Independent Research Providers Lose Share Of US Equity Brokerage Commission Payments

The share of institutional equity brokerage commissions captured by independent third-party research providers declined significantly during the months of tumultuous trading in US equities in 2008-2009.

According to the results of the latest Greenwich Associates US Equity Investors Study, independent third-party research providers saw their share of the institutional research pie drop to 11% of overall equity research commission payments in 2009 from 18% in 2008 (as reported by institutional portfolio managers participating in the survey). That 2009 proportion represents a considerable US$845m out of almost US$7.7 bn paid by institutions to compensate brokers for research in 2009 and US$13.7 bn in institutional equity brokerage commission fees overall.

Independent research providers captured a growing share of institutional commissions for several years following the 2003 Wall Street Research Settlement. That share flattened out in 2007-2008, however, before dropping in 2008-2009. Meanwhile, after losing commission share in prior years, the Bulge Bracket investment banks and global banks maintained their 56% share of institutional research commissions from 2008 to 2009.

“There has been a lot of attention paid to high profile analysts that have left the Street to launch independent research firms,” said Jay Bennett. “We wish them well, since our research suggests they are entering into a very competitive market. There is still a high degree of dependency between US institutions and the major banks, investment banks and broker-dealers, as these large institutions have the resources needed to meet institutions’ growing demand for direct access to analysts, as opposed to published research.”


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