Key Takeaways from the report:

• The wide-spread adoption of zero-fee trading by the brokerage industry began with Interactive Brokers announcing its "IBKR Lite" offering on 9/26, which was followed by Schwab and TD Ameritrade saying they would eliminate all commission fees for online U.S stock, ETFs and options trades in early October (CNBC). The broker price war, coupled with the growing popularity of mobile trading applications such as Robinhood, has set the bar to entering the investing world significantly lower for retail investors in recent months.
• Alongside this downward pressure on trading fees, recent market volatility due to the pandemic, a loss of various entertainment options, and a cash influx from stimulus money has fueled a popular narrative (this, this and most recently, this) that new retail investors have been a key driver behind elevated trading activity, the market's significant rally and recovery from YTD lows.
• In order to quantify this impact from retail investors, our teams analyzed activity in custodial accounts associated with the top retail brokers offering no-fee trading to this group and selected Charles Schwab, E*Trade, Interactive Brokers, National Financial (Fidelity's retail arm), Robinhood, TD Ameritrade and Wells Clearing. These 7 custodians were selected as representing individual-driven, pure play retail accounts compared to many retail custodians that are more representative of wealth management activity or those that share custodial banks with institutions/hedge funds.
• Our data indicates that retail trading volume as a whole has increased in recent months, but this increase has largely accompanied an overall increase in market volume, leaving retail investors as a relatively consistent portion of daily trading volume across our client base.
• When broken out by market cap, smaller companies consistently see retail investors as a higher % of daily trading volume, but have also seen that proportion of volume remain relatively range-bound in recent months alongside an uptick in overall trading volume.
• On an overall ownership basis, retail accounts have seen a slight uptick in relative ownership, growing by 11.8% in total share count since 9/1/2019 to 6/19/2020 across our client base, when compared to institutional and hedge funds accounts as well. This indicates that while the group is accounting for a similar portion of daily trading volume, they are seeing a stronger bias towards buying compared to other groups.
• The trend in relative ownership also varied significantly across sectors, as retail investors were much more notable buyers of sectors that have been beaten down (Oil and Airlines/Hospitality a key highlight) and also of headline-heavy sectors (Healthcare a notable favorite with the focus on potential COVID treatments).
• Overall, we conclude that while retail activity has seen a YTD increase with varied impacts by sector/market, the cohort remains too small to be considered a primary driver of equity price movements. Institutions & hedge funds remain the key drivers of market-wide activity. The variances at the sector level also indicate it is important for issuers to understand their own relative impact from this group.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.