CNBC: Stock Exchanges See New Highs, Volumes Fall

In a Friday story by CNBC’s Bob Pisani, he reports that all of the exchanges are trading at 52-week highs. This includes the New York Stock Exchange (NYX),IntercontinentalExchange (ICE),?Nasdaq (NDAQ),?CBOE (CBOE), and?CME (CME).

He notes CBOE’s announced exclusive deal for the S&P 500 options contract and opines this makes the exchange a takeover target.

But his real question is, as the exchanges trade at highs, what happened to all of their trading volumes?

Lower volatility has been a contributor as high-frequency trading has found less opportunities while ETF trading has been on the rise, enabling investors to buy “swaths of the market” without purchasing the underlying stocks.

Pisani then cites the following:

“According to Patrick O’Shaugnessy at?Raymond James (RJF), average daily volume on all stock exchanges has been 6.4 billion shares for the first quarter of 2013; in 2012, it was 6.8 billion shares, a decline of six percent. And 2012 had lower volume than 2011.

His conclusion: 2012 had the lightest volume since 1999.

Here’s daily average trading volume for several years, once high frequency trading and ETF trading is stripped out:

1999: 2.1 Billion
2007: 3.6 Billion
2008: 3.7 Billion
2009: 3.4 Billion
2012: 2.7 Billion

Pisani’s conclusion? There’s three reasons for the volume declines.

High frequency trading discourages other types of trading (odd claim since HFT is down as well)
Lower volatility has also lessened volume from “trend followers”
The 2008 financial crisis has greatly reduced the public’s appetite for stock trading; a fact amply demonstrated in the huge outflows from mutual funds

On a final and positive note, options volume is up slightly. For the first quarter, it is up around three percent, according to?O’Shaughnessy.

Here’s a look at February’s options volume and January’s. What will March’s numbers look like??