In recent weeks, brokers like Robinhood came under scrutiny for limiting trade in GameStop Corporation (NYSE: GME), AMC Entertainment Holdings Inc (NYSE: AMC) and Koss Corporation (NASDAQ: KOSS), among other stocks.
In light of the volatility and market’s response to the controversial decision to limit trade, Benzinga spoke with Dan Pipitone, co-founder at TradeZero, a trading technology and brokerage firm.
About TradeZero: TradeZero is a holistic solution for the beginner and advanced market participant.
The company prides itself on reliability and access. Core solutions include commission-free stock and options trading, free direct-access routing, real-time streaming on web and desktop platforms, pre-and post-market trade, charting and scrolling news feeds, as well as Short Locates Plus, an easy way to source and sell back shares for shoring.
“We believe in providing comparable access to what the professionals and institutions may have,” Pipitone said in a discussion on innovating for users.
“On our Pro platform, we’ve added things like a market countdown clock, as well as hot buttons.”
Hot buttons are a popular feature among professionals as they cut down on the obstacles to trade execution.
“Many folks trade with us using the keyboard, and many also use the mouse. This is kind of a hybrid solution whereby you can create a hotkey, a combination of keystrokes to do an action either by a certain amount of shares at a certain price, or get out of a percentage of your position, or what have you,” Pipitone said.
At the moment, TradeZero offers eight assignable hot buttons for keyboard and mouse strokes.
“From the mobile perspective, we’ve done a complete overhaul and redesign of the user experience,” Pipitone said. “We brought the locate and sell back feature into the mobile platform. We now have the full functionality of locator, which includes sourcing those stocks that are not easy to borrow, but also, when you’re done with the short, you can market for credit and potentially recoup some of the locate fee.”
Volatility Implications: Alongside speculative commentary on online forums like WallStreetBets, shares of highly shorted companies began rising in an increasing fashion, as funds looked to reduce their short exposure, buying-to-close positions.
Retail market participants — like those that contributed to the speculative commentaries online — added to the crash-up dynamics as they heightened their aggressive stock and short-term call option buying.
The event put pressure on the financial system, forcing brokers to reduce risk by limit trade.
“It’s been a pretty intense few weeks,” Pipitone said.
“We received a note from our clearing firm that they wanted us to halt trading on some of those stocks, but we pushed back because we didn’t see the risk.”
TradeZero ultimately prevailed, leaving customers like Dave Portnoy, the Barstool Sports founder who’s been vocal against the decision by other brokers to limit trade, satisfied.
“We believe that it’s our job to offer that ability. We run a broker-dealer and we’re managing our risk,” Pipitone said. “I think the pushback from the public was well heard, and I don’t see that happening again anytime soon.”
The Response To Volume: Alongside the aforementioned equity market volatility, TradeZero reported 500% growth in 2020 trading volume.
In a statement on the development, Pipitone said: “With new investors in the market and traders more active during the pandemic, we have seen an exponential surge in all of our metrics. We have attracted a substantial number of new clients to the TradeZero America platform, and investors are opening and maintaining larger accounts.”
Amid the doubling engagement and jump in new accounts, Pipitione echoed his firm’s commitment to service.
“If you’re someone who has the conviction and knowledge that something is trading higher than it should be, you should have access. The hedge funds can take full advantage, why can’t the individual investor?”
Going forward, the co-founder said TradeZero would further the depth and breadth of its product portfolio, adding functionality to its short product and vendors to help with short supply.
The company is also looking to hone in on options trading. After acquiring data feeds from CBOE Global Markets Inc (BATS: CBOE), TradeZero will release a robust options product that supports both multileg and direct routing to TradeZero’s operation on the floor of the NYSE American Stock Exchange next quarter.
“This is a long time coming — we have floor traders down there that do a few million contracts a month executing options for institutions. We’re excited about tying in some of our retail order flow to be handled by folks on the platform, to do things like improving pricing and maybe for larger traders, introduce them to more liquidity.”
The initiative accentuates one of TradeZero’s biggest differentiators: 24/7 live customer service.
“If you have a question and you need individualized assistance, we offer that. We want people to make sure they can have full faith and confidence that they’re going to reach someone if there’s an issue, even though the issues themselves should be very limited because of the system’s reliability.”
“In the end, it’s the best trading experience that wins.”
Photo by Jopwell from Pexels.
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