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A New Generation of Active Traders?

This year has seen a remarkable rise in account growth and retail trading activity across both leading and upstart discount brokerages. Consider the following:

• Fidelity added a record 1.2 million new retail accounts in Q2 with daily equity trades doubling to 2.3 million.

• Charles Schwab added 552,000 new accounts (1.6 million if you count the USAA acquisition) in Q2 2020. Daily trading rose to 1.6 million, a 126% jump over the same period last year.

• With over 650,000 new accounts in the first half of 2020, E*Trade enjoyed greater retail organic asset growth in the first half of the year than in the previous two years combined. A daily trading level of 1.01 million in June for the firm and was 267% higher than in 2019. 

• Most impressive of all was the new player on the block. Robinhood, despite having significant technical issues in March, added over 3 million new accounts in 2020 and posted an industry leading 4.3 million daily average trades in June.

Conditions in the second quarter were a kind of perfect storm – in a positive sense – for self-directed brokerage. The foundation was laid last fall when the leading discount brokerages followed Robinhood’s lead in slashing their commissions for online trades to zero. Some added an additional incentive to less well-heeled traders by allowing fractional share purchases. Then the pandemic hit, introducing extreme market volatility, and with it the potential for extreme profits. Social distancing and the economic shutdown also left a good cross section of the potential trading population, both young and old, at home with little to do and no way to make money. 

While conditions this year were highly conducive to growth for discount brokerages, the level of growth is still impressive. Just the four companies cited above added over 6 million new accounts in just a few months. 

It will be interesting to see how long this spike in interest persists and whether it creates a new, sizable market segment of investors that are more comfortable with active trading, at least for a portion of their portfolios.