One of the interesting trends observed in the US retail markets is the internationalization of the US brokerage industry, according to Dan Raju, Co-Founder, Chairman & CEO of Tradier.
They’re almost ten million brokerage accounts in the US that are coming from other countries including Asia Pacific, Middle East, Latin America, and Europe in the last few years, he told Traders Magazine.
The US stock market provides the largest opportunity for citizens of many developing countries to diversify their domestic portfolio, he said.
According to Raju, the retail markets have become so large that they are the single largest dominant force in the market.
“You have a big chunk of that coming from some non-US residents, who trade differently, rationalize the markets differently and are impacted by policies and economic conditions differently,” he said.
He noted that the US broker-dealers have been adjusting to the growing category of retail traders, with many starting offering simplified platforms for a seamless onboarding of international accounts.
“While the industry is grappling with the growing dominance of retail trading, it is captivating to understand how retail volumes will play out when the retail base becomes dramatically global,” he added.
According to Raju, roughly around 25 million retail traders have jumped into the market from 2018.
Since then, the retail market has matured, with traders incrementally leveraging better tools, data, and education, he said.
Dubbing this phenomenon, the “graduation effect,” he said that more retail traders are adopting options and diversifying their portfolios, leaving meme stocks behind.
“It’s a graduation of all the people who came in during the pandemic,” he said.
“There are more single stock options trades today, then the number of shares traded,” Raju added.
While retail participation is at record highs, Raju doesn’t expect more brokerage firms entering the market.
The industry had pushed itself into commission free trading, Raju said.
“If you’re playing purely in the equities space, it is going to be tough for new broker-dealers to figure out a way to make money,” he said.
