as well as two hours of early trade on Tuesday.

Driving the news: The culprit was Robinhood, a fast-growing stock-trading platform that inexplicably face-planted on a day when trading volume surged and the stock market rose by 4%.

Expect lawyers to take aim at Robinhood

Photo: Rafael Henrique/SOPA Images/LightRocket via Getty Images

After Morgan Stanley last month agreed to pay $13 billion for E*Trade, deal-makers began buzzing that Robinhood could be the next discount domino to fall. Particularly on the heels of Charles Schwab agreeing to buy TD Ameritrade for $26 billion.

What's new: Robinhood does now have a target on its back, but the archers are more likely to be lawyers than potential acquirers.