Feb 9, 2021
Retail traders good for markets despite volatility: TMX CEO
Recent spike in retail trading giving new investors, companies more opportunities: TMX Group CEO
The unprecedented spike in retail investor activity that took the world by storm is good for markets despite the surge in volatility, according to the head of exchange operator TMX Group Inc.
John McKenzie, whose company operates the Toronto Stock Exchange, said the increased trading activity will also help boost liquidity in markets.
“Never before have retail traders had so much access to the markets like they have now,” he said. “And while that does add some volatility in certain names or certain companies, it also adds a lot of liquidity and that liquidity is what’s also fueling those valuations that are making it easier for companies to come to market.
"It’s a strong support and we only just hope and trust that people know what they’re buying and they look at the value of what they’re investing in.”
Markets have been driven into a frenzy as some retail investors turned to internet forums such as Reddit in recent weeks. The result has seen shares in companies like GameStop Inc. and BlackBerry Inc. post rapid advances before erasing much of those gains shortly thereafter.
On Monday, TMX Group reported an eight per cent jump in revenue to $219.5 million in the fourth quarter. Growth was partly driven by increased equity and fixed income trading revenue.
McKenzie said the level of retail trading participation has risen from 35 per cent last year to 45 per cent. He added the underlying factors propelling this activity, such as low interest rates, new work-from-home dynamics and the adoption of new trading platforms, won’t disappear any time soon.
“The trends that are driving it are trends that aren’t going away,” McKenzie said.