mom-and-pop investors looking for free stock trades

    Small investors are back, Their fingerprints are visible on Apple Inc.’s staggering rally. They piled into Tesla Inc. as it tripled, and turned speculative fliers like Virgin Galactic Holdings Inc. into some of the most heavily traded shares in the country. Why the enthusiasm? Some see a link to decisions by brokerages to cut commissions on trades to nothing.

    While it’s tough to know what’s causing what — bull markets are fueled by new converts but also lure them — trading volume at online and discount brokers has exploded. TD Ameritrade Holding Corp., which started offering free trading in October, has seen million-trade days multiplying at a record pace.

    Along with ETrade Financial Corp., daily average revenue trades — a standard industry metric that may be a bit of a misnomer now since buying and selling is free — have almost doubled to an all-time high since last September, data compiled by Sundial Research showed.

    “When you take a bull market and juice it with zero commission trading, we can expect it to generate interest among retail accounts. That, it did,” said Jason Goepfert, president of Sundial. “Retail traders have become manic.”

    Individual investors were seen as indifferent participants for much of the 11-year bull market. No more. The latest leg of their emergence times closely with October, when ETrade, Charles Schwab and TD Ameritrade slashed commission fees to zero. Not that it’s firm proof of anything, but since the start of that month, the S&P 500 is up 13% and the Nasdaq 100 has surged 24%.

    Conversations with a handful of clients found lots of praise for zero-commission trades but mostly conservative purchases — index funds and blue chips. Matt Hermansen, 23, who works for a concrete company in Oakland, Calif., said the absence of fees makes him more willing to trade.

    “I’ll invest smaller amounts. Before I never really invested anything less than $1,000, $500 minimum,” he said in a phone interview. “Now if I have enough to buy an extra share, I’ll do it. I’ll do like $300.”

    At TD Ameritrade, the number of days where the amount of trades topped 1 million reached 38 during the fiscal first quarter ended Dec. 31, according to Steve Boyle, interim president and chief executive. That compares to 23 such days in all of fiscal year 2019.

    It’s “a new world in discount brokerage where price no longer clouds the comparison for trades,” Mr. Boyle said in an earnings statement on Jan. 21. By that date, the company’s monthly volume had already risen 40% from a year ago, averaging 1.4 million trades per day.

    At Charles Schwab, similar trends has played out. Daily average revenue trades have increased 74% since the firm’s fee cut, Sundial’s data showed.

    Randy Frederick, vice president of trading and derivatives at Charles Schwab, said the surge in trading also reflects a growing confidence in the bull market. Indeed, from the coronavirus outbreak to Apple’s sales warning, nothing has been able to stop shares from marching higher.

    “It’s partially driven by free commissions, but I don’t think it’s just that, because not everyone is offering free commissions,” Mr. Frederick said. “The fact that we have been in a bull market for a long time, people are just optimistic. Things are going up and they continue to go up.”

    U.S. households are turning more optimistic on the stock market. According to the latest sentiment reading from the Conference Board, the share of respondents expecting stocks to rise in the next year advanced to 43.1% in January, the highest since October 2018.

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