Equity trading volumes are shrinking.  

Average daily trading volume, tallied by month, was just 5.8 billion shares in May of this year. That is less than half of the peak of 12.3 billion shares during the financial crisis peak in February 2009.  

Is this something I should be concerned about as equity option trader?  Maybe yes, maybe no.

Let’s look into how the actual volume trends are changing.  High-frequency traders remain a huge force, but they’re not powering turnover quite as much as they used to. This type of trading, which relies on getting information and prices microseconds faster than the next trader, now accounts for 48.5% of overall U.S. stock-market volume, down from 61% in 2009, according to estimates from Tabb Group, a research and advisory firm.

In my opinion, this is a good thing.  Yes, HFTs account for significant volume, but they are hardly providing liquidity.  In very slow, targeted markets, the HFTs will drill a price target and not let it deviate too much up nor down.  Low volatility, high liquidity.  When stuff hits the fan, they are nowhere to be found.  Market’s depth goes away and the width of the bid/ask widens out.  High volatility, low liquidity.  So, as an actual market participant, HFTs offer no real benefit.  Good riddance.  Their market share going down is a good thing for traders like myself.

Secondly, while trading in stocks has steadily declined, the opposite has happened with equity futures and options.

The average daily equity futures volume was about 40,000 contracts per day in 2007.  By the end of 2013, it has jumped to about 270,000 contracts per day, according to Schaeffer’s Investment Research and the OCC.  I regard this as pretty much a wash as it appears to me that traders have  simply become more  educated and  sophisticated.  They have finally realized that they can control money far more efficiently by buying futures or options and leverage their positions with less capital.   

Third, individual investors now account for 24% of listed options trading, according to Tabb Group. The average daily trading volume of options contracts by retail investors increased 12% last year to 3.9 million contracts, outpacing the overall options market growth of 2.7%.

These are all good signs for the professional trader.