Equities
Falling arrows
and shifting sands
Elliott Holley, Head of Global Buy-side Research
As we draw into Q4, the top issues in equities are the worrying
state of the US small and mid cap market, the impact of
unbundling and the dilemma over commission management,
falling commissions and buy-side concerns that this will
decrease the quality of services from the sell side; shortening
broker lists, especially in Asia; the upcoming Shenzhen Stock
Connect which is due to go live before the end of the year;
the fallout from periods of
volatility such as the UK’s
Brexit from the European
Union; the possibility of
Hong Kong becoming an
ID market; the rise of ETFs
and passive investing.
On the buy side, there is a
desire to ensure that the
commission rates that are
most commonly paid are
standardised, but many
firms are not meeting their
commission targets for
certain brokers. The base
rate has fallen dramatically
over the last 12 months
globally, although there is
some variation – Asia has
fallen more than Europe over the same period.
Responses have been varied; some buy-side firms now actively
avoid the use of low-touch services such as DMA if they feel
their commission rates are
dropping too low; they
turn to high-touch services
instead. The thinking behind
this decision is to ensure the
buy side continues to receive
useful flows and facilitation
services from the sell side;
there is a feeling among
some on the buy side that
increased use of DMA results
in a deterioration of these
services.
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www.buysideintel.com
October 2016