US Equity Commission Volumes Continue to Slide


New York, NY – According to Equity Research Desk, a Greenwich, CT based independent research provider focused on the global securities markets, the US equity markets posted their second consecutive plunge in trading volume during September of more than 20% when compared to the same time last year.

Volumes in the US cash equities markets were down 25% in September compared to year earlier levels, reflecting a 29% drop in NYSE volume, a 20% fall in NYSE Arca and NYSE Amex volume, and a decline of 16% in NASDAQ volume. 

The 25% decline in September trading volume follows a 24% drop in August, and marks the 8th monthly decline seen this year (the only monthly increase in cash equity trading volume was a 7% gain seen in May).

Overall, the average daily volume in US equities totaled 7.2 billion shares in September.  This monthly total reflects a 40% decline from the 12.1 bln share peak seen in May of this year.  The May figure was buoyed by the market volatility resulting from the May 6th Flash Crash.

Through the first nine months of 2010, US equity trading volume has fallen approximately 14% when compared to the same period in 2009.

If we combine this decline in equity trading volume, with the 4.1% drop in equity commission rates that Greenwich Associates reported a few months ago, then overall US equity commissions would likely be down 16% when compared to year earlier levels.

The weakness in US equity commissions, in combination with deterioration in the global bond market, and higher capital requirements mandated by the Basel III accord is expected to make 2010 a difficult year for many financial services companies, including investment banks, securities exchanges, ECNs, agency brokers and other broker-dealers. 

One bright spot for investment banks has been the surge in IPO volume this year.  According to PwC, year to date capital raised in the US IPO market totaled $14.1 billion from 99 IPOs, compared with 34 offerings which raised $8.1 billion during the first three quarters of 2009. The year-over-year comparison of the first nine months represents a 74% increase in value and a 191% increase in volume.

The big question for the investment banks is will the improvement in the IPO business be enough to counter the significant weakness seen so far this year in the cash equity and fixed-income businesses?  This remains to be seen.


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