Wednesday, November 4, 2009

Surprise: Trading Volume Actually Up in 2009?

While we read on news sites that trading volume at the NYSE has gone dramatically down lately, it may actually have just sifted elsewhere. Daily averages have indeed dropped.

Cross-Currents says that in early 2006, the NYSE volume was roughly 75% of NYSE composite volume across all exchanges. In mid-2007, it had dropped to 50%. By the spring of 2008, it was further down to only 30%. So far in 2009, it has ranged between 15% and 30%, and is averaging only 25%. In other words, the NYSE now trades only one-quarter of the volume traded on all exchanges - for NYSE listed stocks.

This is quite stunning and not what you think when you look at any typical stock chart. For example, SPY (click to enlarge please):

Furthermore, they list trading volumes on several exchanges for August:

- NYSE: 1985.3 million shares per day (26.9%)

- BATS exchange: 1139.2M (15.45%)

- Direct Edge: 1750M (23.74%)

- Nasdaq: 2148.19M (29.14%)

- Amex/ARCA: 348.8M (4.73%).

This in addition to the completely unreported dark pools that have been quite a bit on the news lately.

Dark pools

"Dark pools of liquidity (also dark pools or dark liquidity) are crossing networks that provide liquidity that is not displayed on order books. This is useful for traders who wish to move large numbers of shares without revealing themselves to the open market.

Dark liquidity pools offer institutional investors many of the efficiencies associated with trading on the exchanges' public limit order books but without showing their hands to others. Dark liquidity pools avoid this risk because neither the price nor the identity of the trading company is displayed.

Dark pools are recorded to the national consolidated tape. However, they are recorded as over-the-counter transactions. Therefore detailed information about the volumes and types of transactions is left to the crossing network to report to clients if they desire and are contractually obligated"

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