Pro traders fear the rise of GameStop’s army of retail investors

The rise of retail traders was one of the biggest concerns for professional traders, a JPMorgan survey found.

When asked to list top concerns around the structure of the market, the bank’s survey of more than 200 equities traders found some 20% named the rise of retail traders. The worry was topped only by fears of regulatory reform, which 22% named. About 17% named market fragmentation as a worry.

The survey, carried out in January and published on 20 April, comes amid a boom of retail investing as locked-down armchair investors have more time and expendable income to pile into stock markets.

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Retail traders drove a surge in market gains in January — GameStop shares rose by more than 2,700% after a band of traders from the online forum Reddit led a campaign to boost its share price, squeezing hedge funds short the stock.

Following the turbulence, Robinhood – a zero-commission trading app that was used by many of those traders – has been under scrutiny over concerns it may diminish users’ sense of risk in the gamification of trading.

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Almost of third of traders in the JPMorgan survey said mobile trading applications will be the most influential for shaping the future of trading in the next 12 months. Eighty-four percent of the traders surveyed were working from home between March and June 2020.

Separately, in a 1 April note, Goldman Sachs’ analysts said retail trading has been a key driver behind high levels of US cash equity volumes. However, the analysts said the sustainability of the trend is “questionable”, adding that the level of activity could dip as people return to the office.

To contact the author of this story with feedback or news, email Bérengère Sim

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