Despite reaching new highs, traditional equity markets have been forced to take notice of new developments, centred in the US, that threaten to fundamentally change the ways markets have been operating up to now.
Suddenly, new players, such as retail brokers – essentially day traders – and market makers, acting as social media trading strategists, have come to the fore, making banks and asset managers nervous as to their sudden impact.
Trading on an app through Robinhood has favoured small upstart retail players who have upset established hedge-fund players, leading to losses of over $5bn for Wall Street hedge funds at one point. Retail brokers and market makers have become the new middlemen in the US, earning billions in fees amid greater market liquidity.
The onslaught of these upstarts on behalf of struggling gaming outlet GameStop ultimately failed, but it clearly showed that new forces in the market could disrupt established patterns.
For decades, hedge funds have had it all their own way, ruling the roost on the Dow, S&P 500 and Nasdaq, and playing the role of final arbiter on the prospects of companies. Short selling is the favourite way for hedge funds to trade.
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