NEW YORK (
) -- Retail trading volumes for May at online brokers
received a short-lived boost from the "flash crash" trading disaster early in the month, according to research from Sandler O'Neill & Partners.
Channel checks on DARTs (daily average revenue trades) for the brokers showed a jump of about 25% early in May from the effects of the
, which came on top of an increasingly volatile April, analyst Rich Repetto says in a note to clients.
But after the flash crash, retail investors slowed trading activity. Repetto estimates that overall monthly trading volumes likely were up 5%, plus or minus 2.5%, for TD Ameritrade, Schwab, E*Trade and
. He projects DARTs at two other trading firms,
, each fell 5% in May, according to the note.
The online brokers are expected to release monthly trading figures before mid-June.
May was a volatile month for equities, particularly the financial sector.
fled from stocks as fears about the European debt contagion intensified and the flash crash sent the Dow Jones Industrial Average down 1,000 points briefly on May 6. Concerns about the final version of the financial reform bill remain a heavy influence on trading in the financials. In addition, there were the continued disastrous effects of an
that has been categorized as one of the worst in U.S. history and is causing energy stocks to plummet. The major equity indices have fallen sharply, with the S&P 500 finishing down 8.2% and the Nasdaq Composite index down 8.3% for the month.
While the market forces of late have had a major impact on investor's confidence in the market, volatility in general, prior to April had been on a downward trend since the fourth quarter of 2009.
That changed in Many when a popular measure of
spiked to its highest monthly average in a year. The average closing value of the VIX, shorthand for the Chicago Board Options Exchange Volatility Index, was 31.9 for May, up 83.3% from the prior month.
"At the start of the month, volatility was around 20, and
it first spiked on May 6 during the 'flash crash,'" Repetto writes. "Volatility increased further on renewed concerns in the eurozone, hitting an intra-month peak of 45.8 on May 20, the highest level since March 2009. Higher volatility is typically positive for equity volumes and also trading activity in equity index futures."
U.S. equity cash volumes averaged 12.1 billion shares in May, up 23% from April and up 6.7% from May 2009, the third highest month on record, according to Repetto. Furthermore, the average daily dollar volume on Tape A and C rose 19.3% to $228.4 billion.
Ironically, trading in the five most active stocks on the New York Stock Exchange fell to 21.9% of total volume from 24.7% in April and off from the peak in August 2009 of 32.3%.
Turning to futures and derivatives, the
Chicago Mercantile Exchange
averaged 16.8 million contracts per day, up 40.4% from April and 58.1% year over year, the note said. Interest rate contracts, which comprise about half of the total volume, rose 44.6% from April to 8.1 million contracts. Energy average daily volume was a record 2 million contracts a day, up 14.4% sequentially (which was also a record), Repetto writes.
also saw record volume. Total futures volumes traded on the exchange last month was 1.42 million, up 43.1% year over year, the note said.
--Written by Laurie Kulikowski in New York.