The daily US trade frenzy is easing as investors move on. “

The trade boom that Wall Street took for the storm in early 2021 has cooled sharply as U.S. authorities raise the social sidewalk and amateur investors spend more time away from home.

An army of traders who have no doubt and who are armed with free commercial applications propelled The actions of “meme” to high heights during the first months of this year, in such a vigorous movement that led to a congressional investigation into basic market issues such as trade liquidation and links between brokers and market makers.

But as large parts of the U.S. economy begin to open up, the data has begun to point to a rift in appetite for the same kind of intense trading that sparked the volatility of many stocks in January and February.

“The rise was spectacular, but the fall has been just as spectacular,” said Steve Sosnick, chief strategist at Interactive Brokers. “The casual investor or the investor who combined the game with the investment has moved on. More people are heading to the office. . . and frankly, investors have other things to do with their money. ”

In the US options markets, where traders make sometimes risky bets on stock movements and other assets, the trade associated with retail investors compared to the global volume was reduced to a minimum of six months of 15, 5% in early May, from about 20% in January. According to an analysis by Piper Sandler, in April, total trading volumes in the retail brokerage sector fell 26% compared to March.

At the same time, the proportion of transactions aimed at market makers by the largest retail brokers, compared to the overall volume of the US equity market, fell 10 percentage points to 18% between December and March, despite a new round of stimulus funds that hit US banks. accounts of the latter part of this period.

The slowdown in the DIY trade marks a change from earlier this year when stocks like GameStop, which were hotly debated on Reddit and other forums and were the subject of jokes on social media, were sent home by investors. The movements were as strong as them caused serious losses on the Melvin Capital hedge fund, led by a protégé of well-known manager Steve Cohen. Congress has held numerous hearings on the episode.

The cooling of equity trading has coincided with a sharp rise in cryptocurrency activity, with major stock market volumes rising to a record $ 1.7 million last month, according to CryptoCompare data compiled by The Block Crypto. However, analysts said the lack of granular data on cryptocurrency trading makes it difficult to determine the extent to which users of traditional retail platforms have switched to digital assets.

Shares favored by retailers have lost strength in recent weeks. A basket of popular Goldman Sachs recommendations, which includes products the size of Tesla, Apple and Zoom, has dropped more than 12% from its March high.

Speculative trading in higher-risk penny stocks, which are traded outside most domestic stock exchanges and constitute a turning point for day-to-day trading activity, has fallen since its February highs. Over-the-counter market volumes fell by half to 928 billion shares traded in April compared to February highs, according to data from the Financial Industry Regulatory Authority.

After the severe market turmoil in early 2020, stocks have been on a mostly smooth path, and “that’s usually a time when you get more interest in retail,” said Brian Nick, chief investment strategist at Nuveen .

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However, equities faltered this week, with the Nasdaq Composite, a heavy index with technology names favored by retail investors, falling 2.6% on Monday and 2.7% on Wednesday. The two days were among the worst benchmarks of this year.

The Nasdaq now falls about 6% from the record high it reached on April 29, while the broader S&P 500 is about 2% of its May 7 high. If these losses accelerate more substantially, investors could begin to be affected by margin calls in operations that are amplified by leverage, said Randy Frederick, vice president of trading and derivatives at Charles Schwab. Brokers demand that customers provide more guarantees to support operations and keep them open. But sometimes a rapid rise in calls can exacerbate the market crash as investors sell other assets to meet the broker’s request.

The level of margin debt in brokerage accounts it almost doubled between March last year and this year, to an all-time high, according to Finra data. The data do not differentiate between amateur and professional investors, but “retailers. . . they probably tend to exaggerate, “putting them at potential risk,” Frederick said.

Although frantic activity has softened, volumes remain high from a long-term perspective, due in part to innovations in the retail brokerage industry, analysts said. A key element was the decision by most U.S. brokers to abandon commissions in late 2019, which is credited with helping fuel fueling increased activity during the pandemic.

“As we saw during the pandemic, [retail investors] it can be a great force, “said Katie Koch, co-director of key capital at Goldman Sachs Asset Management. Post-pandemic amateur trading” may not be at the same level of hyperactivity. But I hope activity stays high. “

Additional reports by Eric Platt