According to Sandler O'Neill, the average for total trading volume this year is 6.7 billion shares a day. But we haven't gone above 6 billion shares in seven days.
Of course, volatility bulls like to point out that all indices are mean-reverting. You cannot stay at low volatility levels forever. Theoretically that is true, but is anyone surprised that the CBOE Volatility Index is at the lowest levels since 2007, with all these worries about China slowing, and with all the Ukraine/Russia issues? I am.
Bank bulls also like to move the discussion away from the lousy trading volumes and point out the investment banking revenues are still strong —and that's true. Mergers and acquisitions (M&A) activity is good, as is IPO activity and secondary offerings.
What's causing this? Some are blaming regulators, arguing that efforts to limit bank risk has caused banks to pull back. There may be some truth to this: bank proprietary trading desks were major risk takers. Closing those risk-taking desks should have some dampening influence on volatility. And investigations into everything from foreign exchange trading to LIBOR also reduces bank willingness to trade.
The most likely answer is that the economic data is much more mixed, which makes investors much more uncertain about where the economy is going. That reduces conviction levels and causes pullbacks.