Weaker stock market activity: causes, conse-
quences and concerns
Stock markets in 2012 were plagued by widespread
uncertainties, with international financial stress
and poor earnings by a large number of companies
causing activity to taper off. The lower number of
shares changing hands in the year reflects both fears
among savers to take risks and the dearth of funding
sources, as seen by international data on stock market
listings and funds raised in private equity deals. Small-
and medium-sized enterprises (SMEs) have been the
biggest losers from the combination of these factors
(e.g. lack of funding, lower appetite for risk and flag-
ging economy). SMEs have been choked financially as
banks have pretty much slammed the door on lending
and since they have not found other alternatives to refi-
nance or raise funds for what could have proven to be
good business or investment opportunities.
Higher taxes on investment returns and capital gains
(especially on short-term gains), the financial transac-
tion tax (FTT) proposed by a group of 11 EU countries,
the restriction on short positions in shares or attempts to
restrict high-frequency trading are all factors that have
hurt trading volumes on regulated securities markets.
Lower volumes, but similar to other interna-
tional markets
As we noted above, the ban on short positions under-
mined trading in equities on the Spanish stock market
in 2012. However, the c.24% decline was hardly different
from falls of other exchanges with a similar degree of
development and that saw share prices fare better. This
illustrates that the Spanish market has certain qualities
that support demand for listed securities. At least non-res-
idents think so, representing slightly more than three
quarters of the amount of shares traded. Households also
appear to appreciate these qualities, considering that after
the falls in prices over the past few years, stocks are now
fairly valued: net purchases of shares by this group rose
sharply between 2009 and 2012.
Generalised decrease in share trading across all
stock markets
Share trading volumes on Stock Exchanges around the
world have felt the effects of the widespread deteriora-
tion in economic activity in 2012. Turnover volume on
the exchanges of all the main markets was, in most cases,
down by more than 20%.
The Spanish market was no exception, but its perfor-
mance shows an important difference, highlighting the
virtue of high liquidity levels on the country’s market
and securities. In terms of turnover, share trading fell by
around -24.5% year-on-year, a slightly smaller decrease
than in New York and bigger than those on the German
Stock Exchange (-21.2%) or Euronext (-19.7%). However,
while shares in Spain traded below their 2011 closing
levels throughout 2012 (the IBEX 35 was down by more
than 30% at the end of July 2012), the benchmark
indices on other markets enjoyed a placid year, consist-
ently trading above the previous year’s close. What is
more, since 23 July the Spanish market has been subject
to a ban on short selling that extends to all listed shares,
something that other markets have not had to endure
General drop in share trading in 2012
Figures based on annual volumes for 2012 and 2011 on the electronic systems of each Stock Exchange (EOB)
and which, undoubtedly, acts as a brake on the
normal development of market operations.
Based on these two variables alone, trading volumes
on the Spanish Stock Exchange should have fallen
considerably more than those on other markets, but
this has not been the case. The main reason for this is
the fact that the liquidity of Spanish shares remains
extremely high and the market is able to meet inves-
tors’ needs very efficiently. The figures that show the
change in the number of share transactions in the
year provide good proof of this. The number of trans-
actions fell -11.4%, compared with a drop of nearly
-33% on the NYSE, -26% on the Nasdaq, -19.1% on the
German Stock Exchange, and -15.4% on the Euronext
platforms. In Europe in 2012, only the London Stock
Exchange registered smaller decreases than in Spain,
in terms of both turnover volume and number of
share transactions.
The high level of liquidity on the Spanish market and in Spanish
securities has meant that the decrease in turnover volume on the
Spanish Stock Exchange has been very much in line with that on
other markets, although it was quite a lot smaller in terms of number
of transactions executed.
German Stock
Nordic Stock
Swiss Stock
Euronext Europe
% Turnover % Transactions
BME Business Areas
Report 2012
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