where has all the trading gone?

cnbc | It’s one of the biggest mysteries on Wall Street. How can stocks be in their fourth year of a bull market and trading activity be so low?

During March, average daily volume in equity shares was at their lowest level since December 2007, according to new data from Credit Suisse. This is the same month that marked the three-year anniversary of the bull market that caused the Standard & Poor's 500 to double from its March 2009 credit-crisis low.

Credit Suisse tried to solve the riddle by blaming the growing popularity of options and futures markets, a drop in high frequency trading and stock splits.

“There’s no way to sugar-coat it: Volumes are down and trending lower,” wrote Ana Avramovic of Credit Suisse, in a note to clients. “A growing preference for other asset classes may be drawing money away from equities.”

Daily equity volume in March was 6.59 billion shares a day, the lowest since a sub-6 billion volume month in December 2007, according to Credit Suisse. (The firm adjusted December 2011’s low figures to account for the holiday-skewed week.)

Avramovic noted that options and futures volume set a record in 2011, as investors hungry to add risk looked for a place where they could use leverage.

“The options market has been breaking records for nine straight years and the shift has been a growing field that provides protection and leverage,” said Pete Najarian, co-founder of TradeMonster.com, an options and equity brokerage.

The Credit Suisse analyst also notes that high-frequency trading, which accounts for half of all market activity, has been on the decline since last summer. What’s more, Citigroup alone accounted for 7 percent of all volume in the second half of 2009 before its 10 for 1 reverse split, according to the report.

But the answer may be simpler than this. After two vicious bear markets in a decade, the average investor simply doesn’t trust this market anymore.

“There is no fresh money going into the markets,” said Doug Kass of Seabreeze Partners. “Why should we be surprised the retail investor is not there? We’ve had two huge drawdowns in stocks since 2000, a flash crash two years ago and real incomes are stagnating.”