European buy-side firms redirect flow to bulge-brackets
from institutional investors in Europe are being gradually concentrated among
major investment banks with smaller and niche brokers facing an increasingly
The findings are
part of research from consultancy Greenwich Associates looking at European
equity commissions paid by 200 of the region's asset managers between January
and March 2012.
Between 2011 and
2012, the share of institutional commissions paid to sell-side firms that
specialise in specific countries, sectors or small- and mid-cap stocks dropped
to 26% from 29% in the previous period. The decline in commissions share among
specialist brokers was even more pronounced among UK firms, which saw a six
percentage point decline to 25% between 2011 and 2012.
The decline in
share appeared to be picked up by bulge-bracket brokers. Across Europe, global
banks with investment and research services grew their share of the commission
pot from 66% to 70% in 2011. In the UK specifically, it grew from 63% to 68% in
the same period.
Credit Suisse and
UBS were voted joint first by respondents as the most important electronic
trading provider, while UBS topped overall European equity trading share, garnering
10.5% of commissions.
“The slowdown in trading
activity and the corresponding drop-off in sell-side trading revenues are
prompting major brokers to re-assess past strategies based on amassing market
share and to narrow the focus of their equity businesses to their most
profitable customer segments,” said Greenwich Associates consultant John Colon.
“In many cases this includes desk consolidation and headcount reductions.”
investment bank Nomura announced a realignment of its equities trading
business, opting to consolidate execution services under its Instinet agency
brokerage brand. Deutsche Bank and Citi are among the sell-side
providers that have recently taken steps to integrate the equity trading
services offered to institutional clients.