4 ms·

> While it’s difficult to pin down their exact impact, a rush of inexperienced traders tends to cause alarm among institutional investors, who take increased re

> While it’s difficult to pin down their exact impact, a rush of inexperienced traders tends to cause alarm among institutional investors, who take increased retail trading as a sign of rising speculation and worry that a sudden turn in sentiment could send the market spiraling. I read this as "please don't mess-up our playground". It feels the powers of institutional investors is already balanced so that they can decide the way the money flows. Do these people add any value to the economy?

ericmay 6y ago
I agree, at least in sentiment. Adding noise to the market is strictly an advantage for retail investors who don't have access to high-frequency trading algorithms, pre-IPO pricing, detailed equity analysis, sophisticated pricing algorithms, or sophisticated financial instruments. There's certainly competition amongst Wall Street firms and they do create winners and losers... but they are winners and losers amongst themselves. The added noise and participation of retail investors at least somewhat disrupts their playground as you so succinctly put it, and creates arbitrage and investment opportunities. I guess one could argue that although it's still largely exclusionary, at least it's better than in the 1900s in terms of access, but that's not much comfort. I'm open to seeing other points of view, but at first glance this looks like it's a good thing, to my eyes.
- curiousllama 6y ago
  The added noise is strictly to the benefit of institutional investors. Hedge funds pay absurd amounts to trade against dumb money. Quants were suffering for years when vol was low. Meanwhile, big guys (pensions, endowments, banks) literally couldn’t care less what noise is in the market. This is why you can trade for free: because your (very short term)-stupid decisions let someone else make money.
  - verinus 6y ago
    this. The small uninformed and most often unprofessional (being emotionally involved as private savings are invested) pay the big investors...
OscarCunningham 6y ago
You'd think that institutional investors would be happy to have a rush of inexperienced traders to take money from.
- LatteLazy 6y ago
  They are, they just need to be careful as prices are no longer reliable until those idiots have been fleeced and the market has gone back to being roughly correct...
pjc50 6y ago
Given the huge expansion of pensions, they have a huge effect on the economy. They have the opposite incentives to day traders; they would prefer to deliver smooth low volatility 7% average year-on-year, and not have -20% flash crashes driven by panicked day traders trying to exit positions all at once. One of America's largest institutional investors is the Californian pension fund: https://citywireselector.com/news/cio-quits-largest-us-pension-fund-after-just-18-months-in-the-role/a1388183 https://citywireselector.com/news/cio-quits-largest-us-pensi...

ericmay 6y ago

I agree, at least in sentiment. Adding noise to the market is strictly an advantage for retail investors who don't have access to high-frequency trading algorithms, pre-IPO pricing, detailed equity analysis, sophisticated pricing algorithms, or sophisticated financial instruments. There's certainly competition amongst Wall Street firms and they do create winners and losers... but they are winners and losers amongst themselves. The added noise and participation of retail investors at least somewhat disrupts their playground as you so succinctly put it, and creates arbitrage and investment opportunities. I guess one could argue that although it's still largely exclusionary, at least it's better than in the 1900s in terms of access, but that's not much comfort. I'm open to seeing other points of view, but at first glance this looks like it's a good thing, to my eyes.

curiousllama 6y ago
The added noise is strictly to the benefit of institutional investors. Hedge funds pay absurd amounts to trade against dumb money. Quants were suffering for years when vol was low. Meanwhile, big guys (pensions, endowments, banks) literally couldn’t care less what noise is in the market. This is why you can trade for free: because your (very short term)-stupid decisions let someone else make money.
- verinus 6y ago
  this. The small uninformed and most often unprofessional (being emotionally involved as private savings are invested) pay the big investors...

OscarCunningham 6y ago

You'd think that institutional investors would be happy to have a rush of inexperienced traders to take money from.

LatteLazy 6y ago
They are, they just need to be careful as prices are no longer reliable until those idiots have been fleeced and the market has gone back to being roughly correct...

pjc50 6y ago

Given the huge expansion of pensions, they have a huge effect on the economy. They have the opposite incentives to day traders; they would prefer to deliver smooth low volatility 7% average year-on-year, and not have -20% flash crashes driven by panicked day traders trying to exit positions all at once. One of America's largest institutional investors is the Californian pension fund: https://citywireselector.com/news/cio-quits-largest-us-pension-fund-after-just-18-months-in-the-role/a1388183 https://citywireselector.com/news/cio-quits-largest-us-pensi...