In an article by Jonah Keri entitled “Light Market Volume Reflects Uncertainty”, Ed Wedbush the CEO of Los Angeles brokerage Wedbush Morgan points out that changing market conditions are a reason for recent light trade, but in a different way.

“Most of the volume on the market is driven by institutions, and 25% to 35% is driven by computer programs,” said Wedbush, referring to program trading, a growing recent trend.  “So they can turn on or turn off trading based on the algorithms they're following.”

This is similar to the growing offshore trend that has been with us for some time now which was initially pioneered by Deutsche Bank with some of its options trading funds and has long been associated with many of the hedge fund strategies that exist today. Some of you may also recall that it was computer trading that was blamed for the October '87 selloff that hit global markets, but to put your minds at rest, the current systems are far more sophisticated and are used for ongoing portfolio monitoring and trading not merely as a means to cover positions as was the case in the late eighties.  It is also worth pointing out that the current computer models are the basis for many funds now on offer, the whole structure of the fund being constructed and run without emotion as there is no single manager making the investment decisions.