Pandemic drives amateur investor trading boom

·2-min read
A trader studies information on trading screens at ETX Capital in central London. Photo: Daniel Leal-Olivas/AFP via Getty Images
A trader studies information on trading screens at ETX Capital in central London. Photo: Daniel Leal-Olivas/AFP via Getty Images

The COVID-19 pandemic has driven a boom in trading, with two leading UK investment platforms reporting surging activity on their platforms.

Online stockbroker AJ Bell (AJB.L) and investment platform IG Group (IGG.L), which lets people trade currencies and financial instruments, both reported huge spikes in customer interest in recent months.

AJ Bell said on Wednesday new customer sign-ups rose by 8% between April and June, with retail customer sign-ups rising by 12%. Total assets under management rose 12% to £54.3bn ($69.2bn).

The number of trades placed by customers over the last three months was also more than double what it was a year ago, AJ Bell said, exceeding forecasts.

Founder and chief executive Andy Bell put the jump down to the recent surge in stock markets and gyrations in prices around the world.

“Markets have rebounded from the lows seen in the previous quarter but remain volatile and this has helped increase the value of assets under administration and customer trading volumes,” Bell said in a statement.

AJ Bell said the better than expected performance meant full-year profits would be at least £2.5m ahead of analysts’ forecasts.

Meanwhile, IG Group said it had seen “exceptional trade volumes and client onboarding” in the months since the pandemic struck. Over 1 million trades were placed on its platform each day in March, compared with 336,000 a year earlier.

The boom helped IG grow revenue by 36% to £649.2m in the financial year ended 31 May. Pre-tax profit leapt by 52% to £295.9m.

Both AJ Bell and IG said activity on their platforms appeared to have peaked but remained elevated. Shares in AJ Bell were up 0.6% shortly after the open in London, while IG Group fell 5.1%.

Experts say the combination of market volatility, people stuck at home during lockdown, and the stoppage of sports — and sports betting — has driven more and more people into playing the markets.

The pandemic has created a similar boom in retail trading in the US, where a surge in amateur investors was recently blamed for a jump in the stock of bust car rental company Hertz.

Critics say much of the activity is irresponsible and reckless trading, more akin to gambling.

A 20-year-old student in the US died by apparent suicide after he thought he racked up losses of almost $750,000 (£588,247) trading options on free trading app Robinhood. The case has led to scrutiny of the startup from US lawmakers. Earlier this week Robinhood scrapped plans to launch in the UK, pledging to improve its US product instead.

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