What's up with this lousy volume?

I've been asked repeatedly by traders to explain the puzzling drop in volume we have seen since the start of the second quarter, particularly at the NYSE. Most feel it is due to traders simply stepping back in light of the uncertainty of the market.

While there is certainly some truth to this, a more likely explanation comes from a failure of some of the statistics to reveal the true extent of trading.

Simply put, the volume that is reported on the floor of the NYSE now only represents a portion of total trading; when trading in NYSE stocks by all exchanges (including the NASDAQ) is included, as well as the crossing sessions (where stock that is matched up or "crossed" by brokerage firms are printed on the NYSE), a different picture emerges.

Here's the facts (my thanks to Rich Repetto at Sandler O'Neill for the data).

1) Quarter to date, total volume in all NYSE-listed stocks (which includes trading in all NYSE stocks by all exchanges, including the NASDAQ) is UP 23 percent. However, volume to date in NYSE stocks that are traded at the NYSE (which includes Archipelago) are DOWN 10 percent.

2) For NASDAQ, total volume in all NASDAQ listed stocks (which includes all exchanges) was down 5.2 percent, and volume to date in NASDAQ stocks traded at Nasdaq was down 14 percent.

What does this mean?

1) total trading in NYSE stocks continues to expand, due largely to increased electronic trading;

2) trading at the NYSE itself, particularly on the floor, however is lower;

3) trading in some of the more mature electronic stocks (those normally listed at NASDAQ) appears lower.

Bottom line: there is more trading going on in NYSE-listed stocks, but much of it is occurring away from the NYSE.

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