What's driving this low volume

[stepan7]

Okay, before you flame me.. of course we are in the middle of summer. But this is really low volume. This is much lower than the average (I looked at S&P volume) for summer months.

anyone have an idea of what's driving this?

The Volume is like a volume, nothing special.

 

[punisher]

anyone have an idea of what's driving this?

Volume has been trending down since 2003 - maybe all the buyers are already in?

More people are trading options than equities. Options are in a dramatic up trend.

The bar for trading futures is extremely low these days - it used to take a lot of $ to trade futures & was used more for hedging by the more sophisticated informed traders. Now every greedy noob that can afford to open a lemon aid stand is opting to trade futures over equities.

The problems were recently documented in a research note by Credit Suisse titled “The Incredible Shrinking Universe of Stocks.” The bank documented that the total number of companies listed on the United States stock market plummeted by nearly half, to 3,671 last year from 7,322 in 1996.

Companies get bought or go out of business, but new companies are not replacing them. In 1996 there were 706 initial public offerings, but in 2016 there were only 105. The downturn affects all sectors, and last year there were only 30 new private equity offerings, the “lowest level since 2009".

Been doing daily stock scans since the mid 90's - every quarter the list gets shorter.

I'm not sure I follow your logic here: if the bar to entry gets so much lower then there should be more trades. And while the number of companies may be shrinking (let's leave the facts why that's is happening as it shouldn't be a surprise) what does this have to do with shrinking volume? IMO it doesn't matter how big the pie is and if it's smaller than it used to be, what matters is how many hungry people are sitting at the table. There is so much money to be invested/traded etc. But I'm open to the idea that I might be missing a bigger picture here.

I would think that volumes would need to be aggregated across all asset classes and products. So as you pointed out, there might be more volume traded in other products. Add OTC markets, dark pools and it might very well be that volumes are all up (I don't know), thanks in part to the wealth transfer and CBs policies.

Some of the money, especially retail will not be back for a very long time. Burned by tech bubble and later by financial crisis, a lot of people abandoned the markets altogether. Add to that the fact that you will see increase in withdrawals/redemptions from pension plans for many years to come. You can't beat demography.

 

[mushinseeker]

Here is another piece which might explain the low volume/volatility. There is a new Dept of Labor law that covers retirements accounts. In essence, the law is to discourage "churning" retirement accounts . In compliance with this rule, firms have phased out commission based accounts and put their RIA in fixed fee AUM based compensation structure. At a granular level, it means RIA now have little incentive to seek alpha thru research then trading... just put all the accounts in some dividend stox, collect their 1-2%. It incentivises underchurning which can't be good for vol and vol.. BUT great opportunity for traders who can show a good track record since the investment world is starved for alpha.

 

[Pekelo]

Who cares about volume,

Traders who knows better? I generally don't watch volume, but when market is going up on lower volume it is more likely to crash afterwards and it signals market weakness even if prices are higher.

To answer the OP's question, whoever wanted in they are probably already long, and don't want to commit more capital to this high levels. So it just a few non-vacationers pushing price around instead of sitting on the beach.

 

[punisher]

Here is another piece which might explain the low volume/volatility. There is a new Dept of Labor law that covers retirements accounts. In essence, the law is to discourage "churning" retirement accounts . In compliance with this rule, firms have phased out commission based accounts and put their RIA in fixed fee AUM based compensation structure. At a granular level, it means RIA now have little incentive to seek alpha thru research then trading... just put all the accounts in some dividend stox, collect their 1-2%. It incentivises underchurning which can't be good for vol and vol.. BUT great opportunity for traders who can show a good track record since the investment world is starved for alpha.

I've heard that there are requirements now in place that make active fund managers (of pension plans etc) financially liable for both underperformance and excessive costs generated, as compared to some benchmark. As a result of that financial liability it makes then unwilling to take that risk and as a result switch to passive investing which is a growing trend for some time and by itself will cause serious repercussions down the road...