Noruma Holdings scaled back its trading business due to years of low trading volume and falling commissions. The news is telling investors what we already know: individual traders are participating less often than in the past. A greater percentage of trading volume is now coming from high-frequency trading (“HFT”). Motley Fool explained what HFT means for stock markets, but
(KCG) should demonstrate how dangerous it is.
More recently, New York times reported that computer-driven trading may account for upward of half of all transactions on the stock markets.
The more trades that are mande, the more fees are collected by the banks and brokerages that officiate the transactions. Lower trading volume is therefore a bit worrying for revenue streams. Still, trading volume is a lower percentage of overall revenue than investment brokerage stocks. This means big banks move higher if investors anticipate a rise in banking activity such as lending or mortgages.
So which companies in the financial industry should investors look at to follow the trend? We list our picks below.