Former TD Ameritrade CEO Fred Tomczyk told CNBC on Friday that he believes retail investors have never been better off competing against Wall Street professionals.
“If you think about what the retail investor has today, they have free trading, free research, free investor training, and they have faster and better trading performance than ever,” Tomczyk said in an interview on “Squawk on the Street.”
“The playing field between retail and the institutional investor is more equal than I have ever seen,” Tomczyk, who led the brokerage firm as president and CEO, added from 2008 to 2016. He is now on the board of Cboe Global Markets. .
Tomczyk’s comments come one day after the US House Financial Services Committee held a hearing focused on the GameStop short print that began in late January. The Reddit-driven trade chase has been another hotspot in a long-running debate over stock market equity, and whether mom-and-pop investors have equal access to returns.
One of the participants in Thursday’s trial was Keith Gill, the Reddit user and YouTuber, who played a key role in promoting GameStop shares. In his testimony, Gill defends his decision to publicly state his investment thesis in GameStop by noting what he considers to be a long-standing imbalance for retailers.
“Hedge funds and other Wall Street businesses have teams of analysts working together to compile research and analyze stocks of companies,” Gill said. The latest post on Reddit showed that he earned $ 7.8 million from GameStop. “Individual investors do not have those resources. Social media platforms like Reddit, YouTube and Twitter compare the playing field.”
In August, Gill posted a video on his YouTube channel claiming that the share in the video game dealer was undervalued and vulnerable to a short press because there are so many clumsy bets against it.
According to Tomczyk, the success of individual investors during the meteoric rise in GameStop’s shares – which rose from less than $ 20 in early January to an intraday high of $ 483 on January 28 – is remarkable.
“The ironic part, if you stand back and look at it all, is the party that apparently lost the most in this GameStop trade, actually a hedge fund. It was not a retail investor,” Tomczyk said. “A lot of retail investors have done very well, so in my opinion they have done very well and it has never been better due to smart regulation and the use of technology today.”
Other participants in Thursday’s committee hearing were Gabe Plotkin, who manages hedge fund Melvin Capital, and Ken Griffin, the billionaire founder of market maker Citadel Securities. Griffin is also CEO of a similarly named hedge fund, Citadel.
Melvin Capital suffered a huge loss during the GameStop frenzy after concluding its short position on January 26th. Short sellers borrow shares of a share and then sell it immediately, with the aim of buying it back later at a lower price. They then return the borrowed shares and earn money from the difference. But if the opposite happens, as with GameStop, short sellers can buy shares at their current higher price in an effort to limit losses.
Plotkin told Congress on Thursday that his hedge fund would adjust its short-selling approach now that it has seen the impact that social media can have if used by retailers. “It was a risk factor we had never seen before,” he said.
In an interview on CNBC Friday, Griffin was asked by Andrew Ross Sorkin, co-host of Squawk Box, whether he and individual investors had ‘the same opportunity’ to make money in the stock market.
“It all comes down to a matter of horizon and strategy,” Griffin said. “It’s like asking, ‘If I was going to play golf with Tiger Woods this weekend, would I win? Of course not, but there are different ways to get off Tiger Woods off a golf course and do a lot of good. “I’m not going to play him on his court at his game.”
Griffin, for example, said that people who happen to be technically savvy can see opportunities to invest in listed companies that disrupt a specific industry. Or, he said, someone who bought shares in Tesla five years ago under the belief that electric vehicles were the future of the automotive industry, “would have made a lot more money than we did at Citadel.”
Shares in Tesla have risen more than 2,200% over the past five years.
“I never underestimate the ability of the U.S. retail investor to understand emerging trends where real wealth is being created and their ability to benefit from the wealth transformation,” Griffin added.