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can result in substantial financial losses in a very short period of time. So as you’d expect, the companies that have the most connectivity points to exchanges and electronic communication networks (ECNs), with cutting-edge speed and technology, rule the day. They stream orders or quotes to the various exchanges with the hope of capitalizing on small price dislocations, which, if done a great number of times, produces the desired outcome. Securities are not held for long lengths of time, and transactions are based on a pattern of change, velocity, and magnitude. Sometimes this is the “nickels in front of a steamroller” analogy... But when done specifically and timely enough, it becomes your model or strategy. The hubbub around Robinhood comes down to how much the Reddit marauders really matter with their own unique style of day trading. Apparently, they matter enough... The hubbub around Robinhood comes down to how much the Reddit marauders really matter with their own unique style of day trading. Apparently, they matter enough... The House Committee on Financial Services met on February 18 for a hearing regarding recent market volatility, GameStop’s and AMC’s rally and subsequent sell-off, and the various brokerages’ roles in the chain of events. Robinhood CEO Vladimir Tenev, Reddit CEO Steve Huffman, and popular
But first, some backstory... Day trading and individual investing have imploded over recent market sessions, with much of the chatter being discussed on social media platforms like Reddit. And a plethora of this short squeezing and volatility is taking place over at Robinhood, the mobile app offering commission-free access to stocks, options, and exchange-traded funds. Much of the activity has focused on stocks no longer in grace, those that were beaten down due to corporate fundamentals or as part of an out-of-favor industry segment. Going back to 1971, it was the over-the-counter platform known as the National Association of Securities Dealers, or NASD, that first saw the introduction and uptake of day trading. A dozen years later, NASD created the small order execution system (SOES), making it easy for individuals to execute stock trades automatically so long as the orders were for 1,000 shares or less. Trades placed through SOES bypassed the phone lines used to make most trades and placed orders in a matter of seconds instead of minutes. Some initial restrictions were implemented in terms of the frequency one may enter the market, but in essence, day trading was born. The Securities and Exchange Commission (“SEC”) defines day trading as... Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and
American Consequences
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