By Joe Jowett, CEO of StrikeX
Not since the early 2000s’ dot com bubble have we seen retail stock traders rush into the global equities market and with such a high public profile as we have in the last eighteen months. With figures suggesting that roughly 10% of all daily trades globally were by retail traders (reaching almost 25% on the S&P 500) and hitting USD $8bn in volume globally in 2021, the numbers present a startling picture of this rapidly expanded space. The short squeeze Gamestop saga of early 2021 raised the profile and public perception of retail trading, and it is clear that we have entered a new chapter in the story of non-institutional stock trading.
The retail trader storming of the equity market last year was partly facilitated by fintech trading platforms cutting brokerage commission fees. Driven by the sudden onset of the pandemic in early 2020 and the associated curbs on personal freedom and movement, the retail market witnessed a significant swelling of individual investors and day traders. More than 15% of current retail investors only began trading in 2020, many in the Millennial cohort and increasingly Gen Z, under 25 bracket, with little or no experience in investing or equities markets.
The boom in digital retail trading has meant new platforms have emerged to capitalise on the sector, offering the opportunity to help new investors become part of this ever-growing market. However, many of these allegedly accessible services may be misleading, and are not as efficient or transparent in supporting new customers as they should.
The new normal
Online trading platforms are opening up opportunities for younger investors to break into the market. Much of the new wave of investors is made up of heavy users of social media platforms, with the median age of retail investors falling from 48 to 35 since the outbreak of the pandemic.
A different generation means a different outlook, and it was primarily this ‘Generation Investor’ that was behind what happened with GameStop in January 2021: investors on Reddit created a short squeeze by buying out GameStop stocks, causing short sellers to close with damaging losses, pitting the new Generation Investor against the institutional investors who had bet on GameStop’s decline.
When trading platforms retaliated by suspending trading of GameStop stocks, customers lost the ability to trade freely, lost money, and subsequently lost trust in the providers. These platforms were subject to lawsuits and have since faced an uphill battle to win the trust of their customers back and operate with a high degree of transparency to fulfil the needs of customers.
The freedom & flexibility blockchain technology inherently provides, offers a solution for online trading platforms. Used in transactions around cryptocurrency, NFTs and other digital assets, a blockchain has both speed, security & accountability. Blockchain transactions are transparent, fully traceable, and free from the added control & costs of intermediaries as opposed to platforms built on more analogue, legacy technology.
NFTs have shown the potential of tokenising assets, substituting assets for ‘tokens’ that represent ownership of an asset. Using blockchain technology, any asset can be digitised into a token, opening a low cost and accessible market to trade assets over a blockchain network, removing problematic factors such as time and location.
The benefits of tokenisation are clear but are still to be fully harnessed. This technology requires platforms that can offer trading and investment opportunities to a wide customer base. The real power of tokenisation lies within its potential to unify and provide access to a diversified market consisting of stocks, bonds, digital assets, art, real estate, and more. The platforms capable of achieving this will be essential to transforming the market.
The trading platform of the future
StrikeX will launch its flagship product TradeStrike later in 2022, which will offer the ability to trade both tokenised assets and crypto on the platform, making it far more cost effective, user friendly and efficient; with 24/7 trading. Giving control to retail investors lies at the heart of tokenisation. Providing access to the widest possible range of assets with minimal barriers to entry is the primary motivation behind the new TradeStrike platform. Combining traditional and crypto markets through tokenisation can democratise the entire financial ecosystem, making trading and investing a fairer and more inclusive activity. It is fast, secure, accessible, and transparent. It is where the future of finance lies.
Giving ‘Generation Investor’ the trading platforms they have been asking for is just the first step in the revolutionising of retail trading. Improving the infrastructure of the market will empower ‘Generation Investor’ to claim the future for themselves. StrikeX has the ability to facilitate this.