The BJZZ Retail Flow Algorithm
A method for guessing how much of a stock's daily volume came from retail investors, using nothing but publicly reported trade prices and sizes.
Prerequisites: Trade Signing And The Lee-Ready Rule
Exchanges don't tag trades as "retail" or "institutional," but retail brokers route most of their customers' marketable orders to off-exchange wholesalers, who fill them at prices just inside the public quote — a fraction of a cent better than the bid or ask, not exactly at it. Boehmer, Jones, Zhang and Zhang (BJZZ) noticed that this leaves a fingerprint: retail-driven trades cluster at prices with a small, characteristic sub-penny offset, while institutional trades tend to print at round prices or exactly at the quote.
The algorithm scans the tape for trades priced just below a whole cent (a signature of retail buy fills) or just above one (retail sell fills) and classifies them as retail, while everything else is treated as non-retail. Summed over a day, this gives a estimate of retail participation without needing any broker's internal order data.
BJZZ infers retail activity from a market-structure artifact — wholesalers price-improve retail orders by a sub-penny amount — rather than from any label in the data. It's an indirect proxy, not a direct measurement, so it works only where that off-exchange price-improvement convention holds.
Worked example. On a day with 10 million shares traded in a stock, the algorithm flags 2.3 million shares priced with the tell-tale sub-penny offset. The researcher reports estimated retail participation of roughly 23% for that name that day — a number regulators and academics use to study events like meme-stock episodes, where retail's share can spike far above its usual single digits.
Related concepts
Practice in interviews
Further reading
- Boehmer, Jones, Zhang & Zhang, 'Tracking Retail Investor Activity'