Exchange-traded funds now represent 31% of trading volume in the U.S. equities market, an impressive indicator of the continued adoption of ETFs by a broad swath of investors. The $1.7 trillion in trading volume in August, and the $14.7 trillion in trading volume year-to-date, represent a calendar-year record for the industry, according to new data from the National Stock Exchange (NSX).

Michael Traynor, chief strategy officer for NSX, said the trading volume as a percentage of U.S. equities has been steadily growing for ETFs. It has been consistently in the mid-to-high 20s in terms of recent trading volume percentage, and now may have arrived at a permanent level of at least 30% of the U.S. equities market, Traynor said.

Source: National Stock Exchange*

"What is really interesting in these numbers is the fact that the average ETF is twice the share price of the average regular equity, so the investor dollars being traded in ETFs is a huge number," Traynor noted. What's more, the NSX data on trading volume does not take into account associated execution volume in the underlying securities. "None of that market-making activity is captured," he added.

Recent market conditions, continued product launches and continuing institutional adoption of ETFs are all part of what is behind the new trading volume plateau. "This was not a dramatic spike in light of consistent growth, but could represent a new benchmark for ETF trading volume," said Traynor.

Source: National Stock Exchange*

He added that while many skeptics may think these trading volumes are due to immense trading in a few products, like SPDRs and QQQ, skewing the entire industry, the fact is that stripping away that type of active trading, the growth of trading volume in other ETFs is even more impressive on a percentage basis.

Gary Gastineau, principal of ETF Consultants, said ETFs are by far the fastest-growing part of the equities market, and pointed out that one need look no further than yesterday's most active stocks list: Of the 12 most active stocks in the U.S., half were ETFs.

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