By Michael Martin, Vice President of Market Strategy, TradingBlock
In 2025, traders and the online brokerages they leverage can expect major shifts that will bring both challenges and opportunities. These changes could be driven by rapid advancements in technology, shifting investor expectations, evolving regulations, AI’s growing influence and a new administration in the White House.
Navigating the year ahead will require adaptability and an understanding of emerging trends. Whether you are a seasoned institutional investor or an individual trader looking to stay ahead of the curve, the following issues could loom on the horizon.
New White House, New Regulatory Landscape?
President Donald Trump has tapped crypto backer and former SEC commissioner Paul Atkins for the agency’s top job. With Atkins serving as chair, can we expect more clearly defined regulations that support the proliferation of digital currencies, as well as rules around how they are handled by online brokerages?
Just two days into Trump’s presidency, Acting SEC Chairman Mark T. Uyeda, announced the formation of a new crypto task force “dedicated to developing a comprehensive and clear regulatory framework for crypto assets.” Additionally, in a major pivot, the SEC recently rescinded Staff Accounting Bulletin (SAB) 121, which previously guided how financial institutions should account for crypto assets held on behalf of their customers.
With Trump back in the White House, can we also expect sweeping deregulatory efforts that may lead us into a bullish trend?
A Recipe for Volatility?
Despite Trump’s intention to boost the economy through deregulation, his tariffs could snarl supply chains, ignite trade wars and bring about market instability. Traders will likely pay closer attention to the sectors directly impacted by the latest announcements.
Sharp increases in the price of key resources can lead to stagflation – high inflation, high unemployment and slow economic growth. Combine this economic environment with the world’s ongoing wars and conflicts and you could have a potent recipe for market volatility.
Online brokerages should prepare themselves to meet the demands of traders who must quickly adapt their portfolios amid dynamic, unsavory market conditions. Options traders may increasingly use shorter-term options as they attempt to manage news cycle swings.
AI and Augmenting Human Decision Making?
Will AI proliferate and have a profound impact on securities-related research and decision-making? Firms that leverage AI while placing humans at the center of the decision-making process may have a greater chance of gaining market share.
While AI can process endless amounts of data, expedite research and surface valuable insights, the technology lacks the unique skills and insights of a professional who can interpret market sentiment, account for qualitative data, make nuanced decisions, adapt to dynamic market conditions and more.
Might active managers and stock pickers do well in 2025 by using AI to inform decisions rather than relying on AI to make decisions? Regulators will probably continue to review AI adoption and rollout to investors to ensure it doesn’t cross over into investment advice and to ensure investors understand the underlying basis of the research AI may serve up.
Additionally, brokerages will continue to adopt AI to augment traditional customer service roles and back-office services as they look to manage costs in a zero-commission world.
Growing Demand for Custom Routing Algorithms?
Liquidity fragmentation, which is when asset liquidity is scattered across multiple trading venues or platforms, will likely continue to hinder traders, asset managers and hedge funds looking to access available liquidity all at once.This fragmentation can lead to failed trades, delayed execution or inflated costs.
With 18 options exchanges alone, the need to solve this challenge has never been greater.As a result, we should expect to see a greater demand for custom routing algorithms, which promote liquidity management by dynamically scanning for and aggregating liquidity across venues. Done well, they allow traders to carry out orders efficiently across exchanges for smarter, faster and more cost-effective execution.
Balancing Tech with Customer Support?
With the Great Wealth Transfer underway, millennials are expected to inherit more than any other generation – a whopping $46 trillion over the next 25 years, according to Cerulli Associates. This means that the number of tech-savvy high-net-worth individuals and families could skyrocket.
As online brokerages work to build relationships with and meet the demands of these digital natives – who want customized, tech-enabled solutions accessible anytime from anywhere – they will have to strike a balance between leveraging low-friction technology and providing the person-to-person customer support that can make clients sticky. This includes leveraging a streamlined tech stack that can cater to a broad audience with evolving needs.
As we peer into the near future, it’s clear that traders and brokerages will face their fair share of hurdles.To succeed, they will need to embrace technology and be ready to quickly adapt to changing market trends.Those that stay ahead of the trends can emerge from this year even stronger.
