How Has the Rise of Retail Trading Platforms Changed the Dynamic between Retail and Institutional Investors?
The rise of retail trading platforms has democratized access to financial markets and, in some cases, allowed retail investors to collectively challenge the dominance of institutional investors. Platforms with zero-commission trades and fractional shares have lowered the barrier to entry, while social media allows for the rapid coordination of trading activity.
The GameStop saga is a key example of this new dynamic, where a large group of retail investors was able to exert significant pressure on institutional short-sellers. However, institutional investors still hold a significant advantage in terms of capital, access to information, and sophisticated trading tools.
The new dynamic is one of increased complexity and occasional, but impactful, challenges to the established order.