Trading in unlisted US shares dropped. The speculative wave is decreasing

Unlisted US stocks fell nearly three-quarters of their peak
the height of last year’s madness in retail trade, as investors are looking for speculative bets and regulators are fighting potential fraud with penny stocks.

January marked the 11th consecutive monthly decline in the volume of over-the-counter shares, according to Finra, the custodian of US brokers and exchanges. The total number of transactions was 70% below the record high set in February.

Many of the most risky areas of the financial markets have experienced a jump in activity during
in the midst of the Covid-19 pandemic, as novice traders are attracted to the recovery of
asset prices, government incentives and escaping the boredom of lockouts.

However, Finra figures are the latest sign of their withdrawal with increasing volatility and
The Federal Reserve, which is preparing to raise interest rates.

OTC shares are shares that are not listed on national stock exchanges such as the Nasdaq or the New York Stock Exchange (NYSE). These include smaller companies and those in controversial industries such as cryptocurrencies and cannabis, along with US depositary receipts that make it easier to buy shares in large overseas companies such as Nestlé and Tencent.

There is a definite decline in activity from traders who simply had extra money standing around. However, activity remains stronger than before the pandemic
we expect a new normal level to continue in the long run.

We see a shift in activity to more traditional types of investment. Instead of trading euphoric memes on the Internet, [investors] trade in industries they are passionate about or interested in.

Although the absolute number of transactions continues to decline, the dollar value of the business is more sustainable as fewer investors make higher value deals.

The trend has been accelerated by regulators in the US Securities and Exchange Commission (SEC), which restricts trade in the most risky areas of the market.

The rules, which went into effect in late September, essentially prevented retail investors from trading in shares of more than 1,000 companies that did not provide up-to-date corporate disclosures. The shares were considered particularly vulnerable to fraud and so-called “pump and dump” manipulation schemes.

Retail investors are not the only people who reduce risky bets.
Some Finra data show a sharp decline in institutional investors who take out loans to finance investments in January. The amount owed by investors on margin loans
fell 9% a month, its biggest drop since March 2020.