NEW YORK (

TheStreet

) -- Retail trading volume for the online brokers including

TD Ameritrade

(AMTD) - Get Report

,

E*Trade Financial

(ETFC) - Get Report

,

Charles Schwab

(SCHW) - Get Report

and

OptionsXpress

(OXPS)

continued to fall on a sequential basis during the month of December, according to a research note from Sandler O'Neill & Partners.

The firm said Monday its channel checks indicate that DARTs (daily average revenue trades) for the group slowed last month by between 5% and 10% from November levels, despite early signs that volumes had improved.

Analyst Rich Repetto estimates that trading volumes fell approximately 10% for each of the largest names including TD Ameritrade, E*Trade, Schwab, OptionsXpress,

Interactive Brokers Group

(IBKR) - Get Report

, and

TradeStation

(TRAD)

.

This means that declines in trading activity for the fourth quarter could be quite significant, especially considering that

November volumes

were off roughly 15% from October levels, according to Sandler O'Neill.

The markets typically experience a slowdown in activity during the holiday season, but this year the decline started earlier than usual as investors may have cut back on trading in order to protect gains after the historic run-up in equities since early March. Lingering worries about the economy with unemployment still at record levels may have also contributed to the trend.

Also, according to the note, trading volatility fell for the tenth straight month in December and is at its lowest level since August 2008. Lower volatility is usually negative for equity volumes and trading activity in equity index futures.

"As we enter 2010, it appears that volatility levels ... will be roughly half the level we began the year with in 2009, at about 40%," Repetto writes in a note.

Much of the volume that was taking place in December was centered in a small group of stocks as 24.7% of the total volume on the

New York Stock Exchange

came from the exchange's five most actively traded issues. That percentage is up from 16% in November, but down from a near-term high of 32.3% in August.

Big financial names including

Citigroup

(C) - Get Report

,

Bank of America

(BAC) - Get Report

and

Wells Fargo

(WFC) - Get Report

were among the most actively traded stocks on the Big Board in December, Repetto writes

The primary driver for the increase in trading in the shares of the three large banks was that each firm undertook a multibillion dollar common stock offering during the month as part of their since-completed efforts to exit the Troubled Asset Relief Program.

-- Written by Laurie Kulikowski in New York.