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Data: The Block; Chart: Danielle Alberti/Axios

Small investors are playing a larger role in the stock market than at any time this century.

The big picture: Whatever the reason for small investors' rise — lots of free time thanks to the pandemic, zero-dollar commissions, addictive and gamified apps, enticing volatility — retail investors have become a driving force behind many individual stocks and maybe even the market as a whole.

Why it matters: No one can quantify exactly how much retail investors are trading now, compared with pre-crisis. But thanks to SEC Rule 606, which came into force in January, we now have a very good proxy. That proxy shows that the surge in retail investing that started in March isn't slowing down at all. In fact, it's growing.

How it works: Retail brokerages like Robinhood, TD Ameritrade and E-Trade all route their order flow to high-frequency traders like Virtu and Citadel Securities. Those trading firms make so much money buying at the bid and selling at the offer that they're willing to pay millions of dollars for the ability to fulfill the orders. That practice is known as payment for order flow, or PFOF.

  • Stocks in the S&P 500 tend to trade with the tightest bid-offer spreads, so their PFOF is relatively small. Other stocks have wider spreads, and command larger PFOF. The biggest PFOF of all comes from options trading.

By the numbers: Frank Chaparro and his colleagues at The Block did the laborious work of finding and aggregating the Rule 606 reports for Robinhood, TD Ameritrade and E-Trade. Those firms between them received $99 million of PFOF in January, pre-crisis. In March, that number spiked to $164 million, and in April it grew even further to $175 million.

  • June saw yet another massive jump, registering a stunning $258 million of PFOF just for those 3 firms. Of that amount, $146 million, or 57%, came from options trading.
  • Robinhood's take was large, at $139 million for the four crisis months of March through June. But TD Ameritrade's was even bigger, at $226 million. (The numbers for TD Ameritrade and E-Trade do not include figures for Charles Schwab or Morgan Stanley, with whom those companies are set to merge.)

The bottom line: Retail brokerages like to encourage trading so that they can get PFOF. But that PFOF is small (just 8.8% of the total) with respect to individuals trading S&P 500 stocks. The real money is found in options trading.

Go deeper

Dion Rabouin, author of Markets
Sep 3, 2020 - Economy & Business

The stock market keeps rising

Expand chart
Data: FactSet; Chart: Axios Visuals

U.S. stocks continue their surge, with the S&P 500, Dow Jones Industrial Average and the Nasdaq all finishing the day higher on Wednesday, as seemingly every sector of the market has rallied since the start of the third quarter.

What it means: The "buy anything" rally continues as reopening and stay-at-home stocks both remain bid and every sector of the S&P has seen a sizable jump since the quarter began on July 1.

Trump PACs raise over $82M for first half of 2021

Former President Trump during the Conservative Political Action Conference in Dallas, Texas, on July 11. Photo: Brandon Bell/Getty Images

Former President Trump's political action committees (PACs) raised more than $82 million in the first half of 2021, per Federal Election Commission filings published on Saturday.

Why it matters: It's a significant amount for a former president who's been banned from major social media platforms. It demonstrates his ability to raise huge sums of money should he choose to run for the presidency for a third time.

Updated 1 hour ago - Sports

Olympics dashboard

Team USA's Caeleb Dressel celebrates winning gold in the final of the men's 50m freestyle swimming event at the Tokyo 2020 Olympic Gameson Sunday. Photo: Odd Andersen/AFP via Getty Images

🚨: Simone Biles won't compete in Olympic floor finals, individual vault or uneven bars

🏊: U.S. wins gold in men's 4x100-meter medley relay, earning Caeleb Dressel fifth gold — American Bobby Finke wins gold in men's 1,500-meter freestyle

🏊‍♀️: Katie Ledecky wins gold in women's 800m freestyle

🇬🇧: Britain wins gold in new BMX freestyle category and gold in first-ever Olympic mixed 4x100m medley relay

💻: Japan tests teleporting games and "remote cheering"

🏳️‍⚧️: Axios at the Olympics: Games grapple with trans athletesTrans athletes see the Tokyo Games as a watershed moment

Go deeper: Full Axios coverage