Despite the recent wild gyrations in global stock markets, 2015 could represent the calm before the storm for European equity brokers, which are awaiting word from regulators on new “unbundling” rules that could upend the economics of their business.
The competitive landscape of the European brokerage market has been in flux since the onset of the global financial crisis, driven by changes in regulation, market structure and in the balance sheets and business strategies of global banks. These changes could accelerate when European regulators announce their final decision on new rules limiting and possibly even prohibiting the use of client commissions to pay for equity research and advisory services.
“For now, the industry has settled into a holding pattern as banks wait until the rules of the game are set,” says Greenwich Associates consultant John Colon (pictured).
Brokers’ uncertainty about the future of the equity research business might explain why no fewer than five firms are currently deadlocked atop the market for European equity research and advisory services. With market shares that are statistically tied between 7.2 per cent and 7.8 per cent, UBS, Deutsche Bank, Bank of America Merrill Lynch, Morgan Stanley, and JP Morgan all claim the leadership spot for European Equity Research/Advisory Share Vote.
“Consistency over time and the breadth of coverage across markets and sectors play a big role in determining market share in sales and research,“ says Greenwich Associates consultant Jay Bennett. “Over the past several years, however, there has been a significant shift in the sell-side’s view of the economics of this business, which has in turn led to a “right-sizing” of research platforms based on perceived revenue opportunities.”
In trading, UBS leads with a market share of 9.8 per cent, followed by Bank of America Merrill Lynch at 8.9 per cent and the trio of JP Morgan, Credit Suisse and Deutsche Bank, which are statistically tied with market shares between 8.0 per cent and 8.6 per cent. These firms are the 2015 Greenwich Leaders in European Equity Trading.
Greenwich Quality Leaders are firms whose institutional clients award with quality ratings that top those of competitors by a statistically significant margin. The 2015 Greenwich Quality Leaders in European Equity Sales & Corporate Access are Exane BNP Paribas and UBS. The 2015 Greenwich Quality Leaders in European Equity Research and Analyst Service are Exane BNP Paribas, Morgan Stanley and UBS. Bank of America Merrill Lynch and UBS are the 2015 Greenwich Quality Leaders in European Equity Sales Trading & Execution Service Quality, and ITG and UBS together claim the title of 2015 Greenwich Quality Leaders in European Equity Electronic Trading.
