Retail traders took over

If we were to make a movie about the evolution of the stock market, retail traders would be that seemingly random sideplot that all of a sudden becomes the climactic focal point.

Back when the GameStop fervor first emerged years ago, retail traders were the enemy of Wall Street, thwarting their positions with Reddit-fueled short squeezes. But now, the script has flipped: Instead of trying to lock hyper-online crypto devotees out of mainstream financial markets, many Wall Street firms are trying to woo them.

What inspired that change of heart? Money, of course. Today, retail traders are more active in the US stock market than mutual funds and traditional non-quant hedge funds combined, while their trading ecosystem represents over 20% of the entire market’s volume, according to Jefferies.

Retail traders have certainly flexed their collective power this year, re-emerging as a force to be reckoned with, fueled by the bull market. But this time around, they had a slew of tools at their disposal to become even more degenerate: Leveraged single-stock exchange-traded funds, one-day options, and a bevy of crypto products.

That’s how they were able to introduce a whole new level of volatility for companies like Opendoor, which has surged 264.37% this year so far.

If you can’t beat ’em…

It’s not just new funds that offer retail traders riskier strategies. Some companies are now hoping they can become the next retail fad, and are marketing specifically to the retail community.

Just look at crypto firm Bullish, which went public in August. In its initial public offering, Bullish gave retail investors direct access to the IPO through brokerages like SoFi and Robinhood, an early-access perk that’s usually only given to well-connected investors.

The strategy seemed to have worked: Bullish raised roughly $1.1 billion, and its opening price was around double its IPO price.

Now retail traders aren’t just getting a seat at the table—they’re dictating the whole menu.—LB