These are not easy times to be an equities broker in Europe. The institutional commission pool has fallen 25% since 2009, and the market is likely to carry on shrinking. "Commissions in Europe are likely to fall another 10% to 15%," John Colon, consultant at Greenwich Associates in Stamford, Connecticut, tells Euromoney. "So we will have a 35% to 40% drop in the commission pool since the peak."
That is a tough environment in which to make money. And the cracks are starting to show across the market, from large global players to small local specialists. RBS has exited the business altogether and Nomura has moved its entire equity trading business to agency broker Instinet. "Banks are looking at whether they can be truly profitable in this business," Colon says. "Everyone is looking to prune at this point. The price of maintaining optionality is simply too high."
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That price, while high for the banks, represents opportunity for others that can either buy the businesses that the banks can no longer afford or form joint ventures with them to run research and trading. Kepler Capital Markets, an independent European broker, understands this more than most.
