The Rise of Trading Apps and what it means for Hedge Funds

9th August 2022

Digital trends in financial technology are on the rise and are causing gnawing pain to UK investment markets. For DIY investors inclined to stocks and shares among other listed investments, a touch of commission-free trading services; lets them to this for less; from the comfort of a smartphone. The technology seeks to demystify investor trading challenges via hedge funds.

Yet, even free trading apps are not exclusively free. Upcoming services incur losses in an effort to get established and heavily depend on a large client sign up to break even. Safe to say it is a promise and a pitfall. A good example is a recent frenzy at GameStop, which saw extensive losses to high-profile firms? To beat such unwarranted vicissitudes, hedge funds need to change their calculus.

The Struggles of Hedge Funds

Is hedge funds short selling strategy to stay afloat any longer viable? Two&Twenty looks at the trading apps revolution and expounds on its effects to hedge funds

App-based services like e-Toro and Robin Hood are quickly shaking up the hedge funds investment market.

These trading apps may include:

  • Fineco Bank
  • E-Toro
  • Hargreaves Landsdown
  • Trading 212
  • Robinhood
  • Interactive Investor
  • IG
  • Fidelity International

But as hedge funds have incurred losses running to billions, it seems some companies like GameStop, Nokia and Blackberry have halted stock purchases. It came about as a result of the market’s unpredictability.

Robinhood; a popular trading app, announced in a recent blog how they plan to restrict security transactions to selling only. It comes as a shocker to investors as it was the main channel which investors purchased stocks like AMC. Since the ban, users have flocked competitor companies like eToro and many more.

How safe are Trading Apps?

The speed and fuss brought about by how trading apps penetrate the market investment is a worrying trend. They have put in place schemes to outwit hedge funds- Davids bullying the Goliaths analogy.

New generation trading apps like eToro, Trading 212 and Robinhood have seen hedge funds lose billions in the last two weeks alone. However, traders who cashed out before falling of stock amerced big profits.

Typically, the continued rise of trading apps portends a new paradigm for the hedge fund industry. It comes about due to increased technology, therefore, forcing hedge funds to change how they operate. Operational due diligence by hedge fund managers is key to gaining a competitive edge in the market.