Meme stock traders' next chapter

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Note: Shows data from TD Ameritrade and Charles Schwab until entities combined in Oct. 2020; Data: Company filings, Nasdaq; Chart: Jared Whalen/Axios

If 2021 was the big year for the swarm of at-home traders banding together, 2022 will be the big test for whether they stick around or abandon ship.

Why it matters: The wildest trading phenomenon in recent memory ushered in big changes that have — so far — had a lasting impact.

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  • The blistering rise of the retail trader handed struggling companies a lifeline, created the “meme-courting” CEO, and forced veterans on Wall Street to throw in the towel on companies they covered for decades.

  • “It may not look the same every quarter, but we will see people on social media continue to come together and invest as a community,” says Devin Ryan, an analyst who covers investing apps like Robinhood and Coinbase for JMP Securities.

Where it stands: At-home investors aren’t trading nearly as much they were at the height of the Reddit-fueled mania nearly one year ago — but they are still more active than at any other point before the pandemic hit, according to monthly data from some retail brokerage firms.

  • That doesn’t include activity on Robinhood — which exploded in popularity among Reddit traders — that would no doubt push those figures even higher. (They only released monthly trading data on their platform once, in June 2020.)

By the numbers: Robinhood’s monthly active users (its preferred gauge of retail trader engagement) fell to 19 million in its most recent quarter — roughly 2.4 million fewer than the prior quarter. But that’s still over 8 million more users than the same time in 2020.

  • And in a nod to the crazy cryptocurrency activity among at-home traders, crypto trading topped stock trading as their second-biggest source of transaction-based revenue (options trading is the first).

Flashback: The ground was fertile for the retail trading explosion.

  • An epic race-to-the-bottom on trading fees meant that by the end of 2019, most online brokerages were charging $0 to trade stocks and options. So if costs prevented more trading activity, “free” removed that barrier.

  • Then the pandemic left stuck-at-home Americans with nothing to do and “stimmies” gave them extra cash to invest. Apps like Robinhood made it easy (and even game-like) to get in on the budding market frenzy buoyed by unprecedented Fed support.

What to watch: “If the market starts to turn, I wonder if that dampens retail trader enthusiasm,” says Christian Bolu, an analyst at Autonomous.

Go deeper: Meme stock hype dies down

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