New York Stock Exchange, Stock market, Stock Here's the difference between Reddit-fueled GME trade and pot stocks
So much oh good, to hear you thanks so much for for joining us. Do you think the run up was more driven by fundamental factors than perhaps what we saw last month with some other names like amc and uh and gamestop? You know wilfred thanks for having me, i i think what you’re seeing is something very similar in the style of trading that’s out there with, namely with these retail investors, that you guys were just talking about the last couple of weeks when you saw those gamestop. You know and amc it was more driven by influencers. I would say the you know the the reddit forums and so on, and then really the high profile influencers, which we were hearing from which i was kind of surprised about. To be honest with you, some of these guys saying that they were buying call options and others were saying, there’s nothing wrong with this, and others were saying, hold the line. Those are serious influencers out there pushing stocks around where this time it seems to be more. You know chat, room driven, and we have seen this like a lot of you guys have mentioned today in the cannabis sector. It’S, been, you know, obviously done this in the past, so it is an issue with the retail trader now, but there is a you know: people have called it the gamification of the retail market and i do believe that’s a that’s, a proper word to use.
You know things are you know, 35 percent of the flow is what we’re hearing is now retail flow order flow that’s a lot different, it’s up for about 10 15 from last year. So it is. It is different this time, but it is kind of the same style of trading, though i would say that we’ve seen, for example, dave portney portnoy tweeting about uh trading in in a cannabis stock today, so so there’s an element of that influencer aspect to this as Well, even if there wasn’t, perhaps uh the percentage of the float out for for short sellers in the same way that gamestop stop and amc had what about shifting to the other direction and another comparison. Why, therefore, is this different, perhaps it’s, not from say bitcoin or tesla’s surge uh last year and early this year uh? Why are we seeing the till rays of this world pull back in a way that we didn’t see the teslas of this world pull back? Well, i don’t know about that particular name. We don’t cover any names here: we’re institutional traders, we trade on behalf on an agency basis on behalf of uh. You know large institutional clients, hedge funds, mutual funds and so on. But what we do study is market structure and we notice that we can see that a lot of this retail volume that you’re seeing is not making it to the overall market, it’s being intercepted by market makers, it’s being traded off exchange and we think that’s.
A very unhealthy thing when you don’t have diverse market participants trading together in one pool of liquidity: well, that’s how you get a disjoint in prices, that’s, how price discovery process kind of fails, and i think you’re, seeing on days like today or on high volatility. We’Ve been seeing over almost half the flow is traded off exchange. Now that that number is kind of you know hidden, because the new york stock exchange and nasdaq and overall exchange volume, we’re seeing 14 15 billion shares a day traded. But half of that is not coming from exchanges, it’s off exchange and we think that that’s hurting price discovery and then you’re going to see disjointing prices like you’ve been saying yeah i mean the payment for order. Flow argument has certainly been thrust into the spotlight with everything we’ve seen with the so called reddit rebellion of the last couple of weeks. I mean congress is getting in in terms of hearings. I know they’re bringing ken griffin from citadel, i believe in uh to testify. Next week, for example, what do you expect to happen with that, if anything and if there wasn’t payment for order flow, then would we he’s seeing such retail investor interest right now, given what it’s meant in terms of commission free trading, yeah morgan, those those are great Questions and – and i think what you’re going to see next week in that hearing, is a a big focus on payment for order flow.
They are going to put them. Obviously, look at the guests. They’Ve got ken griffin from citadel they’ve got the ceo of robin hood and they’ve got the hedge fund, melbourne capital that’s, going to be really focused on the mechanics of the market. What went on here? What goes on inside the market? Why does rob you know? The big complaint about robin hood a couple of weeks ago was that they shut down. They didn’t have the proper infrastructure. In my opinion, it wasn’t that people were claiming that oh, they got a phone call. That was not proven. It hasn’t been proven, but it’s up to investigators, to look at that. But the problem was, they didn’t, have the infrastructure in place for the capital commitments and they got a call from dtcc and they needed to put up more money and – and maybe they grew so fast, because they’re offering these free commissions and the way they offer free Commissions is they receive payment for order flow as one source of their revenue and it’s been reported that retail brokers overall took in three billion dollars last year and rea and payment for order flow and robinhood was a significant percentage of that three billion.
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