Emergence of meme stocks a "very interesting phenomena" says eToro as trading jumps 233%

The emergence of meme stocks is creating a “very interesting phenomena”, according to the CEO of the multi-asset investment platform which has seen an explosion of retail trading on its platform during lockdown.

Speaking at the AltiFi Festival of Finance, eToro CEO Yoni Assia spoke about retail investors accessing the investment market during Covid-19.

eToro’s recently revealed that customer trading volumes were 233 per cent higher in the first quarter of this year compared with the same period last year, with roughly 300,000 people in the UK joining the platform in the first three months of 2021 boosted by its provision of crypto assets.

Retail investors using trading platforms, and social media investment advice, have also been behind a surge in the value of certain company shares - known as meme stocks.

They include cinema operator AMC Entertainment Holdings and video game retailer GameStop, whose shares jumped in January in a retail-driven rally.

Speaking about the emergence of meme stocks, Assia said: “I think what we are seeing now is the markets in action. So retail investors are passive for a long period of time. 

"And people were complaining about the fact that retail investors are passive that maybe there was a systematic risk of all the money going to just ETFs and indices. 

“And retail investors are the biggest players around the table.

“So you have a player that has been passive for a while gradually becoming more and more passive through indices, that suddenly is becoming active. 

"And is becoming active with the voices of millions and tens of millions of people who are voicing, they are basically voting in the markets with the money. 

“And that is creating very interesting phenomena. That can impact capital formation, sometimes for the better and sometimes with very high risk.”