Former TD Ameritrade CEO Fred Tomczyk told CNBC on Friday that he believes retail market investors have never had anything better when it comes to competing against Wall Street professionals.
“When you think about what the retail investor has today, they have free trading, free research, free investor education and have faster and better execution of transactions than ever before,” Tomczyk said in an interview with Squawk. on the Street ”.
“The playing field between retail and institutional investor is more equal than we have ever seen,” added Tomczyk, who ran the brokerage firm as chairman and chief executive officer from 2008 to 2016. He is now on the board of directors of Cboe Global Markets.
Tomczyk’s comments came a day after the US Chamber of Financial Services Committee held a hearing focusing on the short-term GameStop shutdown that began in late January. Reddit-fueled trading frenzy has been another hotbed in a long-running debate over stock market fairness and whether mother and pop investors have equal access to yields.
One of the participants in Thursday’s meeting was Keith Gill, a Reddit user and YouTuber, who played a key role in promoting GameStop actions. In his testimony, Gill defended his decision to publicly promote his GameStop investment thesis, noting what he saw as long-term imbalances for retailers.
“Hedge funds and other Wall Street firms have teams of analysts working together to compile research and analysis of companies’ shares,” said Gill, whose latest post on Reddit showed he earned $ 7.8 million on GameStop. “Individual investors do not have these resources. Social media platforms such as Reddit, YouTube and Twitter equalize the playing field.”
In August, Gill posted a video on his YouTube channel claiming that the video game retailer’s shares were undervalued and vulnerable to a short press due to so many high bets placed against him.
Tomczyk said he believes the success that individual investors have had during the meteoric rise of GameStop shares – which went from less than $ 20 in early January to an intraday high of $ 483 on January 28 – is worthy. of note.
“The ironic part, when you sit back and look at all of this, is the party that seems to have lost the most in this trading. GameStop was actually a hedge fund. It wasn’t a retail investor,” he said. Tomczyk. “Many retail investors have done very well, so in my mind they have done very well and have never had a better time based on smart regulation and the use of technology today.”
Other participants in Thursday’s committee hearing were Gabe Plotkin, who runs the Melvin Capital hedge fund, and Ken Griffin, the billionaire founder of market maker Citadel Securities. Griffin is also the CEO of a hedging fund similarly named Citadel.
Melvin Capital suffered a huge loss during the GameStop frenzy after closing its short position on January 26th. Short sellers borrow shares of a stock and then sell them promptly, in order to buy them later at a lower price. Then I give back the borrowed shares and make money from the difference. But when the opposite happens, as in the case of GameStop, short sellers could buy shares at their current higher price, in an attempt to minimize losses.
Plotkin told Congress Thursday that his hedging fund will adapt its short-selling approach now, after noting the impact social media can have when exploited by retailers. “It was a risk factor that I never saw until recently,” he said.
In an interview with CNBC on Friday, Griffin was asked by “Squawk Box” co-host Andrew Ross Sorkin if he and individual investors had “the same opportunity” to make money on the stock market.
“It all comes down to a matter of horizon and strategy,” Griffin said. “It’s like asking, ‘If I went golfing this weekend with Tiger Woods, would I win?’ Of course not, but there are various ways to compete with Tiger Woods off a golf course and go very well. I’m not going to play his game on his course. “
For example, Griffin said people who are good at technology could see opportunities to invest in listed companies that disrupt a particular industry. Or, he said, someone who bought Tesla shares five years ago under the belief that electric vehicles are the future of the automotive industry “would have made a lot more money than I earned at the Citadel.”
Tesla shares have risen by more than 2,200% in the last five years.
“We never underestimate the skill of the American retail investor in understanding emerging trends that create real wealth and their ability to take advantage of that wealth transformation,” Griffin added.