Skip to main content
No. of Recommendations: 7
Online DYI trading houses (etrade, Scottrade, TDA, etc) changed the rules back in the late 1990s, and forced traditional "middleman" brokerage houses to re-invent themselves. Buying and selling stocks became democratized when the internet allowed retail investors to access the information for themselves and then DYI their own trades. .
The rate of change due to the disruption was slow enough that the traditional methods were able to adapt and continue their control.

BUT: the traditional stock trading profession faced an "innovators dilemma" type situation.

Over the last 10 months or so, I've been watching social media (Reddit, Twitter, Discord, etc) and YouTube, along with the advent of new FULLY ONLINE/CLOUD based brokerages such as Robinhood and Webull, do the same sort of disruption.

Reddit and social media are allowing retail investors to share "right now, this minute information" ... instantaneously amongst themselves.
In the past, this was only possible for "professional" traders.
More democratization!

I just watched a "news" video about the sensational GME drama of the last couple days.
Basically the news anchor asked a "millenial/Cryptocurrency " guy what happened with reddit retail investors vs hedge funds.

The millenial said that the "traditional investors" set up a "traditional short trap", and shorted GME so they could profit at the expense of GME and retail investors. Retail/reddit investors saw the trap, saw that GME had 140% of its shares shorted, and realized they could FORCE a short squeeze. Ie they could turn the trap around on the "traditional investors".

Reddit and social media provided INSTANT widespread information, to LOTS of "retail" (unsophisticated, immature, foolish) investors... who then bought the GME shares en masse, pushing the share price up, FORCING the short squeeze, and sophisticated, educated hedge fund investors had to buy GME shares at high prices... bag holders.

And hedge funds are crying "foul"...
Those unsophisticated, uneducated, stupid retail investors aren't playing by the rules.


I'm sure there are some details I missed, but that is the gist?

I have accounts at a couple of traditional brokerages. Over the last 2 decades, they've been consolidating. For example, Schwab is swallowing TDA this year.
I've been considering opening an account with Robinhood or Webull.

Robinhood and Webull are cloud native trading houses with a cloud designed mobile app interface that's supposedly really easy to use.

The traditional trading houses were developed for analog environments, then rigged together clumsy web interfaces, and are now clumsily transitioning to "mobile app" interfaces.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.