The last posts about this sort of thing are from several years ago and the landscape has been rapidly changing, so just wanted to get some thoughts on where they think this is going.
What is Copy Trading?
For those who haven't seen it before, there's several brokerage platforms out there where you can elect to automatically copy any trades done by a certain person. In some versions, the person being copied receives direct fees from the person following them. In others, the person receives no fees but instead will be "compensated" by people rushing into the trade after them. This raises big questions around the fiduciary responsibility of the trader being copied to the followers -- a legal gray area that keeps a lot of the major stock brokerage platforms away.
It's more popular in forex and crypto but there have been several recent articles about companies trying to bring this to equities. On one hand, it's really interesting because it's the democratization of who can gain a following by making great investing calls, leveling the playing field for niche investors who are experts in one domain but lack access to a network / capital to launch a traditional fund. Additionally, this already happens in some less organized ways with people mimicking famous investors styles, like Warren Buffet. On the other hand, it's ripe for abuse and a lot of people can be swayed by seemingly large performance that was just random luck.
More Info
- https://en.wikipedia.org/wiki/Copy_trading
Discussion
I anticipate that regulatory hurdles around this stuff will stay in place and likely prevent major firms from launching fully automated copytrading platforms for a while in stocks but I've also heard opposite takes that this will dismantle funds as we know them. Does anyone have experience with them or thoughts on whether they'll succeed?
Submitted September 27, 2021 at 10:47PM by stockartiste https://ift.tt/39K0tAJ
