Former NYSE trader on the rise of meme stocks

Keith Bliss, president of Capital2Market, joins Yahoo Finance's Jared Blikre to discuss retail investors' recent leap into the stock market and whether meme stocks will continue to draw attention.

Video transcript

JARED BLIKRE: Live-- I'm Jared Blikre. We're talking meme stocks. And guess what? We got Keith Bliss, an OG member-- at least that's going back 5, 5 and 1/2 years since I started Yahoo Finance. And you're currently with Capital2Markets. But you've seen a lot here change on the floor. I'm just wondering what you've seen, also from your perspective, over the last year, given what we're talking about, the rise of the retail trader.

KEITH BLISS: Yeah, well it's amazing. First off, it's good being back here on the floor. It's the first time I've been back here in a year and a half. Yeah, I mean, some things continue to evolve and change. But as I was telling you earlier, I recognize every face that I've run into. So it's good that so many have been able to retain their positions.

But listen, when it comes down to the retail trader, given the continued evolution of technology, continued evolution of access to the overall markets-- even what we do a Capital2Market, which is reaching that retail investor for private offerings, it's been the year, the era of the retail investor, where they've seized control of a little bit of the markets-- not only the meme stocks, but also in other areas. And I think that will continue to happen that way. The institutions will try to re-seize control, but it's going to be hard to do

JARED BLIKRE: Yeah, it's kind of like a game of spy versus spy. We've been talking about Reddit and the various forum. But you know the hedge fund guys are in there. They'd be remiss if they weren't. So I'm just wondering how you see the interplay of the institutions and the retail players, just kind of folding, coming out over time.

KEITH BLISS: Well, what goes on on those forums-- and if you go all the way back to shout out for you guys-- 20 years ago, we were reading the Yahoo forums when I was at Knight Securities, a large market maker back then. The institutions absolutely pay attention to it. It's a data point that they watch. If they don't, they would be foolish, because they'll just get run over by the momentum that happened.

So even Bequant shops are now able to read in those messages from Reddit and the other message boards, and feed that in is one data point amongst thousands that they're doing there. So they've become a very important part of trading-- not only for retail, but for institutions and for places like this.

JARED BLIKRE: Yeah, and you mentioned Knight Capital. Wasn't where you worked there? They later blew up for a different reason. But it just goes to show you the danger of this business. Archegos Capital-- $30 billion one day, $0 two days later. And the retail army was a big, big factor in that. So it just kind of shows maybe there is a little bit of hubris here. I'm wondering if you see that dynamic changing over time.

KEITH BLISS: Well, the one dynamic that will change is I think, big institutionally-driven hedge fund players will not get out over their skis the way that Archegos did, which is the case. But what the instructive part of that whole episode was that these bigger players, they're not the 800-pound gorilla in the room anymore. It is the retail investor.

And again, the technological advances that we've witnessed over the last five years, as well as access into the markets-- the reduced barriers of entry for retail investors to come into the markets has really pushed this around. Now the one caution that I will say is that what's happened in trading with retail, what we could see, especially with the Reddit users, Wall Street bats, and some of the other things, is that they've actually gamified trading.

And this of course, is one thing that the institutions are having a hard time dealing with. Because when you hold sway in all of the markets and you carry what we call the axe around in the markets, and then suddenly somebody else is moving you around like a pawn on the chess board, as opposed to you moving all the ponds, that's a big deal. I dare say that the institutions are thinking right now how they can kind of win back that mandate, but it's going to be tough to do, given where we are in the markets.

JARED BLIKRE: Well last question here-- I mean, we've been talking about risk management, the importance of retail traders learning the game, learning the trading game. And there's a lot of discipline involved. I'm just wondering how you see that evolving as well, because as we've talked, we've done webinars about this-- the importance of know your risk and risk management.

KEITH BLISS: Well, that's the case. It's going to come down to how much discretionary income you have and how savvy you are, and educated you are about the markets and trading and what you can do with your capital. The real risk that I see, though, is that if Wall Street as an industry, starts to get too aggressive with outsized leverage parameters, there are rules and regulations which limit the amount of leverage you can extend to someone. But how far are they willing to go?

And again, I think you know retail traders will come to the standpoint. Probably, I dare say when a few of them lose on a number of bets, they become a little bit more rational in their trading. But if they're able to pile on to a meme that's going on right there, and the meme becomes a self-fulfilling prophecy, they're not going to learn many lessons there, other than to pile onto to the meme and make some money.

JARED BLIKRE: Yeah, wise words here-- Keith Bliss Capital2Market markets. Thanks for joining.