By Jeff Kearns and Edgar Ortega

May 23, Bloomberg

Trading on the New York Stock Exchange fell 26 percent this quarter to the lowest since 2001 as alternative venues captured market share and the total volume of U.S. equities climbed.

The shares changing hands each day on the 216-year-old exchange fell to an average 1.27 billion in the second quarter from 1.57 billion a year ago, according to NYSE data compiled by Bloomberg. Total trading rose 19 percent from a year ago to an average of 6.84 billion shares a day, as companies such as Bats Trading Inc. and Direct Edge ECN LLC won more of the business, Bloomberg data show.

The NYSE's share of the total value traded slipped to 52 percent in the first three months from more than 70 percent in 1990, according to data from the World Federation of Exchanges. Analysts who depend on volume to help forecast the market's direction are losing one of their tools.

``Technicians should be losing sleep over this,'' said Ralph Acampora, the 40-year Wall Street veteran who helped pioneer technical analysis. ``I can't be as trusting of my indicator, because I don't have all the data.''

Bats, the third-largest equity market, took business from the NYSE and Nasdaq Stock Market since it started in January 2006. Kansas City, Missouri-based Bats matched about 8.9 percent of total U.S. shares in April, up from 3.5 percent a year earlier.

Trading, Volatility

Direct Edge, which is based in Jersey City, New Jersey, has matched 4.1 percent of the shares traded this month, up from 1.2 percent a year ago, spokesman Rafi Reguer said.

Trading in U.S. markets rose with stock volatility as investors took advantage of wider price swings. The NYSE's move to lift restrictions in March 2007 on automation increased volume by making it easier for brokerages that accommodate rapid-fire strategies.

The new venues make it more difficult for technical analysts, who use exchange data to measure demand for stocks. A rally in the Standard & Poor's 500 Index without an increase in volume may fade, analysts say. Last year's rebound in the S&P 500 during September came with the lowest volume in four months. The benchmark peaked in Oct. 10, and fell 11 percent since then.

``More volume means there's more money and support, more demand and momentum,'' said Acampora, the director of technical studies at the New York Institute of Finance. ``You need money to push stocks up.''

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photo: Traders work on the floor of the New York Stock Exchange, May 19, 2008. Photographer: Jeremy Bales/Bloomberg News