Trading Advantage: Institutional vs Retail

Discussion in 'Trading' started by Woodrow97, Aug 16, 2018.

  1. Woodrow97


    What do you guys think some of the advantages are for both institutional and retail traders?

    Here's my two cents:

    Institutional -
    1. Technology. ex. Renaissance supercomputers
    2. Order flow. ex. MMs doing conversions and reversals.
    3. Portfolio margin. Less collateral needed for hedges; M&A arbitrage; etc.

    Retail -
    1. Low, fixed commissions.
    2. Liquidity. Trading any security one wants and getting filled at the exact price.

    Feel free to add more to the list.
  2. dozu888


    retail has zero advantage.
  3. Institutional has exposure to more liquidity
    As mentioned - economies of scale in technology-Quant and AI talent
    OTC and unique structures in derivatives.
    Institutional pays higher commissions(generally) as the price for upstairs liquidity.
    Generous stock loan.
    Overall trade friction can be lower overall
    Never wait on the phone.
    Some Dark Pool data on the desk.
    Often more avenues for research and ideas.
    Mixed bag on compliance and market regulation.
    Mixed bag on reputation issues as well.
    Better access to Algos.
    Woodrow97 likes this.
  4. smallfil


    Institutions are like elephants. It will take them a while, to unload or buy millions of shares for instance. It is harder for them to put up huge numbers like 100% in returns or more in a short period of time. Institutions would be happy with 10-15% per annum.
    Retail traders can easily sell their shares and get out and get into a new position. The one advantage retail traders have is speed and the ability to take advantage of opportunity wherever that is! Institutions take time to establish their huge positions over a span of 3-6 months depending on how many millions of shares they are buying or selling.
    MarkBrown likes this.
  5. sle


    Added to the list.
    You would be suprised, but retail advantages are a huge deal. I have, more than once, said that a retail trader can easily make really good returns on a small amount of capital simply due to his structural advantages.
    MoreLeverage likes this.
  6. sle


    Gray, wrinkly and smell bad most of the time.
    SmallFry, Lou Friedman and Woodrow97 like this.
  7. Would you not say it still takes alot of talent/work and much time out of your day, to find and monitor these structural trades?
  8. "Women are like elephants. I like to look at 'em, but I wouldn't want to own one." W. C. Fields
    My HR department would want me to qualify this quote as sexist and not supported by the firm.
    MoreLeverage and sle like this.
  9. sle


    Well, yes. It's much easier to climb a Mt. Ranier then it is to climb K2, but it's still hard work.
    DaveV likes this.
  10. If we asked for the structure - we had a reason. It's also a matter of good technology. The challenge isn't always about monitoring - we joke that that is why they call it work. Sometimes we also see opportunities in the listed we can trade around the structure we own.
    #10     Aug 16, 2018