“Even though American stocks have doubled in price in the last three years, investors and traders large and small keep giving the market the cold shoulder.” – Nathaniel Popper, NY Times, May 6, 2012
TOP STORIES 2012: Trading Volume Continues to Fall; No End In Sight
Traders Magazine Online News, January 2, 2013
The dramatic drop in the trading volume of U.S. stocks continued to be one of the biggest stories of the year, notable not only for what it meant in its own right, but also for the corresponding impact it had on virtually all other major stories of the year. Layoffs, crushed brokerage commissions and shuttered trading desks all had their roots in the decline of trading volume that has gripped the industry over the past three years.
Volume has been dropping consistently since the onset of the financial crisis. Worse yet, it shows no signs of improvement. The decline is deeper and longer-lasting than the market experienced following the dotcom crash in 2000 and the overall market crash in 1987.
To illustrate this downward slope, one only has to isolate any given month. If you look at September, for example, the average daily volume in 2012 was about 6.5 billion shares traded per day, according to data from Nasdaq OMX. That is down more than 42 percent from the average daily volume in September 2008 of 11.3 billion shares. Average daily volume in September has dropped steadily in three of the past four years, and this year’s total is the lowest it’s been since 2008.
And it’s not just a September phenomenon. You’d have to track back to October 2011 to find a single month that posted a better average daily volume than the previous year. That is a slow grind, a death by a thousand cuts, each representing another slow day of trading.