In the video above, Bloomberg talks about falling stock market volume. Generally they are correct, but we believe a clarification is in order.

The chart below shows a version of what Bloomberg discussed, the 10-day moving average of NYSE-only volume. By this measure, the last 10 days of volume is at its lowest level since June 1998, including holiday weeks. NYSE volume is disappearing before our eyes!

Click to enlarge:

This measure neglects the move away from the NYSE to other electronic exchanges, the playgrounds of high frequency traders (HFT).

The next chart shows NYSE-only volume as a percentage of all volume in NYSE-listed stocks across all exchanges (known as composite volume). Prior to 2006, the percentage of NYSE-listed stocks trading on the NYSE was regularly above 80%. Since then, this percentage has dropped to less than 25% thanks to the demand for electronic trading by high frequency traders. Dozens of new electronic exchanges have been created to satiate this demand.

So, while composite volume is indeed down, it is not the epic collapse that NYSE-only volume suggests.

This does not mitigate the story that volume is dismal. It still is. But it highlights the move away from the NYSE in favor of electronic exchanges. And when one factors that up to 75% of daily volume is done by a computer with another computer, humans making capital asset allocation decisions are indeed becoming rare.

Bob Greifeld, the CEO of the NASDAQ, once referred to the floor of the NYSE as the “world’s most expensive TV set.” Given the NYSE’s 14-year low in volume, it’s hard to argue he is wrong.

Source: Bianco Research




For more information on this institutional research, please contact:

Max Konzelman

Category: Think Tank

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7 Responses to “Understanding Stock Market Volume”

  1. blackjaquekerouac says:

    i think he meant “TV set with a look-back provision.” anywho one should start with capital STRUCTURE first to determine the “health” of what everyone oh so loosely calls “the rigged game.” Let’s start with one that wasn’t even in existence 10 short years ago (at least insofar as oil is concerned)
    hard to imagine there was a time when the only way you could trade energy futures was “from within Exxon Mobil”…or Enron before they were “taken out.” Clearly there is no place on earth with the capital structure of the USA. To “distill it all down to equity trading” is beyond ridiculous. now let me distill it all down to equity trading: quite the spike on that “one day.” interesting that they want to create an insurance fund as well. looks like there merger with the NY Merc was a real disaster. I imagine a spin off would reveal the dramatic scope and scale of the trading going on in those places in “the biggest run in commodities in history.” not that i recommend trading that either…those folks literally steal your money.

  2. wally says:

    “volume is dismal”
    I suppose if you are a trader or if you make your money off transactions then “dismal” is a good word.
    If you think that volume = churn and that buy and hold is the way to own equities, then there may be a positive aspect to lower volume.

  3. Jack Damn says:


    I’ve said it for years: Index volume is a useless indicator. Aggregate index volume, whether there is a lot or a little, is meaningless. Here, how about this perspective:

    - Why Low Volume Is Actually Bullish

    My thinking has long been that volume in stocks is much lighter now than in the past because no one wants to own them anymore. We’ve lost a generation of traders over the years, so of course volume is lower. Also, there aren’t nearly as many hedge funds as there were just a few years ago, so again, less volume just makes sense. Then, considering some of the issues we’ve seen from the high-frequency trading (HFT) crowd — think Knight Capital Group Inc. (NYSE:KCG) here — and again, less volume is totally logical.

    Lastly, to compare volume during the financial crisis versus now just seems wrong. We had a generational low in stocks (remember, volume always surges at lows, not tops) with various banking stocks (trading under $5) accounting for much of the volume. I forget the exact number, but there was a time that Citigroup Inc. (NYSE:C) made up a very large portion of overall trading volume. To compare volume over the past few years with what we saw during the financial crisis is apples to oranges.

  4. Frilton Miedman says:

    My personal observation in recent years, it seems the only noteworthy volume spikes are on down days.

  5. constantnormal says:

    With the rise of dark pool trading, I’m not sure that listed exchange volume has any meaning whatsoever …

  6. Giovanni says:

    Just a question but if one was using market volume as a measure of market psychology wouldn’t you want to restrict your data set to those investors who have a psyche? Unless of course you are an algorithm yourself.

  7. Tyler K says:

    “With the rise of dark pool trading, I’m not sure that listed exchange volume has any meaning whatsoever …”

    Dark pool activity is included in the consolidated tape.