JPMorgan and Lehman Brothers, which enjoy the largest market shares of US fixed-income trading, are also rated by institutional investors as delivering the best service quality for fixed-i
JPMorgan and Lehman Brothers, which enjoy the largest market shares of US fixed-income trading, are also rated by institutional investors as delivering the best service quality for fixed-income sales, research and trading, according to Greenwich Associates’ 2007 U.S. Fixed-Income Dealer Rankings.
Lehman and JPMorgan tied for the top overall position in the survey, which is conducted annually by Greenwich and involves around 1,300 institutional investors active in fixed-income trading. The investors are asked to name the dealers with whom they trade, to reveal how much of their trading business is allocated to each dealer, and to rate the service quality delivered by the dealers in various categories.
‘In 2007, JPMorgan and Lehman Brothers tied for first place in terms of total market share in US fixed-income trading,’ says Greenwich Associates consultant Woody Canaday. ‘The two firms are also equal first in the service quality ratings awarded to them by their fixed-income clients.’
In terms of market share, the two leaders are followed by Deutsche Bank, Goldman Sachs and Banc of America. ‘Of the firms with top-five market share rankings, Banc of America, Deutsche Bank and JPMorgan all grew their fixed-income trading businesses over the past 12 months, suggesting that these franchises are generating significant momentum,’ says another Greenwich consultant Tim Sangston.
‘Also demonstrating momentum in terms of overall market share growth are Merrill Lynch and RBS Greenwich Capital. Lehman Brothers, by comparison, has had consistently high market share for several years.’
Certain firms made notable gains in individual product categories. Merrill Lynch and Credit Suisse increased their share of rates products, Morgan Stanley boosted its share of credit products, and Banc of America’s share of securitised products grew.
‘It is interesting that three foreign firms – Deutsche, RBS Greenwich and Barclays Capital – increased their market shares in at least two product categories between 2006 and 2007,’ says Greenwich consultant Frank Feenstra. ‘These results certainly suggest that the significant investments that some foreign firms are making in US fixed income are paying off, at least in terms of market share.’
Certain fixed-income dealers have backed away from a market share-based strategy in fixed income, preferring instead to concentrate their attention and resources among clients with the potential to generate the biggest profits.
Among the relatively small group of institutions generating more than USD50bn in annual trading volume, Lehman and JPMorgan are joined by Deutsche and Goldman Sachs, with all four having amassed roughly comparable market share. Lehman and JPMorgan are ranked highest of the four for service quality, with Deutsche and Goldman tied for third place.
With hedge funds a key focus for fixed-income dealers in the current marketplace, Greenwich’s research indicates that Lehman has built up the biggest market share in this segment, with Deutsche and JPMorgan tied for second place.
‘Hedge funds give the highest scores for service quality to Lehman and JPMorgan, followed at some distance by a four-way tie between Credit Suisse, Bear Stearns, Deutsche and Goldman,’ says Greenwich’s Dev Clifford.
The Greenwich research covers a comprehensive range of fixed-income products, including US Treasuries, agency securities and interest-rate derivatives among rates products, investment-grade credit, below investment-grade credit, distressed debt, leveraged loans, emerging markets bonds, and collateralised debt obligations among credit products, and mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities among securitised products.
Greenwich Associates is an international research-based consulting firm covering institutional financial services. Based in Greenwich, Connecticut, with offices in London, Toronto, and Tokyo, the firm offers more than 100 research-based consulting programmes to upward of 250 global financial services companies.