Why Responsible Leveraged Trading is Key to Financial Growth After the Pandemic

By Viktor Prokopenya, London based Investor and FinTech Entrepreneur

Many acclaimed economists have argued that long-term business cycles are tied to underlying technological innovations that form something called a ‘long wave.’ This is a process where new technologies slowly emerge and old technologies die out. A resulting mass adoption ensures an uptick in the economy.

Sometimes an innovation will develop slowly in the background before an event or policy ensures popular adoption and game-changing effects. For instance, the growth of information technology in the 1980s, pioneered by entrepreneurs like Alan Sugar, coincided with the deregulation of the financial services sector in London under Margaret Thatcher. The result: “The Big Bang!” — huge financial growth within the City of London.

London, which already had a respected and established financial sector, became a giant in the industry rivalling New York and Tokyo as a centre for innovation and financial democracy. This allowed anyone with guts, intelligence, and the ability to take sensible risks to prosper and profit. The closed-off gentleman’s club of old-fashioned stock brokerages was replaced by modern trading floors and hedge funds.

London now has the opportunity to create a new innovation cycle.

The UK’s finance industry needs to prove itself once again post-Brexit and post-pandemic. Indeed, increasing numbers of financial service staff are moving to Amsterdam and Frankfurt to trade more easily. We can achieve a vibrant financial sector by embracing the emerging fintech industry and the tools it has provided to ordinary retail investors. According to KPMG, the Fintech sector grew sevenfold this year to £27.5bn of investment: more than the rest of Europe, the Middle East, and Africa combined.

As we come out of a sluggish pandemic economy: it would be prudent to play to our comparative advantage. Outside of the USA, the UK has the most developed digital retail trading sector in the world. One way to responsibly amplify the effects of this advantage could be by allowing the use of restricted leveraged and spread bet trading by retail actors.

A new long wave of technological innovation with a focus on open-source collaboration and democratic participation is going to drive the next cycle of economic growth. Individuals, not just corporations and governments, can benefit from this growth if we continue the opening up of financial democracy that started in the 1980s by allowing retail traders access to tools that reflect their knowledge and ability.

Indeed, coming out of the pandemic, UK growth has slowed in the final quarter of 2021 to an uptick of 6.6% GDP growth — down from a monumental rise of 24.5% in the second quarter after vaccines took effect. The UK government is continuing to stimulate the economy with record levels of spending. In addition, the cost of living is going up for the average household, and cost inflation is currently at record levels. The CPI (Consumer Price Index) reported a record rise of 6.2% by February 2022. Individuals and families need the ability to hedge against these economic forces they cannot control.

Allowing access to tools and platforms that magnify earnings and create passive forms of income could go some way in facilitating this. During the pandemic, with spare time gained through reduced commutes and furlough schemes, many individuals have massively increased their financial literacy, becoming skilled investors and market readers.

This is no mean feat and we should recognize the spread of self-starting investors and financial democracy. Indeed, in July and August 2020 over 25% of financial market actors were retail traders; 6.6 million retail trades were made in December 2020. A new record.

Certainly, leveraged trading comes with risks. However, the capacity to manage risk needs to be a collaborative process between retail traders and the platforms they use, not just the prerogative of large firms and market makers.

My own company, Capital.com, is determined to set the tone when it comes to leveraged trading in the retail sector. We were judged to have the highest client satisfaction in this space by Investment Trends. Our client satisfaction is the result of a commitment to providing easy access to both financial services and financial education. We prioritize digital educational tools to empower our traders to accurately assess risk and effectively read market shifts.

The lockdowns we experienced in 2020 and 2021 were an economic intermission. We are now entering what Klaus Schwab, the founder of the World Economic Forum, has called the ‘4th Industrial Revolution.’ Digital retail platforms, individual traders, and digital financial products like leveraged trading will help fuel this new industrial revolution.

Retail traders don’t want to see their income shredded by inflation: they do want to contribute financially by buying equities in future industries. The next set of groundbreaking green technologies, entertainment systems, or AI abilities will need activist retail investors on their side. But this has to come with profit incentives for those who put their money into shares. Responsible leveraged trading in the retail space gives individuals a full range within their portfolios. Sensible leveraged trading reflects retail investments' important market share.

In short, responsible leveraged trading will be key to the next long wave of technological innovation. Digital retail trading platforms, like Capital.com, need to lead the way.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.