Managing down the cost-per-trade is key to survival for mid-sized players in equities trading.
Author: Asif Abdullah Contributions: Anna Pajor
Although leading global equity markets have recovered to pre-crisis levels, this has not resulted in an increase in equity brokerage fees. Client trading volumes which drive brokerage commissions continue to remain depressed. Industry research shows that the global equity revenue pool in 2012 was 55% of pre-crisis 2007 levels while reduced primary activity, such as IPOs, has curtailed secondary market activity.
As a result many firms have been forced to strategically review their equities trading franchises, which has resulted in the downsizing or shutting down of business lines.
The reduced revenue pool has increased competition amongst brokerage firms. Market-leading equities houses, which have maintained a full service offering, have successfully increased market share at the expense of mid-tier and regional firms. These global firms have maintained profitable business lines by continuing to exploit volume-driven economies
of scale and, increasingly, they have benefited from cross-asset flow by implementing multi-asset platforms.