Why Reddit traders will define the future of brokerages – View from within

The ability of individual ‘retail’ traders to access a range of markets has been made possible by online brokerages who have helped democratise data and give access to a full range of assets through easy to use, fast and flexible platforms, say executives at Aqua

Aqua, a financial services company which uses Big Data and AI-analytics to construct tradable indices based on humans is cautioning against trying to dismiss the recent ‘Reddit Traders’ rally.

The rise of financial activism and investor power is here to stay, it is driven by a new generation of investors who place social media ahead of historical precedent.

The ability of individual ‘retail’ traders to access a range of markets has been made possible by online brokerages who have helped democratise data and give access to a full range of assets through easy to use, fast and flexible platforms. However, the size of the sector means they have struggled to provide the same level of influence as institutional investors.

“GameStop will go down in history as the first-time retail traders have taken control of a market.” says Yasin Sebastian Qureshi, Co-founder and Head of Strategy at Aqua Digital Rising. “The power of individual investors was focused through social media to achieve a result, without breaking regulations, which was against traditional market logic. Reddit traders bypassed financial structures using a stock as a weapon to target other investors. It was never about the company, it was always about the individuals who wanted GameStop to fail.”

Aqua believes there are many very good hedge funds who have identified and exposed many bad companies. However, there are also a number of short sellers who have been crawling through dustbins, using private investigators and dubious analysis to undermine brands. Global financial markets have not regulated against these questionable tactics, so will find it difficult to censure the social media investor activism.

“The reality for brokerages is they democratised trading and created a product which is used by a new generation of traders who were ‘born and live online’. For this group social media is their primary communication channel not an ‘add-on’ to the normal way of working. The problem for brokerages is that the audience they have inspired to trade can use socially activated micro-investing to undermine their business model.” added Mr Qureshi.

This was demonstrated when established brokers were forced, by the volatility in GameStop, to restrict access to their platforms. The industry which had opened up trading to a new audience was forced to close its doors,

“We believe that socially activated micro-investing will increasingly target companies and investors. Successful brokers will need to move towards a multi-asset product with genuine product diversity to be able to continue to attract and retain clients. The sector has been struggling with the gamification of the industry, so the launch of Aqua indices based on people could not come at a better time.” concluded Mr Qureshi.

Aqua produces accessible and easy to use trading indices which put a value on the success of people from sports stars to entrepreneurs, and celebrities. This is the first time in history this has been possible. Aqua indices are recognised financial products based on actual people and, for brokerages and traders, offer an investment product which diversifies market exposure.

Aqua has been founded by a team of industry specialists with a successful, proven track record of developing and marketing innovative financial services companies. They have taken a number of these through to IPO, delivering high quality returns for investors.

Read this next

Industry News

Playtech to close Finalto sale to Gopher in two weeks

Playtech, the London-listed gambling software developer, today said it expects to close the divesting of its financial trading division Finalto by mid July 2022.

Retail FX

eToro valuation halved as SPAC merger deadline expires

The deadline for the completion of the SPAC merger of eToro had passed yesterday, June 30, and the Israeli broker apparently canceled the deal with Betsy Cohen-backed blank-check firm.

Institutional FX

FXSpotStream reports second best figure for monthly volumes

Trading volumes on institutional FX platforms surged in June after fears over the impact of Russia’s military invasion of Ukraine sent speculative asset classes reeling.

Retail FX

Vantage expands MT5 offering with access to new stocks

ASIC-regulated foreign exchange brokerage Vantage has expanded its service offering and trading products by incorporating new markets, namely 14 exchange-based stocks on MetaTrader 5.

Digital Assets

CFTC charges $1.7 billion Bitcoin scam, largest to date

Mirror Trading accepted at least 29,421 Bitcoin from approximately 23,000 investors from the United States and even more throughout the world.

Retail FX

Spotware Systems upgrades cTrader Desktop to version 4.3

Spotware Systems, a technology provider for the electronic trading industry, has launched an updated version of its cTrader Desktop, which adds new functionality to join a roster of advanced trading capabilities.

Digital Assets

OKX launches Block Trading for tighter pricing

With Block Trading, users can integrate spot and derivatives trades on the same platform and trade multiple currencies in a single trade. The service supports trading of perpetual swap, futures, and option contracts with popular altcoins as the underlying.

Industry News

Interactive Brokers pays $1 million to settle with CFTC

Interactive Brokers overcharged its customers a total of $710,828.14.

Metaverse Gaming NFT

DappRadar launches cross-chain token staking

The launch of the cross-chain token staking mechanism by DappRadar comes under a partnership with LayerZero protocol, which enables smart contracts to communicate across different chains.