Photos of the TD Securities trading floor in Toronto on April 3 2013.Fred Lum/The Globe and Mail
Hug a trader. The business of buying and selling stocks on behalf of big clients is getting tougher and tougher in Canada, as commissions remain in freefall.
Greenwich Associates, a U.S. market intelligence firm which tracks commissions, said it estimates that fees collected by brokers declined 12 per cent in the 12 months ended March 13. That put the fee pool at $605-million, down from $690-million in the previous period. The drop was bigger than Greenwich expected, and it appears commission declines are picking up pace. At this time last year, Greenwich estimated that 2013 fees were down 10 per cent.
There is relentless pressure on commissions from institutions such as mutual funds and pension managers, which are looking to cut trading costs. At the same time, the rise of electronic trading has allowed some brokerages to undercut the traditional model of high-service, high-fee trading.
In its report, Greenwich said that the percentage of electronic trades jumped to 24 per cent from 16 per cent.
Because Royal Bank of Canada's capital markets arm is active and strong in both high-touch and electronic trading, according to Greenwich, the division is adding to its market share.
"While there's always back and forth among the Big Five Canadian banks that dominate this business, RBC's position in 2014 is as strong as we have seen any bank achieve in this market," Greenwich Associates consultant Jay Bennett said in the study. "RBC's equity capabilities are the broadest and deepest of the Big Five at the moment. In addition to its strong domestic equity research franchise, the bank also has a strong electronic trading platform, which clearly differentiates it from the other top brokers."
In the 2013 rankings, RBC was first with 14.1 per cent market share. This year, RBC was first with 15.7 per cent share. (Greenwich polls equity portfolio managers to compile its statistics.)
Second place was Bank of Montreal's capital markets division, and third went to TD Securities Inc.
In algorithmic trading, ITG Canada Corp. was first, with 76 per cent of money managers surveyed said they used the firm's trading programs. RBC was second at 61 per cent.