A shrinking number of brokers are accounting for over half of trading activity in Europe, a new report by Coalition Greenwich has found.
According to Coalition’s new research, the European equity commissions wallet grew 4% to $2.3 billion in 2024 in comparison with a 14% decline in 2023. The findings were in line with a similar report released at the tail end of last year focusing on North America.
While a markedly positive result on the year prior, the report also suggests that trading activity is becoming increasingly concentrated between a handful of top-tier brokers, in particular, in the low touch space.
Around 20% of trading activity is executed with the top broker, while 60% is executed with the top five brokers, Coalition Greenwich has suggested.
This “significant challenge” exists despite a slight reduction in the average number of brokers used by UK managers, from 34 to 33, and a stable number of 19 brokers used by managers in continental Europe.
The concentration, Coalition Greenwich has found, is most prominent in the electronic trading sphere.
UK managers reportedly execute 32% of their algorithmic trading flow with their top broker, while continental managers execute 27%. The report has found that in both regions, firms are directing around 60% of their electronic trading business to their top three providers.
This leaves “limited opportunities for others”, Coalition’s report has found.
Electronic trading has been on an astronomical ascent for several years now and Coalition’s recent findings suggest this shows no sign of abating. UK and continental managers execute around 35% of their equity flow electronically, just shy of the 38–40% managers surveyed in 2021 by Coalition expected to trade electronically by 2025.
Looking ahead, UK respondents to Coalition’s most recent survey expect to trade 37% of their flow electronically by 2027, while managers in the bloc anticipate trading 42% electronically in the same period.
“Although the sell-side may be relieved at this year’s modest increase [in commissions wallet], they should anticipate that their clients will increasingly opt for lower-commission electronic trading,” said Coalition in its report.
“While the buy-side still finds value in high-touch sales traders, they are clearly reducing their reliance on them for both economic reasons and workflow scalability.”
When asked what their top priorities for selecting an algo provider were, both UK and continental buy-side firms put the most emphasis on ease of use, reliability and high-quality support, at 65% and 70%, respectively. Access to dark liquidity and proactive algo trading consultancy were also highly valued.
Interestingly, low commission rates were valued comparatively low, with just 19% of UK respondents and 23% of continental respondents selecting it as a priority.
Coalition Greenwich interviewed 116 buy-side equity traders across continental Europe and the United Kingdom. Data evidencing notional value of European equities traded between 2022 and 2024 in the report was provided by BMLL.