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Wall Street News

Where’s the Beef? Market Volume and Volatility

April 5, 2017

[Photo: Wendy's 'Where's The Beef' Commercial from 1984 / YouTube]


Stock market indices are crazy up since their last dip on November 4 ,2016 - the Dow is up 15.7%, S&P 500 is up 13.2%, and Nasdaq is up 16.9%. And, bank stocks are leading the way. So you’re thinking, if only banks could make markets and trade for their own accounts they’d be minting money.


Except nothing can be further from the truth. Traders are languishing in this market. Stock trading is slow. Volume and volatility are low. And realized volatility – the actual volatility of the S&P 500 over successive 30-day periods – is near historic lows.


While many market experts haven’t a clue, some possible explanations for recent trends include, the following:


  • Trading technology – automated traders, and various types of algo traders – have made the markets extremely efficient.
  • ETFs are reducing volatility because investors can trade the ETFs without trading the basket of underlying stocks.
  • The Fed has tamped down volatility for years by keeping rates low and essentially encouraging people to buy equities due to its quantitative easing program.


That said, traders can try and wait for the trends to reverse, or they can figure out ways to reduce costs or gain economies of scale.