With the rise in margins and most mom and pops out of the markets, we are seeing the fruits of the meltdown this fall. The result will be large funds trading between themselves. The coming months are going to be very interesting.
As I always say it's not one factor, but a combo of factors that creates a result. Consider that Christmas is less than a week away. Consider it's been Hanukkah, and yes there has been a drop in daily volume. I agree with your point though, there are more than one reason for the drop in volume.
Most of your hedge-funds that trade the indexes have already closed up for the year. Also, Morgan Stanley announced in their recent earnings this week that they would stop some proprietary trading strategies . . . Whether or not that includes stock-index arb is anyone's guess, but it could also be a factor. They literally pioneered stock-index arb and program trading.