Source: BCA


Today’s chart comes to us from Chen Zhao of the Bank Credit Analyst, who writes in a research report:

The financial services industry have (sic) begun to feel the pinch of the fallout from low volatility and zero interest rates. The average return delivered by hedge funds has fallen sharply since the beginning of the year. Pension funds are under pressure because of highly depressed bond yields. The brokerage and investment banking industries have also been under siege by the rapid decline in trans-action volumes and deal flows.

I can identify at least three forces, other than Federal Open Market Committee policy, driving trading volume lower.

Continues here

Category: Asset Allocation, Bailouts, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

9 Responses to “Where Did All of the Volume Go?”

  1. rd says:

    I would add one other reason: 401ks

    Many people’s investable assets are in 401ks and similar accounts as they have become the default investing tool for most people with investable assets. Trading in these is virtually impossible. In my 401k a lot of the funds don’t allow exchanges more frequently than 2 months for round-trips. So other than steady payroll dollar-cost purchases, mom-and-pop investors generally don’t have the ability to drive lots of transactions.

  2. BetaDist says:

    While I agree with the reasons you listed as a possible explanation, I think we need to be careful when looking at a chart like the one above.

    First, this is a chart of exchange traded stock volume, which does not include other venues. Most obviously, this excludes “dark pools” which are off-exchange and where a significant amount of block trading occurs. Instead of asking how do we explain the decline in overall volume, this chart asks how do we explain the decline in volume on NYSE and NASDAQ only.

    Second, I don’t see the relation between the Fed Funds rate and stock volume — and why would we? From approx. 2004 to 2007, the Fed Funds rate went from 1% to 5% while volume on the NYSE appears to have declined, which contradicts Chen Zhao’s claim that low interest rates are driving low volume.

  3. Christopher says:

    There is no “market” left to trade…it has been HFT’d and corrupted to the point of ludicrousness.

  4. Futuredome says:

    I bet if the bond market sells off into stocks, it surges.

  5. HighSeas says:

    Are the average share prices higher? That would help explain the last 5 years.

  6. mitchn says:

    Wait, volatility that enables hedgies, buy- and sell-siders to rip the face off the retail investor has dried up? Cry me a river.

  7. pielou says:

    Great, so before i could think that i will be smarter than another Joe but now that there are no Joe I am left with Dark Flash Manipulator. There are no skills possible to have, luck is what left.

  8. Moopheus says:

    Yeah, I guess Mom & Pop figured that if they were going to get taken at the casino, might as well go to the one where they’ll at least get comped a couple of drinks. If market volume is dropping, why are we supposed to care? Is this a problem for somebody?

  9. constantnormal says:

    … stock buybacks, mergers & acquisitions … the pool of shares available to buy keeps getting smaller … watch for more ridiculous stock splits (like AAPL’s 7:1 split) that expand liquidity … the paucity of shares could account for a lot of the recent bull run in the markets with their consequent rise in valuation …