On CNBC's Mad Money, Jim Cramer talked about the trend of individual investors jumping into the market to get a piece of this rally. He notes that trading volume through brokerages such as Charles Schwab (SCHW), E-Trade (ETFC) and TD Ameritrade (AMTD) has grown considerably during August, which is normally associated with the lazy summer days of lackluster volume. As the Wall Street Journal points out, traditionally trading volume falls by about 10% in August from July, but this year there was a 7.7% increase.
"A lot of the trading volume is in small, speculative financial stocks. You know some days in August trading in just Citigroup, Bank of America, Fannie, and Freddie made up more than 15% to 20% of market value, and people love trading in and out of these names now. I can understand why, considering all the money they're making. So we need a play on that play. We need the picks and pans maker for the gold rush. That's right. We need Knight. We see retail investors coming back in the volumes, and we know part of the reason for that is because of the market's rise…
{NITE is} The leading source of off-exchange liquidity in U.S. equities. It has greater share than any. Remember, you don't turn to Goldman Sachs for retail, you don't necessarily go to even Morgan Stanley, you may not even be working with — Smith Barney maybe, but institutionally, you're not trading with them. Bear Stearns is gone, so is it leaves Knight Capital in enviable position when it comes to the New York Stock Exchange, which seems to continue to lose market share by the month. Again, not knocking the stock just encouraging as much competition, which includes now, NITE, Knight Capital Group typically handles over 5 million trades a day, mostly for retail clients.
As market makers, NITE internalizes the flow. Again, Wall Street gibberish that I will bust here. It means they take the other side of the trade for the best again, this is a good thing. It gives retail investors great prices. Their average daily volume was 22 billion in August, up 8% from July. Average daily share price was $15.6 billion. That's up a phenomenal 53% over July, driven by increased small stock trading.
