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Summary
- When the whole world entered unprecedented COVID-19 crisis, the trading space saw emergence of Robinhood phenomenon, rapidly embraced by new investors.
- Though institutional investors ignored the phenomenon initially, the app gained strong traction, bringing a new era in retail investing, and making it hard to ignore.
- Afterpay and Zip founders have joined hands to invest in a new Sydney-based, Robinhood-style trading app Superhero, targeting the new-age traders.
COVID-19 pandemic brought changes to various businesses, and the stock markets across the world went into a roller coaster mode. The year 2020 has been unbelievable with the relentless virus gripping the entire world, bringing tremendous uncertainty about the future. However, the period also witnessed rise of several businesses including Robinhood trading.
Robinhood, the free trading app founded by Vladimir Tenev and Baiju Bhatt in the US in April 2013, has changed the trading scenario ever since it came into the picture. The app offers easy and unlimited commission-free trading in stocks, options, and exchange traded funds (ETFs).
Moreover, it facilitates buying and selling of cryptocurrencies with Robinhood Crypto. The rapid embracing of the app by traders has skyrocketed its valuation.
A New Era in Retail Investing
Over the past few months, the app has gained immense traction with millions of Americans working from home. It has experienced a surge in the number of users in the recent past, with nearly 50 per cent of them being the first-time traders.
Given the COVID-19 induced uncertainty, there have been volatile market conditions, with new traders looking for ways to capitalise on the changes in stock prices and helping to validate the app's business model. Recently, Robinhood partnered with Nasdaq to provide real-time last sale prices via Nasdaq Last Sale.
Roaring its Presence Amid the Volatile Market
The new trading platform is undoubtedly disrupting the long-lasting norms of the stock market trading. Initially, institutional investors tried to ignore this new trading phenomenon. However, the platform is growing so much that it is hard for the market to ignore it. The recent trends have confirmed that the much-hyped day trading is here to stay.
Good Read: Robinhood Traders Responsible for Moves in Markets
The Australian stock market volatility during the lockdown: If we talk about the Australian stock market, ASX witnessed a historic surge in March.
Surprisingly, it was the time when the pandemic had just begun, and the world was panicking due to the crisis. The market witnessed significant upticks in volume and volatility. In Australia, on 13 March 2020, the market experienced trading activity peak when 7 million trades were registered in CHESS. The volume spike was across ASX businesses. Futures volumes for March 2020 was up by 11 per cent as compared to the PCP.
Afterpay, Zip Support the Robinhood Trading Phenomenon
The Robinhood phenomenon is now not limited to the US only. It is expanding all over the world, and the pandemic era only pushed its growth. That said, a lot has been happening in the BNPL sector, which got momentum ever since the beginning of global pandemic. In a financially uncertain time, shoppers prefer making payments in instalments without any interest, and hence the trend is catching up.
The BNPL sector is expecting fierce competition with US-based technology company PayPal Holdings, Inc. (NASDAQ:PYPL) entering the space with its latest offering 'Pay in 4'.
Also read: ASX BNPL Players Afterpay and Zip Co Share Price Down ~5%; PayPal Enters the Lucrative Industry
Now the latest speculations in the market are that two Australian BNPL giants - Afterpay Limited (ASX:APT) and ZIP Co Limited (ASX:Z1P) are all set to offer a Robinhood trading experience to Aussie traders. Both the companies are coming together for investing in a Robinhood style trading app called the Superhero.
The Aussie app will not be zero per cent commission-free like the original app in the US, but it will charge a fixed AUD 5 per ASX trade, with investments of at least AUD 100.
The Sydney-based app company has secured AUD 8 million in capital from tech biggies in the country.
The respective founders of Zip, Larry Diamond and Afterpay's Nick Molnar also backed the app in an initial seed round. This new-age online brokerage concept has taken the world by storm, and investors of the app have same expectations from the Aussie app.
Superhero - Paving Way to a New Generation of Investment
Before even entering the market, the app is already being compared with the US-based Robinhood app. The US-based app came like a storm in the market and forced all prominent US brokerages to a zero-brokerage model.
The concept is even more popular among millennials and Gen Z investors. The massive crash and recovery in stock markets during the initial months of pandemic prompted growth of the Robinhood accounts and short-term trading activities. The volatile period of stock markets recently witnessed surges in Apple Inc. (NASDAQ:AAPL) and Tesla, Inc. (NASDAQ:TSLA) stock prices, so new traders want to make most of such opportunities.
Good Read: Three Unique Investment Tips to Build Recession-Proof Portfolio in COVID-19 Crisis
