The European fixed income market continues its transformation as banks implement new and more focused strategies aimed at maximising profitability.
According to a new report, European Fixed-Income Dealers Narrow Coverage Scope, by Greenwich Associates, European dealers are shedding less profitable client relationships and are competing for the business of a relatively small group of preferred customers.
“European fixed-income dealers have said many times in the past that they do not want to be all things to all people,” says Greenwich Associates consultant Andrew Awad. “This time it’s true.”
This shift in dealer strategy is having a dramatic effect on the market with marked changes in coverage, a shift in dealer quality ratings from clients and an increase in fixed-income electronic trading. “Since the cutback in dealer inventories and liquidity provision, there are many competing initiatives aimed at creating alternative trading venues,” says Greenwich Associates consultant Peter D’Amario. “However, for the foreseeable future, investors will be reliant on dealers that as a group have become much less generous with their capital and much more selective about when and to whom they will provide liquidity.”
The competitive landscape among Europe’s top-tier fixed-income dealers has begun to flatten as some historically dominant dealers focused coverage, leaving market share to be picked up by other top-tier dealers that are making a concerted effort to grow their franchises within the new profitability constraints.
In this fast-changing environment, Barclays leads the European fixed-income market with a market share of 11.9 per cent of institutional trading volume, followed by Deutsche Bank at 9.7 per cent. JP Morgan and Citi are tied for third with market shares of 8.9 per cent and 8.6 per cent respectfully. HSBC follows with a market share of 7.1 per cent. These dealers are the 2014 Greenwich Share Leaders in European Fixed Income.
Barclays has a commanding lead in rates products with a market share of 12.3 per cent, followed by Deutsche Bank at 9.5 per cent, and the trio of Citi, HSBC and J.P. Morgan are tied with market shares of 7.2-7.6 per cent. These dealers are the 2014 Greenwich Share Leaders in European Fixed-Income Rates Products.
In credit products, JP Morgan leads with a 12.9 per cent market share, followed by Barclays at 11.8 per cent, Deutsche Bank at 10.2 per cent and Citi at 9.8 per cent. These dealers are the 2014 Greenwich Share Leaders in European Fixed-Income Credit Products.
