Adapt to Low Volumes or Perish, Credit Suisse Tells Traders

The markets remain difficult and yield with acceptable risk elusive. Aivars Lode

Published: Friday, 17 Aug 2012 | 4:28 AM ET

By: Holly Ellyatt
Assistant News Editor

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Declining volumes on global stock markets appear to show that real money trading activity is at decade lows, according to a new report from Credit Suisse, and investors believe volumes will stay low for two more years unless global resolutions to the risks of the economic crisis are found.

Credit Suisse’s report on trading activity shows that over the past four years, volumes in equity markets have been steadily falling and are now at half the level seen in the middle of the credit crisis — and traders fear they could get worse.

After surveying trade desks in the U.S., Europe and Asia, the report found that 76 percent of institutions are trading “a lot less”, with 35 and 40 percent of desks responding that they were trading “well below average - down 20 percent” and “below average - down 10 percent” respectively.

And there is no sign that there will be any change in a hurry, with 83 percent of respondents telling Credit Suisse that it would take 2-5 years (or possibly more) for volumes to recover. As long as global economic woes continue unabated and unresolved, or indeed approach in the months ahead, trading activity would stay subdued and risk averse, according to traders.

“Almost half of the responses said macro-risk needs to be resolved before trading activity is up…This is consistent with the popular view that macro risks are a key factor in decreasing investor risk-appetite — including European defaults, recessions, the U.S. fiscal cliff and its own deficit,” the report said, adding, “It’s unlikely all will be resolved in less than a year.”