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New Retail Investor Surge Will Demand Trading Platform Software Value

New Retail Investor Surge Will Demand Trading Platform Software Value

  • As Retail Investor Participation explodes globally, the demand for software developers to bring innovation and expanded value add services to the typical trading platform development cycle becomes crucial.

Fueled in part by a pandemic lockdown, the financial markets have seen quite an explosion of retail investor participation. As people were practically forced out of typical workforce routines, many entered the financial markets simply to attempt to stave off pressures of simply putting food on the table.

Initially as the pandemic seemed to take the globe by storm, the markets saw a severe downturn, but the resulting side effects unleashed a wave of new account openings not just in the US markets, but globally as well. It was not long after the markets fully recovered to reach new heights. The retail investor wave could have played just as much a role as even the professional money could claim credit.

You can say it was government stimulus, lower taxes, low interest rates or just the simple fact main street was all on boarding to buy stocks, the simple fact is, the retail investor was in the game more than they have ever been.

Just as recently as a few weeks ago it was reported emerging markets like Vietnam halted trading for the first time in 21 years due to a surge in retail investor participation that took its market to an all-time high and up nearly 20% in 2021 alone so far. According to Bloomberg, Taiwan and South Korea markets both up over 10% for the year have seen trading volume transactions being fueled by retail traders accounting for around 70% and 75% of all transactions respectively.

Here in the US, BusinessInsider says retail investors are on pace to sink nearly a trillion dollars into stocks in 2021 and that this number is accelerating just in the past month.

What caught my eye though which I am going to highlight as more relevant was  a recent survey published on Nasdaq called “The 2021 State of the Retail Investor”. In this interesting survey, besides the claim that nearly 20 percent of all US equity trades are now represented by retail investors, the survey talks about what many retail investors will characterize as their most important areas of improvement they wished their brokers would provide through their technology and trading platform offerings.

The survey goes into more detail about how client retention at many top retail brokerages more or less comes down to the services, data and research that their platforms provide.

Topping the list of datapoints from this survey was that 81% of those surveyed believed that trading portability from the multitudes of 3rd party trading tools and analytics services were of importance for the participant to consider as a value add to their platform’s importance to servicing their needs.

This one data point alone speaks volumes to the importance of the software development cycle and its ability to ingest or otherwise be developed (say through an API) by the brokerage’s team of developers or outside development shops like ours here at Fintatech.com. It has become crucial to be able to meet the coming demands of not just the end user, but the platform provider who wishes to enter the market and serve these end users by what is considered to be their overall importance factors of why they would stay a customer and continue to use the platform in lieu of moving to another provider or brokerage firm.

The second important response from this survey was when asked if the user was satisfied with their current brokerage’s information, data and research provision, the results were a poor 48.5% satisfaction rate leaving it to be a 50/50 prospect of whether the retail user can even say the virtues of their current platform solves their comfort level and when you have such a split in personal satisfaction , this cannot be good for the firm’s ability to keep this client once a new offering comes along that they may experiment with.

The final important result from this survey listed out the types of content and analysis the users desired or wanted to see improvements overwhelmingly were news solutions being 34% saw as most important with charts, scans and alerts being 33% as second most important leaving 33% importance to almost a dozen other various services and technology considerations.

The results from this survey emphasize the importance of today’s software developers of trading platform services to custom build and be sure to offer these elements so that the platform provider is meeting the high demands of this new retail trader segment and more importantly magnifies the fact that even today’s popular retail trading platforms are not serving their user needs and run risk of losing clients to any number of new technology providers that recognize these prevailing trends and responses.

  • Many retail investors don’t want that “on their own” feeling. The rise of chatrooms and forum communities is propelling a collective influence on markets and unleashing a new brand of quality armchair analysis.

One of the recent market frenzy trends has been the rise of the online stock forums, chatrooms and message boards that have propelled some stocks not so much as a fundamental value case for the buyers, but more so as a collective “stick it to the man” mentality that many on main street feel empowered to put pressure on large short sellers or other large managed funds that the smaller guys feel have taken advantage of their lower influence for so many years on Wall Street.

This new trend marks not just a movement of rebellion, but more highlights the fact that many retail traders and investors do not want to feel as though they are on their own while say, trading from their living rooms or other forces that confine them to a solitary atmosphere.

Many traditional retail trading platforms don’t provide this built-in functionality of enabling engagement or direct peer to peer messaging functionalities and as a result, users are forced to go outside the trading platform environment and interact with dozens and dozens of 3rd party services to the point where the user may spend more time interacting on these forums than say interacting with their trading platform.

One of the reasons perhaps that the ThinkorSwim platform sold to Charles Schwab last year was long ago nearly 10 years ago, the folks at TD Ameritrade brought live video and audio feeds to the trading platform.  They provided round the clock chatroom participation and as a result, the ThinkorSwim platform rose TD Ameritrade to be one of the most popular trading platform for the retail community, so much so that with all those new retail accounts acquired, Charles Schwab recognized a huge new user base and the technology that was of significant value for all parties involved.

These forums empowered educators to provide services directly to the ecosystem of the platform technology and users who were new to trading gained thoughtful insights and got the 3rd party analysis and opinions that made them feel like they were are part of a collective mindset empowering them to be more active, more knowledgeable and essentially more profitable than where they might have been had they gone it alone to have to learn the hard investing and trading lessons we all learn when not engaging with others who are there to help, support and ultimately cheer together when executing a good trade or investing windfall.

Many of these recent participants learned what “shorting” means and were able to identify highly shorted stock scenarios that were so absurd in their percentage of float, it turned into a collective blizzard of fanatics simply out to break the banks of infamous short sellers into submission.

When you empower a group of enthusiasts to collaborate for one objective, it certainly brings a new level of excitement to the game, right or wrong, which leads to more active trading and more active engagement while at the same time cheering each other’s successes like a rebel army overthrowing kings and their armies.

Sadly, we still see many of even the most popular trading apps and platforms that have yet to integrate a full-fledged chat and direct engagement solution which in the longer run will end up costing them customer retention simply from a lack of innovation and recognition of what is happening right before their eyes.

  • Technology advancement and new data analysis solutions are driving the rise of hundreds if not thousands of new financial service offerings. This fragmentation can be addressed in a well designed and thoughtful single platform interface.

In the last few years as digital cloud adoption has been transforming many industries outside of fintech and financial services, a new breed of data analytics and alternative data approaches to trading and investing have cropped up.

Some specialize in news aggregation, some short interest coverage, others options analysis and derivative analytics and of course the rising tide of crypto currencies and digital tokens of all colors.

Social media trend analysis and various supply chain analytics are reshaping how important data can be ingested and translate to investment performance of many publicly traded instruments.

These services are becoming so fragmented that again, a good software development shop or these larger retail trading platforms need to start providing the API integrations and modular solutions to bring these new analytic approaches into a more confined user interface.

Even traditional financial data offerings by themselves are now facing increased competition with enormous price declines through more convenient accessibility and distribution through cloud architectures and this is an is creating an enormous opportunity for the popular retail trading platforms to evolve into an adaptable 3rd party integration that will return services for a fee to the business model as now the days of zero-based commissions are now forcing most major retail shops to adopt.

We here at Fintatech.com provide white label trading platform solutions for all devices from desktop to mobile as well as various individual components such as charting software, backtesting script engines, and solutions that are scalable and can be built bespoke to incorporate many of the features mentioned above in this article that is sorely lacking in traditional popular trading platforms.

Do you have a special service or value add to bring to a platform solution?  Contact us to bring your solution to market and grab your share of an unlimited opportunity that is exploding globally.

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