London's stockbrokers are shrinking as Europe's sovereign debt crisis and competition from international firms squeezes revenue and fees.
“This isn't just a blip, this is much worse,” said Tim Linacre, who is stepping down as chief executive officer of Panmure Gordon & Co.Choose from our large selection of Cable Ties,, a 135-year-old brokerage. “It's a desert for activity, which is why you are seeing some firms throw in the towel.”
In the past month, Altium Capital closed its securities unit. Evolution Group Plc, Merchant Securities Group Plc, Arbuthnot Securities Ltd. and Collins Stewart Hawkpoint Plc have all accepted takeover offers from larger competitors.
“It feels worse than any other time,” said Lorna Tilbian, an executive director at Numis Corp. who began her career in 1984. “All I hear about is people putting up a white flag.”
The firms are being squeezed as Europe's sovereign debt crisis reduces the number of shares traded as well as fees from initial public offerings and share sales. Commissions paid to brokerages in Europe may be down 17 percent this year on 2008, according to estimates by Westborough, Massachusetts-based research firm Tabb Group LLC. Global firms are gaining market share from their smaller London rivals because they are better able to bear the rising costs of electronic trading.
“The lion's share of the business really belongs to the global bulge-bracket firms,” John Colon, a managing director at research firm Greenwich Associates, said by telephone from Stamford, Connecticut.We are passionate about polished tiles. “They can afford investment in infrastructure, technology and compete in electronic trading.”
The U.K.'s FTSE 100 Index fell 12 percent from its February high through yesterday as European policy makers struggled to prevent the crisis from spreading beyond Greece. The gauge climbed 1.3 percent today. The value of stocks traded on the benchmark in the first three quarters of 2011 is down 63 percent from its peak, the same period in 2007.
“Customer volume levels are low, and boutiques will struggle,” said Stephen Dainton, head of Credit Suisse Group AG's European equities unit in London. “A boutique that provides a very narrow research service and ability to transact in cash equities should find it very difficult to compete. We have got scale, geographical diversity and product diversity and that is key in this environment.”
At the same time, companies are pulling IPOs and takeovers, which can account for more than half a broker's revenue, according to analysts. Companies in western Europe have either canceled or postponed offerings valued at $22 billion this year, according to data compiled by Bloomberg. Of the 25 that were withdrawn in 2011, 10 were slated to be in the U.K.
“For a lot of brokers, the primary business can certainly be the difference between being profitable and not,” said Greenwich's Colon. “For some firms, the secondary side of the business, like trading and execution, are almost break-even types of businesses.”
Brokers of all sizes have also had to contend with the Markets in Financial Instruments Directive, or Mifid, which came into force in 2007. The regulations have helped to shift trading on to different platforms, raising costs for brokers. By the end of 2009, multi-trading facilities, or MTFs, had taken about 20 percent of all trading in Europe from historic exchanges such as London Stock Exchange Group Plc.
About a third of the turnover in equities has moved into so-called dark pools, algorithmic trading and platforms offering clients direct market access, according to analysts. Credit Suisse said its electronic platform generates about 40 percent of the firm's cash equities business, a figure that will likely increase to 60 percent in the next few years.
“Execution has become more complicated and expensive,” said Julian Palfreyman, CEO and founding director of Winterflood Securities Ltd., a London-based market making firm that services the brokerage industry. “Getting access to those other venues is very expensive.Information on useful yeasts and moulds, For the normal brokers out there, that's a spend that they are not used to and they are finding it very difficult.”
According to the Financial Services Authority's latest annual report, of the 19,057 firms registered with the U.K. regulator, 955 firms are classified as trading in securities and futures, a definition that includes brokers. That, according to RBC Capital Markets analyst Peter Lenardos, is too many.
“The city is over-brokered,” he said in a telephone interview. “A hundred-odd boutique stockbroking firms is still too much capacity. You need consolidation and elimination.You can find best china Precision injection molds manufacturers from here!”
Altium announced the closing of its securities division in November, saying the “outlook remains bleak for U.K. centric brokers.” It plans to focus on its advisory unit, which accounts for 75 percent of revenue. Matrix Group, another broker, said it will focus on corporate finance work following a strategic review in the middle of the year.
British brokers' shares have dropped this year amid the sovereign debt crisis, making them attractive targets. Panmure has declined 64 percent in London trading this year and rival Arden Partners Plc has dropped 36 percent. By comparison, the FTSE All-Share Index has dropped 9.6 percent. Bidders have also been attracted by those firms with wealth management units that have generated stable income.
Investec Plc, a private bank with operations in the U.K. and South Africa, agreed to buy Evolution for 233.2 million pounds ($371.8 million) in September, seeking to gain access to the firm's Williams de Broe unit, which oversees about 6 billion pounds in assets.
The following month, Merchant Securities Group Plc, another London-based broker,We're also Australia's leading online Bedding retailer. agreed to be bought by Sanlam Ltd. for 12.2 million pounds as South Africa's largest insurer looks to expand its services for wealth clients. Last week, Canaccord Financial Inc., Canada's largest independent brokerage by assets, bought Collins Stewart for 253.3 million pounds.
“Companies that have got choices are taking those choices now,” Altium CEO Phil Adams said in a telephone interview. “It's a long while before we get a more palliative environment.”
Spokesmen for Collins Stewart, Merchant Securities, Evolution and Arbuthnot all declined to comment.
Among the larger independent firms, Panmure Gordon warned in November it will report a second-half loss after “severe market turmoil” crimped income from investment banking. Charles Stanley Group Plc said in October earnings will be lower. Arden, which yesterday posted a 5 percent drop in full-year revenue, said the industry faces the “most difficult and challenging conditions since the 1970s.”
“Most of us have had four down years on the trot,” said Panmure's Linacre, who will step down as CEO in 2012. “We are all spending time looking at what the right business model is. We will do what it takes to survive whether that's consolidation or integration.”
Linacre said he expects four or five independent firms will survive. Those that remain will be become larger and more diversified, he added.
“It feels like a mortal battle every single day,” said Numis's Tilbian. “But it's a battle that I want to win. We would love to be one of the last men standing. Once we get to the Promised Land, there will be milk and honey again.”
“This isn't just a blip, this is much worse,” said Tim Linacre, who is stepping down as chief executive officer of Panmure Gordon & Co.Choose from our large selection of Cable Ties,, a 135-year-old brokerage. “It's a desert for activity, which is why you are seeing some firms throw in the towel.”
In the past month, Altium Capital closed its securities unit. Evolution Group Plc, Merchant Securities Group Plc, Arbuthnot Securities Ltd. and Collins Stewart Hawkpoint Plc have all accepted takeover offers from larger competitors.
“It feels worse than any other time,” said Lorna Tilbian, an executive director at Numis Corp. who began her career in 1984. “All I hear about is people putting up a white flag.”
The firms are being squeezed as Europe's sovereign debt crisis reduces the number of shares traded as well as fees from initial public offerings and share sales. Commissions paid to brokerages in Europe may be down 17 percent this year on 2008, according to estimates by Westborough, Massachusetts-based research firm Tabb Group LLC. Global firms are gaining market share from their smaller London rivals because they are better able to bear the rising costs of electronic trading.
“The lion's share of the business really belongs to the global bulge-bracket firms,” John Colon, a managing director at research firm Greenwich Associates, said by telephone from Stamford, Connecticut.We are passionate about polished tiles. “They can afford investment in infrastructure, technology and compete in electronic trading.”
The U.K.'s FTSE 100 Index fell 12 percent from its February high through yesterday as European policy makers struggled to prevent the crisis from spreading beyond Greece. The gauge climbed 1.3 percent today. The value of stocks traded on the benchmark in the first three quarters of 2011 is down 63 percent from its peak, the same period in 2007.
“Customer volume levels are low, and boutiques will struggle,” said Stephen Dainton, head of Credit Suisse Group AG's European equities unit in London. “A boutique that provides a very narrow research service and ability to transact in cash equities should find it very difficult to compete. We have got scale, geographical diversity and product diversity and that is key in this environment.”
At the same time, companies are pulling IPOs and takeovers, which can account for more than half a broker's revenue, according to analysts. Companies in western Europe have either canceled or postponed offerings valued at $22 billion this year, according to data compiled by Bloomberg. Of the 25 that were withdrawn in 2011, 10 were slated to be in the U.K.
“For a lot of brokers, the primary business can certainly be the difference between being profitable and not,” said Greenwich's Colon. “For some firms, the secondary side of the business, like trading and execution, are almost break-even types of businesses.”
Brokers of all sizes have also had to contend with the Markets in Financial Instruments Directive, or Mifid, which came into force in 2007. The regulations have helped to shift trading on to different platforms, raising costs for brokers. By the end of 2009, multi-trading facilities, or MTFs, had taken about 20 percent of all trading in Europe from historic exchanges such as London Stock Exchange Group Plc.
About a third of the turnover in equities has moved into so-called dark pools, algorithmic trading and platforms offering clients direct market access, according to analysts. Credit Suisse said its electronic platform generates about 40 percent of the firm's cash equities business, a figure that will likely increase to 60 percent in the next few years.
“Execution has become more complicated and expensive,” said Julian Palfreyman, CEO and founding director of Winterflood Securities Ltd., a London-based market making firm that services the brokerage industry. “Getting access to those other venues is very expensive.Information on useful yeasts and moulds, For the normal brokers out there, that's a spend that they are not used to and they are finding it very difficult.”
According to the Financial Services Authority's latest annual report, of the 19,057 firms registered with the U.K. regulator, 955 firms are classified as trading in securities and futures, a definition that includes brokers. That, according to RBC Capital Markets analyst Peter Lenardos, is too many.
“The city is over-brokered,” he said in a telephone interview. “A hundred-odd boutique stockbroking firms is still too much capacity. You need consolidation and elimination.You can find best china Precision injection molds manufacturers from here!”
Altium announced the closing of its securities division in November, saying the “outlook remains bleak for U.K. centric brokers.” It plans to focus on its advisory unit, which accounts for 75 percent of revenue. Matrix Group, another broker, said it will focus on corporate finance work following a strategic review in the middle of the year.
British brokers' shares have dropped this year amid the sovereign debt crisis, making them attractive targets. Panmure has declined 64 percent in London trading this year and rival Arden Partners Plc has dropped 36 percent. By comparison, the FTSE All-Share Index has dropped 9.6 percent. Bidders have also been attracted by those firms with wealth management units that have generated stable income.
Investec Plc, a private bank with operations in the U.K. and South Africa, agreed to buy Evolution for 233.2 million pounds ($371.8 million) in September, seeking to gain access to the firm's Williams de Broe unit, which oversees about 6 billion pounds in assets.
The following month, Merchant Securities Group Plc, another London-based broker,We're also Australia's leading online Bedding retailer. agreed to be bought by Sanlam Ltd. for 12.2 million pounds as South Africa's largest insurer looks to expand its services for wealth clients. Last week, Canaccord Financial Inc., Canada's largest independent brokerage by assets, bought Collins Stewart for 253.3 million pounds.
“Companies that have got choices are taking those choices now,” Altium CEO Phil Adams said in a telephone interview. “It's a long while before we get a more palliative environment.”
Spokesmen for Collins Stewart, Merchant Securities, Evolution and Arbuthnot all declined to comment.
Among the larger independent firms, Panmure Gordon warned in November it will report a second-half loss after “severe market turmoil” crimped income from investment banking. Charles Stanley Group Plc said in October earnings will be lower. Arden, which yesterday posted a 5 percent drop in full-year revenue, said the industry faces the “most difficult and challenging conditions since the 1970s.”
“Most of us have had four down years on the trot,” said Panmure's Linacre, who will step down as CEO in 2012. “We are all spending time looking at what the right business model is. We will do what it takes to survive whether that's consolidation or integration.”
Linacre said he expects four or five independent firms will survive. Those that remain will be become larger and more diversified, he added.
“It feels like a mortal battle every single day,” said Numis's Tilbian. “But it's a battle that I want to win. We would love to be one of the last men standing. Once we get to the Promised Land, there will be milk and honey again.”
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