NEW YORK & LONDON--(BUSINESS WIRE)--Institutional equities trading in the US is about to be restructured, says TABB Group in new research announced today, “Institutional Equity Trading 2012/13: The Paradox of a New Paradigm,” its eighth annual benchmark study.
TABB believes 2013 will be characterized by a new institutional investment landscape where both buy-side firms and sell-side brokers will be focused on restructuring their businesses. Success among brokers will depend on their ability to maintain client trust as they manage the conflicting elements of servicing the industry with limited resources. At stake is striking a balance between relationships and profitability, liquidity and anonymity and expertise and efficiency.
“The most-valued features such as anonymity and expertise stand to be compromised as the sell side will be forced to explore new ways to do more with less,” says Cheyenne Morgan, a TABB research analyst who produced the study with Miranda Mizen, director of equity research. “Maintaining client trust while consolidating multiple roles into a single-touch point will no doubt prove challenging but is a must in today’s environment,” says Morgan. “This at a time when buy-side traders are openly concerned with facing market quality issues, shrinking commissions and low equity volumes.”
Buy-side traders tell TABB that they have been preparing for the 2013 slowdown by shortening broker lists, having difficult conversations with their brokers and addressing which sell-side services they’ll need and how they’ll pay for them.
TABB spoke with 66 head traders at US institutional equity management firms managing an aggregate $15 trillion in AUM. Interviews were conducted during August and September 2012. Discussions covered the cumulative impact of declining volumes and commission wallets; adjustments to order allocation; the value of the high- and low-touch trading channels; potential changes to broker coverage models; views on today’s market structure; algorithmic providers and product needs; and block trading and risk requirements.
Among the study’s key findings are:
- 60% say off-exchange activity is now impacting market quality but opinions vary over what should be done and by whom.
- Two-thirds of the buy side has trust issues with dark pools.
- Nearly 7 out of 10 believe maintaining anonymity between high- and low-touch trading is vital.
- 80% says their commission wallets are down or flat year-on-year, with over 60% saying their commission wallet goes to the top 10 brokers.
The Executive Summary for this 32-page study with 49 detailed exhibits is available for download by TABB Group Research Alliance Equity clients and qualified media at www.tabbgroup.com. For more information or to order the report, write to info@tabbgroup.com.
About TABB Group
With offices in New York, London and expansion to Asia-Pacific, TABB Group is the only financial markets research firm focused solely on capital markets, based on the proven interview-based research methodology of “first-person knowledge” developed by founder Larry Tabb. For more information, visit www.tabbgroup.com. In January 2010, TABB launched TabbFORUM, the online global capital markets community covering analyses of current issues, tracked daily by more than 13,000 professionals.