House Hearing Provides a Message to Robinhood Traders: Retail Investors Lose Consistently When They Actively Trade their Own Account — Pam and Russ Martens

Gambling against the house.

Himes: “I’ve reviewed the literature here. There is no ambiguity. I’ve looked at the academic studies…It’s very, very clear what happens when retail investors trade a lot. Mr. Kelleher, in terms that the folks watching at home can understand, what happens when retail investors trade a lot?”

Kelleher: “They lose and they lose consistently. And they lose because they’re paying more for every single one of their orders because we have an order routing system that is intentionally complex and designed to extract the maximum amount of wealth from the retail investor.”

Himes: “But it’s not just the structure of the system, right? When you look at the literature, retail investors lose because of a whole series of human biases, because they don’t have teams of Ph.Ds studying the stocks that they’re buying, right?”

Kelleher: “Absolutely. It’s like saying let’s send the local Little League team up against the New York Yankees or the Boston Red Sox or the LA Dodgers. Frankly, you have these institutions that have maximum informational advantage, maximum technological advantage, maximum sophistication. They get to use all of that they have paid billions for, for the purpose of extracting wealth.”...

Wall Street On Parade
House Hearing Provides a Message to Robinhood Traders: Retail Investors Lose Consistently When They Actively Trade their Own Account
Pam Martens and Russ Martens