A new report from Celent Communications, Evolution of the Interdealer Broker Industry: Smells Like e-Spirit, predicts that there is still plenty of room for expansion in terms of revenue and the amount of business that is transacted electronically. “IDBs are big – and growing,” the report begins, adding: “The industry reached $7 billion revenues in 2007. Heightened market activity due to the subprime crisis, interest rate and currency volatility, and the furious growth of derivatives in emerging markets such as China, India, Korea, and Latin America, will likely ensure an industry annual growth of around 15% over the next two years to reach $9.3 billion revenues in 2009.”
Celent points out that the broking industry has seen some profound structural changes over the past five years and has consolidated into just four to five major players: ICAP, Tullett Prebon, BGC/eSpeed, Tradition, and GFI. “The top three players command about 70% of the total industry revenue, up from under 50% in 2001,” says Celent.
Because of pressure on margins, it is inevitable that electronic broking will increase. Celent predicts that this will reach 35% of total revenue (up from 6% in 2000) and 65% in volumes by 2010.