Trading volume in stocks fell noticeably in July with some analysts blaming the decline on a lack of investor interest as the market swings back and forth within a relatively narrow range.
However, there may be another culprit: exchange traded funds.
July was the slowest month in the stock market in years, the Associated Press reported. Activity tends to trail off in the summer months anyway as traders go on vacation.
“The volume in some cases is being lost to things like ETFs,” Art Cashin, director of floor operations at UBS Financial Services, told CNBC on Monday. Individual investors remain nervous about jumping into stocks after the May 2010 flash crash, he added, when asked about reports of equity volumes down 35% to 45% year over year at some of the big trading desks.
ETFs are often portrayed as head-to-head competitors against traditional mutual funds. However, one aspect of the industry’s growth that can be overlooked is that more traders are using sector ETFs rather than betting on individual company shares.