Half of US buy-side to slash commissions allocated to brokers

Traders in US look to scale back on commissions as regional dealers pick up market share.

Almost half of traders in the US are looking to slash commissions allocated to brokers, which will leave $100 million of secondary cash equities ‘up for grabs.

A poll of 321 traders – carried out by Greenwich Associates – found 47% are looking to scale-back on commissions allocated to at least one broker.

Greenwich Associates’ report also found that large brokers in the US have lost 11% of the total amount of commissions paid by institutional investors to mid-sized/regional brokers in recent years.

The nine-largest brokers claimed 78% of commissions in 2007, but this year the group claimed just 60%, according to a study authored by Greenwich Associates.

Mid-sized/regional brokers are picking up the lost share of commissions, taking their market share to 28% as of this year.

David Stryker, consultant at Greenwich Associates and author of the report on commissions explained, “smaller firms have capitalised on the changes taking place in the industry.”

Overall, the US equity commission pool has remained flat over the past years, though its current total is roughly $9.7 billion, the report said

Stryker added: “Brokers need to recognise that capturing commission share is increasingly a zero-sum game, and those who can outcompete their peers will be best positioned to succeed.”

This article was amended following an error suggesting investors will cut back to one broker. Greenwich Associates research showed traders are looking to cut back on at least one broker, not cut back to use just one broker.