Turn Up Your Volumes

Several of us have wondered, perhaps you already know, where the shares are trading these days.  It was curious that during the recent recovery from the July correction, volume seemed unusually low.  We looked back over the past year at the shares traded for each stock listed on the New York Stock Exchange versus the volume actually traded on the exchange.  The analysis, shown below, yielded an interesting conclusion. 

While most analysts and investors agree that trading on the floor of the exchange is obsolete, and the building will become a museum in the next year, it seems that trades executed through the NYSE are also dwindling.  A year ago 68% of all of the shares for NYSE listed stocks were traded through the exchange, now that number is 43%.  To further illustrate: on 8/16, when the record 2.9 billion shares were traded on the New York Stock Exchange, that number was actually more like 6.2 billion for the stocks.

Comments

To Mr. Birinyi and Tickersense:

Can you please translate this post into English? I have no idea what any of this means, and neither do three of my colleagues who have spent their lives in this business.

[Aaron]

My question is, what does this mean for the markets? Will it likely have any effect on the overall market averages going forward or is just a different way of trading?

[Cleve]

To anonymous:
The stocks that are listed on the New York Stock Exchange do not trade ONLY on that Exchange. They also trade on many "secondary" exchanges. The chart above compares the sum of the NYSE stocks' total volumes to the volume traded on the NYSE.

To Aaron:
We view this solely as a different way of trading. The difference in volumes is a reflection of hedge fund and electronic activity and does not have an effect on prices. Information is so readily available that any price opportunities will be arbitraged out. To answer your question, it should not affect the averages, only the volume.

[Wilson]

Hi,

So just to clarify, if I look at NYSE volume provided by DJ and conclude that volume is weak, it may be that significant volume is actually trading on secondary markets and is not visible to the standard sources?

[Cleve]

Wilson:
Yes... If the NYSE volume looks weak it is possible that those stocks are trading elsewhere. IBM for example trades about half of its total volume on the NYSE. If you look at the volume of a particular stock its total volume will be reflected.