Who cares about volume anyway? Prop firms can't move the mkt significantly. Prop monkeys are in and out, long and short. Long only pension funds etc.... are the big boys that will take a stock up/down +/-5% in a day (not including the obvious exceptions e.g Bear Sterns, the soon to go Bankrupt bookie)
That's what I figured 20% of volume. To deny this is just ignorance. So that being said, If the SEC were to enforce the PDT rule and shut down prop houses it's safe to say that the exchange would loose 20% of their current incomes.
I cant say what share of daily volume prop firms are responsible for. But it is not insignificant. Considering the current climate on Wall St. a dramatic fall off in volume would have a serious negative impact on the markets. Bear Sterns just blew up. Lehman is tetering on the brink. The market for all these exotic trading vehicles that so many of the bulge bracket firms dealt in the last few years has virtually dissapeared. The cross collateralization of such instruments has paralyzed other fixed income trading desks. These trading operations generated the lions share of earnings the last few years. Investment Banking revenues are dependent on new credit creation to fund deals. The equites market by comparison are in a mild correction. It would be reasonable to expect the big banks to beef up there equites trading divisions to try to squeeze out as much revenue as possible. A significant decrease in volume in equities means less liquidity. That is precisely what killed the credit markets. Now lets focus on the exchanges themselves they have invested billions the last few years they are consolidating rapidly and have staked there future on easier access to their product. A 20% decrease in volume would be catostrophic. Most prop traders are deemed professional by the exchanges that means that they pay higher fees for data. If a large portion of the prop industry goes down the exchanges stand to lose tens of millions of dollars in fees on top of a massive decline in trading revenue. This does not bode well for Mom and Pop investors who have already taken a large hit in home values and 401ks this year. If Wall Street takes the country into a deeper and more prolonged recession they will see even more wealth wiped out. So let me get this straight some fucking bureaucrat at the SEC gets a bug up her ass and now is undertaking a crusade that will do further damage to an already battered Wall Street. The negative implications of such a blunt regulatory over step will reverberate throughout the rest of the economy. Nice Job SEC way to think things through.