U.S. Markets close in 1 hr 29 mins

‘Significant role’ of retail investing ‘here to stay’: investment banker

·3 min read

High-profile investor and early meme stock bull Michael Burry, known for his depiction in the film "The Big Short," said on Twitter last week that he had received a subpoena from the Securities and Exchange Commission tied to the agency's investigation of GameStop (GME).  

Some recent trading woes have also proven a headwind for the meme stock frenzy. Many of the original meme stocks — including GameStop, AMC Entertainment (AMC), and BlackBerry (BB) — fell in trading on Wednesday. 

But institutional investors are still taking notice of the rise of retail trading. In a new interview, Suzanne Shank — the president and CEO of investment bank Siebert Williams Shank — said retail investing is "here to stay," even as she cautioned about the herd mentality that can drive such trading.

"As a firm, we don't sell directly to retail," says Shank, who spoke to Yahoo Finance on Sept. 16. "But obviously as a market participant, we see the impact of retail, which has been quite significant."

"The question is whether — all of them — they seem to run in packs and move together and pile on, as opposed to making the same measured investment decisions that institutions do," adds.

"But there's no doubt that the retail factor is here to stay, and it's going to play a significant role in how stocks move around on a daily basis," she says.

Off-exchange trading made up 47.2% of total U.S. equity trading volume in January 2021, an increase from 41.5% last year and 37.3% over the same month in 2019, according to an analysis conducted by the trade association SIFMA

In earnings released last month, trading platform Robinhood (HOOD) reported 22.5 million user accounts with money in them, a 130% spike from 9.8 million in the same quarter last year. There were 7.2 million such accounts in March 2020, the company said. 

But wealthy investors continue to dominate the stock market. The wealthiest 10% of U.S. families own 84% of overall equities and 92% of directly held equities, according to a 2019 Federal Reserve survey analyzed by The New York Times.

Billionaires have added $1.8 trillion in wealth during the pandemic, according to a report released last month by the Institute for Policy Studies. Observers attribute the gains in part to the disproportionate amount of money that wealthy individuals hold in the stock market. 

LOS ANGELES, CA - JANUARY 27: A GameStop at 5533 Sunset Blvd. is photographed in Hollywood on Wednesday, Jan. 27, 2021 in Los Angeles, CA. (Dania Maxwell / Los Angeles Times via Getty Images)
LOS ANGELES, CA - JANUARY 27: A GameStop at 5533 Sunset Blvd. is photographed in Hollywood on Wednesday, Jan. 27, 2021 in Los Angeles, CA. (Dania Maxwell / Los Angeles Times via Getty Images)

Shank began her career as a civil engineer, before she realized she could have more impact financing projects than designing them.

After earning a master's degree in business administration from the Wharton School at the University of Pennsylvania, she co-founded the investment bank Siebert Cisneros Shank, which later became Siebert Williams Shank.

Speaking to Yahoo Finance, Shank noted that the rapid spread of information through finance-focused media outlets helps retail investors compete with institutional traders.

"I think the advent of the average investor individual gaining access to CNBC and Yahoo and other mediums gives retail investors more information," she adds.

"[There] used to be a time that institutional investors were the only ones who had hot breaking news — and now I think everyone gets hot breaking news."

Read more:

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, YouTube, and reddit.