Trading Volumes Limp Along Despite Upturn
May 8, 2012 by UPI - United Press International, Inc.
NEW YORK, (UPI) — Data showing rising prices in U.S. stock markets have not increased trading volumes, which plummeted as the financial crisis took shape.
Stock volumes dropped sharply after 2008, falling from a daily average of 12.1 billion to 6.5 billion in April this year, taking into account all U.S. markets or exchanges.
Analysts say the lack of trading volume is certainly related to fear but volumes bounced back within two years after financial dives in 1987 and 2001, The New York Times reported Monday.
Volumes also may be dropping because baby boomers are nearing retirement and it is typical then for investors to pull out of stocks and put their nest eggs into bonds.
Others question the impact of high-speed, computer-generated trades that use algorithms to react to small price shifts.
But these systems rely on someone to trade with and if mutual funds and retail traders aren’t in the game, the high-speed traders are more or less all dressed up with no place to go.
“On a typical trade, two high-frequency trading firms will not trade against each other,” said trader Manoj Narang at the New Jersey digital trading firm Tradeworx. If no one else wants to trade, “there’s really simply nothing for us to do,” he said.
“When you keep in mind recent history, this is kind of uncharted territory,” Justin Schack, an analyst at Rosenblatt Securities told the Times.
Rising prices normally dictate movement. The price of Standard & Poor’s 500 stock is up 102 percent since the low point of March 2009.
But the New York Stock Exchange said trading in the first quarter fell 23 percent compared to the first three months of 2011. One of its rivals, Nasdaq, said its first quarter revenues were off 7 percent compared to the same period of 2011, the Times said.