This frenzy peaked in 2008, when the financial crisis hit and investors' portfolios dropped by 50% in less than two years. Since the crisis, trading volume has declined significantly.
Lightspeed Trading, an online broker, gives some reasons for the low trading volume.
One reason has to do with market integrity. The perceived decline in integrity of the U.S. market structure has prompted many investors to avoid the stock market.
The May 6, 2010 Flash Crash had a devastating impact on retail investor sentiment, and many institutional traders have said they fear the seemingly increasing instability of the market structure.
Similarly, the rapid expansion of high-frequency and algorithmic trading as the primary source of equity volume has frightened investors. The strategies implemented on markets by high-frequency firms are viewed as predatory, and the prevalence of high-frequency trading has created fear about market transparency.
Another factor is the difficulty in generating returns. In August 2010, legendary money manager Stanley Druckenmiller announced his retirement after his Duquesne hedge fund hit rocky times.
He was closely followed by Louis Bacon, a prominent hedge fund manager, who announced that his fund was returning 25% of its money back to investors, saying that "liquidity and opportunities have become more constrained."
The actions of these two investing legends are just two high-profile examples of top investors pulling back from or leaving the markets.
Another factor hurting the volume of equities trading is the popularity of fixed income. Some see the rush into bonds, leading to record low interest rates across the world, as a bubble that could pop. For now, however, bonds continue to rise alongside equities, thereby taking away from equity volume.