Cash equities worldwide is suffering from lower profitability and shrinking volume, as more clients turn to automation and demand higher services for what they pay.
Orders completed by algorithms made up 51 percent of payments in Europe last year, up from 46 percent in 2012, according to Tabb Group LLC. The amount may rise to 52 percent in 2014, the research firm said. The share of commissions from traditional sales traders fell to 27 percent in 2013 from 32 percent in 2012 and will decline to 25 percent in this year, Tabb estimates.
Most banks are losing money trading stocks in Europe when their cost of capital is considered, BNP Paribas SA’s Yann Gerardin, head of global equities and commodity derivatives, said in January. Barclays Plc, UniCredit SpA and Nomura Holdings Inc. are among banks that have cut their equity businesses in the region amid declining activity.
Throsby said the equities business is a profitable one for the top five to six banks. The three biggest make “good money,” he said.